19 August 2019
Taiwanese fear a cross-strait services trade pact will hurt the island's small businesses and endanger local jobs. Photo: Reuters
Taiwanese fear a cross-strait services trade pact will hurt the island's small businesses and endanger local jobs. Photo: Reuters

Is the China services pact good for Taiwan?

The Taiwan government says its service trade agreement with China will create 12,000 jobs and boost the island’s GDP and industrial competitiveness. Mainland firms investing in Taiwan will be allowed to bring only a maximum of seven employees with them, it says, seeking to allay fears of an influx of Chinese managers.

The 200 students who have been occupying the Taiwan Parliament building since last Tuesday and a large section of the population do not believe the claims.

The occupation of the Legislative Yuan is a defining moment in Taiwan’s short history as a democratic nation. Since President Chiang Ching-kuo abolished martial law in July 1987, civil society has been growing at a rapid pace. This first occupation of Parliament is the most radical step taken by the public.

In June last year, Taiwan and China signed the Cross-Strait Agreement on Trade and Services, which was to be ratified by the Legislative Yuan, Taiwan’s parliament.

Under it, Beijing agrees to open 80 service sectors and Taiwan 64. These include insurance, banking, securities, hospitals, travel agencies, theatres and sports facilities, hairdressing and beauty services and telecommunications.

In a statement on March 22, the government explained the benefits of the agreement: “Mainland China allows Taiwan access to 80 sectors, compared to 64 in Taiwan for mainland China, many of which were in substance already opened. Taiwan will enjoy more favorable access to the mainland market than other WTO members.”

It warned that if the pact was not passed, there would be negative consequences. “Our service industries will lose the advantage of early entry to the mainland market. Our access to regional economic integration mechanisms, including the Trans Pacific Partnership (TPP), will be delayed. Future talks with the mainland on trade in goods agreement and dispute settlement mechanism will be influenced, which will jeopardize the development of our external trade.”

For the opponents, the issue is not opening the China market but the impact at home. The 64 sectors encompass thousands of businesses, many family-owned, which employ a majority of the island’s workforce. The service sector accounts for 70 percent of GDP, compared to less than 30 percent for industry.

The opponents believe that many Taiwan firms, especially small and medium-size ones, will be unable to compete with large mainland companies that have economies of scale, have access to abundant state funds and may be allowed to operate at a loss in order to gain market share; politics as well as business will be a factor in how the firms are run.

Take for example the 2.83 million mainlanders who visited last year, a record and up 11.2 percent over 2012; they accounted for 36 percent of all visitors and have overtaken Japan as the top source of tourists. With the market open, mainland investors could own and operate the hotels, restaurants, buses and shops which the visitors use and keep the profits in their own pockets.

Another controversial issue is how many mainlanders would be allowed to move to Taiwan under the agreement. This is what the government statement says: “When a mainland enterprise invests US$200,000 or more, it can apply to bring in two employees to manage its interests in Taiwan; with investment of US$500,000 and above, one more employee may be brought in, with an upper limit of seven.

“As of the end of January 2014, the government had approved 495 mainland investments, totaling US$870 million. The company officials, specialists and family members who have come to Taiwan in association with them number just 264, while these firms have provided jobs for 9,624 Taiwanese. Mainland investment brings in capital for our industries and financial market but also creates jobs for our people,” it says.

Opponents do not agree with this analysis. Looking at Hong Kong, they see the entry of mainland employees as the thin edge of the wedge. They believe that, once these new companies are established, they will lobby for and receive increased quotas. Liberalization means lower wages.

Government figures released at the end of last year found that in the first ten months of 2013, the average real monthly wage in Taiwan was NT$45,112 (US$1,507), lower than the NT$45,514 of 1998, despite average per capita growth of 2.75 percent in the 2003-2012 period.

On Friday, the Taiwan Medical Alliance for Labour Justice and Patient Safety, an organization of doctors and nurses, issued a statement opposing the agreement.

It said that Taiwan’s medical sector faces severe challenges, including the threat of bankruptcy of public hospitals and staff overwork. “If the market is opened to Chinese medical organizations, these problems will only worsen and cause challenges that are even more difficult to solve.”

“Promoting medicine and serving society are not a commodity and should not be determined by market mechanisms and capital,” it said.

Another fear is of becoming a second Hong Kong. “The Beijing leaders want unification,” wrote Chen Mei-chen in a column in the Taipei Times last Friday. “In their long-term vision, there is no room for a free and democratic Taiwan. Trade agreements are a means to pull the nation closer into their unwelcome economic and political embrace.”



Hong Kong-based writer, teacher and speaker

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