19 November 2019
Taiwanese demonstrators protest against a cross-strait service agreement they say will undermine their democratic way of life and curtail freedom. Photo: AFP
Taiwanese demonstrators protest against a cross-strait service agreement they say will undermine their democratic way of life and curtail freedom. Photo: AFP

Taiwan service agreement means winners and losers

Chang Yung-chian founded the Shezidao publishing company in Taipei and has been in the business for nearly 40 years. At its peak, the firm had NT$100 million (US$3.28 million) worth of revenue a year, with three shifts a day.

“Business is not good now,” he said. “If we open the market to mainland publishers, it would be a new challenge. They are not opening their market to us. If we have mainland firms, some books will not be published. How can we have freedom and creativity? My heart is full of anxiety.”

Chang was one of nearly 200 publishers who met the vice minister of Economic Affairs in July to protest against the proposed service trade agreement with China. They said well-financed mainland firms could run at a loss and within two to three years take over small publishers and control the market.

The publishing industry would be one of the losers if the agreement is passed. Chang’s firm is one of those that would suffer; it may be taken over or forced to close. It is this anger and apprehension that fuelled the student takeover of the Legislative Yuan.

“We should not have discussed the service sector so early,” said Tsai Ying-wen, the likely candidate of the Democratic Progressive Party (DPP) in the presidential election in 2016. “We should first discuss industrial goods and commodity trade. Except for a few sectors, Taiwan’s services are weak. They should have more time to upgrade. Then we should discuss an agreement within the framework of WTO [World Trade Organization] and international standards to protect the interests of a small country like Taiwan.

“All the world knows that China gives economic help only to achieve a political objective.”

Under the agreement, Taiwan will open 64 service sectors against 80 being opened by China. The Tianxia (Commonwealth) magazine printed a detailed list: it shows 2.85 million employees would be potentially affected.

Broadly speaking, the winners will be those firms wealthy, efficient and well connected enough to take advantage of the new opportunities the agreement will open in the mainland. The losers will be domestic companies, especially small and under-capitalised, that will not be able to withstand the new competition.

The tourism industry is optimistic. Chen Jen-hung, general manager of the marketing department of Kang Fu Tourism Co., moved to the mainland five years ago. Since then, it has established offices in Beijing, Shanghai, Guangzhou and Xiamen.

Under the pact, there is no limit to the number of Taiwan tourism firms that can set up in China. After two years and with no illegal practices, they will be able to handle international clients. “If we do not go this year, we will have to go in the future,” said Chen.

Going the other way, three mainland tourism firms will be allowed to operate in Taiwan and, initially, restricted to mainland tourists.

Taiwan e-commerce firms are also supportive. The annual market for online commerce in the mainland is more than 12 times that of the one in Taiwan. Under the pact, Taiwan firms can set up e-commerce firms in Fujian and hold a maximum stake of 55 per cent. At the shareholders’ meeting of Hon Hai, chairman Terry Guo said china’s e-commerce market would develop very quickly: “We will throw all our effort into it”.

The financial industry also supports the agreement. It believes that in terms of service quality and experience, it has an advantage over mainland banks. It sees many opportunities in renminbi business and investment, bringing mainland investors into the Taiwan stock market.

The majority of commercial associations in Taiwan have expressed public support for the pact, as have the Taipei City Importers and Exporters Association and the Taiwan Province Importers and Exporters Association.

Behind the debate is a bigger question over the future of Taiwan. A majority of the business elite believe that the only future is economic integration with the mainland. This will happen inevitably and it is better to be part of the process, they say.

Many of them have factories, shops, businesses and second homes in China. Major conglomerates like Foxconn, Want Want and Ding Hsin earn a far higher proportion of revenue in the mainland than at home. The Kuomintang is the party of this business elite.

The alternative vision is that this integration will come at too high a price to the island’s democracy and freedoms. Critics look at the mainlandization of Hong Kong and see such integration as leading to less media freedom and democracy and increased police powers, with the business and political elite serving the interests of Beijing, not those of Hong Kong people.

They want to restrict severely the access to Taiwan of mainland people, capital and investment and to diversify economic ties with other countries that do not wish to take it over.

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A Hong Kong-based writer, teacher and speaker.