Explain ECFA: Refrain From Name-Calling
China Times editorial (Taipei, Taiwan, ROC)
April 14, 2010
The debate over ECFA will begin at the end of the month. There has been no shortage of politicians maneuvering for political advantage during the consultation process. But as the leaders of the two sides make their entrance, we expect to see a rational and business-like debate. We also hope the two sides will dispel public doubts by providing people with clear answers.
The reason the government feels such urgency regarding ECFA, is that beginning this year, ASEAN plus One (10 ASEAN countries plus Mainland China) will form an East Asian Free Trade Zone. Its population will number 1.9 billion. In one fell swoop, the average tariff will be reduced from 9.8% to 0.1%. Over 7000 products will be 100% tariff free. Two years later, ASEAN plus Three (Japan and South Korea will be added) and will also form a free trade zone.
Frankly, the impact of this change on Taiwan needs no elaboration. Tariffs on exports among the countries of these regions will approach zero. Tariffs on exports from Taiwan to other economies within these regions will be subject to tariffs of 5 to 10%. The competitiveness of products from Taiwan will decline. In the short term, domestic companies may be able to endure thinner margins. But in the medium to long term, they will not be able enhance their competitiveness by lowering their costs. All they can do is set up factories in these areas, in order to achieve tariff free status. Two years from now South Korea, our major trade competitor, will also become a member. The pressure on us will then be doubled. The affected products will range from petrochemicals and textiles to electronics and machinery.
The DPP must explain. If we do not sign ECFA, what measures does the DPP have have to prevent Taiwan's exclusion from the East Asian Free Trade Area, and to avoid diminished export competitiveness?
Some in the Green Camp say that simply signing FTAs (Free Trade Agreements) with other governments in the region will solve all our problems. Please refrain from parroting this nonsense. ASEAN plus One did not spring into existence last night. As early as 2001, a number of private and official entities began assessing and reporting its potential impact on Taiwan. The DPP was in power for eight years. Did the DPP "solve our problems" then? With which governments in the region did it sign FTAs?
Since the beginning of this year, exports from Taiwan to Hong Kong and ASEAN have increased. Some in the Green Camp have cited this as "proof" that ASEAN plus One has had no impact whatsoever on our exports. Such unprofessional, amateurish comments are better left unsaid. No nation or industry in the world, when it exports to any particular area, will regard the imposition of higher tariffs as "friendly and acceptable." The market will not change overnight. Manufacturers may be able to endure lower short-term profits. But they cannot endure them over the long term. Look at it from another angle. If Taiwan enterprises are well run, they will enjoy higher profits. But with unequal tariffs, businesses under other governments will be more competitive because of their tariff status. Companies on Taiwan can only respond with price cuts and lower profits. If the government has the means to achieve tariff equity but fails to do so, that amounts to a dereliction of duty.
Besides, export competition is not merely about comparisons against oneself. One must also compare oneself against others. Suppose the ASEAN import market grows. Suppose exports from Taiwan to ASEAN increase 10%, but other economies in the region increase their exports by 30%? Taiwan will be the big loser. Does the DPP really not understand this? Increased exports to the Mainland and Hong Kong are clearly related to Mainland procurement purchasing groups that came to Taiwan over the past year. To conclude from these short-term numbers that ASEAN plus One had no impact on exports from Taiwan, is sheer ignorance.
The Democratic Progressive Party opposes ECFA. It even opposes economic and trade exchanges with the Mainland. But the figures before us represent businessmen from Taiwan investing an estimated 200 billion US dollars in the Mainland. The Mainland and Hong Kong account for 44% of all exports from Taiwan. It is also the major source of our trade surplus. Therefore the DPP must make itself clear. What plans does it have for cross-Strait economic and trade exchanges? If the government signs ECFA this year, but the DPP returns to power in 2012, does it intends to abolish ECFA?
As a responsible ruling party, the KMT must not report only the good news and not the bad. Signing FTAs with other governments will of course have a positive impact on the overall economy and on industry. That is why nearly 200 governments have signed FTAs. After signing their export trade has indeed grown. But this is not the whole story. The overall numbers look good. But they have also created winners and losers. The ruling administration must make clear which industries are likely to be losers, and inform us what relief measures it intends to offer these losers.
This matter affects many businesses and many people's jobs. The government cannot merely announce that it is providing tens of billions in relief funds and be done with it. The relief funds must not be like a cake behind a pastry shop window. One can see it, but cannot taste it. The government must make clear what it intends to do. Only then will the public be reassured. More importantly, no one wants to live on charity. The government must offer a set of policies that will provide relief to those who find themselves unemployed as a consequence of ECFA.
The government has reiterated that only after ECFA is signed, will it be possible to sign FTAs with other governments. Based on the reactions of other large governments, it would seem that ECFA may indeed pave the way for FTAs. But as a responsible ruling party, it must make clear the extent to which ECFA will pave the way for FTAs. Can it go a step further and tell us just how long it will take before we can sign FTAs with other governments?
We hope the debate over ECFA between the ruling and opposition parties will fulfill its function as a policy debate. We hope the debate will be professional and free of name-calling. The public has many doubts. Please allay those doubts, by speaking clearly and plainly.