Cross-Strait Industrial Cooperation Requires Vision
China Times editorial (Taipei, Taiwan, ROC)
November 3, 2011
Summary: Recently cross-Strait industrial cooperation has attracted considerable attention. On October 20th, the Seventh Chiang/Chen Summit announced "increased agreement on cross-Strait industrial cooperation." On October 28th and 29th, the First Cross-Strait Industry Forum reached a consensus on numerous issues. Yesterday, the Second Economic Cooperation Conference announced a preliminary agreement on industrial cooperation, and on plans for the future. Currently industries on both sides of the Strait face challenges such as recession, restructuring, and export competition, Industrial cooperation requires overall review and planning. Only this will meet everyone's needs.
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Recently cross-Strait industrial cooperation has attracted considerable attention. On October 20th, the Seventh Chiang/Chen Summit announced "increased agreement on cross-Strait industrial cooperation." On October 28th and 29th, the First Cross-Strait Industry Forum reached a consensus on numerous issues. Yesterday, the Second Economic Cooperation Conference announced a preliminary agreement on industrial cooperation, and on plans for the future. Currently industries on both sides of the Strait face challenges such as recession, restructuring, and export competition, Industrial cooperation requires overall review and planning. Only this will meet everyone's needs.
In the short term, the debt crisis in Europe and high unemployment in the US have increased the risk of a second global economic recession. The United States and Europe face sharply reduced market demand. Imports from emerging market countries continue to slow. This affects these country's exports and economic growth. Mainland China's exports and economic growth have slowed significantly in recent months. Taiwan's main exports are susceptible to economic fluctuations. These exports include information technology and communications technology products. These products have borne the brunt of the recession. In the past, the government provided strong support for memory (DRAM) manufacturers and panel manufacturers despite countless losses. These manufacturers now totter on the brink of death. The two sides of the Strait have established a large-scale division of labor within the computer industry. The mobile phone industry and LED industry face serious problems with overcapacity and insufficient orders. Following the financial tsunami, both sides of the Strait vigorously supported green energy industries such as solar energy generation and electric cars. All these are in trouble. If they cannot survive these short-term difficulties, how can we talk about cross-Strait industrial cooperation?
In the mid term and long term, industries on both sides of the Strait face severe challenges. South Korea is Taiwan's main competitor in the international market. South Korea is aggressively signing Free Trade Agreements (FTAs) with other countries. FTAs between Europe and Korea, and the US and Korea, have been signed and are about to take effect. The impact on Taiwan's exports will be severe. Taiwan's most advantageous export market is the Chinese mainland. Korean products are a growing threat. The Chinese mainland is also undergoing rapid industrial upgrading. It is rapidly replacing Taiwan in the manufacture of components, intermediate raw materials, machinery, and equipment. The market share of Taiwan exports in the Mainland market continues to drop. Experts estimate that within five to ten years, over half of Taiwan's exports to the Mainland will be replaced by products from foreign countries, Taiwan faces an imminent industrial crisis.
Industries on the Mainland also face a number of factors, such as rapidly rising wage rates, real estate prices, raw material prices, and an appreciating RMB. Low value-added processing and export industries face intense pressure to upgrade, move inland, or move abroad. The Mainland's 125 Plan is a response to internal and external changes. It vigorously promotes industrial restructuring and modernization. It strongly supports the development of new strategic industries. This industrial policy is clearly in coopetition with industries on Taiwan, and adds to the complexity of cross-Strait industrial cooperation.
The environment for industrial development is harsh, Cross-strait cooperation requires a sense of direction and a need for prioritization. In the short term, cooperation should focus on helping industry respond to the recession. The two governments should help them cope with excess manufacturing capacity, reduce duplication of investments, and ensure the survival of the fittest. This will enhance the competitiveness of the economy and establish a foundation for the future. Flat panels, LEDs, and solar energy face a recession. These industries should be our top priority as cooperation projects, If cooperation on these industries yield concrete results, it will increase confidence in cross-Strait industrial cooperation.
In the mid term to long term, the two sides must fully understand that the only way to improve industrial competitiveness is to compete globally and follow the rules of the market. Therefore, the two sides should accelerate their move in the direction of free trade. The Cross-Strait Economic Cooperation Framework Agreement (ECFA) attempts to establish a cross-Strait free trade zone, The long-term cross-Strait division of labor will enhance industrial competitiveness. Its impact will be critical. We have repeatedly called for follow up talks on ECFA. We must clear away the obstacles. We must draw up plans for a cross-Strait free trade zone. This is the main reason the Ma administration must not delay.
Accelerated signing of free trade agreements (FTAs) with major trading partners, and regional economic integration, are keys to industrial development. The Ma administration has announced its goal of joining the "Trans-Pacific Economic Partnership Agreement" (TPP) within 10 years. Taipei is actively seeking to sign FTAs with Singapore, New Zealand, India, the ASEAN countries, and even the U.S. and EU. But the key to success in these efforts, is Beijing's political concerns. Cross-Strait cooperation will endure only with cross-Strait integration and international economic support
We are moving toward global competition. South Korea and Japan are Taiwan's major rivals. Strategic cross-Strait industrial cooperation is an important market niche that can spell victory in the international market. The authorities on both sides of the Strait must approach the matter from the perspective of international industrial competition. They must identify the niche common to both sides of the Strait. They must encourage business owners on both sides of the Strait to form strategic alliances, to break through bottlenecks, and together build globally competitive, high-value industries.
In short, the successful elements of cross-Strait industrial cooperation, must be based on free trade and market rules. Only through global competition in the marketplace, can industries on both sides of the Strait create a win-win situation that offers hope for the future.