ECFA and FTAs: What are We Missing?
United Daily News editorial (Taipei, Taiwan, ROC)
June 6, 2012
Summary: Beijing, Tokyo, and Seoul are about to begin negotiations on a tripartite free trade agreement (FTA). Beijing and Seoul have also begun negotiations on a bilateral FTA. An agreement is expected within two years. Meanwhile Taipei is moving at a snail's pace. Government officials top to bottom have promised to pick up the pace of talks. But Council for Economic Planning and Development (CEPD) Chairman Yin Chi-ming has criticized the government for moving too slowly. South Korea is well ahead in its FTA signing campaign. We have good reason to be worried.
Full Text below:
Beijing, Tokyo, and Seoul are about to begin negotiations on a tripartite free trade agreement (FTA). Beijing and Seoul have also begun negotiations on a bilateral FTA. An agreement is expected within two years. Meanwhile Taipei is moving at a snail's pace on the cross-Strait economic cooperation framework agreement (ECFA), on FTAs with other countries, and on the Taiwan-US Trade and Investment Framework Agreement (TIFA). Government officials top to bottom have promised to pick up the pace of talks. But Council for Economic Planning and Development (CEPD) Chairman Yin Chi-ming has criticized the government for moving too slowly. South Korea is well ahead in its FTA signing campaign. We have good reason to be worried. We must pick up the pace. We must consider the depth and breadth of our FTA policy. That is the key.
FTAs are agreements that signatories promote voluntarily. Only signatories to FTAs benefit from the liberalized conditions FTAs provide. There is no free rider problem. Therefore they are more open than most. For example, South Korea, the EU, and the United States have signed FTAs. Roughly 99% of all products are tariff free. Restrictions on foreign participation in the service sector have basically been eliminated. These FTAs also provide for simplified customs clearance, inspections, and quarantine procedures. They make regulations more transparent, and more consistent with international standards. State-owned enterprises compete on an equal footing. Government procurement is conducted in the open marketplace. Even health insurance and pharmaceutical products are market priced.
Over the past decade FTAs have included "goods, capital, and personnel." All three elements move across borders at all levels. Such an undertaking is daunting. International economic and trade interests often conflict. The difficulties encountered during negotiations can be imagined. Taiwan's economic structure is similar to South Korea's. Yet South Korea was able to sign an FTA with the EU and the US within two years. Mainland China and South Korea believe they will be able to sign an FTA, on schedule, within two years. That is not an empty boast. Once the FTA between Mainland China and South Korea is in place, the edge ECFA provides us will be lost. Chairman Yin's concerns are not alarmism.
What are we missing? Real world implementation of ECFA in both goods and services has been slow. Other FTAs have also gone nowhere. On the surface, we have no shortage of political resolve. Every time a South Korean FTA goes into effect, the President, the Premier, and sundry Ministers reaffirm their determination to accelerate the pace of liberalization. But as Chairman Yin noted, many of them still cling to protectionism. They still do not understand the industries they are dealing with. They are overly conservative. They are reluctant to play ball. One possibility is that high officials are merely going through the motions. They may be paying mere lip service to liberalization. They lack determination. They lack the desire to follow through. The higher the rank, the stronger the determination. The lower the rank, the weaker the determination. This is the first problem that must be solved.
Another reason for the snail's pace of FTA negotiations is the lack of negotiation resources. FTA negotiations involve complex issues. They require expertise in diverse fields. They require a division of labor. Only then can negotiations be conducted swiftly and thoroughly. South Korea's FTA negotiations involved over 100 officials. Government think tanks backed them 100%. By contrast, our own government has only 10 officials assigned to cross-Strait negotiations. Few officials have been assigned to other FTA negotiations. Think tank budgets have been cut or reallocated year after year. Innate deficiencies have led to inevitable problems. Speed has not been easy to achieve. Haste may also make for waste. This is the second bottleneck that must be eliminated.
A lack of industry understanding is another problem. Take the service sector. The Ministry of Economic Affairs is responsible for negotiations and coordination. It has little to do with the service sector. Telecommunications, finance, education, tourism, construction, transportation and other key services each have their own overseers. Each agency is responsible only for oversight. They lack industry understanding. They lacke international perspective. In the past industrial development was the responsibility of the CEPD. But since our accession to the World Trade Organization (WTO), the CEPD no longer participates in economic and trade negotiations. It has no role in cross-Strait negotiations. Over the past decade, it has played no part in negotiations.
In the long term, the government must re-position the CEPD as an economic and trade negotiator. The CEPD should promote liberalization. It need not sit at the negotiating table. Using external pressure from FTA negotiations to promote domestic reforms is also a worthwhile goal. FTAs are now about regulatory reform and structural change. These are matters the CEPD was adept at. These are matters it can promote. The CEPD Finance Legal Co-ordination Centre was responsible for regulatory reform when we joined the WTO. It has been quiet since. But if the need arises, it could once again play a role.
Finally, we offer this reminder to the government. The key with ECFA or FTAs is to negotiate well. South Korea seeks short-term advantages. But we should attempt to secure more favorable entry conditions. That would consitute a real victory.