Must Taiwan be a Loser in Global Competition?
United Daily News editorial (Taipei, Taiwan, ROC)
July 30, 2014
Summary: The National Affairs Conference on Trade and Economics adjourned
yesterday. The opposition DPP refused to participate. Controversial
bills and government policy were left off the agenda. As a result the
public paid little attention and the conference was relegated to the
status of a giant debate. The conference reached nearly one hundred
points of agreement, as well as a majority opinion. They all concerned
basic principles, but will be hard to implement. Extensive discussions
led to a feeling of urgency about Taiwan's economic difficulties. How
can we maintain and increase our momentum? How can we find a winning
strategy for Taiwan's economy? These are the Ma administration's biggest
Full Text Below:
The National Affairs Conference on Trade and Economics adjourned yesterday. The opposition DPP refused to participate. Controversial bills and government policy were left off the agenda. As a result the public paid little attention and the conference was relegated to the status of a giant debate. The conference reached nearly one hundred points of agreement, as well as a majority opinion. They all concerned basic principles, but will be hard to implement. Extensive discussions led to a feeling of urgency about Taiwan's economic difficulties. How can we maintain and increase our momentum? How can we find a winning strategy for Taiwan's economy? These are the Ma administration's biggest challenges.
The National Affairs Conference on Trade and Economics discussed two new issues. Taiwan's economic development strategy under globalization, and Taiwan's accession to regional economic integration and cross-Strait economic and trade policy. Put more bluntly, the question is how can Taiwan avoid becoming a loser in the new global economic foot race? How can it snatch victory from the jaws of defeat?
Following the financial tsunami, many nations committed to large-scale structural reforms. They enhanced their industrial competitiveness. This led to a significant restructuring of the global supply chain. Many nations chose to form alliances. This led to regional economic integration. These two trends intensified competition in the global economy. They resulted in swift and brutal changes in the world economic map. During the first wave of competition, the United States, the European Union, Japan, Mainland China, ASEAN, South Korea, and Singapore emerged as winners. They at least won more than they lost. Taiwan's position in the global supply chain however, was severely undermined. Taiwan has been increasingly marginalized by regional economic integration. Obviously it ranks among the losers.
Taiwan faces an increasingly grim situation. To win it must promote structural reforms. Long term domestic underinvestment and a brain drain are lethal for an economy. Insufficient diversification of industrial structure, excessive concentration of resources in ICT-related industries, and economic growth too dependent on a "Taiwan orders, overseas production" OEM export model, have deepened our economic vulnerability. They have led to a shortage of employment opportunities, income stagnation, unequal distribution of income, and sundry other problems. Therefore Taiwan must strive to create a favorable environment for investment, innovation, and entrepreneurship. We must promote industrial investment, job creation, boost wages, and halt the brain drain. We must change the pattern of industrial development, from an model driven by efficiency, to a model driven by innovation. The public supports these efforts. The key is how to implement them.
The biggest obstacle now is inertia and lack of determination. Take the recent improvement in our economy and the stock market boom. The main reason is the upcoming Apple iPhone 6 release and the rise of Mainland branded smart phones and tablet PCs. This has led to a significant increase in Taiwan OEM orders. This has stimulated exports and economic growth, and stimulated the Taiwan stock market. Following the 2010 financial tsunami, ICT industry exports rebounded sharply. This contributed to that year's 10,76% economic growth rate. But lo and behold, the result was lax efforts at structural reform, and even greater dependence on the OEM exports business model. Mainland brands are rapidly coming into their own. Taiwan accounts for an increasingly high percentage of its OEM production. Once once the Mainland acquires its own manufacturing capacity, it will be "Adios, Taiwan." Taiwan cannot turn defeat into victory through shortcuts. The government and private sector must eliminate inertia. We must change our growth model in order to become true winners.
A strong response to regional economic integration is another key to Taiwan's comeback. ROC-ROK FTA negotiations will be completed by the end of the year. The Trans-Pacific Partnership Agreement (TPP) and Regional Comprehensive Economic Partnership Agreement (RCEP) should be ready by the end of next year. South Korea is Taiwan's biggest competitor in the Mainland market. Taiwan's main trading partners are all TPP, RCEP participating members. That is why President Ma Ying-jeou is concerned. This is a matter of life and death. This is why he has repeatedly called on the legislature to accelerate the Cross-Strait Agreement Oversight Bill, STA, and sign the MTA as soon as possible.
This of course is the chief bone of contention between the ruling and opposition parties. Will globalization boil down to Sinicization? Will Taiwan's cross-Strait trade do more good than harm or more harm than good? In the final analysis, the answer to the globalization vs. Sinicization question will depend on whether Taiwan can join the TPP and RCEP after signing the STA and MTA with the Mainland. If the answer is uncertain, if we cannot join in the short term, we must have a ready response. Only then can we avoid defeat at the hands of our competitors, and avoid "Sinicization." Will cross-Strait trade do more good than harm or more harm than good? The answer depends on the aforementioned structural reforms and the effective management of cross-Strait risks. If the public unites behind reforms, there will be no insurmountable difficulties.
Therefore, when confronting sensitive cross-Strait policy issues, neither the Ma administration's dogmatic policy advocacy nor the DPP's obstinate "oppose everything" policy are acceptable. Only pragmatic problem-solving can resolve concerns and break through the current political impasse.
2014.07.30 02:22 am