Loving Taiwan and the Asian-Pacific Division of Labor Chain

Loving Taiwan and the Asian-Pacific Division of Labor Chain
China Times editorial (Taipei, Taiwan, ROC)
A Translation
November 24, 2014

Executive Summary: The main reason Taiwan has been an economic success for the past 50 years, is that our strategic partners became international brand names. They played a key role in the Asian-Pacific region division of labor. The PRC-ROK FTA will be a major blow to our role in the region. Voters motivated primarily by economic considerations must understand this. They must then walk the walk, and not just talk the talk.

Full Text Below:

The main reason Taiwan has been an economic success for the past 50 years, is that our strategic partners became international brand names. They played a key role in the Asian-Pacific region division of labor. The PRC-ROK FTA will be a major blow to our role in the region. Voters motivated primarily by economic considerations must understand this. They must then walk the walk, and not just talk the talk.

Cross-Strait economic and trade relations may seem like nothing more than bilateral relations between Taiwan and the Mainland. In fact, they are not. They are the result of the evolution in the East Asian region division of labor. They are the result of the production process for international brands. This process can be traced back to the US-Japan bilateral trade arrangement of the 1950s. Back then Japan directly exported textiles to the United States. It quickly dominated the US domestic market. Japan's exports led to a multitude of American textile import quotas. It also led to rising domestic wages.

From 1960 onwards, Japan began making foreign investments. For its major OEM base, it chose Taiwan and South Korea. Japan-US bilateral trade became trilateral trade. Japan exported raw materials and components to Taiwan and South Korea. Taiwan and South Korea processed them into consumer goods, then exported them to the United States and Europe. During that period, the United States was Taiwan and South Korea’s largest exporter. In other words, Japan's trade surplus to the US became Taiwan and South Korea's trade surplus to the US.

By the 1980s, Taiwan and South Korea were facing rising wages, exchange rate appreciation, US dissatisfaction with the trade surplus, and other factors. Those of us on Taiwan were forced to make outward investments. We continued to produce semi-finished products. But we transferred the final, labor-intensive stages to Mainland China and the ASEAN countries with cheaper wages. Triangular trade then became quadrilateral trade. Japan continued to export advanced core components and high-tech materials to Taiwan and South Korea. Taiwan and Korea turned them in semi-finished products, which were then exported to Mainland China. The Chinese mainland performed the final processing and assembly of these consumer goods, then exported them to Europe and other world markets.

When triangular trade became quadrilateral trade, the Chinese mainland naturally become Taiwan and South Korea's largest export market. The United States and Europe became Mainland China's largest export markets. Taiwan and South Korea's trade surplus with the United States was in large part turned into Mainland China's trade surplus with the United States. Japan’s trade surplus with the United States was turned into Taiwan and South Korea's trade surplus with the US, in the exact same way. This was how the East Asian division of labor evolved over the past half century.

Quadrilateral trade was not the result of political or partisan forces. It was the result of market mechanisms. Japanese scholars referred to it as the "East Asia Flying Geese Paradigm." Investments will always shift from exporting countries with high wages, to latecomers with low wages. Higher salary exporting countries must endlessly progress. They must upgrade their technical standards, and continue to move upstream in order to maintain their position on the division of labor chain. Taiwan and South Korea were able to maintain their position on the chain in East Asia purely by accident, by joint efforts on the part of owners and workers.

Is anyone to blame for this quadrilateral trade relationship? Who turned the Mainland into Taiwan and South Korea's largest export market? Who made the Taiwan and South Korean economies "over-reliant" on the Mainland? Of this there can be no doubt. Those who must be roundly condemned are the final decision-makers who placed the orders, the Western and Japanese manufacturers and brand owners, including Apple, HP, Dell, Levis, Uniqlo, Zara, Adidas, and Nike.

No one the least bit familiar with the dynamics of the global economy would issue such a condemnation. These international brands consider Taiwan an important strategic partner. They include Taiwan in the quadrilateral division of labor chain. If they didn’t, Taiwan would not receive any orders. Taiwan's investments would plummet. Taiwan employees would be unemployed or receive wage cuts.

We need do the exact opposite. We must cherish our relationship with these brands. We must retain them as Taiwan's strategic partners. Taiwan can develop its own brands, and its own services of course. But to be fair, doing so would take time. It would take considerable investments. It would involve a number of risks. Current orders from international brand manufacturers are the backbone of our employment. They provide us with our income. One can see them, touch them, earn them. In order to oppose Mainland China. some political parties and politicians may attempt to forsake these orders. They may attempt to prevent cross-Strait trade. The only word for this is “madness.” This is not “loving Taiwan.” This is harming Taiwan.

South Korea is about to sign an FTA. For Taiwan manufacturers who must pay duties on exports to the Mainland, this is a nightmare. This will jeopardize their position in the quadrilateral division of labor chain. If Taiwan and the Mainland cannot sign the MTA and complete FTA negotiations, these manufacturers could well perish. More importantly, while bosses can invest elsewhere. The poor employees cannot. According to current statistics, those most likely to be affected are hundreds of thousands of families, the vast majority of which live in southern and central Taiwan.

The quadrilateral division of labor chain is Taiwan's lifeline. Once again we urge voters motivated primarily by economic considerations to decide carefully. Consider the workers who fought so many years to secure Taiwan’s status in the division of labor chain. They are innocent. Unlike business owners, they cannot relocate. Their lives, their families, their children, are all on Taiwan. Please care for them. Give them a chance. Give Taiwan a chance.

社論－愛台灣 不能從亞太分工鏈掉隊
2014年11月24日 04:10
本報訊

台灣過去50年以來，經濟能夠成功發展，最重要因素就是我們的廠商成為國際品牌大廠的戰略夥伴，在亞太的生產分工上扮演關鍵角色。中韓FTA的簽訂，將對這個地位的繼續維持，形成重大衝擊。經濟選民不可不知，不可不起而行。

兩岸的經貿關係看似為台灣與大陸的雙邊關係，實則不然，它根本是東亞分工體系演化的結果，是國際品牌大廠生產安排的表現。這個過程可溯至自1950年代美日雙邊貿易：當時日本直接外銷紡織品到美國，快速占領了美國國內市場；出口數量龐大導致日本廠商面臨美國紡織品進口配額限制，以及其國內工資上漲的雙重壓力。

於是從1960年代起，日本開始對外投資，選定的主要代工基地就是台灣和南韓。從此日美「雙邊貿易」轉變成「三角貿易」，也就是日本出口原料及零組件到台灣及南韓，經台韓加工製成消費品，再外銷到美國及歐洲。在那個時代，美國是台灣也是南韓的最大出口國，換言之，原本從日本出口到美國的貿易順差，大部分移轉到台韓對美國的順差。

到了1980年代，台灣和南韓面臨薪資上升、匯率升值、美國對順差不滿等因素，而必須向外投資，保留自己生產半成品的能力，轉移最後階段的勞力密集加工到薪資較便宜的中國大陸和東協國家。從此，「三角貿易」轉變為「四角貿易」：日本仍然出口最先進的核心零組件和高技術的原料到台灣和南韓，由台、韓製成半成品出口到中國大陸，再由中國大陸進行最後加工和組裝製成消費品，然後出口到歐美等世界市場。

當「三角貿易」轉成「四角貿易」的時候，中國大陸自然變成台灣也是南韓的最大出口市場，而美國和歐洲則變成中國大陸最大的出口市場。原本台灣及南韓對美國的貿易順差，很大一部分也就轉變為中國大陸對美國的貿易順差，一如過去日本將其對美貿易順差轉到台韓對美順差一樣；這就是過去半世紀以來東亞分工演化的實際狀況。

四角貿易的形成不是任何政治或黨派的力量所造成，而是市場機制運作的結果。日本學者將其視為「東亞雁行理論」的一個實現，也就是投資會繼續不斷的從先開始出口但薪資變高的國家，移動到薪資仍低的後進者。薪資變高的出口國家則必須不斷進步，提升技術水準，繼續往上游發展，才能維持在分工鏈上的地位。是以台灣和南韓能保持在東亞分工鏈上的地位絕非偶然，是業主和員工共同奮鬥的結果。

如果一定要指摘有「個人」主導了這種四角貿易的型態，讓大陸成為台灣和南韓最大的出口市場，讓台灣和南韓的經濟「過度依賴」大陸，那麼毫無疑問的，最應當「被譴責」的是分工訂單的最後決策者，也就是歐美日品牌大廠的老闆，包括Apple、HP、Dell、Levis、Uniqlo、Zara、Adidas、Nike等等。

對全球的經濟動態稍有一點認識的人，都不會這麼做，因為這些國際品牌大廠如果沒有把台灣當作重要的戰略夥伴，讓台灣留在四角貿易的分工鏈上，台灣的訂單就會流失，台灣的投資會因而減少，員工更會因而失業或減薪。

我們要做的事應該正好相反，一定要抓牢和這些品牌大廠的關係，保持台灣作為他們戰略夥伴的地位。台灣可以自己發展品牌，可以發展服務業等，但平心而論，這些都需要時間，需要大量的投資，也有一定的風險。目前國際品牌大廠的訂單，則是我們就業和所得所依賴的實際支柱，看得到、抓得到、賺得到。如果某些黨派或政治人物為了反中，為了阻斷兩岸貿易，要放棄這些訂單，那就只能用「瘋狂」兩個字來形容。這不是愛台灣，是害台灣。

中韓即將簽訂FTA，對輸往大陸要付關稅的台灣廠商而言，這是一個夢魘，將危及他們在四角貿易分工鏈的地位。如果台灣和大陸不能簽訂貨品貿易協定，完成FTA談判，這些廠商將面臨生死存活的難關。更重要的是，老闆可以將投資外移，悽慘的是無法輕易外移的員工。依照目前資料顯示，最可能受影響產業的員工代表了數十萬個家庭，絕大多數在中南部。

四角分工鏈是台灣的生命線，我們再次呼籲，請經濟選民要審慎地做出決定。更要顧念已經在台灣奮鬥多年，好不容易把台灣分工地位穩住的員工。他們是無辜的，他們不像企業主一樣，有外移的能力，他們的生活、家庭、子女都在台灣。請顧念他們，給他們一個機會，給台灣一個機會。