Taiwan's Gradual Trade and Economic Marginalization

Taiwan's Gradual Trade and Economic Marginalization
China Times Editorial (Taipei, Taiwan, ROC)
A Translation
August 25, 2015

Executive Summary: Future generations who look back at the international trade and economic situation during the 21st century, will surely zero in on Free Trade Agreements (FTAs) and regional economic cooperation organizations. These have redrawn the map for international trade, and rewritten the rules of the game. The ROC's chief competitor, South Korea, has signed 12 FTAs with major nations or regions. They include the United States, the EU, Brazil, India, and the Chinese mainland. Among the world's major economies, only Japan has yet to sign an FTA with South Korea. But Mainland Chinese, Japanese, and South Korean foreign ministers reached an agreement in March of this year. The three governments will accelerate FTA talks. The impact on Taiwan's exports will be far-reaching and immense.

Full Text Below:

Future generations who look back at the international trade and economic situation during the 21st century, will surely zero in on Free Trade Agreements (FTAs) and regional economic cooperation organizations. These have redrawn the map for international trade, and rewritten the rules of the game. The ROC's chief competitor, South Korea, has signed 12 FTAs with major nations or regions. They include the United States, the EU, Brazil, India, and the Chinese mainland. Among the world's major economies, only Japan has yet to sign an FTA with South Korea. But Mainland Chinese, Japanese, and South Korean foreign ministers reached an agreement in March of this year. The three governments will accelerate FTA talks. The impact on Taiwan's exports will be far-reaching and immense.

Taiwan's performance in this area has been lackluster.  Taiwan has signed fewer than 10 FTAs, five of which are with small countries in Central and South America, with which we have diplomatic relations. They add up to a mere 0.2% of our total trade, and constitute a formality of no real significance. We did sign ECFA, an FTA with the Mainland. But ECFA's early harvest list means less than 9% of Taiwan's trade is covered by the agreement. By contrast, once the Mainland's FTA with South Korea takes effect, up to 73% of South Korea's trade will be covered.

The future is even more frightening and pessimism inducing. Two key regional economic and trade organizations are currently under creation. They are the United States led TPP (Trans-Pacific Partnership), and the Chinese mainland led RCEP (Regional Comprehensive Economic Partnership Agreement). The TPP includes 12 countries with a total economic output (GDP) of $ 27 trillion, accounting for 38% of the world's wealth and 34% of the Chinese mainland's trade volume. The RCEP includes 16 countries, with an economic output of $ 21 trillion, accounting for 29% of the global total, and 57% of our trade. These two regional organizations are in the midst of active negotiations. The soonest they may be complete is next year. The latest, the year after that. 

Joining these two regional organizations is essential to Taiwan's economy and trade. Unfortunately so far we have failed to do so. Among the 24 current APEC member nations, only two have not joined the TPP or RCEP. One is the ROC, and the other is Papua New Guinea. If this is not trade marginalization, what is?

Signing FTAs is beneficial for our exports. This is common sense. Suppose Taiwan and South Korea export the same products to the United States. South Korea has signed an FTA and enjoys zero tariffs. Taiwan companies are required to pay 5 to 10% in tariffs, maybe more. Profit margins are already low with 5 to 10% profits. Taiwan will naturally be unable to compete, and will ultimately have to hand over the market to Korea. Unfortunately when faced with these sorts of economic issues, "common sense" is far from common. Many anti-China elements who oppose the cross-strait MTA claim that "FTAs are useless" and have misled the public into opposing FTAs.

Taiwan's economic and trade marginalization is reflected in its exports. For example, Taiwan manufacturers once enjoyed a defacto monopoly in certain niche petrochemical raw materials. But once South Korea's FTA with the  European Union took effect, South Korean companies immediately monopolized the European market. Two months after the US-ROK FTA took effect, South Korea's machine tool exports to the US eclipsed Taiwan's. The tariff on Taiwan's hosiery exports to the US is 14%. South Korea benefits from its FTA. The tax rate on its products is zero. As a result over half of the 600 plus companies in Shetou, Zhanghua, Taiwan's hosiery production region, have closed their doors.

Trade and economic marginalization affects more than exports. Even more lethal and serious is its impact on investments. If exports from Taiwan fail to benefit from tariff concessions offered by regional organizations or FTAs, private investment and even existing plants are likely to move to countries and regions that enjoy preferential tariffs. Recently the Formosa Plastics Group announced that over the next three years, the percentage of its overseas investments will substantially increase, from 25% to as much as 80%. When foreign transnationals decide where to build factories in the Asian-Pacific region, they find Taiwan offers the best conditions. But since it has no FTAs, they look elsewhere. This is why Taiwan's foreign direct investment continues to plummet, and its total is now less than half that of Vietnam and the Philippines. Over the next two years, the PRC-ROK FTA and other major regional organizations will begin to have an effect. Our marginalization will become even more apparent. Can we really remain indifferent?

To overcome this marginalization crisis, Taiwan must join regional economic organizations and sign FTAs with the world's major economies, as soon as possible. The plain truth is that Taiwan cannot sign FTAs with the United States and Europe, because we cannot even get our foot in the door. Even assuming we could sign them, they would not take effect until years later, and would not meet Taiwan's urgent needs today. Taiwan has yet to be invited to join the RCEP or TPP.  The former is Mainland led, Taiwan cannot join while it ignores the MTA. The latter Taiwan can probably join sooner or later. But perhaps only during the second round, no sooner than 2020.

Only the MTA can provide truly meaningful and immediate benefits to Taiwan's trade and economy. It can temporarily defuse the crisis of marginalization. Unfortunately the MTA has been politicized. It has become the target of green camp political party and "anti-[Mainland] China" element demonization. The Ma government may be able to complete negotiations before its term runs out. But it will not be able to implement the MTA before then. Can MTA negotiations continue after next year's election? That is hard to say.

Tsai Ing-wen and the DPP are favored to win next year's general election. Will they support the MTA? If Tsai is willing to support the MTA, perhaps the Ma government can complete negotiations during his remaining time in office, then let whomever assumes power afterwards take responsibility for its implementation. That would defuse the crisis of Taiwan's trade and economic marginalization to a considerable extent. Otherwise, no matter who winds up in office next year, she will endure the pain of economic and trade marginalization.

溫水煮青蛙的經貿邊緣化危機

2015年08月25日 中國時報

如果後人回顧進入21世紀後的國際經貿變化，主軸必然是FTA（自由貿易協定）及區域經濟合作組織；這股趨勢改寫、重塑了國際經貿的版圖與遊戲規則。我國主要競爭對手韓國，已簽下12個「重量級」FTA，其中包括美國、歐盟、巴西、印度及中國等大型經濟體，全球重要經濟體中，只剩下日本尚未與韓國簽FTA。但今年3月的中日韓三國外長會議已達成共識，將加速3國自貿區的談判，這些對台灣的出口影響深遠而鉅。

台灣這方面的成績乏善可陳，台灣簽下的FTA不到10個，其中5個是與中南美洲邦交小國簽，所占貿易額只有0.2%，徒具形式而無實質意義。即使加上與大陸簽下的ECFA，因ECFA只有早收清單，因此台灣貿易量只有不到9%為FTA所涵蓋。相較之下，韓國在中韓FTA上路後，涵蓋比率可達73%。

未來更讓人悲觀又心驚，亞洲現在進行中，最重要的兩大區域經貿組織分別是由美國主導的TPP（跨太平洋戰略經濟夥伴關係協議），及由大陸主導的RCEP（區域全面經濟夥伴協定）。TPP有12個國家，在經濟總量（GDP）上有27兆美元，占全球的38%，占我國貿易額的34%；RCEP有16國，經濟總量為21兆美元，占全球總量的29%，占我國貿易額的57%。這兩大區域組織正積極談判中，快則明年、晚則後年可望完成談判上路。

加入這兩個區域組織對台灣經貿有其必要性，但遺憾的是我國至今都未能加入。而目前24個APEC（亞太經合組織）成員國當中，只有兩國未能加入TPP或RCEP：一個是台灣，一個是巴布亞新幾內亞。如果這不叫「經貿邊緣化」，什麼才叫經貿邊緣化？

簽FTA對本國出口的助益以常識思考即可知，如果台韓兩國出口同樣的產品到美國，韓國因有簽FTA而享零關稅，台灣企業則需要支付5～10%、甚至超過10%的關稅，以現在平均5～10%利潤的「微利時代」，台灣產品當然不可能與韓國競爭，最後只能拱手讓出市場。可惜對這種「常識性」的經濟議題，猶有不少「反中人士」，因為反對兩岸貨貿協議而倡導「FTA無用論」，誤導民眾去反對FTA。

事實上，台灣經貿邊緣化的衝擊已反映在出口。例如原本屬於台灣廠商利基產品的石化原料，在韓國與歐盟的FTA生效後，歐洲市場就立刻被韓國廠商搶占。美韓FTA生效後兩個月，台灣工具機輸美市占率就被韓國超越；台灣的織襪產業輸美關稅是14%，韓國受惠FTA產品稅率降為零，結果是台灣織襪產地重鎮的彰化社頭，600多家業者倒閉一半以上。

經貿邊緣化的影響不僅在出口，更致命且嚴重者在投資；由於從台灣出口的商品無法享受區域組織或FTA的關稅優惠，民間新增投資、甚至現有的廠房，都可能移往享有優惠關稅的國家與地區。日前台塑集團就表示，未來3年海外投資比重也將從之前的25%大幅調高至80%；跨國外商在選擇亞太投資設廠國時，即使台灣擁有最佳條件，但也因無FTA加持而被放棄，這也是台灣外商直接投資持續滑落，總額只有越南、菲律賓一半不到的主因。未來兩年，中韓FTA與主要區域組織上路，這種邊緣化的衝擊將更明顯，台灣得無憂乎？

要突破邊緣化危機，台灣必須盡快加入區域經貿組織或與大型經濟體簽FTA。擺在眼前的現實是，台灣不可能與美、歐簽FTA，因為八字沒一撇，達陣機率低，即使完成也會在多年之後，根本難救台灣燃眉之急。加入RCEP或TPP，台灣尚未被接受加入，前者大陸主導，台灣不可能跳過貨貿而可直接加入；後者台灣應遲早可加入，但只能列入第二輪加入國中，加入時間最快也在2020年了。

真正對台灣經貿有實質意義又已有相當進度、可暫時化解邊緣化危機者，只有貨貿了，但貨貿卻被染上太多的政治與意識形態，遭在野黨與「反中」者強力反對。馬政府任內不論是否能完成談判，都不可能讓貨貿上路實施；明年大選後，貨貿談判是否能持續也有變數。

最有希望執政的蔡英文與民進黨，該表態支持貨貿與否，如果蔡願意支持貨貿，也許可由馬政府在最後任期內完成談判簽署，再由下任執政者負責讓其在國內落實，則庶幾乎可在相當程度上化解台灣經貿邊緣化的危機，否則，明年之後不論誰執政，都將飽受經貿邊緣化之痛苦。