China Times Editorial (Taipei, Taiwan, ROC)
October 1, 2015
Executive Summary: DPP presidential candidate Tsai Ing-wen says that upon becoming president, she will promote a "New Southern Policy". As usual the specifics of her policy are a muddle. But her pledge to "promote trade diversification... improve relations with ASEAN and India" show she has not changed her long-held anti-Mainland stance. She argues that the Kuomintang government's cross-Strait trade policy "unifies" trade. She says she would undo this, by "diversifying" trade, beginning with ASEAN and India.
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DPP presidential candidate Tsai Ing-wen says that upon becoming president, she will promote a "New Southern Policy". As usual the specifics of her policy are a muddle. But her pledge to "promote trade diversification... improve relations with ASEAN and India" show she has not changed her long-held anti-Mainland stance. She argues that the Kuomintang government's cross-Strait trade policy "unifies" trade. She says she would undo this, by "diversifying" trade, beginning with ASEAN and India.
Twenty-one years ago, in 1994, Taiwan already had a "Southern Policy". Back then, Lee Teng-hui was in power. The Mainland underwent reform and liberalization, making it highly attractive to Taiwan-based capital. The Lee regime argued that the Mainland economy was about to implode. It pressured Taiwan business leaders to invest in the ASEAN nations. But all good things must come to an end. In 1997, starting with Thailand, the Asian financial tsunami spread. Turmoil inundated Indonesia. The following year, large-scale anti-Chinese violence erupted. Taiwan business leaders bore the brunt of the violence. Not only did they lose money, some were even beaten and abused. Since then, those Taiwan business leaders who went south have either downsized or pulled out altogether. Taiwan business leaders who rejected the government's "sage counsel", who "risked death" by going to the allegedly "high-risk" Mainland, caught the trade boom express train. Japanese futurist Kenichi Ohmae compared the two paths, and noted that the biggest difference between Taiwan and Japan was that Japanese business leaders were too deferential toward their own government, while business leaders on Taiwan were not. That is why business leaders on Taiwan were more successful.
In fact, whenever the government promotes any economic policy, the most important consideration must be professionalism and rationality, not ideology. The most expedient way to formulate policy is to fall back on ideology. No thinking is required. Decisions can be reached instantly, Answers are ready made. No expenditures are required. The government can of course choose to base its policy on ideology. After all, talk is cheap. But business leaders must invest real money. If they lose it, the government will not compensate them because it gave them bad advice. Ultimately the business leaders themselves will suffer the consequences. Ms. Tsai may have the power to promote policies consistent with her ideology. But Taiwan business leaders' decisions must be rooted in rationality and professionalism. From this perspective, the "New Southern Policy" is superfluous.
Why? Whether one chooses to go west, south, east, or north, the goal is to make a profit. Even brand name companies in advanced countries, configure their production chains based on the profit motive. Over the past 15 to 20 years, the main production chains in East Asia have been located in Japan, Korea, Taiwan, and the Mainland. Japan sends its raw materials and components to Taiwan and South Korea. In both places, semi-finished products are then shipped to the Mainland, then assembled into finished products. From the Mainland, they are then shipped to consumers the world over.
Most manufactured products today are labeled "Made in China". But that does not mean the most profit or added value accrues to the Mainland. Similarly, Taiwan and South Korea are the Mainland's largest export market. But that does not mean Taiwan and South Korea are "dependent" upon the Mainland. One might even say the opposite, that the Mainland is dependent on Taiwan and South Korea.
East Asian division of labor patterns will change. Mainland wage levels are rising. The manufacture of some products may move to Vietnam, where wages and overhead remain relatively low. The Mainland is already moving up the production ladder. It is becoming a supplier of semi-finished materials from Japan to Taiwan or South Korea to the Mainland market, to Europe and the US market "four cornered trade" supply chain. It may well become part of the "five cornered trade" supply chain that includes the Mainland, Europe, the US, and ASEAN. No matter what, when this happens, the government will not need to encourage business leaders to invest in the ASEAN countries. They will do so naturally. Therefore the New Southern Policy is superfluous.
Another change is the Mainland's "One Belt, One Road" and "Asian Infrastructure Investment Bank" strategy. This strategy links Mainland-related supply chain countries and regions through infrastructure investment, and facilitates their rapid development. The Mainland will then enjoy lower shipping costs. It will then be able to obtain raw materials from South East Asia, South Asia, Europe, and Russia, and supply finished or semi-finished products to these regions. Once the One Belt, One Road is complete, the Mainland and South East Asia and South Asia will enjoy closer economic relations, just as the United States and neighboring Canada and Mexico enjoy close economic relations.
Tsai has proposed a New Southern Policy. If Taiwan business leaders respond, the results may not meet her expectations. In fact, they may be just the opposite. During the 1990s, South East Asia, South Asia and the Mainland were in competition. Now however, they may be in a cooperateive relationship. If Taiwan imposes a New Southern Policy on Taiwan business leaders, it may actually help the Mainland realize its One Belt, One Road vision. It may actually strengthen cross-Strait economic relations. If Tsai thinks such a policy can weaken cross-Strait economic and trade relations, that is willfull blindness. Responsible national leaders must realize that the Mainland is already the world's second largest economy. It has already signed FTAs with most countries, including ASEAN countries. Taiwan faces marginalization. How can it be saved? Certainly not by foisting a long-discredited, 20 year old policy off on voters suffering from historical amnesia.
We hope that each party's presidential candidate will refrain from ideologically-based policy formulation. We hope they will not just hear what they want to hear. Policies must not be reduced to slogans. The candidates must look at changes in the environment, then evaluate their own strengths and weaknesses. Only then can they arrive at the right decision.