Ten Questions vs. One Question: The Two Parties' Economic Achilles Heels
China Times editorial (Taipei, Taiwan, ROC)
September 5, 2014
Summary: The KMT and DPP must set aside their rote positions. They must listen
to different opinions. They must recruit people with broader experience
and greater wisdom. They must face the problem squarely. They must
offer genuine policy options. If the ruling and opposition parties can
move in this direction, then Taiwan's economy and its people may
Full Text Below:
Last week, the Democratic Progressive Party held its first "citizen's economic conference." In her opening address, DPP Chairman Tsai Ing-wen asked the government "Ten Questions" about Taiwan's economy. She asked: Why has the economy nearly been suffocated? Why is work so hard to find? Why are wages declining? Why is the starting salary for a young person a mere 22,000 NT? Why have consumer prices increased? Why have real estate prices soared? Why is income disparity increasing? Why do people on the same Taiwan inhabit two different worlds? Why has Taiwan been left behind by South Korea? Why do government officials insist that Taiwan is no longer an Asian tiger? Where is Taiwan's economy headed? What has happened to the people's hope for the future? In response, KMT spokesman Chen Yi-hsing cited President Ma. Ma has repeatedly cited a Wall Street Journal editorial which asked, "Why has Taiwan left Itself Behind?" In short, Chen responded to Tsai's "Ten Questions" with "One Question." The exchange reflects the difference in economic thinking between the DPP and the ruling Kuomintang.
In fact, Tsai Ing-wen's "Ten Questions" are simply criticisms of the KMT's economic policies. Her barrage of questions underscores the two parties' vastly different solutions to economic problems. They too have failed to gain public approval.
The Ma administration and the KMT's key prescription for Taiwan's economic problems is liberalization. Its strategy is the liberalization of trade, first with the Mainland, then with the rest of the world. This thinking is rooted in the fact that the Mainland has become the world's largest trading entity, second largest economy, and since 2003, Taiwan's largest trading partner. Taiwan hopes to open up to the world, to participate in the TPP (Trans-Pacific Strategic Partnership Agreement), the RCEP (Regional Comprehensive Economic Partnership), and other regional economic organizations. To do so, it must first sign the FTA related cross-Strait agreements within the ECFA framework, such as the STA and MTA, and promote the FEPZs. Alas, the DPP persists in obstructing the STA, FEPZ, and Cross-Strait Agreements Oversight Regulations in the Legislative Yuan. As a result, Taiwan's negotiations with the Mainland have fallen behind South Korea's FTA negotiations. This could lead to billions in exports from Taiwan replaced by exports from South Korea. That is why the KMT demanded of Tsai, "Why has Taiwan left Itself Behind?"
Taiwan faces complex economic problems. In particular, intense internal and external pressure to change its economic structure in the wake of the financial tsunami. Emphasizing liberalization alone is the KMT's Achilles Heel. One. Liberalization alone cannot change an economic growth model overly dependent on exports, especially the "Taiwan takes the orders, then manufactures the product overseas" OEM export model. Two. Liberalization alone cannot problems with the growth model. It cannot remedy the disconnect between domestic employment and wages that has led to increased income disparity. Three. Liberalization alone lacks supporting industrial policy and structural adjustment measures. It cannot ensure the effectiveness of further liberalization of Taiwan's economy. Four. Taiwan's liberalization to the world, and participation in regional economic integration, remains limited by cross-Strait factors. These are not under our control. Liberalizing trade with the Mainland first strikes a sensitive cross-Strait policy nerve. It inevitably triggers opposition.
The Ma administration and the KMT's economic policy emphasizes the external and de-emphasizes the internal. This policy has lost the support of the public. It is meeting with great resistance. By contrast, the Democratic Progressive Party's economic policy emphasizes the internal and de-emphasizes the external. Tsai Ing-wen's "citizen economic conference" underscores innovation, employment, sustainable development and domestic issues in the real estate sector and SME development. Alas, on globalization and the sensitive policy of cross-Strait liberalization, she is clearly evasive, and has failed to break free of the DPP's habitual policy prescriptions.
Tsai Ing-wen and the DPP must be clear. Taiwan's population, natural resources, and market scale are limited. It cannot phase out its current overly export-dependent economic model overnight. Cross-Strait economic and trade relations are inseparable. Beijing's growing influence in the international community, and Taiwan's response to globalization and the world, make it impossible to bypass the Mainland market and the Beijing authorities. The DPP's biggest Achilles Heel has been cross-Strait relations. Yet all it does is blame the KMT for excessive reliance on the Mainland market. All it does is stress the need to balance international relations with cross-Strait relations. As for internal structural reforms, the DPP has an appealing policy statement. But so far it has failed to make any breakthroughs in policy sufficient to change the status quo. Their feasibility remains difficult to verify. Add to this the 2012 presidential election. Tsai has stressed "fairness and justice" in public housing, the capital gains tax, and real estate tax reform. These are all doable. But the government is already doing them. The differences in the two parties' policies are limited. The DPP may blast the Ma government, but charges of vilification without content continue to haunt Tsai Ing-wen.
The KMT emphasizes liberalization alone. It emphasizes external factors and de-emphasizes internal factors. The DPP blindly evades the core issue in cross-Strait relations. It emphasizes the internal and de-emphasizes the external. Both parties have Achilles Heels that expose them or entrap them. Neither offer healthy, sustainable modes of economic development. As Tsai pointed out, Taiwan's economic growth model and economic decision-making patterns must change. But how must they change? What must they be changed into? Neither party has an answer.
The KMT and DPP must set aside their rote positions. They must listen to different opinions. They must recruit people with broader experience and greater wisdom. They must face the problem squarely. They must offer genuine policy options. If the ruling and opposition parties can move in this direction, then Taiwan's economy and its people may survive.