With Total Government, Tsai Ing-wen Must Bear Total Responsibility
China Times Editorial (Taipei, Taiwan, ROC)
May 20, 2016
Executive Summary: Ms. Tsai Ing-wen will be sworn in today. The DPP will enjoy “total government”. The new regime is clearly intent on "de-Sinicizing” Taiwan. But the global economy has taken a downturn, and Taiwan must upgrade its economy. This puts the new regime under enormous pressure. Any economic policy that attempts to de-Sinicize Taiwan will be subject to close scrutiny. If the economy remains in the doldrums two years from today, if wages stagnate and private investment dries up, the Tsai Ing-wen regime will be asked to step down and be judged.
Full Text Below:
Ms. Tsai Ing-wen will be sworn in today. The DPP will enjoy “total government”. The new regime is clearly intent on "de-Sinicizing” Taiwan. But the global economy has taken a downturn, and Taiwan must upgrade its economy. This puts the new regime under enormous pressure. Any economic policy that attempts to de-Sinicize Taiwan will be subject to close scrutiny. If the economy remains in the doldrums two years from today, if wages stagnate and private investment dries up, the Tsai Ing-wen regime will be asked to step down and be judged.
Tsai Ing-wen is determined to de-Sinicize. She refuses to recognize the 1992 Consensus. Therefore cross-Strait relations will not be what they have been for the last eight years. Cross-Strait economic and trade exchanges beneficial to both sides or even to Taiwan alone, will be reduced. Tsai Ing-wen has proposed a "New Southern Strategy" as her response. Although not explicit, its clear intent is to shift Taiwan's export-oriented investments from the Mainland to Southeast Asia and South Asia. These policies, put simply, are yet another form of de-Sinicization.
This trade policy, rooted in political ideology, contains serious blind spots. The blindness may even be willful. The first blind spot is the importance of the Mainland economy. The second blind spot is the time delay.
Mainland China is already the world's second largest economy, its largest exporter, and its second largest importer. Its growth rate has slowed to 6.5% to 7%. But among the major world economies, such a growth rate trails only India's. The Mainland market accounts for 40% of Taiwan's total exports. It is also the destination for most of Taiwan's external investments. These are hard realities that cannot be changed in the short term. Ignoring the importance of cross-Strait trade, or worse, abandoning the Mainland market, means certain disaster for Taiwan's economy. Advocates of the New Southern Strategy say "the Mainland economy is already dying", therefore Taiwan must change direction. These allegations are absurd.
When two economies engage in trade, a gravitational attraction manifests. When the distance between them closes, and one economy is much larger than the other, trade inevitably focuses on the larger one. Furthermore, the two sides share the same culture and the same language. Twenty years ago, during the Lee Teng-hui era, Mainland GDP was only 700 billion dollars. Lee Teng-hui promoted his Southern Strategy, then his “remain patient, avoid haste” policy. The result was clear. Taiwan's economy could not escape the Mainland economy's gravitational field. Mainland GDP has now reached 10 trillion dollars. Yet Tsai Ing-wen wants to shift our trade southward with her New Southern Strategy? The probability of success is vanishingly low.
It matters not whether one focuses on export markets or investments. Even assuming the New Southern Strategy is feasible, it would not take effect overnight. From start, to negotiations, to investments, to concrete economic rewards, would require at least two years and as many as five years before taking effect. Without knowing whether the New Southern Strategy will be a success or a failure, there is no benefit in the Tsai Ing-wen government rushing to dismantle cross-Strait economic and trade relations. Doing so would only provoke a sudden tightening of the Mainland market, and a shrinking of Taiwan's economy. As Premier Chang San-cheng noted, the New Southern Strategy "cannot overtake the Mainland overnight. Wishful thinking will only send shockwaves through Taiwan's economy".
Over the next four years, Taiwan's trade and economic marginalization will become more serious. The past 15 years has been an era of global Free Trade Agreements. Taiwan alas, has been kept out of the loop. Tsai Ing-wen has high hopes for the Tsai regime's sole solution -- the TPP. But the presidential candidates for both major US political parties have expressed opposition to the TPP. Therefore it may be stillborn. Taiwan cannot possibly complete negotiations and join within four years. Only the MTA might prevent Taiwan's economic marginalization. But because the DPP assumed power, the MTA is stillborn. Therefore Taiwan's exports and private investment will be harmed. Can the new government really keep chanting “TPP!” for the next four years? Is there any other way out?
During the Ma administration, the green camp reveled in criticizing the substantial increase in Mainland tourists to Taiwan. They even claimed it was of no help to the economy. But anyone with even a shred of economic sense knows that such allegations are nonsense. If Mainland tourism to Taiwan is substantially reduced, the impact on the growth rate will be secondary. The impact on the job market will be devastating. Tourism is a service industry. It brings far more employment opportunities than high-tech industry, and can absorb more low-end labor.
The new Premier Lin Chuan expects cabinet members to “produce results in the first 100 days". Frankly this is too rushed and too outrageous. The positive or negative results of economic policy are not going to manifest themselves in a mere 100 days. Talk of "producing results in the first 100 days" is mere rhetoric. On the other hand, half a term, or two years, is probably a reasonable time frame.
Two years later, how will people feel about the economy? Such feelings are not a matter of mere numbers. High or low numbers only make sense within a time frame. What's important is that people feel the difference. Has it increased or decreased? Are jobs easier to find? Or does the shadow of unemployment still hang overhead? Such feelings are closely related to whether businesses have increased investment in Taiwan or fled elsewhere. Tsai Ing-wen insists on her de-Sinicization economic policy. Its effectiveness will eventually be subject to rigorous testing. Will the new government pass muster?