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Trade & Investment

China Trade Deal Raises Hackles in Taiwan

TAIPEI, Aug 6 2013 (IPS) - A broad coalition of Taiwanese labour, human rights and other civil society organisations are campaigning to block legislative ratification of the controversial Cross-Strait Services Trade Agreement signed Jun. 21 by representatives of Taiwan and China.

The signing of the pact in Beijing, a continuation of the Cross-Strait Economic Cooperation Framework Agreement (ECFA) signed in June 2010, sparked a two-day occupation of the legislative podium by opposition Democratic Progressive Party and Taiwan Solidarity Union lawmakers.

The boycott ended only after all legislative caucuses agreed that the agreement would be reviewed line by line instead of being rammed through a ratification vote, as desired by the rightist Chinese Nationalist Party (Kuomintang or KMT) government.

“But we are more concerned with the likelihood that China’s state enterprises will use their capital to buy up neighbourhood beauty parlours and hair dressing salons...” -- Cosmetology and Hair Vocational Association chairman Peter Ku Wen-fa

President and ruling KMT Chairman Ma Ying-jeou and other officials maintain that the new deal is in Taiwan’s favour since it would open 80 service product lines for Taiwan companies in China compared to 64 service industries in Taiwan listed for market liberalisation for investors and service providers from the Peoples Republic of China.

A post-signing impact study by the Chung-Hua Institution of Economic Research commissioned by the Ministry of Economic Affairs released Jul. 16 forecast that the pact would lift economic growth by between 0.025-0.034 percentage points and provide over 11,000 new service sector jobs over the next decade.

Among the sectors to be opened up to Chinese investment and experts are financial services, hotels and restaurants, printing, consumer services such hairdressing and beauty parlours, wholesale commerce, transportation services, construction, telecommunications and many social services including care services for handicapped and elderly citizens.

However, a wide range of economists, labour and human rights organisations, small entrepreneurs and cultural figures together with opposition parties warn that the new pact will harm the interests of Taiwan workers and small businesses and to democratic freedoms out of proportion to its anticipated benefits.

During a rally in front of the Legislative Yuan Jul. 28, Cross-Strait Agreement Watch Alliance Convenor Lai Chung-chiang announced the official formation of the Democratic Front against the Black-Box Cross-Strait Services Trade Agreement composed of a coalition of labour, human rights, environmental, social welfare and media reform organisations.

Critics have concentrated their fire on the lack of transparency in the negotiations, the asymmetrical liberalisations to China’s benefit and the impact on Taiwan society, culture and national security of deeper links with China’s party-state dominated economy.

The government did not conduct any comprehensive impact assessment or hold any substantive dialogue with industry associations, labour unions or legislators before signing this pact, Taiwan Labour Front secretary-general Sun Yu-lien told IPS.

National Taiwan University department of economics chairwoman Prof. Cheng Hsiu-lien told IPS that most of the market liberalisations offered by China have preconditions while most Taiwan’s market openings for Chinese companies are unconditional.

Cheng noted that Taiwan e-commerce ventures will not be allowed to directly offer cross-border services, but will have to set up joint ventures in China’s Fujian Province and apply for licences which would ban content contrary to Chinese policies, such as Beijing’s claim that Taiwan is part of Chinese territory.

Taiwanese e-commerce enterprises will be forced to take their capital, staff and knowhow to China and will also be forced to engage in self-censorship, warned Cheng.

Hong Yi Travel Services co-chairman Jack Tsai Chia-huang told IPS that the new pact would let Chinese companies set up a vertically integrated system of travel agencies, hotels, transportation, restaurants and retail stores that would monopolise the cash flow from Chinese tourism and let the Taiwan people bear the costs to the environment.

Cosmetology and Hair Vocational Association chairman Peter Ku Wen-fa told IPS that officials affirm that Chinese workers will not be imported and so they will have to worry about their jobs.

“But we are more concerned with the likelihood that China’s state enterprises will use their capital to buy up neighbourhood beauty parlours and hair dressing salons and our beauticians or hair stylists will become employees in Chinese state enterprises.”

Even businessmen eager to expand into the China market were dismayed.

Locus Publishing Company chairman Rex Hau Ming-yi said in a news conference Jul. 27 that government negotiators had failed to press Beijing to allow Taiwan publishers and printers access to book and magazine publishing licences, but agreed to permit Chinese state-owned publishing groups invest in Taiwan’s printing and wholesale market.

Taiwan publishers will be squeezed if Chinese state companies gain control over printing and wholesaling and will be subject to self-censorship, said Hou, who added that the result would be the erosion of freedom of thought and cultural diversity in our own civil society.

National Taiwan University professor of economics Lin Shang-kai told IPS that the new pact will spark another wave of migration of capital, talent and knowhow to China and thus further push down investment, employment, wages and consumption in our own economy.

A survey of 1,008 Taiwan adults released in late July by Taiwan Indicators Survey Research found that 48 percent opposed signing the services trade pact, while 34 percent were in favour. These figures reflect a reversal three years ago, when 47 percent supported signing an ECFA compared to 32 percent who opposed.

The impact of the backlash was shown when Taiwan’s 113-member national legislature began a two-week special session Jul. 29 during which the KMT had initially aimed to secure ratification of the pact.

Instead, while the civic alliance held protests against the pact outside the Legislative Yuan complex, party caucuses agreed to submit the pact to review by a legislative committee in September.

Taiwan Democratic Watch president Hsu Wei-chun told IPS that the delay shows that citizen pressure can have impact as many KMT lawmakers are aware that citizens on the streets and voters in their districts are very worried.

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  • michael lim

    Interesting article. Sounds just like what Malaysia is going through in its negotiations with 11 other countries over the Trans Pacific Partnership Agreement (TPPA) that the U.S. is attempting to push through.

  • Julian

    Thank you, Dennis, for this excellent analysis. The Chunghwa Institute study is poorly disguised self-affirming propaganda that government-paid economists at that institute routinely churn out to justify, however lamely and unconvincingly, these political deals with Beijing. They did the same with some other agreements with China like ECFA. Their studies are useless, especially since they are known to hold back results of their economic modeling that didn’t fit the pre-ordained conclusions. Let’s hope the Legislative Yuan gets some backbone this time and tells the government either to renegotiate or trash this agreement and forget about the whole thing.

  • Jin Defang

    an incisive article that gets to the heart of the issue

  • Taiwan Observer

    Ma has a 13% approval rating and yet feels he has the political mandate to push something this radical through the legislative process. What astonishing self-righteousness: he is on a crusade. It is rather like George W. Bush failing to win the popular vote in the 2000 American presidential election and yet deciding that he had a mandate to take the US in a radically right-wing policy direction from 2001 to 2009. I don’t understand the arrogance of politicians like Ma and Bush.

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