Thursday, October 22, 2009

Ech! Fah! Redux

Yes, it's that kind of week -- a week where Yahoo endangered the entire subculture of scantily clad babes at Tech Shows by providing a bevy of lap dancing bikini babes at Hack World, engendering much tut-tutting and creating international embarrassment for the firm. A week in which a local school made students eat fire and walk on glass, which surely must have been a relief from the usual mass quantities of homework they have to do. A week in which there was a flurry of ECFA news as the Council on Labor Affairs (CLA) announced its study on job gains from ECFA, which saw less than half of what CIER saw (Taiwan Today from the pro-KMT UDN):
The report found if Taiwan did not sign an ECFA with Beijing, the island’s gross domestic product would shrink by 0.179 percent, resulting in job losses for 47,000 workers. On the other hand, if Taiwan did sign an ECFA with the mainland, between 105,000 and 125,000 new jobs would be created, the report concluded.

Workers in traditional manufacturing sectors and in the mining industry would be most adversely affected by ECFA, the report said.

In commenting on the report, CLA Deputy Minister Pan Shih-wei said that in the short term an ECFA could have an adverse impact on some Taiwanese industries, but in the long run the agreement would help make Taiwanese products more competitive.

The report also took into account what would happen after the free trade agreement of the Association of Southeast Asian Nations Plus Mainland China, South Korea and Japan.

The study looked at four possible scenarios. The best scenario for Taiwan would be if the mainland opened its market completely, while Taiwan only opened its market to industrial goods and products.

Under this best-case scenario, the main sources of new jobs would be the marketing, knowledge-intensive service and high-tech sectors. After an ECFA is signed, additional jobs for service assistants, machinists, manual laborers and technicians would be created as well, as the economy gradually improves.

Some jobs would be lost because of an ECFA, however. The garment and accessories industry could lose more than 5,500 jobs; the metal manufacturing sector could lose over 2,100 jobs; and other industries such as sports equipment and stationery manufacturing could lose some 2,500 jobs.
The uncertainties here are vast, probably too vast to make such claims. For one thing, no one knows the areas of agreement, and for another, they are almost certain to favor China. Consider the problems with the "fifth freedom" as the Taipei Times reported the other day (and Taiwan News has been editorializing about):
The fifth freedom of the air would allow Taiwanese carriers to fly on to other nations after arriving at airports in China, and vice versa.

Chinese Nationalist Party (KMT) legislators Yang Li-huan (楊麗環) and Chu Fong-chi (朱鳳芝) suggested that the ministry take the opportunity presented by ECFA talks to discuss the matter.

Chu said Taiwan and China had failed to reach a consensus on the fifth freedom at previous cross-strait talks because if China agrees to the fifth freedom, it could risk Chinese carriers losing some customers to their Taiwanese counterparts.
The pattern in Taiwan's agreements under the KMT is that Taiwan gets had. Why should ECFA be different? Consider also that not only are the particulars completely unknown, but further, there is no suggestion that if ECFA fails the nation should be permitted to abrogate the agreement. No one has planned for failure....

The Ministry of Economic Affairs was quick to get out there with damage control:
Huang Zhi-peng, director of the MOEA’s Foreign Trade Bureau, explained that the differences in the estimates were the result of using different methods to gauge the impact of a cross-Strait ECFA on Taiwan’s job market. Moreover, Huang added that although the two estimates were different, both reports showed that a cross-Strait ECFA would have a positive impact on Taiwan’s economy.
The financial industry should also make out like a bandit in the cross-strait agreements -- today the MAC put out a poll on the financial industry MOU. The poll was chiefly interesting for the questions it didn't ask, but on the last question, which asks whether Chinese banks should get tighter restrictions than other banks on their operations in Taiwan, the nearly 70% of the public said yes. How was this spun? The government was quoted as saying this:
Taiwan's top China policy body said Tuesday 52% of Taiwanese support the island's signing of financial memorandums of understanding with China, according to a survey by local TV station TVBS.

Of the 1,084 people that answered the survey, 60% said signing the MOUs will help improve cross-strait financial cooperation, the Mainland Affairs Council said in a statement.

Here are the first two questions that address the first paragraph:
  • 1. A cross-Strait MOU on financial services is a base document of cooperation to be signed by the financial regulatory authorities of both sides of the Strait for the exchange of information, confidentiality of information, regulatory mode, and mechanism of coordination. Do you think Taiwan should sign a cross-Strait MOU on financial service? (46.3% yes)
  • 2. To date, we have signed MOUs on financial services with 32 countries or areas. Do you think we should negotiate and sign an MOU with the Mainland? (52% yes)
Note how totally loaded question number 2 is; it appears that it is there only to produce a higher number in case (1) turned out to be a failure (as it actually did). MAC could also have given the percentage answer to number 1 as the actual level of support.

In other economic news, the unemployment rate trimmed to just slightly above 6% and the fall in commercial sales slowed -- according to the article, Taiwan is now climbing into recovery by riding the China boom. Taiwan's pariah status is forcing it to choose a carbon tax at home instead of paying carbon tariffs abroad. The new tax cuts have the government refunding billions to local taxpayers.

REF: A friend flipped me this article from The Age on Australia's losing free trade agreements, NAFTA from EPI. Both articles make essentially the same point: free trade agreements regulate sovereignty over trade, but do not increase trade or jobs. Of course we all know the whole point of the relationship between ECFA and local sovereignty...
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7 comments:

Jenna said...

oh no! Whatever will we do without Computer Xiaojies?

Word Verification: partail

Somehow fitting.

Anonymous said...

On Flights

Why doesn't Taiwan trade Chinese carriers being able to fly on to a third country for Taiwan carriers being able to fly on to a third country? Lots of southern Chinese cities that couldn't get direct flights to Canada/US could transfer in Taiwan. This happens for destinations in Vietnam (probably a little too far for directs to be economic) and Philippines already. I fail to see how this doesn't work both ways.

On ECFA/FTAs

I strongly disagree that FTAs are bad in principle. It's just that China is using it as a political tool and favors its own industries through the judicial system and subsidies in a way that isn't fair to foreign companies.

But beyond that, remember that salaried workers are at a very big disadvantage relative to investors/bosses in Taiwan. In a trade agreement between Taiwan and a poorer country, it's the investors/bosses that win in Taiwan and the salaried that win in China. If Taiwan could get agreements with Japan and the US, the salaried, who are very cheap relative to their productivity, would benefit a lot more as more efficient US capital comes in and competes against Taiwanese capital that sometimes borders on exploitative (not all cases, but there are quite a few bad apples).

I can't take that NAFTA article seriously when it makes claims like this: "The continued willingness every year of hundreds of thousands of Mexican citizens to risk their lives crossing the border to the United States because they cannot make a living at home is in itself testimony to the failure of NAFTA to deliver on the promises of its promoters."

Just because NAFTA closed the gap somewhat doesn't mean that poor Mexican governance and the absolutely noxious, perversive, and prudish anti-drug laws in the US have not held back or even rollbacked progress in Mexico. A fair comparison comes when marijuana is legalized in the US.

I'd urge you to reconsider your position on free trade in general. Would you really be against FTAs with Singapore, Japan, the US, or the EU?

Anonymous said...

Apologies, I forgot to also mention that Mexico has much lower environmental regulations, but the real elephant distorting everything is American subsidies for CORN. It is disgusting what the American government does to agriculture. Pre-NAFTA taxes and tariffs were not correctly directed at these distortions, but post-NAFTA, it's not hard to imagine that these distortions ended up even worse. But the enemy is these distortions, not free trade itself.

Michael Turton said...

How to put it: I wouldn't be against an FTA with any of the listed countries; Taiwan would benefit. But a FTA with China is really stupid. Fortunately in practice FTAs are almost never FTAs, they only open selected markets and then in carefully controlled ways.

Anonymous said...

A little off topic:

It really appears the KMT is working very closely with China to marginalize the DPP and cultivate a sham multiparty system of strictly Chinese Nationalist parties. I imagine once the DPP is a non-issue ,there will be some choreographed schism in the KMT to create the illusion of pluralism before Taiwan's annexation.

Anonymous said...

So ECFA is bad!

What's the alternative for Taiwan economic geniuses?

Michael Turton said...

I think the most important issue is that ECFA is not a free trade agreement. It's an agreement to open up certain sectors of the economy in certain ways. Really we need to stop thinking about it as if it were a free trade agreement.