Monday, November 02, 2009

Fourth Round of ECFA Talks Postponed

Breaking news this evening as the Mainland Affairs Council (MAC), which does not, as its title would suggest, help Taishang manage their mistresses in Shenzhen, announced that the fourth "informal" round of ECFA talks has been postponed.
Huang Chih-peng, chief of the Bureau of Foreign Trade under the Economics Ministry, said that the ministry had already received a message from the Mainland stating that the details of the consultations and progress required further discussion. As a result, Huang said that the two sides decided to postpone the informal talks. Asked whether the delay was related to the intense media coverage of public concern about the progress of a cross-Strait ECFA, the Economics Ministry spokesman declined to comment.
This week the European Chamber of Commerce here said that Taiwan should sign the ECFA with China as soon as possible, which would help it gain a market opening agreement with Europe. It might be helpful to review what has happened so far with agreements with China. Fortunately Taiwan News had a helpful summary today:
Although the KMT government confidently promised that 3,000 Chinese tourist arrivals daily and would inject NT$60 billion annually into the economy, the actual volume of PRC travellers averaged only 1,307 from December 2008 through September 2009, a fraction of the average 11,897 daily visits to the PRC by Taiwan citizens during the same period.

Moreover, the substantive benefits to Taiwan's economy and employment are subject to a substantial "discount'' due to the concentration of PRC package tour groups in the hands of PRC-approved tour companies and the "squeezing out'' of spending by higher-spending tourists from Japan or other nations and many local citizens who avoid sites frequented by PRC tour groups.

Although the number of PRC tourists more than doubled year on year to nearly 624,000 during the first eight months of 2009, the inflow of Japanese tourists, who spend 1.4 times more daily and spread their activity and purchases far more widely in Taiwan, shrank 10.7 percent to just over 638,000.

According to an estimate by the DPP's Policy Research and Coordination Department, gross revenues from Chinese tourism over the past 15 months has amounted to NT$32.8 billion, far less than the promised NT$60 billion annual input.

Moreover, the establishment of direct marine and air links has failed to revitalize Taiwan's major gateways such as Kaohsiung Port and Taiwan Taoyuan International Airport.

During the first half of 2009, Taiwan's main port of Kaohsiung, which was supposed to be revitalized by the implementation of direct links, suffered a 21.1 percent drop in cargo traffic, for the second worst record among East Asia's top 10 seaports.

During the first eight months of 2009, arrivals and departures through Taiwan Taoyuan International Airport fell nearly 11.5 percent, while total air cargo throughput dropped nearly 25 percent. While much of the decline is attributable to the economic recession, the structuring of the "direct links'' agreements in line with the PRC's characterization as "domestic routes'' also contributes to these declines.

Most of Taiwan's shipping fleet, mainly "flag of convenience'' cargo vessels, are barred from cross-strait marine shipping since they are "foreign'' registered, while Beijing's denial of fifth-freedom onward connections for Taiwan airliners and restriction of cargo shipments to direct cross-strait trade is reducing Taiwan's air and sea ports from "Asia-Pacific'' marine and air "hubs'' into "spokes'' for PRC ports, notably Shanghai.

Moreover, the toothless agreement on cross-strait food safety has failed to deliver the promised reparations for Taiwan companies hurt by imports of melamine - laced milk powder, while a pact on "judicial assistance'' inked in April has yet to result in the extradition of a single major economic fugitive back to Taiwan.
Similar points were made in the Taipei Times today. The DPP claimed that arrivals from other nations had fallen, including Taiwan's bread-and-butter South Koreans, whose arrivals had plunged 35%.

The confidence of foreigners like the European Chamber in the promises of China to Taiwan continues to amaze me, in light of these simple facts. Well, actually it doesn't -- a couple of years ago a delegation of pro-Taiwan academics traveled the capitals of western Europe and was told to get on with the business of unification so everyone could make money -- whereas in eastern Europe the locals knew exactly what was what.

Perhaps China will permit Taiwan to have free trade agreements (FTAs) with other nations, but why should it? China already has FTAs with many those nations, or will under upcoming agreements. Consider that if Taiwan does not have FTAs, then its businessmen will be compelled to move to China in order to take advantage of lower tariffs. There is in reality little incentive for China to permit Taiwan to have real FTAs with other nations. That is why one thing the US can do to aid Taiwan is to pursue an independent FTA with Taiwan, which will encourage other nations to do so.

A couple of other points -- people in the know are reporting that the old government message (ECFA will save Taiwan!) under the former Liu Cabinet is going to be replaced by an upgraded Version 2.0, which will strike a more nuanced tone of "benefits exceed costs". The line that ECFA will not damage sovereignty will continue, however.

Also, note again -- ECFA is NOT a free trade agreement. It's an agreement to open certain markets and industries to certain kinds of economic activities. Expect that to become more prominent in the government line as well. FTAs will be follow on agreements.....
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Thomas said...

The Port of Kaohsiung could build some extra capacity, but that is about it. As I have said before, the port may grow, but it will never again grow at the rate it did 20 years ago. Taiwan simply does not have the huge manufacturing hinterland that China does leaving it to focus on exportation of components and high-end products as well as transshipments.

The direct links could improve the latter, but not by an enormous amount and certainly not so fast.

The government has made it sound as if the extra containers that would come in because of the direct links would bring a windfall. In fact, they would just edge up the port's growth slightly.

I know you know this. I wonder whether the reporter does. I have no beef with his comment that the government's promise did not pan out, but the criticism of this one point would be more effective if the reporter made the point that the supposedly massive growth was always going to be a mirage.

Anonymous said...

It's very strange. The Euro Cham is just aping Amcham. But they said that there could be an agreement as soon as there were direct flights too!

Everyone else says "sign FTA with me, do it before you do it with anyone else". It's a competitive thing that they want early. But to Taiwan, they say, sign with China, maybe we'll sign with you. What the hell? How does that make any sense? Either you know it's good for you, and so you should sign it, or it's not, and signing with China won't change anything. What weirdos.

Anonymous said...

Europe (and Japan to a certain extent) want to sign deals with Taiwan after ECFA is signed because they'd rather conduct their China business through Taiwan. The sooner Taiwan and China do the deal, the sooner Taiwan can benefit.

Taiwan News et al pointing to low tourist numbers just shows what most already know - the media in Taiwan is terrible. Blaming tourist numbers (which are down across the board) on KMT and the TW-China agreement completely overlooks the fact that the world economy has been down since mid-2007 - tourist numbers globally are down. The Ma govt can hardly take responsibility for the worlds ills, although some in the DPP and TW media seem to think they should.

Feiren said...

Why is the ECFA not a free trade agreement? I ask because I have seen the ECFA characterized as a quasi-FTA in the Liberty Times etc.


Free trade area is a type of trade bloc, a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them. It can be considered the second stage of economic integration. Countries choose this kind of economic integration form if their economical structures are complementary.

Is it because the first element of this definition is not met since not enough goods and services have had tariffs etc eliminated? Arguably, Taiwan and China's economies are complementary, right?

Jennifer said...

I think it's amazing that a person who is not of Taiwanese descent has so much concern for the small island. Thank you for your infomative and interesting blog!

Dan Luthi said...

Taiwan: To be or not to be?

Is it just me or is Taiwan headed towards becoming the first country in the history of the world that regresses from a young and troubled but fully-functioning and recognized democracy to becoming part of a gravely troubled totalitarian one-party state? China is facing a severely troubled economy with 25 million recently unemployed workers and a real possibility of violent social unrest across the nation. The apparent increase in corruption at all government levels and the rapidly widening gap between the abominably poor and obscenely rich combined with a non-existing quality control mechanism makes China a very bad choice for any kind of trade agreement, especially under a One-China policy.

Is our current government really that weak, naïve, and short-sighted? Do they truly believe that the territory of the R.O.C, by default, includes the territory of China and therefore signing an agreement under the One-China Policy is absolutely acceptable? Or are they all positioning themselves in favorable view of China’s leaders so that when the much sought-after unification takes place they will enjoy great benefits and preferential treatment possibly even being offered positions within the communist party? Now, anyone who has spent time studying the history of China and in particular the historical, ideological and emotional differences between the Nationalists and the Communists would have to agree that this would never happen! How many Tibetan leaders, pro-China or not, were given high level positions and/or benefits that went beyond some temporary face-giving ceremonies and banquets? Hello, anybody home?

What can Taiwan do, as it is constantly faced with the shortcomings of a “country” that isn’t recognized and doesn’t behave as one due to the political complexity and historical inaccuracy as well as the short-term, financially-oriented thinking and planning of its government and citizens?

First, let’s focus on what we do have to offer to the world: Pristine and gorgeous East and South coasts, complete with wonderful hot springs and splendid beaches, a central mountain range that offers some of the most spectacular sights anywhere in Asia, and warm, hospitable, and extremely generous people. We must develop and cherish these assets in an ecologically sound way, promote sustainable long-term tourism, and put in place an infrastructure that can facilitate this industry and can be expanded as demand grows.

Secondly, Taiwan has to implement and enforce tough anti-pollution laws for factories and farms, so that our rivers and coastal areas can once again be safe for harvesting seafood, so that the river water can be used as a clean irrigation source, and so that we can provide an unpolluted and fun environment for recreational activities. This includes that 100% of households and businesses are connected to waste-water treatment plants and it is imperative that this goal is achieved within the shortest possible time.

Thirdly, Taiwanese factories in China that produce food, or goods requiring highly skilled labor, should be encouraged to relocate back to Taiwan. Government subsidies or tax breaks to offset, at least initially, higher local wages and operating costs, could boost the competitiveness of Taiwan. This would ensure and maintain the well-known, quality and safety-oriented, high standards of Taiwanese goods as well as provide much needed jobs to an ailing economy. Absolutely no food products, cosmetics, and medicines should be allowed into Taiwan until there are rigorous and enforced safety procedures operational in both countries.

Most importantly, Taiwanese must stand together united, believe in and strive for Taiwan’s identity and recognition, fight for their rights and for their freedom, and prove to themselves and the world that democracy is here to stay!

Dan Luthi
Taichung, Taiwan

Macca said...

From Today's Taipei Times.....

'Meanwhile, Su told reporters that the government had turned down a request from Xinhua news agency to interview President Ma Ying-jeou (馬英九) and Premier Wu Den-yih (吳敦義) because this was not a “convenient” time.'

Yeah. That just before an election time is never very 'convenient' for Ma to spout his 'hopes and dreams for the Chinese race' type waffle. This is one of those short windows when he has to pretend he gives a toss about the Taiwanese people.
What was Xinhua thinking?

Michael Turton said...

I heard privately that officials are saying to well connected visitors that ECFA is not an FTA.

Think of it as an agreement to co-manage markets -- for China's beenfit and the benefit of selected connected Taiwan companies -- that will permit future FTAs.


Michael Turton said...

Thanks for the excellent comments, Thomas.

Anonymous said...

"Europe (and Japan to a certain extent) want to sign deals with Taiwan after ECFA is signed because they'd rather conduct their China business through Taiwan. The sooner Taiwan and China do the deal, the sooner Taiwan can benefit."

Name a single specific example of how this is the case. The international firms that want to work with Taiwanese companies can already do so.

Taiwanese can provide the marketing, the management, the manufacturing know-how, the communications skills that the international firms don't have. International firms could provide the cover of being non-Taiwanese, capital, scale, and sometimes brand, though the Taiwanese brands can sometimes be stronger in China. What about that is stopped by Taiwan not having an ECFA agreement?

Anonymous said...

This is hilarious...

Anonymous said...

@anon 8:29 ....the world economy has been down since mid-2007..the Ma govt can hardly take responsibility for the worlds ills....

Don't you remember before the election the KMT was blaming all the problems in Taiwan on the DPP, not on outside influences?

Everyone knew the global economy was tanking then, but the KMT kept insisting that it was the DPP's fault. The KMT can't use the global economy as reason now for its failure because they ignored this issue during the election.

Anonymous said...

"The Port of Kaohsiung could build some extra capacity, but that is about it."

What Kaohsiung should do is build a first class international airport that can run twenty-four hours on reclaimed land in the bay. And the MRT must be extended to the new airport. Though it has a working, convenient daytime international airport at the moment, it's limited in both passenger and cargo capacity, which makes no sense with no other major airports in the south and the huge part of Kaohsiung there.

If Taipei can build a deep water port, then Kaohsiung can build a first class international airport. It's a major missing part of infrastructure for the southern half of Taiwan (Yunlin, Jiayi, Tainan, Kaohsiung) that would also serve Hualien, Taitung, Pingtung.

Robert Scott Kelly said...

More breaking news. ECFA talks are entering a new formal stage and the signing may in fact be closer and not further than we think. Was this all a headfake? Taiwan Today reports:

"Signs emerged Nov. 2 that talks over an economic cooperation framework agreement between Taiwan and mainland China may be entering a new phase.

Zheng Lizhong, vice chairman of the Association for Relations Across the Taiwan Straits, arrived in Taiwan Nov. 2. He is scheduled to meet with Kao Koong-lian, vice chairman of the board, as well as secretary-general, of the Straits Exchange Foundation of Taiwan, Nov. 3.

Sources indicated that Zheng and Kao will make a formal announcement after their meeting that official ECFA negotiations will begin before the end of the year. If true, this would mean that the status of the talks has now been elevated from an “informal” to a “formal” level. It would also mean that both Taiwan and the mainland are attempting to hasten the signing of ECFA.

Sources familiar with how cross-strait negotiations are conducted said that if ARATS and the SEF make a joint announcement of the sort anticipated, then it will no longer matter whether any further informal negotiations are held between Taiwan’s Bureau of Foreign Trade under the Ministry of Economic Affairs and the mainland’s Department of Taiwan, Hong Kong and Macao Affairs under the Ministry of Commerce.

Only two days before Zheng’s arrival in Taiwan, mainland authorities informed Taiwan Nov. 1 that the informal ECFA talks due to take place in Beijing Nov. 3 would have to be postponed because officials from the mainland side “could not finish preparing their dossier on time.”

Dwayne Elizondo said...

There is another G-20 meeting in Scotland coming up (Nov09). Perhaps the ChiComs are pushing the KMTards to sign quickly so they can have more leverage at the next bankers convention.

Anonymous said...

@anon 7:17 - Hard to name a specific example considering it hasn't been signed, and hasn't happened yet.

@anon 12:44 - Of course they were. It was an election campaign - stuff like that is par for the course. Right now however, is not an election campaign (at least not presidential/legislature).

Feiren said...

I heard privately that officials are saying to well connected visitors that ECFA is not an FTA.

But are they just saying that? China is supposed to be insisting that FTAs are between countries so Taiwan can't sign one.

Is the ECFA a (limited) FTA in substance called by another name? Or is it something else entirely?

Anonymous said...

"@anon 7:17 - Hard to name a specific example considering it hasn't been signed, and hasn't happened yet."

If no one knows what's supposed to happen, then why is it a prerequisite for signing an FTA with the EU? That makes no sense.

Anonymous said...

"@anon 7:17 - Hard to name a specific example considering it hasn't been signed, and hasn't happened yet."

If no one knows what's supposed to happen, then why is it a prerequisite for signing an FTA with the EU? That makes no sense.

Tell that to the European countries who are waiting for it.

It seems to me that if Taiwan wants to remain a viable, independant nation then signing ECFA is a must. Without it, the global economy will increasingly bypass TW, the standard of living will drop and there'll be nothing to stop China taking over. It's ironic that the anti-KMT crowd's actions may well serve to make it more likely that TW gets annexed, not the other way round.

Anonymous said...

"Tell that to the European countries who are waiting for it."

Anon, you've given no evidence for your assertions. Put up or shutup. The EU and the US have all said that they will only consider negotiations for FTAs. That's pretty weak for something that supposedly will benefit both sides. Where is the down side to signing an FTA with Taiwan now? You can't name any, but you will keep running your blind ideological mouth.

Economists have long concluded that FTAs or opening to any kind of trade are not the clear win-win situation that everyone once thought they were. Sure, being Cuba is going to hold back development, but for everything in between, the benefits aren't clear, esp with developed nation agricultural subsidies, among other real world problems.

This week, several pro-Blue economists, including one that took a big position in China, have thrown sand in the face of Ma Ying-jeou and said among other things, that Taiwan 1) must first reach a consensus before signing and 2) should not rush to sign ECFA.

Taiwan is highly connected to the rest of the world. It is more closely connected with China than it has ever been before, and more so than most nations due to geographic and cultural proximity. But it hasn't saved Taiwan's economy from this downturn, and the blue collar class has been in the shit-hole since the late 90s. What, pray tell me, specifically about moving even faster towards integration with China, will make Taiwan's economy magically better, especially for blue collar and corporate drones?