Monday, April 26, 2010

The Ma-Tsai Debate on ECFA =UPDATED=

Yesterday was the big debate between President and KMT Chairman Ma Ying-jeou and DPP Chairman Tsai Ing-wen. As a friend of mine put it, Ma appears to have "won on points" inasmuch as anyone could be said to have won. The Taipei Times has a complete transcript (Part I) in the works. Its report is here. Taiwan News report and vids are here.

Two key points to take away here. First, a televised debate on a major issue of national policy is an important step forward for the nation's democracy. Due credit should be given to Ma for accepting an open and public debate on key political issues. Second, the fact that Ma agreed to a debate shows, better than any argument or poll, that the KMT Administration believes that public support for ECFA is low and needs shoring up, whatever poll numbers may say. Ma, who has struggled to keep ECFA away from democratic oversight, made a major concession in even having the debate.

It is ironic to contrast the President's claim that Taiwan needs ECFA and that Taiwan will be isolated "like North Korea" if ECFA is not signed, with the economic reality that the economy is doing well without it, as the Taipei Times reported today.
Shih said the IMF expected Taiwan to achieve GDP growth of 6.5 percent this year, and the Council for Economic Planning and Development (CEPD) has forecast the economy to grow by at least 5 percent.

If those forecasts prove correct, Taiwan’s economic growth will outpace that of the other Asian Tigers — Hong Kong, South Korea and Singapore — Shih added.
The arguments about isolation are simply emotional appeals to the visceral fear of being weeded out instilled in every Taiwanese by the educational system. The reality is that Taiwan's economy is performing well with the links it already has, and there is no reason to assume that shipping more industry off to China will help it perform better.

Monsieur Rick, what kind of man is Captain Renault?
Oh, he's just like any other man, only more so.
No, I mean, is he trustworthy? Is his word --


Reuters reported:
Markets would welcome the deal to slash tariffs as the strongest link between export-reliant Taiwan and world economic powerhouse China, boosting $109 billion in annual two-way trade, after recent trade talks following six decades of hostilities.
There are two assumptions, widespread in all the reports, that are never subject to scrutiny in the international media. The first is that ECFA will "reduce tariffs." The actual tariff on Taiwan's exports to China, according to a Taiwan Thinktank member piece, is 0.58%. The tariff benefits, at best, look to be a delusion (my post). Perhaps the 0.58% figure is wrong, but needless to say, there will be no investigation of the actual tariff effects in the international media, partly because the Ma government has refused to discuss them. Businessweek hosts the AP report on the debate.

The second assumption is that -- assuming tariffs are magically slashed -- that China will uphold its end of the agreement. This assumption is not borne out by any reality. The Straits Times noted a while back:
Thailand, in particular, had a bitter experience. In 2005, tariffs for 200 items of vegetables and fruits were abolished. Thailand expected to export tropical fruit to China and import winter fruit from it at zero tariff. But what happened was that Thai farmers of garlic, longan and other fruit and vegetables were decimated by cheap Chinese imports. Worse, Chinese officials reportedly either refused to lower tariffs on Thai imports or left the Thai produce to rot in warehouses.
It has been noted that the swath of destruction caused by the Thai "early harvest" agreement was a factor in the unrest now gripping Thailand. Continuing with the Straits Times piece....
.....It is no wonder that Indonesia has asked for a two-year delay in tariff reductions for 228 items.

The trade and foreign direct investment (FDI) figures are not encouraging either. Since 2004, tariffs between the two sides have been coming down, and Asean's trade deficit with China has widened. From 2000 to 2008, China-Asean trade grew sixfold to US$198 billion (S$280 billion). But Asean's trade deficit also widened five times to US$21.6 billion. Asean's cumulative FDI in China was US$52 billion in 2008. By comparison, China's FDI in Asean was just US$2.8 billion.
In other words, nations that enter into reduce tariff agreements with China find themselves in increased trade deficits with China and low FDI from China. Nor is thus just an experience of underdeveloped countries; it is even more urgent for developed nations. Anyone who has been following the news out of China has seen many pieces like this one about US business or this one about European, hosting complaints from foreign businesses about the lack of good faith in China's dealings with foreign businesses. For example (from the latter):

The European Chamber says foreign companies are "excluded outright" from China's service sector, and uses Amadeus, a Spanish travel-booking company, as an example. More than seven years since China signed up to the WTO, it has still not granted Amadeus, a computer travel reservation system, the right to issue tickets and reservations to the growing Chinese market.

Meanwhile, China's host of technical regulations and certification procedures "blatantly discriminate" against foreign companies, said Dr Wuttke. The report cites an unnamed company that was the market leader in providing encryption services to Chinese banking, telecoms and public transport firms until the government "suddenly" required a new certification from the Office of Security Commercial Code Administration (OSCCA). "Not one foreign company or foreign-invested Chinese company has to date received OSCCA certification," the report points out.

To add to that, consider once again Google vs Beijing (or Rio Tinto), a case that clearly shows that no matter how hard you work to cooperate with China, you'll be screwed, partly to steal your tech, and partly to favor local businesses you're competing with. China's mercantilist approach means that the assumption that it will uphold its end of bargains is iffy, at best. Yet there will be no benefits from ECFA unless China is committed to upholding its side of the deal. Needless to say, the assumption that China will uphold its side is never explored in the international media.

A second aspect of the willingness of China to uphold bargains is smuggling, an item never mentioned in international media reporting on China's economic behavior (except for smuggling of endangered species, for eating, just a spiffy and morally correct way to orientalize the Chinese). But smuggling has devastated economies around China. Back to the Straits Times:
Already, smuggling of cheap Chinese shoes into Viet Nam has done damage to the shoe industry there. In Indonesia, cheap imports of clothes, toys and electronic goods, often through smuggling, have hurt local manufacturers of such products.
Anyone who buys in Taiwan's markets already has to consider the problem of smuggling in their daily lives -- do we risk eating China's inferior, poisonous products now easily found in morning markets around the island? When you invite Chinese goods in you invite their smuggled goods in as well -- unregulated and destructive. The CNA, for example, hosted a piece on smuggled day lilies, part of a larger and growing problem of smugglers using third parties to bring in illegal goods into Taiwan -- agricultural goods are already being regularly smuggled into Taiwan even without ECFA. Ma has even proposed special assembly zones where Chinese goods are brought in for processing in Taiwan and then shipped out for sale overseas. The gods alone know how big a boost they will give to smuggling in Taiwan.

The DPP really needs to hit the international comparisons harder; they are a direct antidote to Ma's China Cargo Cult claims that taking down barriers will be good for local economies, and bring in the daily experience of Taiwanese in local markets dealing with, for example, the problem of smuggled seafood. I'll leave the reader with a quote from Philippine legislator Warden Bello's excellent commentary on this topic:
It is owing to massive smuggling that few analysts take seriously official trade figures with China released by the Chinese Embassy in Manila that show the Philippines enjoying a positive trade balance.
REF: Commonwealth Magazine hosted an excellent piece that explores some of these economic problems more deeply.

UPDATE: Polls out from UDN, China Times, TVBS.
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28 comments:

vin said...

"The arguments about isolation are simply emotional appeals to the visceral fear of being weeded out instilled in every Taiwanese by the educational system."

Outstanding insight in an impressive post.

Anonymous said...

Nice work Michael. Thanks.

I also enjoyed your Random Story/Warm Sunday photo essay.

Michael Turton said...

Thanks Vin, and thanks anon. I still owe anon a piece on why ECFA = Annexation, and the government knows it.

Yushan said...

HA-still waiting for the piece!
The thing is that most Taiwanese do not believe that ECFA=annexation. If they did they wouldn't support it.
I thought Ma won the debate easily.

Vin-the DPP also play on visceral fears of being swallowed up and losing Taiwan's sense of identity.
In fact over the last 30 years of contact and exchange with China, Taiwanese identity has only increased in strength. The DPP should recognize the positives in engagement across the strait.

What is particularly hard to comprehend is their opposition to Chinese students studying in Taiwan. How does a move like this undermine Taiwan's sovereignty? Actually I can only see positives.
I am glad to see that Lee Yuan Tseh has come out in favour.

former anon

Michael Turton said...

The thing is that most Taiwanese do not believe that ECFA=annexation. If they did they wouldn't support it.

Most Taiwanese don't support ECFA. No credible poll shows that they do. Generally they split with 2/3 opposed or don't know, and 1/3 supporting.

In any case it hardly matters what ordinary Taiwanese think, but what the KMT and CCP think. ECFA is all about annexation -- Beijing has made that clear. It's the first step, they've said.

Vin-the DPP also play on visceral fears of being swallowed up and losing Taiwan's sense of identity.

Not identity, sovereignty. Swallowed up = annexed.

What is particularly hard to comprehend is their opposition to Chinese students studying in Taiwan. How does a move like this undermine Taiwan's sovereignty? Actually I can only see positives.

Several issues -- it is just a subsidy for universities that should not exist (and thus for the KMT since virtually all the private universities that suck and should be weeded out are family run and deeply Blue going way back). Second issue is that Chinese annexation strategy always involves flooding the target with Chinese people. Thus the students are part of a larger strategy including undocumented and documented workers, etc. Third is that the Chinese use their students for intelligence and for technology theft, something known in the US since at least the 1990s. One can easily see how large numbers of Chinese students will play out here -- the island is already crawling with undocumented illegal workers from the Philippines and Thailand.

Note I am not taking a position, but explaining to you how others might see them. It would take a mighty impaired sense of history to simply view students as such.

As an academic I would prefer to see the universities weeded out and the funds spent on Chinese students instead devoted to the upgrade of facilities and research as well as the importation of foreign professors and systems to truly internationalize Taiwan. Good Chinese students aren't going to make Taiwan any more competitive; that can only be done by systematic upgrade across the system. Bringing in Chinese students is the typical government response of appearing to do something to reform without making hard changes -- they permit the system to go on as it is.

In any case outside of the PRC agents and intelligence specialists, I doubt we'll get all that many Chinese students. our universities are just not that good, and do not confer status on status-hungry Chinese.

Michael

Michael Turton said...

DPP legislator in China Times:

"In response to Lee’s words, DPP Legislator Kuan Bi-ling said she, too, is in favor of mainland students studying in Taiwan. But additional laws have to be passed first, such as those that would prohibit people with mainland degrees from obtaining professional licenses in Taiwan and prohibit them from becoming certified teachers or public servants.

For some reason, she said, the ruling Kuomintang has been opposed to the DPP proposals.

“We are also strongly against the practice that mainland students who wish to study in Taiwan must first be approved by mainland authorities and forced to undergo ‘thought education.’ That’s definitely not something we can accept. Taiwan’s schools must be able to choose whatever students they want,” Kuan said. (HZW) "

D said...

"Monsieur Rick...". Ha ha ha. That's hilarious. But Renault turns out ok in the end, doesn't he?

As always, a thoughtful and informative post. Yet I still see so many unknowns, so many that the arguments on either side come down to one's "sense" of the situation. Each side may draw up its factual underpinnings, but their views aren't really based on facts. It's quite like the US health care debate in that way -- very few people understand all the details of the issue, and even if one does it's really impossible to declare what the effect of the policy will be in 15 years. (Still want a referendum?)

There are some very interesting facts here, but they (some of them, at least) could be turned around to service the other side. The economy's going well now? All the more reason to forge ahead, from a position of strength. Or China's untrustworthiness,as shown in trade pacts it has signed elsewhere. I might say that this is more of a reason for Taiwan to sign on, thus becoming, in effect, part of an international community with problematic trade relations with China.

Along these same lines, there's the idea that China has ulterior motives. Well, no kidding. It wouldn't be much of a "rational actor" if it didn't. Hopefully Taiwan has ulterior motives too. Not to make light of the situation, but it is not incorrect to see a sort of "game" being played here, and the object is -- to win. (This is where I'm supposed to quote the "It's chess, not checkers" line). China is making some bets -- that they can win over the hearts and minds of Taiwanese, and/or that they can take over the Taiwanese economy -- but Taiwan can make its own bets. Do you really think Taiwan can't win? I don't believe that for a second. Is there risk? Sure. But uncertainty is a part of life. You've got to play the game, and despite what Tsai said in the debate last night, it really seems to me that Ma was right when he argued that the DPP hadn't pursued an effective strategy.

Oh, if you write an "why ECFA = annexation" column, let me make a pair of related requests (well, you can always ignore it -- it is your blog): try doing it without simplifying China's motives, and try doing it without assuming that China will be successful. Treat them "just like any other man, only more so", as you put it. That will at least make it more challenging.

Michael Turton said...

try doing it without simplifying China's motives, and try doing it without assuming that China will be successful. Treat them "just like any other man, only more so", as you put it. That will at least make it more challenging.
+++++++++++++++++

Interesting requests. But China's motives are simple, in the long run -- annex Taiwan, snuff out its democracy, and hollow out the economy (after a period of looting), along with levering taiwanese firms out of their markets in the short term, while stealing their tech. In that sense, China does not treat Taiwan differently from other nations -- just more so :)

I've commented too much on everything elsewhere.

Michael

Michael Turton said...

But thanks for the great comment, D.

D said...

"But China's motives are simple..."

Aww, you can do better than that ;)

Start with the fact that countries (and people) have varied and conflicting interests, hence varied and conflicting motives. Is Taiwan the only interest of the PRC? Could this interest come into conflict with other interests? You can ponder it.

Michael Turton said...

D, if you think China's interests in Taiwan are in conflict with some other agenda of that nation, do tell.

D said...

"D, if you think China's interests in Taiwan are in conflict with some other agenda of that nation, do tell."

Let me make like Confucius and sum up the PRC/CCP in one (hyphenated) word:

Risk-averse.

I take it that you don't think anyone in the international community, including the US, will stand up for Taiwan in a time of crisis. I see otherwise, but that's not the point. You can't deny that there's _a chance_ that other countries wouldn't stand for it. The CCP doesn't like that "chance".

Also, consider, if I may suggest so, not taking Chinese "policy statements" as policy in the way we normally think of it. Chinese policy is actually propaganda. "Peaceful unification" may mean something other than what you think it mean -- it may be a way of drawing down the nationalistic sentiment and leading towards a long-term acceptance of the status quo.

I'm just saying that cartoonish portraits of PRC thinking is no different from the cartoonish portraits of the DPP you often object to. And while I have profited immensely from your blog, one continuing misgiving I have is the way you simplify "China".

But to answer your question directly: I think China's simple stated interest in Taiwan is in conflict with US and Japanese interests, and to some extent with those of any Asian democracy. How that would play out is unknown, and honestly I think the advocacy of a blog like yours can play a positive role in pushing people to recognize those interests. Therefore I remain -- an optimist. Thanks for the conversation --

Michael Turton said...

Thanks, D. But your comment that my views are cartoonish -- as if there were not a wide range of evidence to support them -- betrays a position that would rather be sophisticated than right.

Good luck.

Robert R. said...

D, I'm surprised to see China characterized as risk-averse. While they don't want to completely piss off the international community, actions such as the Rio Tinto trial and lack of support for many of the US's priorities makes me skeptical.

Rather they seem to act with confidence that no one will actually call them out on their imperialistic (and other) tendencies. And confidence is rarely seen in someone who is risk averse.

On the other side, they are not headstrong. They will not rush into an action that they cannot diffuse or back off (but not back down) from.
That is why you do not see them invading Taiwan militarily. They will continue to try to blur the lines little by little, and you can see it working as each US President's interpretation of the TRA becomes less and less helpful to us.

ECFA is just another (big) step toward annexation. And they don't even have to sneak it past the US, they nearly get their blessing!

D said...

"...would rather be sophisticated than right"

I think I've heard Bill O'Reilly use that one. But I said your portrait was cartoonish, not your views. I think your view of China is "limited", though understandable and not incorrect. But perhaps that's simply because you are -- "the view from Taiwan". (Couldn't resist that one).

@Robert R: I don't see much risk in the Rio Tinto trials. I don't see why any country would be expected to support the "priorities" of another. I don't see confidence and risk-averse as being mutually exclusive. But I agree with you about the unhelpful US fuzziness on TRA -- again, I think blogs like Michael's can help people realize the subtle but important lines being drawn there. Maybe Barack is reading now.

As for a) "no one will actually call them out on their imperialistic (and other) tendencies" and b)"ECFA is just another (big) step toward annexation", I a)disagree and think other countries will push back when necessary and b)think that Beijing certainly regards it as such, but does that mean it will be? Can't the Taiwanese outgame the Chinese? ECFA is a tough call, though.

Michael Turton said...

Ok, D. I accept what you say. Sorry for my response.

Michael

D said...

Keep up the good work. Your blog is a valuable resource.

Anonymous said...

Risk-averse? Perhaps, but another way to look at this is to consider Geert Hofstede's cultural dimensions study, which identifies, among other things, the level of uncertainty avoidance generally found in national cultures.

Uncertainty avoiding cultures try to minimize the possibility of uncertain situations by strict laws and rules, safety and security measures, and on the philosophical and/or religious level by a belief in absolute Truth; ‘there can only be one Truth and we have it’.

The higher the UA score, the more likely you'll find these tendencies.

China score is 40.
Taiwan is 69

I believe it's the KMT who have arguably long-held to an absolute belief in what is the "true" China. Although mainland China has been an aggressor, they have also wavered on Taiwan throughout history.

As fraught with uncertainty the China/Taiwan relationship appears to be, I try to keep an open mind about China's real intentions--and Taiwan's, for that matter. There is so much we don't know!

Even though, as another poster stated, many Taiwanese may not even believe that unification will ever happen, I would very much like to hear what the benefits might be for such a scenario.

For example, if, in future, climate change causes 30% of Taiwan, including its two main cities and much of its arable land to become submerged, wouldn't a proactive relationship with China be benficial? (I'm playing the devil's advocate - so please don't get overexcited - LOL)

Anonymous said...

While I am all for not demonizing the Chinese, one has to understand and accept that they wont be satisfied with anything less than the official recognition of one China.

Whether that means the PRC would be satisfied, with controlling Taiwan in name only, without the peoples liberation army or more subtle state organs exercising control over Taiwan is a big question, concerning the History of the PRC and China as a whole it doesn't seem overly likely, on the other hand the current leadership could be pragmatic enough to let it pass, initially.

Richard said...

"Can't the Taiwanese outgame the Chinese?"

D, I think the Taiwanese are surely capable of doing so. The problem is right now the Taiwanese aren't in control of their future. It's the few KMT in power that are brokering back-door deals with the PRC, putting Taiwan on borrowed time.

As far as China's interest in Taiwan, as Robert mentioned, China will continue to blur the lines until they are capable of militarily taking Taiwan (though it does not mean they definitely will). I believe recent U.S. military reports have stated around 2020? is when China's military power will be able to block out the (U.S.) 7th fleet.

Thomas said...

Richard,

I fully agree with you, and I do think you have hit on one of the weaknesses of D's argument. Essentially, he assumes that Taiwan's current administration has the stamina or desire to resist a Chinese push towards unification.

As for your comments about the US Seventh Fleet, the matter in question is something that worries me. I just hope that the US is really planning for such a situation rather than simply hoping that China will change before 2020.

Articles like this one give me hope (http://www.popularmechanics.com/technology/military/4203874), but the perfection of any successful weapons that could slow a Chinese advance from over the horizon seems to be a little far off.

D said...

So many "unknown unknowns".... The key, I think, is to engage China constructively, and the question is whether ECFA is a constructive engagement. I lean towards thinking it is, or at least it might be and is worth the risks. Admittedly, though, I don't yet share the complete cynicism towards the KMT that others seem to have. Perhaps I am willing to trust Ma et al -- a little bit.

Michael Turton said...

D is right. After all, the years of clean government, support of democracy, the complex battery of programs aimed at Taiwan's SMEs, the years of advocating for a more Taiwan-centered polity, and the treatment of Taiwanese under KMT rule, all definitely show that the commenters on this blog, as well as myself, are much too cynical about people like Ma, Lien, and Wu po-hsiung.

I mean, look at Ma and his administration. It has never put out government documents denigrating Taiwanese as ignorant boobs for opposing ECFA, and never appointed a prominent gangster as spokesman for ECFA. It has never held a negotiation with China in which it permitted China to name cross-strait shipping routes "domestic" and to block third country flags. It never conceded the really good routes or the fifth freedom in its air agreements. It has never repeatedly floated the idea of Chinese labor being permitted into Taiwan. It does not have the backing of powerful foreign financial interests cooperating with PRC financial elites. It has never said relations between C and T are region to region, or attempted to reintroduce more Chinese history into the educational program. Nor has Ma ever appealed to traditional confucian/imperial rituals of imperial power while in office as president. Prominent KMT officials are not deeply involved in businesses in China. Etc.

D's correct. There's just no reason, based on years of experience, and Ma's current behavior, to think that ECFA could ever be a sell out. It must be a straight economic liberalization program, otherwise all things I just said would be true instead of false.

Michael Turton

D said...

@Michael

Nicely put ;)

mx said...

Sorry if this is a bit off topic:

I often wonder if Taiwan is paying attention to the outside world.

What I mean is that we can clearly see that Greece is about to default, followed by Portugal, Spain, Ireland, Italy and then the UK.

Once the Fecal Matter Impacts the Rotary Impeller (SHTF) in the UK, the contagion will spread to Singapore, I believe. Once there, all of Asia will experience 1997 all over again except 100x worse.

Why are the KMTards in such a rush to get this ECFA signed? Shouldn't we wait and see what happens in the EU, US and Japan before we sign any long term agreements? From my POV, the wait won't be very much longer. Once things really start to fall apart, the dominoes will fall rapidly.


fyi: I lifted this from a comment on Zerohedge today:

"What you hysterical defenders of financial and political establishments utterly fail to realize is that we are experiencing NOT just a recession, NOT just a depression, but a collapse of the entire financial and monetary order. We are living through a phase-change and the beginnings of a revolution as profound as the Renaissance, the birth of printing, and the creation (recreation?) of money itself."

I believe this. Taiwan should not be thinking of China as the savior.

Patrick Cowsill said...

Great photo. What is it though? A guard post for protecting people in the forest from communists?

Is that an address on the side?

Michael Turton said...

Yes, that's the address on the side, Patrick. There were two guardhouses on opposite sides of the road facing opposite directions. I think this must have been some military reserve at some point, but I am not sure. It is on Donglin Rd coming north out of Dongshih.

Patrick Cowsill said...

Wow! I love this sort of stuff. So much has been lost in recent years that I can't keep track. The Communist Chinese, who the last generation wasted so much time and money to protect us from are now, it seems, our friends.

Such places as you've captured in the pic remain symbols of our past foolishness. LOL.