Sunday, September 05, 2010

Nathan Novak Rides Again: ECFA's economic dangers

The last few months I've been noticing a series of excellent pieces by one Nathan Novak in the Taipei Times. This week's offering reiterated what many of us have been saying about ECFA....
Taiwan’s manufacturing and services industries are showing signs of slowing down the Taiwan Economic News reported on Tuesday. The Taiwan Institute of Economic Research (TIER) said that manufacturing edged up a mere 0.24 percent in July, while services fell 2.61 percentage points during the same period. Indicators in the construction industry were less than favorable and a construction slowdown is predicted.

TIER has predicted that overall growth will slow down in the second-half of the year. Moreover, the percentage of manufacturers surveyed who foresee a better climate over the next six months fell 4.7 percent from the previous month.
Novak then goes on to make several points:
The numbers simply do not add up. Before the ECFA was even signed, Taiwan’s economy was already showing signs of recovery; trade, with year-on-year growth of over 46 percent, was thriving. The ECFA was imposed as a necessary measure to save Taiwan’s “failing” economy, which was being threatened with marginalization (even though the numbers were already indicating a strong recovery).

The ECFA was then signed after economic recovery appeared certain and trade numbers were growing rapidly. Now, after the ECFA has been signed, second-half growth is expected to slow. What gives?

Reality is finally beginning to rear its ugly head. The ECFA, instead of being purely economic, is almost entirely political. Not only has it served CCP-KMT interests by bringing Taiwan and China closer economically (although it would appear with few actual economic benefits) and politically, it has also served as a tool the KMT can use to continue to force its agenda through the legislature and into Taiwanese homes. The continuous advertisements on television and radio promoting the ECFA even after the agreement has been signed only serve to underscore its political, not economic, consequences.
Second half growth slowing was probably inevitable. In the first two quarters of the year Taiwan grew at over 12%. The DGBAS just raised its forecast from 6.1% to 8.2% growth for the whole year. Note that all that massive growth occurred with the current pre-ECFA level of connection to China -- basically all of it in place under the DPP.

Second half growth is slowing in China, now Taiwan's number 1 market, with the ongoing malaise in the industrialized countries (especially the US where the nation's leaders from both parties appear bent on destroying the economy) and China's own steps to rein in speculation and credit growth. Taiwan will perforce follow.

On many occasions commentators have noted that increasing Taiwan's dependence on China simply makes Taiwan even more marginalized. Meanwhile this year India will grow over 8% and Brazil is booming. It's a big world, but we've tied our economic fate to Beijing.

An Economic Daily News editorial was translated for Focus Taiwan this week:
In a status report released this week, the Ministry of Economic Affairs noted that Taiwan's latest economic recovery was mainly driven by the electronics and information industries, which shows that the country's industrial structure is not sufficiently diversified.

This situation, combined with the increasing percentage of Taiwanese businesses moving their production lines overseas, is likely to lead to high unemployment and widen the wealth gap, according to the report.

The report echoes what we have been emphasizing repeatedly -- the focus of Taiwan's economic policy should be shifted from "pursuing growth" to "adjusting structures."
President Ma has been claiming that the wealth gap will fall because of the rising economy. There might be some marginal improvements but fundamentally the wealth gap in Taiwan is the consequence of the tax regime and the offshoring of manufacturing, as well as government budgetary policies aimed at the local areas. It is not an issue that can be resolved by growing the economy -- during the last four years of the Chen Administration we had solid economic growth, but saw stagnant incomes and a worsening wealth gap. Comprehensive changes in economic structures will not occur until the public votes in politicians ready to pass legislation. And as long as A. Q. Public votes for politicians because they send flowers to funerals and show up at auto accidents, that will not happen.....
Daily Links
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!


mike said...

"Hey Prez, got one word for ya: dams."

Absolutely - if you hadn't said it, I would have. But more than that, I think it was a world-historical disgrace for the Allies to let the commies have their way after the civil war.

Anonymous said...

I love this blog! It's like you dish out the awkward truth in heaping shovelfulls that the KMT doesn't want to hear.

Anonymous said...

Again and again the Reuters rep interjects "anti-China" as his modifier of choice to demonize the DPP and its leaders. In other forums he displays contempt for the people and culture of Taiwan.

If anyone reading this blog knows the guy please put these questions to him:

1) Have you ever thought of getting a job with Xinhua, propaganda arm of the genuinely "anti-China" Chinese Communist Party?

2) Are you proud of your efforts promoting the cause of the "anti-freedom anti-democracy anti-self-determination" KMT?

Thank you.

Anonymous said...

"Are you proud of your efforts promoting the cause of the "anti-freedom anti-democracy anti-self-determination" KMT?"

Sure cuz the KMT is also solidly pro-USA!

Despite the fact that Washington samuried diplomatic ties with the Island in favor of the Mainland Taiwan's American President still
buys what the DPP calls American prime 'Mad Cow' steaks in tons!

Then the American Taiwanese President is even willing to buy near-obsolete but triple-priced
American miltary junks!


Anonymous said...

"Again and again the Reuters rep interjects "anti-China" as his modifier of choice to demonize the DPP and its leaders."

So the DPP is actually pro-China!

That's big news!


Anonymous said...

anon 11:07

That is poor analogical reasoning.

If it is not a dog... it must be an elephant.

Anonymous said...

Examine the "China" in "anti-China". What does it refer to?

(Anti) 9.5 million sq km of territory? Nope. (Anti) 1.3 bn people? Nah. (Anti) The security, prosperity, well-being and happiness of all those people? Not likely.

It's a black-white formulation that indicates lazy hackery or an ideological slant but doesn't mean anything you can pin down.

The reason it gets used -- not stressed, just repeatedly slipped in -- is as a deliberate slur. Because for a Reuters readership labelling a third party anti-China is akin to saying they are anti profits, anti progress, anti reality itself ie it's akin to calling someone a reactionary moron.

Fair enough, if that's how you feel. But not very professional for a responsible journalist.

Anonymous said...

"Anonymous said...
Examine the "China" in "anti-China". What does it refer to? "

Most probably meant the government of the USA.

Washington is the biggest and most powerful supporter and financier of the PRC.

Anonymous said...

"If it is not a dog... it must be an elephant. "

I don't know if dogs and elephants ( Republicans) are anti-China but the DPP?

They use China as a ' hate word' or ' fear word ' to suction all those votes!

Michael Turton said...

They use China as a ' hate word' or ' fear word ' to suction all those votes!

If China did not threaten Taiwan, the DPP would not have this leverage. There's a lesson there.....

Anonymous said...

"If China did not threaten Taiwan, the DPP would not have this leverage. There's a lesson there....."

The lesson is history repeating itself.

Once it's the KMT who used this tactics before Uncle Sam bluntly stopped Pres. Lee from doing it.

Anonymous said...

Michael, you could have informed your readers that the Tom Plate article would require more than one barf bag. Now I've got vomit all over the keyboard. My Indonesian carer is going to be mad at me again...

Anonymous said...
This comment has been removed by a blog administrator.