Wednesday, February 02, 2011

ECFA and Independence

The market was an absolute madhouse today as the New Year holiday closes in.

The Taipei Times reported on an American Enterprise Institute discussion of Taiwan and ECFA, the speaker being Council for Economic Planning and Development Minister Christina Liu...
Liu said that if the ECFA was the right policy and the markets showed economic benefits, there would be no pulling back.

Asked if the ECFA could continue if Taiwan moved toward independence, Liu said that if the majority in Taiwan were to pursue independence “then the whole thing will be totally different.”

If independence became a central theme and central belief for Taiwanese, then “everything would change,” she said.

“I don’t think that is the consensus for Taiwan. We have done many surveys and the majority of people in Taiwan are hoping to keep the ‘status quo.’ I don’t think that independence will be an issue,” Liu said.
Note how she says "everything would change" if Taiwan became independence-oriented. The politics of ECFA are interesting in this context -- it is possible to read this as her saying that ECFA would be rejected if the populace wanted an independent Taiwan, but she might also mean that China would withdraw ECFA's benfits in that case. Her speech is very ambiguous. It seems like ECFA is something that once in, you can't get out, at least in the government planning view.

Another facet of this speech is the way that KMT officials treat "the status quo." The KMT is careful to separate "the status quo" from independence, as if the status quo itself, overwhelmingly supported, were not a form of independence. This helps create a vagueness that lends support to the idea that advocates of independence are a minority, whereas as poll after poll indicates, no one wants to be part of China and if China did not threaten to maim and kill Taiwanese, everyone would opt for independence. Those Chinese missiles help keep the KMT in power.....

She also mentioned that the government is planning to further transition the economy to services and to promote domestic consumption. Their answer to the problem of diversification is not to diversify to other countries, but to reduce dependence on exports by ramping up domestic consumption -- as if Taiwan were not an export dependent economy! Liu did call for wage hikes in 2011. The government expects growth of 5% in 2011 as TIER said that manufacturing indicators showed the economy might be slowing down.
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Marc said...

All my professional Taiwanese friends and contacts don't know the term "status quo". How is this Latin phrase said in Mandarin?

Anonymous said...

So you think it's bad that the KMT is moving Taiwan towards true independence (more domestic consumption and investment into local economy) because it would reduce dependence on the US.

To the DPP, caterwauling about independence is more important than actually having it. It's so much more glamorous!

Dixteel said...

Taiwan will most likely always be an export oriented country if it wants to maintane or improve the current standard of living, because its domestic market is small and it has no natural resources. Taiwan's situation is not like Japan/US (large domestic market) or Canada (natural resources) etc.

Therefore, no matter how hard they concentrate on domestic market, if the export market is not diversified (currently extremely China heavy), Taiwan will remain in danger. I also worried about their strategy on focusing on service sector. A lot of times when the government tries to direct the economy heavy hendily (like trying to direct resource into a sector) it ends up in failure.

They also need to define what type of service sector. If Taiwan can combine its technology, manufacturing know-how with service, then great. But if they are thinking of doing it like Hong Kong or other South East Asian country, then they might be heading in the wrong direction.

Anonymous said...

That's just the economy though. They can shore up their purchasing power and improve living standards by putting more renewable energy online (sourced from themselves) instead of paying through the nose for power.

Likewise Taiwan is far more US dependent than China dependent. It may seem like they are because they export parts to China, but they are simply being reassembled and shipped back out.

Taiwan needs China as a hub, but in terms of actually landing finished products there they are underperforming severely.

Anonymous said...

Marc: 現狀 => status quo

Dixteel said...


You have some points right, but it's a lot more complex I think. For example, energy is not the only problem. Taiwan needs to import metal ore, beef, oil (not for energy, but for plastic), machinery, weapons, commercial/agriculture vehicle engines and even people (experts in industries)...and loads of other stuff which Taiwan cannot make or has no resource of making. In order to have those, without large domestic market and natural resource, Taiwan can only export in exchange for the import.

For China, yes, a lot is just assembly, but there are also other stuff. For some industry, the entire value chain has been pulled into China. Taiwan's FDI into China is huge, in real term and in % term. It's really scary. Taiwanese companies export does not just go to the US, but also Europe, Japan, SE Asia and China. But of course the US is the largest export destination simply because it currently has the largest market. Either way, Taiwan has to diversify its export (both in scope and depth). Without that, more domestic consumption does not really help in terms of depedency.

blobOfNeurons said...

@Marc A quick glance at wikipedia shows that "status quo" means "the current state" which is easily translated to Mandarin.

Shiwee thoughts said...

you say "It seems like ECFA is something that once in, you can't get out, at least in the government planning view." But how about the termination clause (Article 16 of ECFA): where either China or Taiwan can notify the other of termination of the ECFA which takes effect 180 days later.