Sunday, March 27, 2011

ECFA to only benefit wealthy

In dog-bites-man news, the Cabinet released a report on ECFA that appears to confirm everything so many of us have been saying since Day 1 -- it could hardly have been any other way -- and throughout the long period of chameleon-like shifting of rationale for ECFA. The Taipei Times has the call:
People who possess large amounts of capital appeared to reap benefits from the Economic Cooperation Framework Agreement (ECFA), while those on the lower end of the economic scale absorbed the costs, a recently released report on the cross-strait trade pact signed in June last year suggested.

The report, conducted by National Sun Yat-sen University, was commissioned by the Executive Yuan’s Research, Development and Evaluation Commission in hopes of gaining a better understanding of attitudes in southern Taiwan toward the ECFA and making the government more aware of the causes of objection to the ECFA from people in the south.
Note: a Cabinet-level agency report commissioned by one of the most important (and Bluest) agencies in the government, specifically aimed at understanding why the South hates ECFA -- aiming at the south simply obscures other issues from China integration affecting the North, such as the Taipei housing bubble.
The report also mentioned a further outflow of Hong Kong’s manufacturing and production services after the signing of the CEPA. Hong Kong’s service industry also moved north into China, causing a second exodus of the territory’s industry, it said.
The effects of CEPA on Hong Kong were already old news when ECFA was signed, known to the business community in Taiwan as well. This was realized even before CEPA was signed. The Macao gov't noted in 2005:
Mr. Leung said he believed that Macao could benefit more than Hong Kong from CEPA: “ Firstly, Macao is a smaller economy. If Macao can make full use of its advantages within the framework of CEPA and take in the manufacturing industry moving out of Hong Kong, Macao can benefit more from CEPA. Secondly, easing the restrictions on Mainland tourists to Hong Kong and Macao was designed to help Hong Kong tackle its difficulties and generate more jobs for medium and low-income people. At the end of the day, the impact of Macao will be ever more beneficial. Macao’s tourism sector stands to benefit greatly even if only one in three Mainland tourists heading for Hong Kong choose to visit Macao as well.”
This single paragraph encapsulates the KMT's China policy under President Ma: moving industries into China while bringing tourists into Taiwan. These two policies are two sides of the same minted-in-Beijing coin: dulling working-class opposition by throwing tourist dollars at it while hollowing out the local economy -- and satiating investors with a convenient housing bubble. Yay!

I blogged on the income inequality effects of CEPA and their omens for ECFA in August of last year, quoting a news report:
The CEPA has also had a considerable impact on Hong Kong’s industries and labor market, gradually turning the majority of Hong Kong’s middle to lower-class workforce into marginal workers, those forced to “work more for less.” This is one of the main reasons for the increase in Hong Kong’s poverty gap.

A few examples might well shed a little light on these figures. The number of workers who earn less than HK$5,000 (US$640) a month has increased by more than 70 percent, from 307,000 in 1997 to 528,000 in 2006, and the number of workers who work 55 hours or more per week has increased by more than 80 percent, from 501,000 in 1997 to 934,000 in 2006.
The CEPA-ECFA mirror was also a theme in a legislative report from nearly three years ago that covered the same ground.

Of course, what day was ECFA signed? Yep, Taiwan News back in the day:

The most telling signal of this reality was the date and place of the signing, which occurred precisely on the seventh anniversary of the signing of the "Closer Economic Partnership Agreement" between the PRC central government and the PRC's Hong Kong Special Administrative Region" and the location of the ceremony in Chongqing, the location of peace talks between the late KMT autocrat Chiang Kai-shek and the late CCP Chairman Mao Zedong in August 1945.

These "coincidences sent the symbolic messages that the pact was a "party to party agreement" between the KMT and CCP and that the ECFA was parallel to the CEPAs signed between Beijing and Hong Kong and Macau.

Once more, with feeling: an acquaintance of mine passed around this witty Chinese tone drill from her father on Taiwan-China relations: The Four stages of Tong: 1 通, 2 同 , 3 統 , 4 痛
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Anonymous said...

Michael what are your thoughts on Tsai vs Su and Tsai advocating a nuke-free Taiwan by 2025?

Anonymous said...

This is basic free trade economics: when a wealthy country lowers barriers to trade with a less wealthy one, the wealthy in the wealthier country benefit, and the poor in the less wealthy country benefit. They really didn't need a study to confirm this. The only reason people go through with free trade anyways, is that the hope is that the total benefit outweighs the total costs.

And very importantly, you attempt to transfer some of the benefits from the gainers to those that bear the brunt of the costs. Taiwan did not do this. Is it any wonder that people are unhappy?

Michael Turton said...

Nuke-free Taiwan is really good idea. I'll comment later today or tomorrow, this gorgeous little B&B I am in has INTERNET!!!!!!

Robert Scott Kelly said...

I knew you wouldn't be able to resist blogging on this, even on vacation. LOL. But this report seems so potentially damning to the Ma admin it is hard to see why they have not tried to suppress it. Are they trying to give themselves time to come up with mitigating policies before the 2012 election? With rising food costs and unaffordable housing at least attributable to ECFA, and now an admission that reinvestment is not going to happen, how on earth are they going to weather this storm? Massive infrastructure spending to keep unemployment down? Don't know, but I smell a bait-and-switch coming.

Michael Turton said...

I think their strategy is to hope that economic growth trickles down. Only the papers are doing a good job of insisting that it isn't, even with falling unemployment. Lots of people who voted against Chen are now going to return to the DPP. Going to be a tough election for Ma, but with a little help from China -- like a dramatic missile gesture -- and maybe some gangster bullets, they can probably squeak through.