Tuesday, February 24, 2009

The Brewing Conflict over CECA

There's so many things going on in Taiwan now, but what are the top 10 stories on the Kuomintang News Network (KNN) website as I am writing this post? Take a gander:

Chen Starts Eating after Wu’s Visit
Chen’s Lawyers Accuse Prosecutors of Str...
Ma Absent from the Opposition Conference
What a Former President!
Chen Cheng-hui Pleads Guilty, May Impact...
Wu Shu-jen Visits Chen Shui-bian
Former President Chen Shui-Bian Stages H...
Huang’s NT$ 100 Million Check May Belong...
TPHC Rejects Chen Shui-bian’s Interlocut...
DPP Lawmakers Block Premier’s Repo

Yes, that's right -- eight of the top ten stories are about the Chen case, showing the KMT's uncontained obsession with the former president. This is often the case, and I like to dip in now and then to confirm their idea of what "news" is.

The KMT's use of the Chen case as a media instrument is also on display, as the stories have been use to divert the public from other important issues, such as the growing controversy in Taiwan over the CECA agreement, an alleged free trade agreement between Taiwan and China (previous post). Taiwan News discussed some of the issues in a recent editorial:

Mainland Affairs Council Chairwoman Lai Shin-yuan dismissed such concerns by stressing that an "integrated economic cooperation agreement" would be negotiated under the framework of the World Trade Organization and would only be an "economic" agreement and did not impinge on Taiwan's sovereignty and thus did not require ratification by national citizen referendum, a process that she claimed would turn an "economic" issue into an "ideological" conflict.

However, Lai undoubtedly knows that trade talks do not have to directly deal with political issues to be "political" or "ideological" or to involve "sovereignty."

Such is the case in the proposed CECA because the PRC refuses to recognize Taiwan's independent sovereignty (even under the "Republic of China" name) and is openly committed to its annexation under the rubric of "unification" and since PRC State Chairman Hu Jintao explicitly indicated in his New Year's Eve "six point" speech that any such agreement would be signed only under Beijing's "one China principle," which posits that Taiwan is part of the PRC.

Lai's claim that a CECA would not impinge on the sovereignty of Taiwan is not shared by the international community, as shown by news reports in The New York Times and The Washington Post last weekend that describe the possible signing of a CECA as "an important step toward unification."

This consensus in the world community that Taiwan's agreement to such terms would be a "step toward unification" with the "one China" of the PRC will not be overturned by Lai's unilateral claim or by Ma's unreal self-delusion that "no matter what (Hu) thinks, we think 'one China' refers to the Republic of China."

Moreover, nowhere in any statements by Hu or any other PRC trade negotiator is there the slightest hint that a CECA or IECA would be negotiated under the WTO, even though both the PRC and Taiwan are full members.

Indeed, the PRC has fiercely warned nations not to sign free trade or regional trade agreements with Taiwan precisely to force Taiwan into negotiating a CECA first and thus denigrate our status to that equivalent to the PRC's own Hong Kong Special Administrative Region.
The KMT Administration's position is the classic "shock doctrine" position:

1. Hurry! The rest of Asia, including China, is forming a free trade region!
2. We'll be locked out of this if we don't get on board now!
3. Our economy is in the tank! We must do something now!
4. Claims that opponents' objections are "ideological"

The idea that CECA's opponents are driven by "ideology" but CECA proponents themselves are ideology-free pragmatists is found in both MAC Chairman Lai's comments above, and this recent China Times editorial, whose final paragraph sums up the Chain of Fear:
"....East Asian regional economic integration is just around the corner. The global financial crisis has yet to subside. Taiwan's economy, dependent upon the growth of exports, remains besieged on all sides. Signing CECA is merely one way to break through this siege. Besides, all cases involving tariff agreements must be approved by the Legislative Yuan. At that time all concerns will be addressed. If after all we have endured over the past eight years, we still cannot get past ideological struggles, that will be the real tragedy."
Similarly the Vice Premier today said that the agreement was only economic:

Vice Premier Paul Chiu (邱正雄) denied accusations that signing a comprehensive economic cooperation agreement (CECA) with China would trade away Taiwan’s sovereignty and bring unification with China one step closer, adding that the government’s intention to sign a CECA with China was purely an economic decision.

Chiu said the plan, initiated by the Ministry of Economic Affairs, was aimed mainly at enabling Taiwan to meet the challenges that would arise from the ASEAN Plus One (China) agreement set to take effect next year.
Several business groups have been arguing for the agreement, as the Taipei Times reported, based on the same two arguments: unrestricted market access will favor Taiwan, and we have to get it now because of the ASEAN free trade agreement coming online next year.

A recent Washington Post piece displayed the hollowness of KMT position, for China sees CECA exactly the way the DPP does: as another step toward annexing the island:
The Comprehensive Economic Cooperation Agreement would allow the free flow of goods, services and capital across the Taiwan Strait at a time when the economies of the mainland and the democratic self-ruled island are increasingly interdependent. While Taiwanese groups have tried to play down the political implications of the economic pact, those on the mainland are already talking about the eventual union of the two.

Li Fei, deputy director of the Taiwan Studies Center at Xiamen University on the mainland, said the agreement would be a significant milestone in gradually warming relations between the antagonists. "It's a start toward full cross-strait economic integration and a necessary condition for marching forward toward final unification," Li said.
What is driving CECA is not economic need, but political ideology -- specifically, KMT and CCP "One China" political ideology. The need to hurry is an ideological decision by KMT elites who want to see the island in China's grip ASAP. (UPDATE: KNN says that Li Fei denies having ever said this -- since it caused a controversy here.)DPP TSU Chairman Huang Kun-hui even threatened to impeach recall Ma over CECA although the legislature is controlled by the KMT (Taiwan News has coverage here)

Despite the claim that opposition to CECA is driven by ideology, in fact, as an upcoming commentary in English from DPP Chair Tsai Ing-wen notes, the DPP's problem is that the economic assumptions underlying the idea of "free trade" with China are all wrong. (The Chinese version was published a few days ago by the China Times). The DPP has always maintained that the China trade must be carefully handled to avoid destroying the local industrial and economic base. The KMT -- not so much.

It should be noted that the pattern of KMT agreeements with China is that they benefit China disproportionately. I find it difficult to imagine that a CECA agreement negotiated with China by the KMT is going to be comprehensively beneficial to the island's industries.

CECA is certain to be treated as a domestic agreement by China, which refuses to submit it to the WTO framework though both Taiwan and China are members, and by local business as a legal lever they can use to get around the cap on China investment, weak as it is, to move still more production across the water. "Exports" are merely the pretense for continued hollowing out of the economy. Note that while ASEAN arranges an FTA among its members, and FTAs proliferate in Asia, Taiwan, excluded from international bodies by China's fierce opposition to its independent existence, has only China it can turn to.

Readers may gain some insight into what a "free trade" agreement really means (read: managed trade) and how China has been treated by ASEAN from this 2007 article on India's experience with the ASEAN FTA regime. China's previous FTAs are reviewed in this 2006 article. This small article is a piece of a much larger discussion on East Asian FTAs; links are on their sidebar.

Taiwan needs to step back and catch its breath. The ASEAN + China FTA will not remove all barriers overnight, but will phase them out over time, and many industries will still be protected. There's no need to do CECA right away -- what drives the urgency is not economics, but ideology.

Pro-China ideology.


DeMo! said...

Perhaps their rush to force unification is something to do with the 100th anniversary in ROC in 2011.

It seems clear that they do not want to ever give freedom back to the voting Taiwanese public which has had it since 1996.

They do not ever want to have to deal with another party in power unless it is the CCP.

Anonymous said...

1. The Grand Poohbah (Lien Chan) is probably still pissed off that CSB made him Kiss the ground to show his love for Taiwan.

2. Anyone with a brain larger than a betel nut realizes that a PRC unification will make things much worse in Taiwan. I know this requirement pretty much excludes most of the KMTards (Keep Marginalizing Taiwan retards). What power do they think they will have once the CCP takes over? the CCP does not want competition.

3. Its looking grimmer and grimmer that unification (and a Taiwan sellout) is in the works. Clinton's recent trip to the PRC begging the Chinese to keep purchasing T's ($2T+), the AIG/Kissinger big money connection, Geithner being a Kissinger associate, human rights a non-issue, etc.

In 1995, AIG became the first company to be licensed to sell insurance in China. AIG is a client of Kissinger & Associates. It was Henry Kissinger, the former Secretary of State, who advised against harsh sanctions after the Tienanmen Square massacre. „No government in the world would have tolerated having the main square of its capital occupied for eight weeks by tens of thousands of demonstrators,“ he wrote. The conduct of the students made a crackdown „inevitable“, he added.

4. Free trade in China means maximize exports and minimize imports. (mercantilism). Taiwan will be flooded with even more cheap "bluesky" goods. Say goodbye forever to Taitung rice cookers and anything else formerly MIT. (including the auto industry ...wasn't there a mention in the paper a few weeks ago that China Chery cars may be sold in Taiwan via the used car network?).

5. Me thinks there may be a day in the near future (after the CECA is passed and the violent street riots are contained) that the Taiwanese may take out some of the their anger on westerners here. (ala 1979). The media will probably hype this up, but in reality, its the Taiwanese's own fault for being politically apathetic and ignorant about the trend of the global economy. I've said from day1 after the election that there will not be another prez election. I believe this will hold true.

6. The TaiwanNews has been posting some great stuff lately. It reminds me of the pre-TaipeiTimes AL/LE days. I wonder who is the person behind the keystrokes? Their website still makes my Firefox crash though. I wish they would fix it.

7. Impeach MA and bring in a new chairman.

8. Lastly, nice analysis Michael.

riceagain said...

Ma will be eager to get his performance bonus..

Tommy said...

In fact, perhaps that is part of their motivation. Once China is unified, they think they will be able to step in as the next party once democracy blooms there. Hehe.

I find it quite amusing that the top-10 stories you list, Michael, don't include a defense of the CECA.

The thing that is amusing me so much now is that, well before negotiations begin, Ma and company are tripping over themselves to say that the CECA will not violate Taiwan's sovereignty. Yet, as A Gu notes on his blog, they can't even agree on what the CECA would look like themselves.

And what I have never understood about the crisis ASEAN+1 argument is this. Even if Ma and company were correct, and this would just be economical, how would Taiwan's problems be magically solved by opening trade with only one of the ASEAN+1 countries? It is not like Taiwan will suddenly gain access to ASEAN even with the CECA.

Anonymous said...

The 1979 riots were not so much a spontaneous eruption of emotion, but rather an officially organized, unofficial KMT protest incited by the secret police. Remember the violence at the US embassy in China? Same thing. Authoritarian governments don't allow protests unless they want them to happen.

Anonymous said...

In fact, perhaps that is part of their motivation. Once China is unified, they think they will be able to step in as the next party once democracy blooms there.

THe KMT isn't interested in a democratic government, but re-establishing the republic.

I know all you folks keep saying, "but what about what the people of Taiwan want?" -- and the resounding reply is -- as far as the competing Republics of China are concerned -- "WHO CARES?"

Taiwan Echo said...

Nobody in Ma's government and -- in fact, the entire Taiwan -- know what exactly CECA will be, yet Ma and his cohort are able to determine that this unknown CECA is a must-have.

WTF! If someone tells you that although I have no idea what is in this pill, but I assure you that it will help your health -- will you swallow it ?

And now since so many groups are opposing "CECA", Ma govt is trying to solve the conflict by calling it a different name.

They are just so arrogant to think that people are so dumb and can be easily deceived ..

Anonymous said...

A few commenters have hinted at something here. The following is a rumor only.

The KMT is very keen to celebrate the 100th anniversary of the ROC in Nanjing. (That will be in 2011). The KMT is also seeking to re-establish itself in China. It hopes to participate in elections there.

Taiwan is a mere bargaining chip in achieving these goals.

Dixteel said...

Man...the good thing is the opposition is very strong on this one, but the KMT is also trying very hard to rush it through as well...I wonder what will happen...

Robert R. said...

What power do they think they will have once the CCP takes over? the CCP does not want competition.

As a party, not so much. But as individuals, they can do alright for themselves.... as a present for putting the bow on Taiwan for China.

Anonymous said...

Thanks for the India article. I didn't realize ASEAN countries (I think they really mean Indonesia in particular) were so eager to export palm oil to India.

Which should remind us of another very important dimension to these free trade agreements. I think somewhat similar to Michael's post on how globalization stresses like marriages. Really, there needs to be an environmental and health (remember Sanlu?) framework that goes along with these things.

Anyways, many people are aware but in case--

A few years ago, the Dutch wanted to increase use of biodiesel, which is cheaply made from palm oil. They wanted to be good global environmentally-conscious citizens and subsidized it, causing Indonesia to move in on the gold rush. Indonesia then proceeded to burn vast tracts of peat bogs to clear land to grow palm to export to the Netherlands. Now burning peat is disastrous and way worse than even just burning forest because it's essentially a thick layer of dead tree material that has accumulated over a very long time--it's the stuff that'd end up being coal given enough pressure and time. This burning (burns for a long time) is responsible for 25% of world CO2 released into the atmosphere in recent years! Talk about unintended consequences!

So. When Taiwan attempts to sign free trade agreements with a whole lot of countries less developed than itself and whose environmental, safety, and health regulatory regimes are much weaker, there will be changes. Businesses will move not just to take advantage of natural resources or cheaper labor or an industry cluster--they'll move to avoid so they can pollute all they want or use overly subsidized water and electricity etc.

Now the solution to this kind of thing isn't really the current tariffs that are in place here. It would be tariffs on products that are produced in a way that could never be allowed to occur in Taiwan. It's difficult to do, but perhaps if Taiwan could align with Japan and other developed markets to do this, there would definitely be enough leverage to get undeveloped economies to upgrade their regulatory regimes.

Anonymous said...

@RobertR, Yes you are right. Individually they will make out.

A couple of weeks ago an Anon poster made the following comment here on Michael's blog. I think it's worth repeating in case anyone missed it:

The business elites are losing their shirts in China. The military hasn't been a major player since the days of Gen. Hao Bo Tsun. Look at the arms procurement packages. The military budget has been slashed and they stand to be made impotent.

The people who stand to gain are the politicians who are involved in private enterprise, either directly or indirectly-- through hidden share holding "family members with shares" etc...

Organized crime stands to gain as they have maintained decades of illegal trade with China. Their illegal means are disappearing, but they are positioning themselves to take advantage of legal enterprises to enrich themselves. Organized crime is deeply involved in hotel and travel, construction, transportation, education and entertainment.

The last and most advantaged group would be organized crime members who are also politicians. They have the power to negotiate deals, which serve to enrich themselves. They maintain stakes in the enterprises mentioned above, but they also hold the power to negotiate to their personal advantage which may be at odds with their constituents. They can manipulate zoning requirements, issue construction permits, amend tax laws, manipulate law enforcement and the judiciary, they can access insider trading schemes and even become the ultimate insider. They can accept bribes for other schemes that will illegally enrich others. They can even order transportation routes to favor certain districts, businesses or enterprises. They can also wield the powers mentioned above in an equally punitive manner and destroy competition.

These guys are in charge of Taiwan. You wonder why, when a boss dies, the major politicians all send a wreath...?

Unification is for these guys.

China is just inviting more of this behavior while Taiwanese who are not privy to such power are getting laid off.

@Anon - keep 'em coming!!

Robert R. said...

I'm filled with warm feelings after Premier Liu, when asked if there's a 2016 timetable to unify with China said he's never heard of such a timetable rather than saying that the KMT does not intend to unify with China.

Either that, or he means he hasn't heard of such a 2016 timetable because it's a 2011 timetable.

Anonymous said...

Few things my government has done in recent years have disgusted me as much as the failure of the Bush administration to pursue a free trade agreement with Taiwan. Now Taiwan is turning to China for free trade.

If we want Taiwan to become part of China, why not just sell them outright? Rather than spending money on an arms race with China, why not just sell Taiwan cash and carry? We could probably wipe out all the debt we owe China in one transaction! Even with all the money that was in the recently passed generational theft bill!

We had a chance to firmly stand with Taiwan while avoiding charges (from anyone but China) that we're militarizing the area or being hostile to China. And it would have been good for our economy and good for Taiwan. I have a hard time imagining how passing on that chance wasn't stupid, cowardly, or both.

Antonio Liao said...

Hi Michel,
This topic is really cover down with Chen's news & econmic depress news, while you watching TV, I do not agree to sign such kiss ass contact with china, it's look like feeding you for kill. but we also can't avoid losing market in such low consumption affect.

But I really don't believe we can build up such business partnership with close country, Are this much the same like eu coporation?

Anonymous said...

If Taiwan would like to reap many of the benefits of free trade, it could unilaterally lower all import tariffs and barriers.

I know that would freak out the guy worried about Taitung losing its rice cooker monopoly (LOL - My wife only buys that brand - who's buying bluesky - and they sell those with 220v for China use too! Its an export item!)

But many of the gains from free trade come not from opening up foreign markets but from opening up your own markets.