Ma says Taiwan FTA Need Beijing FTA First

As my loyal readers know, pundits both here in Taiwan and abroad have been saying that with ECFA Taiwan will be able to sign FTAs with other nations. ECFA must come first, they all claim, and then everything will be alright -- despite the fact that China has consistently refused to promise to permit Taiwan to have Free Trade Agreements (FTA) with other nations once the ECFA agreements are signed.

But what does Mr. Ma say about it? Taiwan Today translates the China Times:

Taiwan should not demand that mainland China allow it to enter into free trade agreement talks with other nations as a precondition for discussions on an economic cooperation framework agreement, said Chiang Pin-kung, chairman of the Straits Exchange Foundation.

The idea, first put forward by the opposition Democratic Progressive Party, is “excellent—but inappropriate,” said Chiang, adding that making such a demand publicly could cause additional difficulties.

The SEF Chairman made his remarks Jan. 11 during an interview with “Formosa Weekly,” an online newspaper founded by former Vice President Annette Lu. His interlocutor was Hsu Hsin-liang, former chairman of the DPP.

The paper adds:

In related news, President Ma Ying-jeou noted though cross-strait economic development has been growing rapidly, there has not been a systemic trade mechanism between the two sides.

“We must seek a breakthrough, or Taiwan will be marginalized in the wake of East Asian regional economic integration,” he said.

Asked whether Taiwan will sign FTAs with other countries after signing an ECFA with the mainland, President Ma answered, “It most certainly will.”

“As long as other nations have already signed FTAs with the mainland, Beijing will have no objections if these countries wish to discuss similar deals with Taiwan,” the president said.

Read it -- from Ma's lips to your ears: first Beijing signs the FTA, and then Taiwan follows, but only with those countries. In other words, Taiwan has no independent policy of its own.

Sell. out. Can it get any clearer? Is this what the foreign business community in Taiwan wants? To go meekly where Beijing points?

The China-ASEAN FTA is coming into force this year, and strangely, other nations take a jaundiced view of what an FTA with China might mean. For example:

The FTA, which was first announced at the Asean-China Summit in 2001, is the third largest in the world and covers a combined population of 1.9 billion with a gross domestic product of US$6.6 trillion and a trade volume of US$4.3 trillion.

Under the FTA, more than 9,000 products imported from China to Malaysia are duty-free while China will reduce tariffs on more than 7,000 products from Asean. Besides manufactured goods, the agreement also covers services and investment.

Unlike the Asean-India FTA, which was concluded last August at the 7th Asean Economic Ministers-India meeting, and also came into force on Jan 1, the FTA with China faces opposition.

While governments in the region have welcomed the agreement with China, whose economy is the fastest growing in the region, thousands of workers from across west Java staged a rally in Bandung against the FTA last week.

The Jakarta Post on Tuesday carried a commentary by an Indonesian academic on how the FTA could slow down the fulfilment of human rights in Indonesia, including rights to health, decent wages and access to natural resources.

Associated Chinese Chambers of Commerce and Industry of Malaysia president Tan Sri William Cheng had in an earlier interview with a Chinese-language newspaper called for a delay in the full liberalisation of trade with China.

However, sections of the business community were more cautious on the impact, with Federation of Malaysian Manufacturers (FMM) president Tan Sri Mustafa Mansur saying that it was still early to assess the impact on local businesses.

“We’re organising a special panel discussion with Chinese officials together with officials from the International Trade and Industry Ministry next month as we’ll be able to better assess the impact after one month,” he told StarBiz over the phone.

Cheng had voiced objections over the removal of tariffs for 90% of the goods traded under the FTA as local businesses might not be fully prepared. The more restricted agreement with India carries with it many exemptions, especially for agricultural products, while negotiations are still ongoing under the FTA for services and investment.

Cheng added that industries in Thailand and Indonesia had also called for a delay in the implementation of the agreement.

This opinion piece gives the propaganda vs reality on the China-ASEAN FTA. Grim....

The trend of Asean losing ground to China accelerated after the financial crisis of 1997.

In 2000, foreign direct investment in Asean shrank to 10 per cent of all foreign direct investment in developing Asia, down from 30 per cent in the mid-nineties.

The decline continued in the rest of the decade, with the United Nations World Investment Report attributing the trend partly to "increased competition from China."

Since the Japanese have been the most dynamic foreign investors in the region, much apprehension in the Asean capitals greeted a Japanese government survey that revealed that 57 per cent of Japanese manufacturing TNCs found China to be more attractive than the Asean-4 (Thailand, Malaysia, Indonesia, and the Philippines).

But wait, there's more. There's the smuggling -- not just Taiwan, it's everywhere:

Massive smuggling of goods from has disrupted practically all Asean economies.

For instance, with some 70-80 per cent of shoe shops in Vietnam selling smuggled Chinese shoes, the Vietnamese shoe industry has suffered badly.

In the case of the Philippines, a recent paper by Joseph Francia and Errol Ramos of the Free Trade Alliance claims that the local shoe industry, along with the vegetable industry, has also been hit badly by smuggling of Chinese goods.

Indeed the range of goods negatively affected is broad, including steel, paper, cement, petrochemicals, plastics, and ceramic tiles.

“Many Philippine companies, even those that are competitive globally, had to close shop or reduce production and employment, due to smuggling,” they write.

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.

Then there was the Thai "early harvest" which, as the writer notes, is now well documented.

Local vegetable producers complain that they have already been badly hit by Cafta’s experimental “early harvest agreement” that went into effect in December 2005. A similar result has apparently emerged in Thailand, where the impact of the early harvest agreement with China has been better documented.

Under the agreement, Thailand and China agreed that tariffs on more than 200 items of vegetables and fruits would be immediately eliminated. Thailand would export tropical fruits to China while winter fruits from China would be eligible for the zero-tariff deal.

The expectations of mutual benefit evaporated after a few months, however, with most Thai commentaries admitting that Thailand got a bad deal.

As one assessment put it, "despite the limited scope of the Thailand-China early harvest agreement, it has had an appreciable impact in the sectors covered.

The "appreciable impact" has been to wipe out northern Thai producers of garlic and red onions and to cripple the sale of temperate fruit and vegetables from the Royal projects."

Thai newspapers pointed to officials in Southern China refusing to bring down tariffs as stipulated in the agreement while the Thai government brought down the barriers to Chinese products.

Resentment at the results of the China-Thai "early harvest" agreement among Thai fruit and vegetable growers was, in fact, one of the factors that contributed to widespread disillusionment with the broader free trade agenda of the Thaksin government; and opposition to free trade was a prominent feature of the popular mobilizations that culminated in the ouster of that regime in September 2006 by a military coup.

The whole piece, written by a member of the House of Representatives in the Philippines, is a ringing condemnation of the China-ASEAN FTA Cargo Cult, well worth reading and contemplating.

Note the same patterns we always see with China: agreements made but not kept, illegal activities designed to undermine the competition, streams of lies issuing from Beijing and its representatives, and local businesses dying off in droves. Welcome to the future, Taiwan.
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