Evolving Colonial Formosa Again

Idle speculation: I was reading the speculative articles on the Brobdingnagian engineering project of running a vehicle tunnel under the Taiwan Strait to connect Taiwan with China. This got me thinking about water: anyone ever thought that Taiwan, with its massive water surplus (80% of the water that falls on the island runs back to the ocean) is an ideal place for a water deficit nation like China to grab? Maybe you never did, but I'd bet dollars that the CCP brain trust has. In contrast to a vehicle tunnel, running a large water pipe under the Strait is a simple and strai(gh)tforward engineering problem.

Reuters published an unintentionally humorous interview with KMT Secretary-General King Pu-tsung, Ma's hatchet man, known as "little knife". The Reuters reporter who did the interview, Ralph Jennings, is on the ground in Taipei and had no trouble identifying the problem locals have with Ma's policies (unlike some):

The KMT and DPP will face off in tense local elections at the end of this year that are seen as a bellwether for the 2012 presidential race. The KMT has already lost seats in recent by-elections on voter concerns over its pro-China policy.

King comically assured all readers that everything was going to be peachy-keen:

"ECFA can be a turning a point. Wen Jiabao said he's going to yield benefits to Taiwan, so how can you say the deal would sell out Taiwan?" King said.

Wen Jiabao said it, I believe it. Everyone knows that China's leaders are inveterate truth tellers.

There's been quite a few pixels expended in debating the effects of ECFA on Taiwan industries, but less of a focus on the way Taiwan, as a Liberty Times commentator noted a couple of weeks ago, is becoming a de facto colonial holding of China: as its industries are sucked into China's maw, the island is gearing up to supply plastics for processing, steel, and other basic industrial materials. China is not only de-industrializing the island; it is returning it back to the 1930s when Japanese planners envisioned Taiwan as a place that would provide basic industrial and agricultural inputs like rice, timber, camphor, and sugar. Former Taiwan rep and international trade specialist Benjamin Lu pointed this out in a Taipei Times interview:

“I certainly don’t believe that the proposed ECFA will provide any opportunity for Taiwan to increase its exports to the PRC [People’s Republic of China],” he said. “The reason is that what we can manufacture in Taiwan can be manufactured in mainland China at a much cheaper price. We have no competitive edge at all, even with the concession of a tariff provided by ECFA, if there is any. There is a slight chance for Taiwan to export more tropical fruit to mainland China and some semi-finished products.”

We have already seen this reversion in Mailiao, where new petrochemical and steel plants, running on state-subsidized water (supplied by a hugely destructive dam in the mountains above it), will supply the Chinese market, but another complex is going in Changhua which will borrow water and hurt a wetland (Chinese). Not just waterfowl are suffering: the Formosa Plastics coal-fired power plant at Mailiao is the fifth largest single human source of CO2 on earth. Going in Changhua is the Changgong Power Plant, another coal-eating monster that when completed will edge out the Mailiao plant to become number four. The plant is being built to serve Changbin Industrial Park, slated for completion this year, on the coast north of Lukang. This entirely retrograde industrial movement, for the sake of China, is punishing Taiwan's dwindling natural resources and warming the earth. Our industrial structure is not the only thing being shaped by increased contact with China.

Taiwan News argues in another hard hitting editorial that the title of the cross-strait economic agreements constitutes an acceptance of domestic status vis-a-vis China, in contrast to Ma's promises that ECFA will not impinge on the island's sovereignty. To wit:

After all, a cursory review of trade agreements between Beijing and other countries indicates that the PRC is meticulous in ensuring proper "protocol" and insisting on the use of formal titles. The innumerable examples include the "Framework Agreement on Comprehensive Economic Co-Operation Between the Association of Southeast Asian Nations and the People's Republic of China" signed on November 4, 2002.

The only exceptions appear to be pacts between Beijing and the subordinate "special administrative regions" of the former British colony of Hong Kong and the former Portugese colony of Macau.

In both of the "closer economic partnership agreements" (CEPA) signed with the Hong Kong Special Administrative Region (HKSAR) and the Macao SAR on June 29, 2003 and October 18, 2003, respectively, Beijing refrained from using its formal status and instead used the term "Mainland" (literally "neidi" or "inside territory" instead of the usual "dalu") and the geographical phrases "Hong Kong" and "Macau."

Through footnotes, the preambles of both CEPA pacts also explicitly define "the Mainland" as referring to "the entire People's Republic of China," which includes the two SARs.

The "cross-strait economic cooperation framework agreement" title apparently agreed upon by the KMT and the PRC's ruling Chinese Communist Party departs from international protocol and is also by no means "ambigous." Instead, its use constitutes direct evidence of acceptance of a "domestic" status within the PRC parallel to that of the Hong Kong and Macau "special administrative regions."

Hence, the refusal of the Ma government to insist, at the very least, that the formal WTO titles of both parties be used in the title and body of the ECFA constitutes a profoundly "political" concession of our international legal status as a state or "economic legal entity" and has troubling implications for Taiwan's sovereignty and economic autonomy and horizons.

For Beijing, ECFA is about annexing Taiwan. D'oh. James Wang commented in the Taipei Times on ECFA, saying it is pretty clear what Beijing wants:

Once Taiwan buys into the “one China” principle, Beijing will be taking a mile for every inch given to it and say “thank you very much.” It will be reaping its “early harvest,” alright: a present of Taiwan’s sovereignty. It may even well mete out its concessions and remove the odd missile or two, orchestrating a “warming” of the Taiwan Strait situation and pushing for “peace talks.” This would, in turn, make all the more plausible China’s case to the US that there is no real need to sell arms to Taiwan.

All you can say is BINGO. Meanwhile government officials continue to insist ECFA will be signed in the very near future. Please note the government's constantly shifting rationale for it -- remember when we had to have ECFA IMMEDIATELY to save the economy? Oh yeah, two years have passed with no ECFA, but we have recovery already now with the links to the China market we already had under the DPP. Then it was to prevent marginalization by the ASEAN FTAs -- which have turned out to be not so great for those trading with China. Note also that the announcement is from V-P Vincent Siew: remember when he was the amazing technocrat that Ma promised to make Czar of All Economies in Taiwan? Yea, verily, it was the bright spring of our naivete.

In other ECFA news, AFP reports that Taiwan's financial industry wants to be able to take a 30% stake in Chinese banks.

The government hopes such a move would let any individual Taiwanese bank to buy up 30 percent of any Chinese lender, as opposed to the current 20 percent ceiling China imposes of foreign investors, the Commercial Times said.

It said Taiwan also hopes its banks will be allowed to open branches as soon as they enter the mainland market, instead of having following the prerequisite that foreign banks have to first open representative offices for two years.

As I have been saying, the main beneficiary of ECFA is going to be the financial sector; local manufacturing industries are going to be decimated. Will China really let Taiwan take out stakes in its financial sector? That isn't how China works.

Businessweek offered another China Pessimism article: biggest bubble in history. Because China is so opaque, it is hard to make judgments about what kind of handle the government has on the problem. Yet, if you recall famous Taiwan scandals that occurred in the credit sector during the martial law era, such as the massive Tsai family conglomerate collapse, one might argue that the authorities in authoritarian states show a marked reluctance to put a stop to things once the size of the problem grows. Hence that chilly feeling between the shoulder blades when one contemplates China's bubble -- you know that bubble economy that Ma desperately wants Taiwan to graft itself onto. Wouldn't it be ironic if ECFA came online just as China's growth went ka-boom!

Idle speculation: is the desire to annex Taiwan a factor in keeping China's yuan down? The material basis for Taiwan's independence is its vibrant industrial base, which will undoubtedly be stimulated by a rise in the yuan, both in terms of rising demand for exports when the currency appreciates, and because as the cost of manufacturing rises, firms will move out (and back to Taiwan).
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Daily Links

• Forbes interview with Jason Hu, mayor of Taichung, on ECFA.
• Hear in Taiwan interviews the Taiwan Association for Human Rights
• Anyone know the story behind this tale of a local woman abused at Canadian immigration? I still have warm fuzzies for Canada and find this a bit incredible.
• Lief with a lovely post on a temple battle array.
• Panniers on road bikes for Taiwan trips from Biking in Taiwan

SPECIAL:

• Simply the best piece on the Geithner's apparently criminal role in the problems on Wall Street.
• Hardest logic puzzle ever, be sure to read whole post.

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