Book Review: Taiwan's China Dilemma: Contested Identities and Multiple Interests in Taiwan's Cross Strait Economic Policy

Taiwan's China Dilemma: Contested Identities and Multiple Interests in Taiwan’s Cross-Strait Economic Policy
Syaru Shirley Lin
Stanford University Press
304 pages

One of the joys of operating this blog is the privilege of meeting incredible people, listening to them talk, and then reading their incredible books. Few have merited these encomiums more than Shirley Lin.

She arranged a meeting with me in Taipei to give me a copy of the book, and then talked at me nonstop, ideas, insights, histories, stories, more ideas, more insights, pouring out of her, an Amazon at full flood. I think it took me until about 40 minutes in to complete my first sentence.

A former partner at Goldman Sachs, Lin teaches part of the year in Hong Kong, and the part in Virginia. She was born in Taiwan and comes from humble stock: one of her grandmothers sold gong wan in the Yuanhuan Market on Nanjing W road for decades. Few people have her breadth of experience in both the financial and academic worlds, as well as her deep Taiwan roots, making her uniquely qualified to write this work.

The major idea of this work is that "Identity is treated as an integral part of a more comprehensive understanding of how the Taiwanese have dealt with their China dilemma." Following Alexander Wendt, she argues that values, such as identity, are how economic interests are chosen. Lin supports her argument with a (1) comprehensive historical review of the debates over the economic approach to China and the rise of the modern Taiwan identity that is (2) not pro-China or pro-KMT but well balanced and inclusive and (3) buttressed by charts and graphs of every type and kind. In addition to placing identity at the heart of the cross-strait decision-making process, Lin also uses the distributive effects of the economic engagement with China on Taiwan, effects that have strong explanatory power for the choices the Taiwanese have made over the last 15 years. Up to date, she observes that Taiwan's identity is rooted in shared democratic values. She also puts her finger on the recent changes in identity as class and socio-economic cleavages created by interaction with China. In short, this is a meaty and informative work that demonstrates a deep grasp of the topic at hand.

Lin's framework for understanding the debates is eclectic, and she has little patience with the propagandistic pro-China mutterings of the kind of Blue scholar who regards Taiwanese rejection of economic ties with China as a form of irrationality, dismissing them as facile:

"Because of the shortcomings of these perspectives, a highly influential line of analysis attributes the otherwise inexplicable to the role of identity in Taiwan's domestic society. One approach views identity as artificially constructed by opportunistic politicians engaged in "identity politics," appealing to groups to adopt or sustain a certain identity in order to mobilize support for particular political leaders or public policies on that basis. According to this approach, such identity politics has led Taiwanese voters to act emotionally or even irrationally when considering Taiwan's economic policy towards China (K. Chen 2004). National identity has no intrinsic value in this kind of analysis; it is simply an outcome of political contestation, in which entrepreneurs are manipulating identity for political gain. But even though "identity politics" can be an easy way of explaining behavior that departs from rationalist predictions (L. Cheng and Keng 2009; S. C. Hsu 2007), this perspective can overlook the fact that Taiwan's unique history and values have created a deep sense of national identity that should not be dismissed simply as false consciousness created by a small group of extremists"(p19).

Historically, the book focuses on the period between the missile crises in the 1990s and the run-up to the signing of ECFA under the Ma Administration in 2008-2010, and carries the history through to the Sunflowers, chronicling the shifts back and forth under successive Administrations. Under the Lee Administration the debates over how to engage China were forthrightly painted by both sides in terms of identity, with the diehard KMTers throwing language at the Taiwan side that will be familiar to anyone who has followed the debates over ECFA and the services pact. Little has changed in that regard.

The Lee era gave way to Chen Shui-bian and the debate over the opening to China, which resulted in an economic boom in Taiwan. Lin uses the semiconductor industry as a case study for understanding the cross-currents of economic decision-making and identity. That industry is the perfect choice: in 2008, when the DPP was fielding Frank Hsieh for the presidency, I sat down with a friend of his to chat about the election, and the semiconductor industry was the topic of conversation, and not very happily either.

Lin's up-to-date understanding shines in her discussion of the Sunflowers and the Ma Administration. Unlike so many authors who assigned Sunflower objections to the services pact to identity politics, Lin's analysis recognizes that their objections were rooted in practical and informed understandings of the effect of the pact on the Taiwan economy.

I can't recommend this book enough. Detailed, packed with information and statistics, and very conservatively argued, this work should be on the shelf of everyone interested in the debates over Taiwan's economic future.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Diplomat: Ma Ying-jeou's Legendary (Trade) Millions

In the Diplomat today:

When The Economist recently reported that Taiwan’s trade with China “ballooned” during the administration of outgoing President Ma Ying-jeou of the pro-China Kuomintang (KMT), it was repeating what has become a commonplace among writers on the cross-strait relationship. We are told that trade “boomed” under Ma (Washington Post, Institutional Investor), or “particularly since Ma” (East Asia Forum, International Business Times), or that since Ma cross-strait trade has “climbed more than 50 percent” (New York Times) and even “soared” (Economist). Indeed it is possible to write that China is “showering” Taiwan with economic benefits (East Asian Forum), that booming cross-strait trade was “only a hope little more than a decade ago” (National Interest), and that Ma’s policies have resulted in “substantial material gain” (National Interest).

There is just one problem with these thoroughly conventional claims: they are thoroughly wrong...

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

MEDIAFAIL: Is there no Internet in the Economist's Offices?

Taiwan is full of lovely mountain roads.

Ah, the Economist, still carrying a torch for Ma Ying-jeou. The most recent piece, Sizing Tsai Up, contains all the journalistic tropes we know and love.

When the media lies, it usually does so by key omission, and the Economist is no exception. Consider this paragraph:

As for trade with China itself, it ballooned under the outgoing president, Ma Ying-jeou (as did Chinese tourism to the island). Indeed, Taiwan is one of very few countries to run a trade surplus with China, thanks mainly to contract manufacturing and exports of capital equipment. Yet many Taiwanese resent the relationship, along with the cross-strait trade and economic agreements that multiplied under Mr Ma. Indeed the signing of a services agreement led two years ago to the “sunflower” movement of protesters, who argued that the deal would lead to China’s exerting undue influence on Taiwan. The movement, and subsequent student occupations of the Legislative Yuan, greatly undermined Mr Ma’s presidency.

Of course everyone recognizes the first sentence, it's a common trope. Yes, overall trade grew under Ma. What none of these "journalists" ever notes is that it ballooned far faster under the Chen Administration and Taiwan businessmen did much better. The Ma Administration represented the end of the golden age for Taiwanese in China.

The trade numbers are available on the Bureau of Trade website (go to SEARCH BY VALUE, set the country to China, and select the years you want). Even writers for the Economist should be able to find them. Let's look....

First, the total trade numbers for China in billion US$ (column 2) and growth rate (column 3)(w/o HKK and Macau)(trade with Hong Kong was $33 billion in 2000, peaked at $44 billion in 2014, and fell back to $39 billion in 2015. Trade with Macao is not very large.)...

2000	10,440,540,918	47.82
2001	10,798,076,970	3.424
2002	18,495,033,007	71.281
2003	33,907,784,754	83.335
2004	53,140,562,278	56.721
2005	63,736,408,872	19.939
2006	76,590,504,462	20.168
2007	90,430,526,782	18.07
2008	98,273,497,890	8.673
2009	78,670,764,058	-19.947
2010	112,879,654,027	43.484
2011	127,555,177,571	13.001
2012	121,621,186,471	-4.652
2013	124,376,057,324	2.265
2014	130,158,219,397	4.649
2015	115,392,430,915	-11.344

Note that trade under Chen skyrocketed from $10.4 billion in 2000 to $98.2 billion in 2008, or a gain of nearly $88 billion. What happened in the "ballooning" Ma era? Trade grew from $98.2 billion and peaked at $130.1 billion. Using that peak, the best gain was just $32 billion, less than half the Chen Administration figure. Through 2015 the total net gain was a paltry $17.1 billion (115.3-98.2). To put those numbers in perspective, in the two years between 2002 and 2004, trade gained $35 billion (in fact, trade gains were larger than the entire Ma Administration in almost any two year period in the Chen Administration). Nor did the Chen Administration experience any negative trade growth.

Indeed, as my son pointed out to me as I wrote this post, trade basically stagnated during 2011 to 2014, with a net gain of just $3 billion during those 4 years, or about what a Taiwan businessman spends on drinks with his buddies during a Saturday night out in Shenzhen.

Of course, the sharp-eyed among you will note that in 2010 ECFA was signed. That's right, since ECFA came into force, trade with China has stagnated and then fallen. And that's what the Economist calls "ballooning." Well, perhaps the Economist calls it "ballooning" because there is so much hot air in its claims...

But let's look at that next omission by the Economist.

Indeed, Taiwan is one of very few countries to run a trade surplus with China, thanks mainly to contract manufacturing and exports of capital equipment.

Yes, we do run a trade surplus with China. Here are the numbers (US$billions, China only):

2000	-2,005,682,704	0.819
2001	-1,007,492,002	-49.768
2002	2,558,443,421	-353.942
2003	11,872,821,076	364.064
2004	19,557,486,938	64.725
2005	23,550,236,834	20.415
2006	27,025,853,070	14.758
2007	34,402,295,404	27.294
2008	35,492,565,742	3.169
2009	29,825,438,414	-15.967
2010	40,989,496,995	37.431
2011	40,363,622,351	-1.527
2012	39,806,327,025	-1.381
2013	39,199,232,438	-1.525
2014	34,080,427,333	-13.058
2015	27,026,406,849	-20.698

What the Economist doesn't say is screamingly obvious: since ECFA was signed the trade surplus has plummeted. Compare: the 2015 trade surplus is nearly identical to the 2006 trade surplus. ECFA is clearly "working as intended".

If you mention the trade surplus and Taiwan in the Ma Administration, but omit that it has fallen since Ma's centerpiece legislation was signed and all but two years during the Ma Administration... no need to complete that sentence.

The article constantly attempts to position the Ma Administration as economically successful, but opposed by those "hardline" Taiwan independence types solely for political reasons. It never mentions that the anti-ECFA and services pact forces were motivated by the economic effects of increased integration with China. Once it had committed to the lie that trade was awesome, it was inevitable that it could only explain opposition to increased integration in terms of independence politics. Sad.

Once again, Economist, you have my gratitude. It is because of lazy, trope-ridden, pro-China reporting like this that my blog and other Taiwan-centered websites continue to be useful for and popular with academics, analysts, and media workers. Thanks, guys!
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Daily Links:

• New Bloom: Why is nobody in Taiwan talking about the fish die-offs in Vietnam?
• Great Taiwan 1970 photo album on Flickr. 23 photos from 1966 visit here.
• The Ma Administration, even in its last days, continues to troll SE Asian nations on the South China Sea, in this case with an invitation to Manila to visit Itu Aba.
• Meanwhile Beijing continues to set the stage for war
• Zika reaches Singapore

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

DPP: 2 steps forward, 1.9 steps backward Redux

When you absolutely, positively, have to cross that river.

Many DPP leaders linked the goal of democratization directly to the issue of Taiwanese identity and the principle of self-determination (Hu and Chu 1992). Because this subethnic cleavage transcended socioeconomic strata, the DPP consider it an effective counterstrategy to the KMT's broadly based socioeconomic development program. It was also an issue that could unite tangwai members of different social and economic interests under a common cause. -- Bruce Dickson

Some of the cleavages within the DPP are starting to appear as the May 20 handover approaches... Tsai has done a wonderful job holding the party together, but...

President-elect Tsai Ing-wen finally had to tell her incoming cabinet members to shut up this week after a couple of embarrassing incidents....

President-elect Tsai Ing-wen on Saturday warned her prospective government members against wasting the team’s credit by making careless remarks.

She made the statement in an address to a “consensus camp” in Taipei City’s Yangmingshan area of her Premier-designate Lin Chuan with about 40 of the ministers and Cabinet members who will be sworn in on May 20.

Remarks by at least three of the members had to be countered by the prospective Cabinet leadership after they caused public unease.

Nothing demonstrated this necessity more than remarks of Chang Ching-sen, a Minister without Portfolio, on social activists and urban renewal. He had caused an uproar:

The controversy stemmed from a Facebook post by Chang on Monday about an ad advertising the Wenlin Yuan (文林苑) urban renewal project in Taipei’s Shilin District (士林) that in 2012 met resistance from the Wang (王) family who had refused to be relocated for the renewal and sparked a protest that was joined by scores of activists and students.

“[It was] the most kuso [a term in Taiwanese subculture meaning memed or parodied, but has evolved to indicate something nonsensically funny] activism in history. The Wang family that seemed to have been persecuted by the construction company and the government had a house that was 56.06 ping [185.2m2], but now has been distributed five apartments that total 175.02 ping with a value of more than NT$100 million [US$3.1 million],” Chang wrote.

“Fuck! How pathetic,” he wrote. “I meant those highbrow young people who howled for justice and staged candlelight vigils for the family.”

Chang soon deleted the Facebook post after it attracted a barrage of criticism.

However, Chang wrote another post saying he had no intention of making fun of the Wang family and the activists,” and added: “If the Wang family is still not satisfied with the five apartments they got, I can only say that they are unhappy billionaires. The [2012] protest, in my opinion, has stigmatized urban renewal and halted the city’s renewal projects.”

As an aside, it seems a widespread dodge among people who take things here in Taiwan that taking is ok, if something equal or greater than the thing taken is "returned." Recall that Ma Ying-jeou, when on trial for downloading government funds into private accounts, said that he had made donations greater than the amount of funds he took.

Chang's technocratic contempt for the activists was shown in his "standing firm" despite an apology for his words. The cabinet is made up largely of men and technocrats, and apparently its average age is just over 60. I expect that the social justice wing of the DPP and its supporters is going to become increasingly disenchanted with it over time. Though a commenter on my blog aptly termed it a suicide squad, here to take it on the chin for a period before it is replaced. [ADDED: Taiwan Law Blog just tweeted: Undeterred that the cabinet is only 10% women, Lin Chuan picks 6 more men to be deputy ministers (storm article)].

Ma Ying-jeou's last little vicious gift to Beijing, a fishing dispute with Japan, received a boost this week when the government sent patrol boats to Japan's claimed EEZ off Okinotori Atoll (contrary to media reports the Coast Guard said that the garrison on Taiping Island/Itu Aba was not increased). This is a small headache, fortunately, since Japan realizes that Ma too will pass. But Tsai will inherit this headache, which will put her at odds with the fishing lobby.

The incoming transportation minister also opined that maybe the new rail link to the east coast wasn't the best idea, a public statement that will likely cause the new administration further headaches. Transportation is THE issue for the east coast, whose residents have trouble getting train tickets because of the tourist crowds and the lack of trains. The east coast elected DPP legislators this year... it might not if the DPP does not give it the transportation infrastructure it demands. Because the DPP has been patiently cultivating the east coast -- Hsiao Bi-khim has done amazing work -- this decision could be even more important than the fight with the fishing and pork lobbies.

A larger headache is the looming fight over American pork. A legislative committee passed a motion demanding that imports of ractopork from the US be banned. Ractopork would cause large losses in the local pork industry, according to the article....

In a report to the committee, the Council of Agriculture (COA) yesterday said that allowing imports of US pork containing the feed additive ractopamine would cause about NT$14.3 billion (US$442.99 million) in losses a year to pork-related industries.

“There are about 5.5 million pigs bred by more than 8,000 farmers in Taiwan. Pork ranks No. 1 among all agricultural products,” COA Deputy Minister Huang Kwo-ching (黃國青) said. “The nation’s pork self-sufficiency rate is 91.1 percent, with an estimated total economic output of NT$71.74 billion per year.”

US pork is heavily subsidized by the US government. There is no way Taiwan can compete with that, and the ractopomine controversy exists simply to keep that subsidized pork out. Good. But the pork farming and fisherman are important lobbies... recognizing this, Changhua County Chief Wei Ming-ku, a DPP politician, has already come out in support of a ban on ractopork.

MEDIA FAIL: O be serious. WSJ says in an awful piece arguing that cross-strait relations are getting worse in the run up to the May 20 handover to Tsai (no, they are not, but it is sexier to maintain they are):

Perhaps like Richard Nixon, the only leader who can put relations on a new and more stable basis is a former firebrand like Ms. Tsai.

"A former firebrand?" 180 degrees wrong! Tsai is famous for not being a firebrand. What a total distortion of reality, and a disservice to the incoming President. But it doesn't end there....

...Kenyan judges acquitted the suspects, but China asserts it has jurisdiction and wants the suspects tried where the victims were affected. That Beijing offered Kenya some $600 million in loans one week prior to the deportation likely helped.

(1) Kenyan judges didn't acquit the suspects (8 were convicted of document forgery and did a year in jail). They were acquitted for charges relating to illegal telecom equipment and illegal business organization, but not tried on the fraud charges. Since China sought to try them on fraud charges, it is hard to avoid the conclusion that it was a deal China and Kenya had arranged long before, meaning that... (2) the $600 million in loans was probably not a driver of the affair; Chinese police had been asking for the suspects since Dec of 2014 and Kenya had probably agreed long before the loans (see #1 above). The loans are more likely to be related to China's long-term purchasing of influence in competition with the US -- Kenya used to be a major US ally in the region.

This editorial is like a stroll through the greatest hits of China-Taiwan myths:

Departing President Ma Ying-jeou established closer ties with China, including a free-trade agreement, by accepting the slogan of “one China, separate interpretations” as the basis for talks.

ECFA was not a free-trade agreement, but a managed trade agreement designed to let Chinese goods flow into Taiwan and gut Taiwan's industries. There was no 1992 Consensus of "one China, separate interpretations" and Beijing does not accept that formulation. The basis for CCP-KMT cooperation is China's desire to annex Taiwan. Everything else is noise.

WSJ also forwards the myth of China giving Taiwan "economic carrots." The stats don't lie: ECFA has been bad for Taiwan no matter how you slice it. It is, at this point, sheer stubborn laziness to keep writing sentences like this:

Despite the economic carrots offered by the mainland, Taiwan’s separate identity grew stronger during his eight-year term.

Substitute "BECAUSE OF" for "DESPITE" and you might be a bit closer to the truth. The purpose of ECFA was to tie Taiwan's economy to China's gut its industries, reduce its trade surplus (fallen every year since ECFA was inked), and pave the way for further agreements. Once the public experienced ECFA (which never had majority support) it promptly rejected the subsequent services pact. D'oh.

Why is it so hard to get people to stop writing as if they were taking psychic dictation from the Spirit of Inertia?

PS: WSJ, stop writing "the mainland." You're thinking of Hainan Island. This is Taiwan we're talking about. Just write "China".
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Daily Links:

• Is it time for US aircraft carriers to visit Taiwan? Yes, after Tsai comes in!
• Shannon Tiezzi on the Japan-Taiwan fishing spat
• Taiwan still hoping to attend WHA as observer
• If you want to see the failure of ECFA up close and personal, read Drew Kerslake's brutal account of Giant's failed ventures in China and the growing bike industry malaise. Giant's exit from Dajia severely harmed the Taichung economy, for zero gain for Taiwan. 

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

ECFA success #25904: Exports, Industrial Production Slump

Wish I could have gone to Tainan...

FocusTaiwan has the news:

Taiwan's industrial production index fell 3.18 percent to 106.71 in May from the previous year, ending 15 consecutive months of growth, according to data released Wednesday by the Ministry of Economic Affairs.

...........

In a breakdown of the production in the different sectors, the data showed that manufacturing dropped 2.57 percent year-on-year in May, mining and quarrying increased 4.71 percent, electricity and gas supply dropped 19.32 percent, water supply fell 4.21 percent, and buildings construction rose 2.45 percent.

Quarrying and mining -- essentially gravel digging in Taiwan -- and construction are two sectors tightly linked to local patronage networks that are critical supporters of the KMT. If these flows of money and work to that sector continue, it will help the KMT.

Meanwhile, ECFA continues to drive massive increases declines in exports to China. The Taipei Times reports:

The value of export orders dropped 5.9 percent annually and 4.1 percent monthly to US$35.79 billion last month, dragged down mainly by declining orders from China and Hong Kong, the Ministry of Economic Affairs said yesterday.

The value of orders from China and Hong Kong fell by US$1.17 billion from a year earlier to US$8.98 billion last month, accounting for 52.7 percent of the US$2.22 billion annual drop in overall export orders last month, the ministry said.

ECFA has had little positive effect. Our trade surplus with China is shrinking and will likely return to ~2007 levels this year. Of course, this is due in part to China's increasing ability to manufacture its own stuff, as the article notes.

UPDATE: A comment below notes:

This is a lot to drop in just a simple comment, but Taiwan will need to reckon with its longtime trade surplus eventually, not seek to achieve it across various trade relationships. Who does a cheap currency truly help? Exporters and the owners of those companies. Who's hurt? Regular households that are not employed by the export sector and being severely underpaid across decades. Taiwan's air, water, land, sweat, and blood have been sold too cheaply abroad for far too long. In the beginning, this was actually useful to develop nascent industries, but today's Taiwan is so far beyond that it is only an addiction that benefits the rich. It's madness that has to end, and if you are looking at China, what's important is that China has been copying the model of Taiwan and Japan before it, but now is being forced to reduce all surpluses and develop the domestic consumer market. Unfortunately, China is being forced to adjust prior to achieving the same level of wealth of Japan and Taiwan, but that's how it is, because the US consumer is out of money and can no longer get a poorly thought-out loan.

Taiwan would do well to prepare for a much appreciated TWD. One bright spot: there's a ton of domestic demand opportunity in infrastructure investment that the government could do, as in that regard, Taiwan's government has been relatively conservative in spending money versus other developed countries.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

ECFA Really so awesome?

Sympathetic magic as public policy: if we make the smokestacks cute, they won't be harmful.

I had a few minutes today so I thought I'd check out the trade figures for China pre and post ECFA, which I posted on several years ago. Then I said of the 2010-11 figures:

I had Excel put in the trend line on this quick-n-dirty chart. It's obvious even to the Mark I eyeball that the numbers for 2010 and 2011 and 2012 lie on the trend line (in fact slightly below where we would have been had the trend for 2004-07 continued). If ECFA were really that awesome what we should see is a spike after 2010, with the years 2005-2008 lying clearly below this simpleminded trend line

I spent some time today at the Bureau of Foreign Trade, which has a great database system which can be downloaded as Excel files.

First, here are the numbers for the total trade figures for China only from 2000 to 2014.

China Only Total Ex/Im	Imports from China	Surplus/Deficit	Annual Rate of Change
00 10,440,540,918	6,223,111,811	-2,005,682,704	0.819
01 10,798,076,970	5,902,784,486	-1,007,492,002	-49.768
02 18,495,033,007	7,968,294,793	2,558,443,421	-353.942
03 33,907,784,754	11,017,481,839	11,872,821,076	364.064
04 53,140,562,278	16,791,537,670	19,557,486,938	64.725
05 63,736,408,872	20,093,086,019	23,550,236,834	20.415
06 76,590,504,462	24,782,325,696	27,025,853,070	14.758
07 90,430,526,782	28,014,115,689	34,402,295,404	27.294
08 98,273,497,890	31,390,466,074	35,492,565,742	3.169
09 78,670,764,058	24,422,662,822	29,825,438,414	-15.967
10 112,879,654,027	35,945,078,516	40,989,496,995	37.431
11 127,555,177,571	43,595,777,610	40,363,622,351	-1.527
12 121,621,186,471	40,907,429,723	39,806,327,025	-1.381
13 124,376,057,324	42,588,412,443	39,199,232,438	-1.525
14 130,158,219,397	48,038,896,032	34,080,427,333	-13.058

It's a bit wonky, but you can see that our trade surplus with China only has been falling. In fact it is down 13.3% again the first three months of this year. ECFA was supposed to buoy our trade with China. Just the opposite has happened since it was signed.

The data below is for the China, Hong Kong, and Macao.

China, HK, and Macao  Imports Surplus/Deficit Annual Rate of Change
00   44,322,830,265   8,455,926,708   27,410,976,849  23.72
01    41,904,357,865    7,999,571,603   25,905,214,659   02    -5.493
02    53,689,295,915    9,914,356,923   33,860,582,069   04    30.71
03    67,025,011,837    12,964,443,215   41,096,125,407   21.369
04    88,696,335,831    19,133,872,975   50,428,589,881   22.709
05    100,237,776,611    22,235,386,509   55,767,003,593   10.586
06    116,139,937,773    26,688,448,674   62,763,040,425   12.545
07    130,642,313,459     29,866,598,811   70,909,115,837   12.979
08    132,890,050,715      32,912,808,344   67,064,434,027   -5.422
09    109,557,179,579     25,560,602,695   58,435,974,189   -12.866
10    152,632,897,958     37,591,908,057   77,449,081,844   32.537
11    169,546,957,259     45,290,463,268   78,966,030,723   1.959
12     162,388,783,057     43,579,102,256   75,230,578,545   -4.73
13  165,613,353,823     44,257,780,261   77,097,793,301   2.482
14  174,528,005,846     49,732,434,501   75,063,136,844   -2.639

Same general trend. Back in 2012 I noted that the trend was clearly showing a pronounced change beginning in 2010, as Fig. 1 below shows. Several things happened, among them ECFA, but also the Great Recession and the follow on austerity and other collective elite madness in Europe and the US.

Fig 1. Total trade with Hong Kong, Macao, and China. 2000-14 Data source: BFT

I just eyeballed the trend lines, so they are not exact. But they should be clear. The purple line beginning in 2010 is nowhere near as steep as the growth of the Chen Shui-bian era. If ECFA was supposed to make things boom beyond the dreams of the Chen Shui-bian era, it has been a total failure. Indeed, as the trade surplus numbers show, the surplus has fallen each year and returned to 2007 levels in 2014. In 2015 it will likely be smaller. Extrapolating from the first quarter, it will check in around $30 billion. There are many reasons for the shrinking surplus, but the numbers show that ECFA does not appear to have had any discernable effect.

It should also be obvious what will happen to the trade surplus with China if we sign that god-blighted services pact.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Ex-Im News + Fun with WSJ

A fighter comes in for a landing in Taitung.

A friend alerts me: Great decline in Taiwan exports and imports last month. From the Ministry of Finance:

"For the month of Apr. 2015, total exports contracted 11.7% year on year to US$ 23.49 billion. However, total imports fell 22.1% from a year earlier to US$ 18.73 billion. The trade balance of this month was favorable, amounting to US$4.76 billion."

Exports to Europe and ASEAN-6 fell, reflecting the slower growth in both regions.

In Apr. 2015, comparing with the same month of last year, exports to Japan and U.S.A. rose by 9.3% and 1.2% respectively, however exports to Mainland China and Hong Kong, ASEAN-6 and Europe declined 12.2%, 18.9% and 21.6% separately.

But particularly interesting, my friend notes, is the 12.2% drop of exports to China and the 10.2% drop of imports from China. Combined with the "unexpected" fall of 6.4% in exports and 16.2% imports in China (via Reuters), the not-so-smooth landing of the Chinese economy is starting to have some serious effects.

But as my friend points out

Yet the imports from China drop less than from other regions, meaning that ECFA did its job in replacing ever more Taiwan local production and imports from elsewhere with made-in-China products.

I've reproduced Table 5 showing imports....

I note that imports from China for the first four months also decline the least. This has an interesting effect -- if everyone else is declining faster, China's share of Taiwan's import market is rising even when overall imports are declining. ECFA not only buffers the fall in Chinese exports to Taiwan, it also ensures that China's market share grows even in periods of decline. There's a reason why the public rejects these bullshit "free trade" agreements...

My friend then observes that this new economic reality of Chinese slow down is the reason that the CCP and KMT are pushing to move from the "economic benefits" phase of the KMT's China engagement to the "political talks" phase. The economic benefits, which went only to big businesses anyway, are gone. If economic benefits were the reason to annex Taiwan to China, there's no reason now, and no support for it among the populace. "Peace accords" --likely annexation in all but name -- will be next.

Just think about it an alternate universe where Lien-Soong wins in 2004. The 2004-8 period was the golden age of Taiwanese investment and manufacturing in China. Imagine what treaties they could have passed then, when things were booming. Chen Shui-bian's victory in 2004 was a major turning point in Taiwan history, probably saved Taiwan from a much worse fate than the ugly ECFA agreement.

MEDIA STOOPID:
WSJ "blog" with piece on how opposition to "free trade" is hurting Taiwan's exports. Can we stop writing as if this simpleminded dichotomy "for free trade or against the services pact" is really something other than ideological spew? To wit:

Taiwan’s exporters could soon face another challenge: local opposition to further free trade with China.

Taiwan already is heavily dependent on China, which sucks in 40% of its exports. Many Taiwanese work on the mainland. Currently, the territory has a limited free-trade agreement with its neighbor, which the ruling Kuomintang party wants to extend to cover up to 5,000 items and services.

But protests against the deal last year, led by students, shut down Taiwan’s parliament and put such trade liberalization on the backburner. Many in Taiwan feel further dependence on China will erode its independence and give ballast to China’s claims on Taiwan’s sovereignty.

The problem for Taiwan is that rivals like South Korea are pushing ahead with their own deals with Beijing. Southeast Asia and China already have a trade pact.

What silliness! Everyone on the island is pro-trade liberalization. In the real world, some pacts are good and some are not. Claiming that being against the services pact is the same as being against free trade is like arguing that because I dislike Risk I must hate boardgames. What kind of world is it where this has to be explained? Srsly!

The purpose of ECFA and the services pact are to hollow out the Taiwan economy and boost exports from China to Taiwan, as well as provide a channel for Chinese people to flood into Taiwan. It's not difficult to figure out that these are not "free trade" pacts. The island's exports are in the doldrums because the US and Europe are down, not because the services pact -- a trade treaty so crappy even legislators from its own party wouldn't support it and the KMT had to try to get into law without a vote -- was blocked by the students.

Note that the WSJ blames the students. It says nothing about the opposition from within the KMT. That's another political fallout of this mindless four legs good, two legs bad kind of thinking: it covers up the fact that the treaty was supported by the KMT leadership and big business and nobody else. Indeed, neither ECFA nor the services ever achieved majority support in credible independent polls. But why let facts stand in the way of ideological posturing?

Finally, the clearest marker of ideological blindness: the writer presents no concrete evidence that defeating the services pact has negatively affected Taiwan's external trade. Ma himself said it would create only 12,000 jobs, while the Chung-hua Institute for Economist Research said GDP would grow by an awesome 0.025-0.034 percent. What a shame those anti-free trade students are preventing us from getting those incredible benefits, eh?
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Daily Links:

• HUGE: Taipei city recommends that President Ma face prosecution over Taipei Dome project, also recommends that Min of Justice, not Special Investigative Division, carry out investigation/prosecution. The SID is widely seen by pan-Greens as a tool of Ma...
• ALSO BIG: KMT heavyweight Wang Jin-pyng is going to run for President, announcement on Tuesday, according to Storm Media report.
• Yay! KMT news organ: Tsai's position on Status Quo is identical to US position. Good news, she's selling the position properly.
• WantWant tries to explain away Chu's lack of any real benefits from trip to China
• Taiwan's problem -- too many graduates, not enough machinists
• Taiwan Insider from Thinking Taiwan

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Case No. 59213: China Specialists Don't Get Taiwan

A ladybug predating.

I often complain about how China specialists just don't get Taiwan. Here is another example of it. taiwansecurity.org published an interview with longtime, well-known China specialist Andrew Nathan last week about Beijing and Taiwan. He replied to one question on the Sunflowers.

I think that they had already learned that to settle what they call “the Taiwan problem” peacefully, which is their goal, they are going to have to win over public opinion in Taiwan—the people, the voters. They knew that. But to me, the lesson of the Sunflower Movement is—but I don’t know if Beijing understands the lesson the way I do—is that you can’t win over public opinion strictly with economic benefits. I think Beijing’s strategy had been that we will take care of the Taiwan economy by opening up our markets, by giving privileges to Taiwanese investors and others, and sending tourists, and so forth, and the Taiwan people will understand that their economic interest is in the same basket with us. It turns out that the Taiwan people are instead resentful of growing economic dependence on the mainland. They’re not very trusting of how that economic influence will be used by Beijing. The Chinese leaders are still in some ways Marxist, they still believe in economic materialism, the idea that people will respond to economic incentives. They seem to have a hard time getting a grip on the idea of identity and self-dignity as an important factor that people sometimes fight for.

We just had this problem with Denny Roy, which I commented on below. Once again we see the false idea that Beijing offers those generous economic incentives. But everyone in Taiwan can see that (1) Beijing is not offering generous terms (2) it is only doing econ agreements because it wants to hollow out Taiwan's economy because of (3) it wants to bind Taiwan to China and annex it while destroying the economic basis for Taiwan's independence. The result of the China engagement has not been positive economic benefits for Taiwan, but stagnating wages, reduced democracy, increased smuggling and gang activity, and so on.

China specialists need to face this fact squarely: there are no generous economic benefits from Taiwan's economic involvement with China. That golden age passed in 2008, six years ago. Instead, the people of Taiwan experience assaults on their independence and democracy on one side and the hollowing out of their economy on the other, along with China's continued interference in FTAs and other international agreements. They know that the benefits of the trade relations go to a few big businessmen. They know the tourism profits are taken by a handful of Hong Kong-based tour agencies, while the locals get low paying service jobs while Chinese tourist facilities destroy local lands and the tourists themselves overrun whatever place they go into, driving away locals. As Ian Rowen has trenchantly observed, tourism is a territorial strategy of China in Taiwan. They know that China has special zones on its coast to poach Taiwan's agricultural technology. The public here is well aware that everything the public was told about China by the Ma Administration has turned out to be a lie. You'd think the message would have gotten out by now to the China specialists who study this stuff... no wait, why do I think that?

The whole idea of "generous economic benefits" is Chinese propaganda. Stop forwarding it, scholarly folks.

As a friend of mine commented so much better than I could on Nathan's remarks about China's authoritarian government and Taiwan's shifting democracy:

LOL. Poor China. they must be having fits according to Nathan because of that protean democratic process. They don't know who's in charge in Taiwan; or for that matter, the US, the UK, France, Germany, Japan, Korea, India, Australia, Canada...

Nathan also answers the question about what if China became democratic.

If Beijing became a democracy in some authentic sense, I believe that the problem of Taiwan’s relationship to the PRC would then be much easier to resolve peacefully. And I guess I gave in my earlier remarks already the logic of why I think so. The Taiwan people do have an economic advantage in close relations with China, but they don’t want to make that into a political relationship because they don’t trust the authoritarian regime. But if China had a truly democratic regime—I’m not saying a U.S.-type regime or any particular format, but something that was really democratic with political freedom and political security—then I think the Taiwan people would gradually grow to trust the government in Beijing and they would understand that this mainland China political entity has a security interest in an arrangement where both their own and Taiwan’s security will be guaranteed, and we need to provide that to them, and it’s not going to be a threat to us. That kind of a thought would grow in Taiwan.

And then I think on the Chinese side, they would also be willing to negotiate with the Taiwanese for their interests in more autonomy and they could—over the years, many different formulas have been vetted about confederation, and so on—they could probably solve the problem.

There's already poll data on this. As Emerson Niu's survey

Q4. If only small political, economic, and social disparity exists between Mainland China and Taiwan, do you favor or not favor Taiwan unifying with China?

Not Favor: 56.4% 
Favor: 36.4%
NA: 7.2%

...and that data is years out of date. Things are even stronger now. Why do people in Taiwan reject being annexed to China? The reason is simple: they have their own identity, the Taiwan identity. China has a different identity (see Don Rogers' work on the young). Authoritarianism is an issue, but even if China became democratic, the identity issues that separate the two sides would remain (see Scotland, Catalonia, Slovakia, etc). Taiwanese would see a democratic, non-threatening China as "at last! we can be free!" and that the peaceful resolution would result in an independent Taiwan, which most everyone here wants to see.

In any case no one in Taiwan would imagine that a democratic China would keep its word in some kind of security treaty. The Taiwanese would much rather be security linked to Japan and the US, two nations that don't want to annex the island. Nothing in the basic equation of the Taiwan-China-Japan-US quadrilateral would change.

I'm just curious about people who think that China will be less willing to use force if it is democratic. The history of the western democracies does not make one sanguine in this regard....

Finally, Nathan remarks...

And then I think on the Chinese side, they would also be willing to negotiate with the Taiwanese for their interests in more autonomy and they could—over the years, many different formulas have been vetted about confederation, and so on—they could probably solve the problem.

How kind of Beijing to grant us the status of an autonomous satrapy and refrain from murdering us wholesale! Never mind that Taiwan would be negotiating for less autonomy than it has now (and why would it do that?). This remark: "they could probably solve the problem" elides so much. The problem is not between Taiwan and China as something that could "be resolved" by the two sides sliding closer to each other. Taiwan is not the cause of the problem, and thus, nothing it can do will resolve it, save surrender.

The problem is Beijing's desire to annex Taiwan. Only Beijing can resolve that problem.

UPDATE: Some good comments below.
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Daily Links:

• Gout is really common in Taiwan. Watch your diet.
• Why the US would defeat China in a war. That's not the issue. The issue is when China will produce someone who can persuade the government that war with the US and Japan is a good idea. Once that occurs, the government will rationalize away the weight of metal against it.
• Speaker of the Legislature Wang Jin-pyng denies that he will run for presidency
• Taiwan's quest for international space, Bonnie Glaser on video.
• Yoniguni islanders vote for radar, troops. Yoniguni is near Taiwan and this radar will be useful for Taiwan's security.
• TaiwanTake on the Hung candidacy in Taichung. Another blog you should be putting on your blog roll.
• Hong Kongers increasingly want to move to Taiwan.
• A review of the Sunflowers. Ok, with the possibility of third-party emergence identified. 
• Can Taiwanese fishing boats carry armed guards?
• MUST READ: J Michael brutally takes down KMT spokesman's Charles Chen's defense of the KMT in Foreign Policy.  
• SPECIAL: Ian Rowen on the Sunflower Occupation in the Journal of Asian Studies
• EVENT: Chthonic lead singer, activist, and now politician Freddy Lim will be speaking at the Taichung speakers corner on Mar 1, 2:30. Facebook page

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

ECFA = Negative Benefits

Gravel operation moonscape on the Dajia River.

I love that phrase, negative benefits. Farmers groups complaining about what everyone knows -- food smuggling from China is rampant (Taipei Times):

The associations highlighted statistics released by the Coast Guard Administration (CGA) showing that smuggled produce confiscated during the Lunar New Year holiday — when smuggling operations peak — dropped 80 percent last year compared to 2013 and stood at just 0.6 percent of the 2008 level.

The farmers said that there is still a huge quantity of smuggled produce on the market, and accused President Ma Ying-jeou’s (馬英九) administration of colluding with smugglers working with Chinese.

Statistics released by the coast guard show that the volume of illegal agricultural products smuggled from China fell from 6,632 tonnes in 2008 to 57 tonnes in 2011, before dropping further to 41 tonnes last year.

Everything about the article suggests serious collusion to destroy local Taiwan producers. For example, take tea leaves:

No Chinese tea leaves have been confiscated since 2011, when authorities discovered two tonnes of contraband.

Taiwan Tea Farmers Self-help Group chief executive officer Chen Chien-nung (陳鑑農) said the coast guard had failed to intercept smuggled Chinese tea leaves over the past three years.

“You can find as many Chinese tea leaves as you want in the marketplace,” Chen said, adding that if the Ma administration requires proof, he could immediately provide evidence.

He said that most tea circulating in distribution channels is brewed from Chinese tea leaves, which leads him to believe that at least two freight containers, or 36 tonnes, of Chinese tea leaves disguised as being from other countries are being smuggled into the nation on a daily basis.

"No Chinese tea leaves have been confiscated since 2011..."

One of the reasons the services pact is so unpopular is widespread awareness of these issues. In order to secure even limited public support for ECFA, the Ma Administration had to put Chinese agricultural products on a banned list. The Administration's answer to this problem appears to be to serve Beijing by turning a blind eye to smuggling. Taiwan importers use third party routes, which the government must surely be aware of. For example...

The smuggled tea leaves were first shipped to a third country, such as Thailand and Singapore, before being transported to Taiwan, where they were mixed with locally produced tea leaves and then processed into oolong tea, green tea and jasmine tea before being sold to unsuspecting customers.

An investigation found the unscrupulous business people had carried out 50 smuggling trips, shipping around 1,000 to 2,000 metric tons of cheap Chinese tea to the island, prosecutors said.

Moreover, this is not a new problem. I stumbled across this piece about the 1980s:

It appears that smuggling tea in from the mainland is causing major difficulties for established processors. Those who respect the law and don't deal in mainland tea are at a major disadvantage. Processors and retailers have been urging the government to reconsider the current ban and legalize mainland imports. It is significant that, of the legal imports of 565 tons in 1985, 95% was fermented and semi-fermented tea and only 5% green tea. By 1989, of the total 1,333 tons imported, 29 % was green tea. It is highly likely that this tea originated from the mainland.

Given the massive jump in smuggling from ECFA, coupled with the amazing fall in enforcement of smuggling laws, it should be obvious what the consequence of the Ma Administration's proposed Free Economic Zones will be. Those clunkers out of the 1960s would permit Chinese agro-materials to be processed in zones with little oversight, once again spurring massive increases in smuggling. The government's policy called for a formal lifting of the ban on the over 800 agricultural goods currently not permitted to enter Taiwan (TT) so that they could be processed in the zones -- with the government laughably claiming that goods made with materials on the forbidden list wouldn't be permitted to enter Taiwan. As if the government could or would stop them...

This knowledge is one reason Taiwanese rejected the CSSTA pact. They know perfectly well that letting in China in X amounts means that in reality X + SMUGGLING will enter. Hence any statistical claims about the effects of the agreements are meaningless since they never take the illegal trade into account.

One reason I find westerners who are boosters of ECFA so detestable is precisely their simpleminded, deliberate neglect of this destructive issue, their refusal to face what increased trade with China has meant for Taiwan and the health of its people and its economy. Such boosters, as in the Drysdale piece I linked to below, invariably neglect the military and political threat as well, as if trade with China were like trade with Canada or Thailand. As the TT article above notes, prices of tea buds in Taiwan have plummeted. This forces local tea farmers who would rather not to use Chinese teas if they want to stay in business and remain cost-competitive, while at the same time destroying the made-in-taiwan brand value. It is hard for me to see that outcome, easily predictable since adulterating Taiwan teas with cheap Chinese crap teas is a habit that dates back to the 19th century, as something other than a deliberate policy. A policy that extends to many areas of the economy...
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Daily Links:

• EATS Young Scholar Award
• DGBAS growth forecast to 3.78%
• Ma Administration/MOE war on Taiwan history thumbnailed in this Taipei Times editorial
• The always good Danshui history blog: watermelon of Taiwan
• Drysdale at EAF: Can Taiwan survive in the shadow of China?

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Friday Night Short Shorts: Loquacious Version

In case you've ever looked at your manager and thought: "My god, even a robot could do better than him", your wish will soon be granted. Yes, apparently the local youth, already reeling under stagnant pay and low wages, must now face the threat of robots moving into management positions. The thing is, when they do replace all those managers, will anyone even notice? Besides the KTV girls, I mean. Stat of note from the piece: mid-level management jobs in Taiwan have fallen by 170,000 positions in recent decades.

Good news out of Toronto: the school board voted 20-2 to terminate that Confucius Institute in the school district.

Which is it:

Taiwan GDP Growth Misses Estimates After Food Safety Concerns - Bloomberg          Taiwan's economy gains momentum in third quarter - MarketWatch

You decide!

The Economist joins the ranks of the many media organizations who have noticed that the Hong Kong protests are affecting Taiwan's already miniscule desire to annex itself to China. This is a major media moment, with many news organizations finally talking openly and clearly about Taiwan's lack of desire to become a satrapy of Beijing. And the Economist, which has always lavished affection on Ma Ying-jeou, said flatly he's one of the most unpopular elected leaders Taiwan has had. It even quoted Ketty Chen in her DPP capacity. Awesome.

The Ting Hsin oil scandal is now hitting its prosecution phase, with prosecutors deciding to indict the owner of the hapless conglomerate with 30 years worth of charges. Some from the pan-Green camp in Taiwan are charging that the company made a deal with the Ma Administration to cover up its involvement in the oil scandal last year, from which it miraculously emerged unscathed. The owner of Cheng-yi, in the Ting Hsing group, was given charges worth a possible 18 years. No doubt they will go through the whole charade of a trial and sentencing and then flee to China like everyone else, where they will continue to run their multibillion dollar conglomerate. The Ting Hsin group was also forced to drop its attempt to become manager of Taipei 101 and banks withdrew loans for land acquisition.

I'd say someone got peeved at Ting Hsin over one of the many deals it was involved in and decided to unmask the firm, but it could just be bad luck. And just before the election too, voters were made aware that the Wei Family and the Lien clan whose scion Sean Lien is stumbling stumping for mayor in Taipei were buddy-buddy, a reminder of the you-scratch-my-back-I-give-you-lucrative-access nature of KMT rule. Also of interest in that scandal, an employee in the Pingtung County government faxed the document confirming that animal feed oil had been used to Ting Hsin "inadvertently", thus tipping the company off to the investigation.

China's construction of islands on reefs in the South China Sea threatens Taiwan. Helicopters from the new bases could reach Taiping in five minutes, claims one legislator. Let's station warships there! he suggests. Taiping island is a strategic disaster for Taiwan, sucking military resources for no strategic return.

ECFA Awesomeness alert: Those ECFA successes just keep rolling in, a tsunami of greatness whose individual accomplishments require banks of supercomputers to track. For example, in the third quarter exports to China rose 6%, while imports from China fell 13%. Hahaha. No, of. course. not, that happened on ECFA Planet, where even Taiwan farts may be canned and profitably exported to China. No, here on Sol Three, exports to China declined 6%, following an overall decline of just over 9% for Q1 and Q2, while imports from China rose 13%. Exports to China have been rising the last few years, so this decline may be an ominous signal. But at least we have ECFA so we are not shut out of China's markets! That's why after ECFA our share of China's market has skyrocketed fallen to just 7.5% while everyone else, even the US whose largest export by weight appears to be bombs and by volume, Obama verbiage, has seen increases in market share this year.

A local sage and observer pointed out that news of China's buying missions has vanished from the intertubes. Have they stopped? Or are they just not being reported? Or what?

Pinch me. New road for Suhua will make it a tourist attraction, while old road will only be open to slower vehicles under 30 kms an hour and BIKES. BIKES BIKES BIKES. Doubly good -- the Chinese tourist herds will be whisked on air conditioned buses to the tourist trap slaughterhouses, while we gambol and cavort on a road preserved just for us. This can't be true.

More news collected at Thinking Taiwan's Taiwan Insider. SOAS in London is hosting Linda Arrigo talking on on the origins of the Taiwan Democracy Movement. Nov 7, at 2. Attend, she's always humorous and interesting, and no one knows more than her about that period.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!