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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[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!

Robin Winkler Allegedly Assaulted During Environmental Protest - UPDATED-

Last week Robin Winkler, whose energy and commitment to The Beautiful Isle I deeply admire, was allegedly punched during a protest by a local elected official. Taiwan Headlines has the call:

Environmental groups protested outside the Environmental Protection Administration on Monday morning to condemn the agency for siding with the Formosa Plastics Group on a proposed steel plant that they fear would take a heavy toll on the environment.

They also vowed not to let "gangster politicians" rule the country after an activist was assaulted by an elected official at a meeting held to review the plant's environmental impact.

Protesters held placards claiming "the EPA is an affiliate of the Formosa Plastics Group" on the agency's building and held up banners reading "people are feeling insecure due to black gold politics" and "don't allow gangster politicians to rule the country."

The protesters argued that the agency should not shelter the Formosa Plastics Group, which wants to build a 7.5-million-ton capacity steel plant in Yunlin County.

The investment project is still being assessed by the committee.

"We know that the EPA must have felt huge pressure in dealing with the steel plant project. But the government should never side with a conglomerate whose carbon dioxide emissions account for one-fourth of all of the country's emissions," said Green Party Taiwan Secretary-General Pan Han-sheng.

The protest was held after lawyer and environmental activist Robin Winkler was assaulted by Yunlin County Council Speaker Su Chin-huang during an EPA meeting at its offices last Wednesday to review the project.

Winkler, also a former member of the Environmental Impact Assessment Review Committee, participated in Monday's rally.

"I'm feeling better physically, but I'm feeling bad mentally," Winkler said. "The government didn't show any concern for environmentalists who were beaten by gangster politicians. It seems to say that it is OK to beat environmentalists without having to be held accountable.

"Now most environmentalists live in fear, and we don't dare walk in stairwells alone," Winkler said.

He urged media workers not to report the story as a war between himself and Su - who has a criminal record that includes corruption, sexual assault and crimes against personal liberties - but to focus instead on the relationship between the EPA and the Formosa Plastics Group.

There's further discussion in Chinese on the Wild at Heart blog:

朋友警告我要小心，因為我現在是環保署眼中的麻煩人物，當他們無法安撫你、收編你，他們就會開始設計你。其實，與會的地方民代和漁民，都是為了雲林好，所有的意見都應該是對事不對人。但環保署「維持秩序」的方式就是，只顧到「會議順利進行」，並且往他們期待的方向進行討論，只要在「會議室」之外的，像茶水間這樣的地方，就與其毫不相干。「有證人你自己找出來」、「警察不能作證」，施暴者被保護在會議室內，不讓當事人當面對質，而任其無聲無息的離去。

Video of the event is online at Hemidemi. More reporting in Chinese, with a photograph of the massive bruise on Robin. Of interest is the long lag between the event and its appearance in the English media; Feiren and Maddog were both emailing me about it days ago. Why the delay? Yu, BTW, denies the assault.

The Formosa Steel plant, said to cost $4.1 billion, is going in at the mouth of a river in Yunlin as part of a huge, malign development project that represents the ultimate in Old Economy, Taiwan. The Sousa Dolphin blog has more information on the issues with the EPA's handling of the case.

After hearing the reports from the developer and its government sponsor, the Industrial Development Bureau, one of the commissioners requested that the representative of an environmental group be allowed to speak. The EPA chief of the EIA section, Tsai Ling-yi, then prompted the representative of a local township to speak out in favor of the project.

After a closed door discussion by the commissioners and other government agency representatives it was announced that the committee would “respect” the decision of the previous committee and send the case to the plenary commission with the recommendation that it go into second phase evaluation.

The EPA’s lack of objectivity in handling the case has been cited numerous times and following the meeting this morning it was learned that the EPA plans to include this case in the plenary meeting which is scheduled to be held on the afternoon of 1 October 2007. This sudden burst of “efficiency” comes despite numerous requests from commissioners (sixth and seventh terms) that commissioners be given materials regarding all cases that are to be discussed and decided upon seven days in advance of the meeting. There has also been no public announcement of the meeting or its agenda as of close of business 26 September 2007.

The associated petrochemical plant, a naptha cracker, got in trouble in August for overusing water but the EPA rescinded the fines over the strong protests of legislators and other government organizations. I blogged previously on the EPA, environmental impact assessment, and government-business collusion at a conference earlier this year where Winkler gave an extensive presentation on the process of approval for the projects....

Similarly, Winkler had reviewed 4 projects relating to the Mailiao Development projects, the eighth naptha cracker (for plastics manufacturing), the Formosa Plastics plant, a steel plant [the one in question above -- MT], and a port. The Dolphins had come up as an issue, since they live off the west coast where the project was being carried out. Studies by the Council of Agriculture showed that the dolphins came up only to the sandbar south of the port -- meaning that they would not have to be considered by the project. But, as Winkler pointed out, other work, very easily found, showed that Sousa was known north of the sandbar and north of the project itself. That information somehow didn't appear in the reports appended to the EIA, an omission which Winkler described as "bordering on criminal."

The post is long and the description of the problems involved in assessment of large projects like this one is, I think, worth a read (I don't normally plug myself but I'll make an exception here).

UPDATE: Wild at Heart has a translation of a great editorial on the insanity of building more steel plants in Taiwan:

The FPG steel mill project threatens nearly two-thirds of Taiwan's clam hatcheries, the important aquaculture business, and Taiwan’s Indo-Pacific humpback dolphins. This is part of the price we will pay.

Taiwan's petrochemical, steel, concrete, and paper industries have consumed more than 30% of Taiwan's energy production in recent years. Yet these industries have accounted for less that five percent of Taiwan's real GDP during the same period. In 2005, they accounted for just 2.49 percent of GDP. Taiwan is the world's biggest producer of steel per square kilometer. Can Taiwan, a tiny island nation that is virtually 100 percent dependent on imported energy, afford to continue developing this extravagantly polluting industry with its profligate energy requirements given the heavy environmental burden it already bears? Should we let FPG, which produces one third of Taiwan's carbon emissions, go on lining its pockets, destroying the environment, and preying on the weakest among us?

[Taiwan]

What is the East Asian Growth Model?

A recent posting on the excellent China briefing blog on whether China's growth has/will hit a glass ceiling reminds me of another debate still in its opening stages: How will China's growth be refracted through the debates over East Asian growth?

China's growth trajectory might, on the surface, appear to be similar to that of South Korea, Japan, and Taiwan. Yet there are some key differences.

Land: In the Taiwan case, land reform is often identified as one of the leading factors in Taiwan's growth. In China land ownership remains mired in uncertainty and corruption, yet growth continues apace.

Authoritarianism: A business researcher friend of mine pointed out to me that in China it is often only the Taiwanese companies that make money. Run by people who grew up in Taiwan under the KMT, they understand how to work around the issues of conducting business in an authoritarian state. Both the KMT and the CCP shot/shoot people get in their way, but the "soft authoritarianism" of the LDP took a different approach. Korean authoritarianism had its own twists and turns... Commonalities? After Communism bankrupted itself, China turned to an artificial nationalism as a legitimating factor for authoritarian rule, an approach is not effectively different from similar approaches in Korea, Taiwan, and Japan. In the latter three one-party rule was also legitimated by rapid economic growth, a position that I expect the CCP will be taking soon enough.

Currency: here is a massive commonality -- the East Asian formula is really quite simple: trade with US, and keep currency artificially low.

Industrial development & Domestic consumption: OEM leads the way. Another commonality. Low domestic consumption relative to what is exported. In Taiwan consumption was artificially held down to promote development of a pool of savings to support export-oriented industries. People who point to the high savings rates of Asians often miss the fact that those savings rates are artificially inflated.

Fortress East Asia: Markets in Japan and Korea were heavily protected to serve as bases for expansion overseas, but Taiwan's domestic market was never large enough for this strategy to work. China seems to give foreign firms more latitude for production and marketing than Japan and Korea ever did. Some variation here.......

Rural-urban migration: Commonality.

wealth inequalities: In the miracle period Taiwan's economy was characterized by a remarkably equitable distribution of wealth. Korea, less so, and China today is a nightmare resembling Latin America or the US. Those glittering high-rises in Shanghai and elsewhere are not a sign of wealth, but of wealth inequality.

Rural impoverishment: The post over at ___ raised the interesting contrast between India and China, pointing out that India's democracy demands that legislators respond to rural development issues. In China the rural areas are experiencing negative growth, as even the CCP admits. Raping agriculture while feeding industry was an approach in the Taiwan case too -- through tax and price mechanisms (higher prices for industrial inputs to agriculture, lower prices for agricultural inputs to the industrial sector) the government moved something like 22% of the value of agricultural production into industry.

State Subsidies: commentators frequently kvetch about China's bloated state sector. Few now recall that when Taiwan began its ascent the State was the center of production, and that its share of the economy shrank only because the private sector's rose. As Robert Wade put it, writing in 1990, Taiwan's state ownership of business was probably the highest in the world outside the Communist bloc. This lead, at least in Taiwan, to heavy dependence of OEM firms on subsidized inputs from the State, including cheap electricity, cheap raw materials like plastic, and R&D work.

Worker rights: worker what? East Asia choruses.

mass education: I have no idea how Chinese production of workers and technologists compares to Taiwan's, Japan's or Korea's.

Access to US market: the fundamental factor, in so many ways. And the support and encouragement of the US. How different would the histories of Japan, Korea, and Taiwan be if the US had not desired to make them capitalist showcases to parade about during the Cold War? If the US did not trade with China, its economy would look a lot more like Cuba's.

Organized crime, gray markets, parallel economies: Across the East Asian cultural sphere, how much economic activity, productive and unproductive, is essentially illegal? Yet the necessity of illegality to the operations of OEM firms is generally only mentioned with respect to environmental policies, but it goes much deeper than that.

Construction-Industrial State: I don't know about Korea in this respect, but in Japan and Taiwan the local one-party state ran on flows of money to local politicians, who turned it into flows of concrete around the countryside. In Taiwan the KMT prevented local factions from operating at the national level, and prevented business from sending its tycoons into politics as independent political forces. In China, where the relationship between Beijing and its satrapies is not nearly so straightforward, how does the center-periphery political economy run, and where does it stand in relation to the economic development path?

Gender roles in business: Ever take a look at the masculinity rating for Hofstede on Taiwan and China compared to Japan and Korea?

Confucianism: Confuciuns say work hard, save money, explains East Asian growth, with the addition of China to as massive exclamation point for this "theory."

Another Gosling: Japanese scholars have pointed to the coincidence that all the growth areas of East Asia were Japanese colonies or occupied territories. So it is with China's growth areas. It's only matter of time before some brave right-winger in Japan advances the idea that because Japan raped and plundered its way across south China, the south Chinese are now rich....

Own branding: Japan, and to a lesser extent, Korea, have seen their OEM firms make the successful transition to own-brand operations. Many Taiwanese OEM firms are still trying to figure that trick out. Debate rages over the current status of Chinese firms in this respect.

Lots to think about. Reading political economy debates over the next three decades is really going to be fun....

[Taiwan] [US] [China] [East Asia] [Korea] [Japan]

RAND Corporation report on China's Econ Pressure on Taiwan

Murray Scott Tanner has a new report out at RAND that discusses China's attempts to coerce Taiwan economically. Tanner says that Beijing's economic clout is a tricky weapon to use and cannot always be brought to bear. For example:

Beijing’s frustration was dramatically illustrated in the 2004 Taiwan presidential election. The elections proved that widespread forecasts that Taiwan’s business leaders and Taiwan voters -- both worried about the poor state of Taiwan’s economy and anxious for expanded cross-strait economic relations -- would combine to defeat President Chen Shui-bian were mistaken or at least badly exaggerated.

A major reason why Beijing is having trouble exploiting its economic leverage is that most Taiwan businesspeople have become highly adept at “flying below the radar” politically—keeping their true political inclinations and activities hidden from political leaders in both Taiwan and mainland China, thereby frustrating Beijing’s efforts to pressure them into forming a ready-made “lobby” for Beijing’s interests. While mainland-invested Taiwan businesspeople have been, for the most part, successful in encouraging their government to loosen economic restrictions on cross-strait ties, the business community has been unwilling or unable to use its political influence to pressure Taipei into making significant political concessions to Beijing.

Taiwan’s voters have also frustrated Beijing’s forecasters. Although the voters have largely supported candidates who favored improved cross-strait economic ties, it
has not prevented the continuous slide in support for reunification with China on terms that Beijing prefers.

Nor have Taiwan’s political leaders sat back passively as Beijing attempted to exploit its burgeoning economic might. President Chen has frequently shown himself to be fairly adept at politically disarming or counterattacking many advocates of a more rapid opening up of cross-strait relations.

Finally, China must reflect upon the potential blowback that large-scale efforts at economic coercion against Taiwan might have upon its own economy and society. Although Taiwan is, overall, more economically dependent upon mainland China than China is on Taiwan, there are key regions and sectors of China’s economy that are enormously dependent upon Taiwan investment, and these would likely suffer very badly in the event of a serious cutoff of trade and investment.

The report is 180 pages crammed full of statistics, projections, warnings, and analyses too complex and detailed to go into here. Enjoy it yourself.

[Taiwan] [China] (hat tip to Life, the Universe)