Tuesday, June 29, 2010

The deed is done

Jason Miks of Australian magazine The Diplomat contacted me yesterday for comment on the economic cooperation framework agreement (ECFA) Taipei and Beijing are signing today. This was an opportunity for me to condense six months into a few rather conversational paragraphs. For those who haven't been following the developments closely, this should provide a good introduction — at least to the side that does not agree with the manner in which the whole process took place.

The economic cooperation framework agreement (ECFA) that will be signed in Chongqing on Tuesday is controversial for a number of reasons:

Firstly, in good old Chinese Communist Party (CCP) style, most of the negotiations were conducted behind doors and only very recently were the “early harvest” lists — the items from each side that will be receiving preferential tariff treatment — made public. Secondly, two public referendums proposed by opposition parties were turned down by the government on technicalities that would probably be unacceptable anywhere else in the world (at least in democracies). Third, while the trade pact is to be “reviewed” by the Legislative Yuan during an extra legislative session in July or August, the legislature is almost three-quarters controlled by the Chinese Nationalist Party (KMT) — President Ma Ying-jeou’s party, of which he is also chairman. If the previous 12 agreements that the Ma administration has signed with China are any indication, the LY will once again serve more as a rubber stamp than an actual instrument meant to keep the government honest. Fourth, both sides refused to negotiate under a WTO framework, which would have ensured that both entities are treated as equals [the ECFA document is entirely in Chinese and each side will provide the WTO with its own English version, we are told].

There is a misconception out there that the main opposition party, the Democratic Progressive Party (DPP), is “anti-ECFA” and “anti-China.” It isn’t. It is, rather, in favor of taking a more cautious approach and believes the public has the right to have a say over a pact that will undeniably have a substantial impact on the future of this country. Most trade agreements require years of negotiations. Not only was the ECFA negotiated in record time — about six months — but a fixed deadline appears to have been imposed for its signature, which is never a good thing in negotiations. Furthermore, beyond the complexities inherent in a trade pact, it involves one entity (China) that does not recognize the existence of the other (Taiwan), claims sovereignty over it and threatens force to accomplish this, if required. 

Beijing has made no secret that it sees an ECFA as a stepping stone to unification; this could explain its “generosity” on the “early harvest” list and other sweeteners likely to follow. That’s why we’re seeing reports on TV and in the papers that Taipei is getting “almost everything that it wants” from Beijing. There are, therefore, very serious political implications to an ECFA, something that the KMT denies but that the CCP has made no secret of. Short of “selling out” Taiwan, as some have accused Ma of doing, his administration may very well be falling into a trap set by Beijing.

In terms of social impact, it’s too soon to tell, but an ECFA will likely benefit large industries while hurting the smaller and traditional ones. There is also great fear that a flood of cheap Chinese goods will hurt small industries in Taiwan (a phenomenon that has already been observed with ASEAN countries that recently entered into an FTA with China).

We must remember, as well, that an ECFA is transitory rather than an end in itself. More trade liberalization will follow, but the psychological blow has already been struck and a line has been crossed. If the KMT can get away with the manner in which it shoved the EFCA down people’s throat, whatever comes next that does not touch on politics should be a relatively smooth ride. The ECFA and future agreements will create facts on the ground that will be very difficult to undo, even if the DPP were to return into office in 2012. 

Overall, greater economic entanglement with China will give the latter more power to blackmail Taipei and more leverage on the various sectors of its industry. Even if not overt, this is a political outcome to what has been portrayed by Ma as a “purely economic” trade pact. It doesn’t matter that there is no political language in the ECFA documents to be signed on Tuesday.

See also my editorial on the same subject in the Taipei Times today.

5 comments:

D said...

Thanks for the handy summary. How about a little response from someone who, while not necessarily supporting ECFA, doesn't exactly think it's the kiss of death. To your points:

"Firstly". Negotiations are indeed best done behind closed doors. I too was waiting for the lists to be published, and I suspect the reason they weren't was that they weren't settled yet. In other words, that it was a real negotiation.

"Secondly". People are going to have a difference of opinion about the value of referendums in a representative democracy. If we'd had one on health care in the US, where I'm from, then we wouldn't have gotten a national health care plan, and that would have been a bad thing.

"Third". With all three of these points the underlying issue is representative democracy. People elected Ma to engage China; likewise, they elected a KMT majority in the legislature. Unelect these people this fall and in 2012 if dissatisfied with them.

"Fourth". Here I don't know. Was going to skip this point but it seemed intellectually dishonest to do so....

You continue: "There is a misconception out there that the main opposition party, the Democratic Progressive Party (DPP), is “anti-ECFA” and “anti-China.”"
Wow. If that's a misconception, then I'm getting my news from the wrong places. The DPP is not anti-ECFA? Really? And I know they're not officially anti-China, but they seem to be struggling to articulate how they would constructively engage China. But as you continue: "t involves one entity (China) that does not recognize the existence of the other (Taiwan)...". If this reflects then DPP view of things, then they're not going to have a China policy. I'm all for standing up for our principles, but there are practical considerations too. It may not be possible, in the short term, to convince China to recognize Taiwan as a state. It's a bit like the Israeli demand that Palestine recognize them as a Jewish state -- should that demand really take precedence?

"The ECFA and future agreements will create facts on the ground that will be very difficult to undo, even if the DPP were to return into office in 2012."
A) Is it so dire? B) Can't we allow that governments should be able to pursue policies with lasting impact? Isn't that what they are elected to do?

"Overall, greater economic entanglement with China will give the latter more power to blackmail Taipei and more leverage on the various sectors of its industry."
As if the Taiwanese presence there now weren't enough leverage? The Taiwanese economy is intertwined with China's, like it or not. It might be better to try to work within an established "framework". And while you are right that there is a political dimension to all of this, there is a political dimension to _everything_. Just because it is so does not mean the Ma government is playing into the hands of the CCP's unification strategy. In fact, everything is a wager. To distance Taiwan's economy from China's would entail a lot of uncertainty (notably, why would you distance yourself from the world's most dynamic economy, to which you have close access). To draw closer to it also is uncertain. Which direction has more opportunity for success? I would hedge my bets on a stable relation with China, even if it requires some prestidigitation.

Just food for thought. Keep up the good work.

MikeinTaipei said...

Hi D: Thanks for your message and the useful comments. When differences of opinion are put in a constructive manner like this, it’s hard not to respond. Please allow me to respond to your comments in the same order. This is a long response, so I need to break it into sections.

“Negotiations are indeed best done behind closed doors. I too was waiting for the [early harvest] lists to be published, and I suspect the reason they weren’t was that they weren’t settled yet. In other words, that it was a real negotiation.” I agree with you that negotiations are never fully transparent. However, in this case, it goes well beyond the “early harvest” lists and extends into, among others, the names used by both sides in the ECFA (we still don’t know); whether the document is regarded as a treaty, quasi-treaty, agreement or something else; whether China has said it would allow Taiwan to pursue FTAs with other countries. We’re told there is no “political language” in the text, but have not been told whether concessions were made; Beijing openly says it’s a means to a political end; Taipei denies it is; we’re told the ECFA is “transitory,” without explanation; it’s been signed, but we still don’t know how it will be reviewed by the legislature (e.g., as a whole or article by article). Ma also hasn’t explained why the ECFA had to be signed so quickly, or why he now wants the legislature to quickly “review” it (one season, perhaps, would be to beat South Korea to it, as an ECFA with China before its Northeast Asian competitor does so could give it an edge in certain key sectors). And so on. That’s too many unknowns or half truths for me to be comfortable in this specific situation. Remember: This isn’t NAFTA, which involved two countries that recognize and respect each other’s sovereignty.

“People are going to have a difference of opinion about the value of referendums in a representative democracy. If we’d had one on health care in the US … we wouldn’t have gotten a national health care plan, and that would have been a bad thing.” I agree with you that referenda are problematic and by no means a perfect instrument. Still, it is a people’s right to call for one, and it was dishonest of the government to use wild technicalities to turn down the two attempts made by the DPP and the TSU. We had a referendum in the mid-1990s where I’m from (Quebec). Would I have agreed if the referendum on Quebec independence had passed? No. Would I agree that it was a good thing for Quebec? Canada? No. But I would have had to respect the opinion of the majority, even if the decision were purely an emotional one. I’d argue, furthermore, that using a referendum on the ECFA — and blocking it, or delaying it, or allowing it to proceed — is of far less consequence than an actual decision to split from a country, as the Quebec referendum was about. In essence, I think the ECFA referendum is far more about delaying its implementation (and therefore making sure that it is being made properly) than killing it altogether. If the KMT had been more transparent about the content of the ECFA, and had proven itself to be pro-localization rather than pro-Beijing, apprehensions about the pact (and therefore desire for a referendum) would, in my view, have been far less. Taiwanese voted Ma into office believing his rhetoric; now many of them who voted for Ma are realizing that he’s actually (and was all along) pro ROC in the old sense of the word — that is, not willing to separate the ROC from China.

I think this constitutes an answer to your third point as well. I’d add, though, that the ECFA (and whatever comes next) will create many facts on the ground that will be difficult to undo. With the speed at which Ma has signed agreements with China, we’ll see many more changes in the next two years — likely political ones as well. A referendum, to come back to that question, would have forced the Ma administration to slow down the pace.

MikeinTaipei said...

“You continue: ‘There is a misconception out there that the main opposition party, the Democratic Progressive Party (DPP), is “anti-ECFA” and “anti-China.’” Wow. If that’s a misconception, then I’m getting my news from the wrong places.” You have — international wire agencies, right? If the DPP were anti-China, you wouldn’t have seen the cross-strait integration that we saw starting in 2000. Theirs was a more cautious approach, and was protectionist in terms of ensuring that key technologies were not transferred to China. But already back then, the DPP had no choice but to listen to the increasingly strong voices of the corporate world, which sought greater engagement with China. Chen Shui-bian also made many overtures to the CPP, especially in 2000. Those were all shot down by Beijing, simply because the DPP would not abandon the independence clause in its charter. If the DPP were anti-China, Kaohsiung Mayor Chen Chu would not have visited China last year to promote the World Games. I’ve met former MAC chairman Joseph Wu on a number of occasions. His job principally concerned dealing with China. His discourse is certainly not anti-China.

“The DPP is not anti-ECFA? Really?” DPP Chairperson Tsai herself has said the DPP does not oppose the ECGA per se, but asks for more time to review it properly, and for the implementation of additional mechanisms and oversight. International media have successfully portrayed the DPP as “radical” and “emotional.” Its main body is actually far more pragmatic that you’d thing (the “radicals” are in fact fringe and are only catered to during election time).

“Can’t we allow that governments should be able to pursue policies with lasting impact? Isn’t that what they are elected to do?” Not if the lasting impact is key to the annexation of Taiwan, or a means to trap it. Again, Taiwanese voters brought Ma into office because they believed he was the best person to improve the economy. Now some who voted him into office are afraid he’s going too far, too fast.

MikeinTaipei said...

“As if the Taiwanese presence there now weren’t enough leverage? The Taiwanese economy is intertwined with China’s, like it or not. It might be better to try to work within an established ‘framework.’” The Taiwanese presence is leverage, and was so even under the DPP. However, up until now, Taiwan had managed to maintain a physical buffer that is now quickly disappearing by allowing all kinds of Chinese investments in Taiwan and eventually bringing managers, cadres and workers. Prior to this, the leverage only existed physically in China; now it’s about to occur in Taiwan, and later this year the two sides will be discussing possible investment in the media. Once the PRC extends tentacles in the media, a new united front will open and those who oppose it risk being elbowed out, as happened in Hong Kong after retrocession. Remember: The ECFA is transitory, with all kinds of additional agreements bound to follow. That’s why, to return to a previous point, I think it would have been more cautious to take a go-slow approach, and why people need far more information about not only the ECFA proper, but what will come next (that’s another long list of unknowns).

“To distance Taiwan’s economy from China’s would entail a lot of uncertainty (notably, why would you distance yourself from the world’s most dynamic economy, to which you have close access).” I never advocated distancing Taiwan’s economy from China’s, and have written elsewhere that this would be suicidal. The fringe few in the opposition who advocate this are not being listened to and usually argue this for narrow protectionist reasons. I remember telling a Quebec separatist who advocated shifting trade from Canada and the US to Europe (namely French-speaking countries) that this would be suicidal, and maintain that doing the same with China would have equally delirious consequences. I’m all for liberalization, but I also believe in diversification, which the Ma administration has yet to demonstrate (despite its vow to seek FTAs) it takes seriously. What happens if Beijing blocks such attempts? We have yet to get a single indication that Taiwan will be allowed to sign FTAs. Would it not have made more sense to sign a number of FTAs first, and then an ECFA, so that Taiwan could ensure it did not create hyper-dependence on China without any assurances that it will be able to diversify afterwards? Another unanswered question.

D said...

Thanks so much for your detailed responses. I won't take up more of your time here, but I'll continue reading your articles and may comment again if I have new thoughts.

ECFA should be interesting, at least...