Tags: Taiwan | China | trade | debate

Taiwan Debates Impact of China Trade

Monday, 24 May 2010 08:40 AM

TAINAN and LINKOU, Taiwan — Cabdriver Chang doesn't like the deal.

Weaving through traffic in the balmy, temple-studded southern city of Tainan, he lets loose on why a proposed Taiwan-China trade deal — the Economic Cooperation Framework Agreement (ECFA) — is bad for Taiwan.

Taiwanese will lose jobs, he says. Taiwan's president is "selling out" the island. And Taiwan firms can't compete with the dirt-cheap "China price" made possible by low-wage labor.

"Take these, for example," he said, tugging on the worn, dark gray pair of pants he was wearing. "These pants are made in China, and I bought them for just NT$200 (about $7). The same kind made in Taiwan will cost you NT$1,000."

Asked about the apparent contradiction of railing against cheap Chinese imports while wearing a cheap pair of Chinese-made pants, he just laughed.

So goes the ambivalence of a globalized age. Trade deals like ECFA promise cheaper stuff for consumers in wealthier countries like Taiwan or the U.S. But wages for most workers in such countries are likely to stagnate, and some in low-end industries will lose their jobs.

Nowhere are feelings more mixed than in today's Taiwan, where the government is negotiating a deal that would bind the island more tightly than any other country in the world to China's behemoth economy.

Taiwan has the added anxiety of negotiating with a rising political and military force that has vowed to one day absorb the self-ruled island, by force if need be.

But, to a surprising degree, the debate on ECFA in Taiwan is shaping up as a classic — if more pointed — argument on the pros and cons of globalization, mirroring similar conversations from Brazil to Botswana.

In a late-April TV debate with the pro-ECFA president, anti-ECFA opposition leader Tsai Ying-wen barely talked about politics, focusing instead on economics. ECFA will worsen income inequality, mostly benefit big conglomerates and put many Taiwanese out of work, she said, as the two sides commit to scrapping most tariffs over the next decade.

"You're talking about the first two or three years," Tsai told Taiwan president Ma Ying-jeou, chiding him for low-balling potential job losses. "But in the next seven or eight years we have to eliminate most tariffs. How many people will be affected then?"

Ma, for his part, said Taiwan's trade with China, the island's chief export market, will "definitely" increase after the deal and that he would not allow Taiwan's sovereignty to be hurt. He accused Tsai's party of fear-mongering, saying it was "exaggerating the negative effects" of the deal.

Interviews with business bosses, workers, government officials and locals here illustrate why trade deals like ECFA create so much anxiety and uncertainty. The gains are often intangible, spread economy-wide and over long stretches of time, and so don't mean much in day-to-day terms to the average "Chou."

The threat is much easier to grasp. Cheap Chinese stuff could overwhelm the island, putting Taiwan firms out of business and hundreds of thousands of workers on the streets, the deal's opponents say.

"We can't compete"

Such are the fears of hand-made shoemakers, clustered in the Tainan area in southern Taiwan, and in the north around the capital Taipei.

Over tea at the Taiwan-made Footwear Development Association's office in Tainan, association chairman Yang Rong-de and local industry official Chiu Fu-yin said ECFA will put their business in peril.

Right now, they said, Taiwan's small firms can still make money selling hand-made shoes, because a high tariff of more than 40 percent on Chinese-made shoes makes them sell for roughly the same price as Taiwan-made shoes.

But if ECFA is passed, that tariff protection could come tumbling down, and consumers like cabdriver Chang would buy Chinese instead.

Footwear industry spokesman Yang said Taiwan's entry into the World Trade Organization in 2002 wiped out a third of the jobs in the island's hand-made shoe industry. Another half of the remaining employees could be out of work if tariffs on Chinese imports are scrapped, he said.

Such workers are typically less-educated and don't have the specialized skills needed to thrive in a globalized world. Many will likely end up in low-end service sector jobs, or unemployed.

In a worst-case scenario, Yang and Chiu said they might have to move their businesses to China or elsewhere. Both are preparing to hand off the business to their sons; neither wants to see their sons leave to set up shop abroad.

"If ECFA is signed, our factories will move to Vietnam or other countries because their workers are cheaper than ours," said Yang. "Signing ECFA will hurt our next generation."

The blow might not be immediate, they acknowledge. Taiwan's current tariff on imported Chinese shoes will run through 2012, they said, and they may be able to extend it another five years. They say they need to buy at least that much time to adjust to the China threat. By then, they hope, Chinese wages and materials costs will have risen enough to create a more level playing field.

Currently, workers in a hand-made shoe factory near Tainan make above $630 a month; their Chinese counterparts across the Taiwan Strait make less than half that, said shoemakers.

"If the tariff on Chinese shoes went to zero today, it would be 'game over' for us — we'd be finished," said Chiu, chairman of the Yifeng Leather Company in Tainan. "We can't compete."

The government has already identified shoes as one of 17 traditional industries likely to be harmed by ECFA. It's set aside a $3-billion, 10-year fund to help such firms upgrade, but Yang and Chiu just don't believe they'll see any of that money.

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TAINAN and LINKOU, Taiwan — Cabdriver Chang doesn't like the deal.
Monday, 24 May 2010 08:40 AM
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