Traditional Industries Worry Over Impact of ECFA

December 12, 2009 Updated: December 12, 2009

The proposed free-trade agreement between Taiwan and mainland China, known as the “Economic Cooperation Framework Agreement” (ECFA), continues to draw worldwide attention and concern. Business owners in Taiwan are cautioning their government against signing the agreement with Beijing’s regime.

Under the leadership of Taiwan’s President Ma Ying-jeou, the current administration in Taiwan helped to initiate the agreement.

The agreement proposes the free flow of various industrial products, services, and capital between the two sides of the Taiwan Strait, known as the “Cross-Strait Economic Zone.”

A major concern of traditional business owners in Taiwan is that manufacturing industries would relocate to China where both raw materials and labor are much cheaper, further impacting Taiwan’s high unemployment rate.

Another concern is that with certain trade barriers lifted, including tariffs, Taiwan’s market would be inundated with poor-quality products from China.

Taiwan’s Central News Agency (CNA) reported on Dec. 15 that President Ma said Taiwan must negotiate the proposed ECFA with China to “avoid marginalization of local industries,”

Taiwan has been holding informal talks with China on the ECFA proposal, the 4th round of which is expected to conclude by the end of 2009, according to the Jamestown Foundation.

Selling out Taiwan

The Taipei Times, through a series of editorials, outlined the difficulties business owners would face if the ECFA is ratified. Economic resources and production activity would shift to China where production costs are significantly lower. Manufacturing industries would then move out of Taiwan more quickly, prompting unemployment to rise ever higher.

Additionally, the removal of tariffs and other barriers to trade between Taiwan and China would flood the market with cheap Chinese goods. Home-grown businesses (agricultural and other traditional industries with Taiwan as their main or sole market) would then be forced to cut back on production or shut down, leading to further job losses.

The influx of Chinese products would cause domestic agriculture and industry to collapse—especially small and medium-sized enterprises which manufacture towels, ready-made garments, shoes, bedding and ceramics—raising unemployment levels even higher.

The Taipei Times also stated that more than 80 percent of workers in the manufacturing sector are employed in traditional industries, and the ECFA is likely to compromise those industries that are largely uncompetitive.

Wang To-far, an adjunct professor of economics at National Taipei University, views the ECFA as “a contract to sell out Taiwan” and “a shortcut to political unification [with China].”

Business Owners Speak Out

Businessman Huang Kuang-yi of the bedding industry told Sound of Hope Radio (SOH) that he hopes the government of Taiwan will be mindful of its own industries.

“Business owners will petition both the Legislative Yuan and the Executive Yuan. We feel the government has not heard our concerns or doesn’t care about our low-tech industries. They seem determined to sign the ECFA without consulting with anyone else.” Huang said.

Previously, Huang had told the Taipei Times that because the products of the bedding industry are mostly for domestic consumption, the signing of an agreement to avoid double taxation—such as the ECFA proposes—would be useless to his industry.

SOH spoke with businessman Lin Kuo-long of the towel industry. “The government should take precautions at every step and make unambiguous statements regarding trade deals when engaging in talks about ECFA issues,” he said.

According to a CNA report on Dec. 8, recent surveys show 38.2 percent of local business owners who responded think the agreement will bring “more opportunities than threats,” while 34.5 percent believe there will be “more threats than opportunities.”