Concluding free trade agreements (FTAs) with other countries will prevent Taiwan from being marginalized in the world market, Premier Jiang Yi-huah said today at a symposium on the recently signed cross-strait services trade agreement held today in Taoyuan County.
Jiang touted the inking of the agreement as "a huge step forward" following up on the signing of the Cross-Straits Economic Cooperation Framework Agreement in 2010 and said this pact and a goods trade agreement which is currently under negotiation will be the two most important pillars in economic relations between Taiwan and mainland China.
Several businesses view the trade in services agreement as a stepping stone to the mainland Chinese market. However, some have complained that the government failed to sufficiently communicate with the service sector prior to the inking of the agreement and that the accord could hurt some industries and impact Taiwanese workers' employment opportunities, indicated Jiang. "In response, the Ministry of Economic Affairs, Mainland Affairs Council and other relevant agencies will conduct at least 100 meetings to explain the details of the agreement to the service sector," he said.
The services trade agreement is of great significance to Taiwan's economic development, stressed the premier. "The ROC has always upheld the principle of free and open competition in world trade. As more and more countries remove tariffs and other trade barriers to allow their strongest products to be sold in other countries, those who fail to join free trade groups will be marginalized," he said.
Citing South Korea as a model, Premier Jiang said the East Asian country in recent years has been proactive about entering into FTAs with its trading partners, including the United States, European Union, Singapore, Association of Southeast Asian Nations and mainland China.
"As our export product types are similar to South Korea's, missing out on opportunities to sign FTAs with other countries will cost us in the future. If we fail to compete on an equal footing, our exports will dwindle, and we will definitely lose out to South Korea in the global marketplace," he explained.
"Many countries are working to conclude FTAs for similar reasons. To maintain its competitiveness in this environment, Taiwan must participate in regional economic integration," he affirmed.
On the surface, it may appear that Taiwan can absent itself from such agreements, and industries do not need to accept the challenges of increased competition and possible restructuring, Jiang said. "The protection of a few fragile industries in the short run, however, would forfeit the competitiveness of strong industries in the long run. By that time, Taiwan's businesses would regrettably be forced to move to countries that have inked FTAs, leaving the island void of investment and employment opportunities," he emphasized.
This is why the services agreement with mainland China is important, Jiang said. "To win the mainland Chinese market, Taiwan will have to change its industrial constitution through free, open competition. Only this will ensure the next level of prosperity, the premier maintained.
"Whatever challenges we are faced with, we will take them head-on and do our best to overcome them," the premier declared.
Moreover, as a buffer against the impact of the agreement, relevant government agencies have prepared plans to guide business to restructure, he said.
In response to complaints that the signing of the cross-strait service trade pact lacked transparency, Jiang said that it is not feasible to consult all organizations and unions or hold public hearings before completing international agreements, and instead the government speaks with certain industry representatives. Since citizens and businesses both expressed hope for more communication and transparency, however, Jiang pledged improvement in this respect to ensure greater support for its agreements.
Some businesses are also worried that since mainland Chinese companies investing more than US$200,000 in Taiwan are allowed to employ two of their own managerial workers for their operations there, Taiwanese workers may lose employment opportunities. Jiang reiterated that the service trade pact allows mainland investment to come to Taiwan to create more jobs for Taiwanese, not to open the island to mainland laborers. Besides, these mainland white-collar workers can only apply for work visas for temporary residency and are not eligible to become ROC citizens, he said.
There are also concerns that the infusion of mainland capital might lead to monopolistic control of markets by mainland firms. Jiang responded that the government has established an array of safety mechanisms, including the Ministry of Economic Affairs' Investment Commission, which evaluates the scale of each potential mainland investor's capital, its business type, and its potential impact on Taiwan's industries. Any investment that would have a serious negative impact on Taiwanese businesses would not be permitted, he said.
Jiang mentioned that since the government opened the traditional Chinese medicine market to mainland wholesalers on June 30, 2009, only four such mainland companies have applied to do business in Taiwan, with two permitted, and thus far only one operating. This firm has a mere NT$2.1 million (US$70,159) in capital, a mere drop in the bucket considering the annual revenue of NT$3 billion (US$100 million) produced by the 464 traditional Chinese medicine wholesalers in Taiwan. Besides, if any enterprise attempts to monopolize its industry, regardless of the source of its capital, the government will implement the Fair Trade Act to prevent it and impose penalties.
Moreover, the services trade agreement includes an emergency negotiation mechanism to allow prompt negotiation with the mainland and subsequent adjustment if an industry is found to be suffering from mainland influence, the premier said.