[Text/Observer Network Columnist Yan Mo] Regardless of whether Tsai Ing-wen is re-elected in 2020, both sides of the Taiwan Strait must face the issue of whether the ECFA is renewed or broken. In fact, this economic cooperation architecture agreement has never been officially sig

[Text/Observer Network Columnist Yan Mo]

Regardless of whether Tsai Ing-wen is re-elected in 2020, both sides of the Taiwan Strait must face the issue of whether the ECFA is renewed or broken. In fact, this economic cooperation architecture agreement has never been officially signed. It is like a bridge with only steel beams built, and only a few industries can pass through. Even so, in the past decade, Taiwan has saved more than NT$200 billion in tariffs, and according to the provisions of WTO, the lifespan of this advance agreement is only 2020.

After "severing diplomatic relations" between the two countries, Tsai Ing-wen's "National Security Council" used a public special project report to prevent unstable election situations, saying that the mainland will take several measures to affect the election. The most eye-catching of the so-called "suffocating economic pressure" measures is that the mainland may threaten to terminate the ECFA before the election.

Although this report is full of publicity, if it is regarded as an assessment of the cross-strait situation after Tsai Ing-wen's re-election, it is of reference value. Since the Guo Taiming abandoned the selection, the choice of the relationship has become more boring. The real interesting highlight is the possible development of cross-strait relations after the election, and ECFA is the summer drama next year.

The current ECFA is just a transitional agreement. According to WTO regulations, the validity period is ten years. If the cross-strait does not complete the signing of the formal "free trade agreement" during this period, it will automatically expire in September 2020. Even if neither of the two sides of the Taiwan Strait publicly express their opinions on the continuation of ECFA, other WTO members will question it, forcing the termination of cross-strait economic and trade reciprocity to enhance their economic and trade advantages in the Chinese market.

In other words, there is no question of "breaking" in ECFA, only the question of whether to continue, and naturally there is no need to negotiate for interruption. Only when the continuation is continued requires the restart of economic and trade negotiations between the two sides of the Taiwan Strait.

The opposition party questioned the ruling party. If the ECFA is interrupted, it will disappear about NT$22 billion in tariff concessions every year. What should I do? The ruling party replied that ECFA is unlikely to stop it, "Made in Taiwan" is irreplaceable, the sign is shiny, and no written notice has been received at present. Even if it is terminated, it will only affect foreign trade and is concentrated in the petrochemical industry.

Simply put, the answer is: Not as good as it is, even if it is, it is still fine.

is it? Let us piece this image together in a calm way.

In 2018, Taiwan's exports amounted to approximately US$335.9 billion, and ECFA projects (539 items) exports were approximately US$23.6 billion, accounting for about 7%. Looking at the numbers is indeed not terrifying enough, but traditional industries such as agricultural products, petrochemicals, textiles, metals, and machinery are affected. From the perspective of technology and scale, they cannot be compared with Taiwan's high-tech industry. Therefore, FTA is needed to ensure that their competitiveness is not disturbed by tariffs. ECFA is currently the most economically beneficial FTA in Taiwan, and the facts cannot deceive people.

For ten years, most of the discussions on the pros and cons of ECFA in Taiwan have been meaningless political saliva. Any FTA has inherent gains and losses. If you look at the details, why not worry about it? Therefore, to test whether ECFA is good or bad for Taiwan, the most intuitive perspective is whether the DPP, which despises ECFA, and its accompanying organizations, resolutely and unilaterally destroy it after taking full power? The answer is obvious. After Tsai Ing-wen took office, the ECFA lived in a healthy and complete life until now, and no one dared to touch it.

said that he was upright and made a fortune by relying on ECFA silently after he became accused of the same group of people who were accused of the whole process.

2010 ECFA signing ceremony (Photo source: "China Review News Agency")

The petrochemical, textile and machinery industries that may be damaged

00 The Democratic Progressive Party used to discredit ECFA as "over-reliance on the mainland" and "political concessions are unreliable". Under these overwhelming words, Wang Wenyuan, president of Formosa Plastics Group, the leader of Taiwan's petrochemical industry, said the best: Only requiring the same competitive conditions, ECFA will not make us more dependent on the mainland.

is actually that simple. For the industry, the real meaning of FTA is "the same competition conditions", which is not about dependence or concession. Moreover, from the perspective of industrial roots in Taiwan, ECFA is a suction force, not a thrust force for the industry.

For the petrochemical industry, quality is not the most important consideration. Competitiveness focuses on delivery time and cost, so the level of tariffs has a huge impact.

Formosa Plastics is an international group. If the ECFA is interrupted, it will indeed cause damage to the petrochemical industry, but it is not as good as it is, because they may find a better place to live outside Taiwan. In other words, if you don’t keep your master here, you will have your master’s place. The heavyweight entrepreneur Wang Wenyuan may be criticized by Taiwan’s politics because of this.

Wang Wenyuan, president of Formosa Plastics Group, said this year: Taiwan is in a difficult period (Picture source: Taiwan's "China Times Electronic News")

Wang Wenyuan's attitude is important? Because the textile industry, which benefits from ECFA, is also the semi-petrochemical industry.

Taiwan's textile industry is Sunset Industry, with output value shrinking by 16% in 12 years, and only 133,000 employees. Due to the outward movement, the industrial structure has formed a state of extreme shrinkage in the middle and upper reaches and the downstream garment industry. However, the textile industry is still the fourth largest trade surplus industry in Taiwan, with an export amount of about US$10 billion and the largest piece of fabric.

At this year's Taipei Textile Exhibition, Wang Wenyuan pessimistically looked at the prosperity. This year is not good and next year is worse. This view does not include the negative impact of possible interruption of ECFA. Judging from the upstream textile development that pursues high technical thresholds, rising raw material prices have become a crisis. If tariff interference is added, it will face the continuous increase in costs, and the pressure to move outward will be even heavier.

machinery is also a highly dependent industry in Taiwan on exports (60%), with mid-level products as the main force. ECFA's help to this industry is to enable Taiwan's mid-level products to maintain export advantages in an environment where mainland China supports local operators to move to higher-end and therefore prefer imports of high-end machinery products. At the same time, this is also a case that prevents the outward movement of the industrial chain.

From 2015 to 2018, machinery exports grew year by year, but due to the impact of the Sino-US trade war, export sales declined on the mainland, and had negative growth in 2019, which shows the importance of ECFA to the machinery industry.

In short, under the pessimistic global economy, the ECFA interruption has a double impact on the above traditional industries, with increased pressure on external movement, and is a problem that the entire industrial chain has to face, not as simple as shown in the data.

Petrochemical, textile and machinery industries can still escape, but agricultural and fishermen cannot escape.

is the top priority, the impact of agriculture and fishery

In the 539 "early collection list" that was the first to reduce taxes or open, the utilization rate of the petrochemical industry exceeded 50%, and most other industries were below 45%, and the utilization rate of agricultural and fishery products was as high as 84%. It can be seen that ECFA's top priority for Taiwan is the agricultural and fishery industry.

ECFA agricultural and fishery products only have 18 items, but in fact there are 34 items with zero tariffs. Most of the early collection lists are fruits, flowers, and fresh foods with higher economic value. The export volume of fruits on the non-list is larger, such as pineapple, Saga , and Wax fog . In other words, if the ECFA interruption means that the cross-strait transitions to confrontation, the scope of the agricultural and fishery industry will be higher than the ECFA coverage. Due to the high utilization rate, the number of farmers and fishermen affected may also be higher than that of the petrochemical and textile industries.

Agriculture and fishery companies with no such scale as Formosa Plastics. Among the 346 Taiwan’s excellent agricultural product certification manufacturers, 70% come from the central and southern regions, and 95% belong to small and medium-sized enterprises. Most of the employees in the industrial chain belong to the middle- and low-income groups, which is commonly known as the "Three Middle School" industries. Because of this, the voices of farmers and fishermen are enough to represent the middle and lower classes. Their feelings about livelihoods have a profound impact on the reputation of the ruling people. As long as farmers and fishermen call, politicians will say "yes". If they spit out water to farmers in the way of dealing with opposition parties, the result will be a "nine-in-one" tragic situation. Is the situation of

a bit similar to the relationship between American farmers and Trump ? Therefore, ECFA has key points in agricultural products, and of course there are political considerations, and those who rule on both sides of the Taiwan Strait are of course given special preferential treatment. Farmers and fishermen’s attitude towards ECFA is that it is very good, but they cannot all be sold to the same place. Especially those pineapple, sakura, and wax fog that are exported to the mainland and account for almost all exports, farmers hope to diversify risks. However, Tsai Ing-wen did not have the ability to copy another ECFA to assist in selling products outside the mainland. Anything was a temporary order and could not be said to be sustainable.

Since a large part of the DPP's ruling foundation comes from the support of voters of the "Three Middle School", the ECFA interruption is enough to shake Tsai Ing-wen's suitability, and the situation is similar to Trump.

According to statistics from the Committee of Agriculture, the amount of Taiwan’s agricultural products exported to the mainland in 2018 was US$1.27 billion, with a growth rate of 23.2%, setting a new record high. This fact was greatly exploited by the ruling party, saying that cross-strait relations are tense and will not affect the sale of products to the mainland, because Taiwanese goods are good and the mainland has to buy them.

Regarding the benefit of ECFA on agricultural products, compared with the first year after the agreement came into effect (2010), exports to the mainland (including Hong Kong) grew by 1.61 times in 2018, projects on the early harvest list grew by 1.99 times, and non-early harvested agricultural products grew by 1.37 times. The data facts are true, and the ECFA, which is highly disliked by the DPP, actually reflects the importance of the institutionalized arrangements for cross-strait economic and trade.

Some people and some things are disgusted when they exist, and cry out in pain when they disappear. ECFA is such a kind of existence.

Conclusion

Can't think of any reason. If Tsai Ing-wen is re-elected, the mainland will take the initiative to negotiate a "renewal of the cup" with Taiwan. It is strange that ECFA will continue to continue. The ruling party will always say it beautifully, it’s better if this one is gone, so find the next one to make up for it. The problem is that he has a high vision and low skills, lacks political strength, and does not have enough economic strength. If he disconnects the mainland, what should he use to sign FTA with other countries?

key is in the hands of the mainland. No matter how loud the "hate the mainland" shouts, it will not be possible.

RCEP will be signed next year. Member states in this region account for 60% of Taiwan’s foreign trade. At that time, Taiwan’s economic and trade will be isolated in East Asia, and the outward movement of industries and funds will be the general trend. The economy is the most honest. If you can’t do the economy well, it will be invalid if you use any "value" to deceive voters.

Taiwan is rushing towards " Philippines ization", which is becoming more and more obvious, and the Philippines is catching up.

The worse the Sino-US trade dispute, the more important ECFA is to Taiwan. It is not a box office guarantee, but a basic box office. ECFA interruption, isn’t it “not”? I really don’t know where this Ah Q’s confidence came from.

Next year, the true chapter will be seen.