ECFA referendum

The DPP and TSU are consolidating their efforts to prepare for a referendum on the upcoming ECFA Ma will likely sign with China by the end of the year.

The current DPP text is:

「是否贊成政府與中國簽定經貿協議應提交人民公投」
"Should the government subject economic agreements signed with the mainland China to popular referendum?" [whoops! Thanks for the correction commenters, not sure how such things could slip into my head...]

While the TSU is planning to go with:

「你是否同意政府與中國簽訂ECFA」
"Do you believe the government should sign an ECFA with China?"

I think the DPP text is more useful in that 1) it avoids the problem of Ma changing the name or scope of the agreement, thus getting around the referendum results 2) It's asking people should later approve by referendum the full text of the final agreement (the details of which are still mostly opaque; no drafts have been presented).

This conveniently places the DPP in a moderate position 'of advocating for a referendum on economic agreements with China in principle, as South American countries have done for free trade agreements involving the Western Hemisphere ; the DPP is not using this referendum to shoot down the ECFA directly, at least not yet.

My hope is that the final text agreed upon by the TSU and DPP is essentially identical to the DPP version. There should probably be an ultimate decision by next Wed.

Straits Forum

The rally wasn't the only thing happening this weekend. Also check out the program from this year's Straits Forum. My favorite part has to be an article about a performance put on during the evening of the 16th titled Chinese Spirit, Straits Fate (中华情·海峡缘).

The performance included a song called One Hundred Surnames 《百家姓》which included lyrics like:

百家姓里你姓李我姓张，骨血里淌着都是黄河长江；百家姓里你姓赵他姓王，心脏里装的都是龙族的荣光…

You're name is Li and my name is Zhang, but our bones and are blood all flow with the waters of the Yellow and Yangzi Rivers; You're name is Zhao and my name is Wang, but our guts and hearts are filled with the glory of the Dragon People...

The chair of the event had a little cute poem to read that included the following:

“离我们不远的地方，就是欢腾的海峡。”“每一阵海风，都是亲人的消息。”“我们是知己，不分我和你，咱若有代志（闽南话，指事情），互相来扶持，因为你是我的兄弟。” Not far from me is the great [Taiwan] Strait. Every time the wind blows in from the sea, it brings news of relatives. We are intimate friends, and we do not distingish ourselves from each other. Whatever the situation, we can count on each other, because we are brothers."

Best of all have to be lyrics from a Beijing opera titled I am Chinese 《我是中国人》. This reads like it's jumped out of a time warp in the Cultural Revolution where even all the Beijing Opera was political:

“中国人，同是华夏好子孙；中国人，海角天涯一条根。你和我逢盛世担大任，做一个坦坦荡荡、磊磊落落、堂堂正正中国人……”

Chinese people are all decedents of the Yellow Emperor. Chinese people even in far off regions still have the same roots. You and I have a great mission in this world, to be honest, proud and true Chinese ...

If that closing line doesn't ring a bell, may I direct your attention to Taiwanese elementary school textbooks from not that long ago (more images here):

Breaking

Twenty three minutes ago, CNA reported the list of industries in Taiwan which mainland Chinese investment will be allowed into during the next round of cross-strait economic liberalization.

A total of 99 industries are listed and include Chinese medicine, automobile production, paper and plastics products, the wholesale business, retail, tourism, air and sea cargo, other service industries.

In all, 65 manufacturing industries will be open, or about 30% of Taiwan's total manufacturing industry, though the wafer and LCD industries along with a few other high tech industries will not be on that list. And twenty three service industries will be opened up as well, though those service industries requiring special certification like law and accounting will remain off the list.

Chinese will also be able to invest in public infrastructure firms, though Chinese firms will not be allowed to directly win public infrastructure contracts themselves here.

You can expect some stock market reaction to that tomorrow!

Another two sets of 16 characters.

Nearly one year ago, on April 30^th, 2008, I analyzed two different 16 character formulas that were seemingly guidelines for how the KMT and CCP wanted to approach cross-strait relations:

When VP-elect Vincent Siew (蕭萬長) met with Hu Jintao (胡锦涛) met a few weeks ago at the economic conference, he raised a sixteen character phrase that he hoped would be the guiding principles of cross-strait relations:

「正視現實，開創未來，擱置爭議，共創雙贏」
"Face reality, start a new future, set aside disputes, and create a win-win situation."

Well, today Hu Jintao responded in kind, using his own slightly modified formula:

“建立互信、求同存异、搁置争议、共创双赢”
"Establish mutual trust, seek common ground while reserving differences, set aside disputes, and create a win-win situation."

Today I bring you a third set of 16 characters that spoken by Premier of the People's Republic of China "Grandpa" Wen Jiabao (温家宝) on the 18^th of this month at the 2009 Boao Forum for Asia. This third formula appears to be another direct response to the KMT's 16 character formula. Wen called on Taiwan and China to:

“面向未来，捐弃前嫌，密切合作，携手并进”
"Face the future, relinquish grudges, closely cooperate, and move forward hand-in-hand."

In the same speech, Wen Jiabao calls on Taiwan to be more open to Chinese imports and for more completely integrating the economic situation. He also called for "discussing and solving the political and economic problems" under the One China principle.

A China time article on the same subject notes a 16 character phrase of Ma's which is also very closely related to all of these discussions:

「同舟共濟，彼此扶持，深化合作，開創未來」
Cross the stream on the same boat, give support to one another, deepen cooperation, and start a new future.

So you can see where all of this is going.

I'm not sure how I feel about it all.

Obviously I have no trust whatsoever in China's willingness to accept anything but full annexation of Taiwan, but I have no doubt they would be willing to form an intermediate agreement which will (a) buy time to make coercion unnecessary (sway Taiwanese public opinion) to achieve a "one country, two systems" unification, or failing that, (b) reduce all other foreign interest in the Taiwan question, thereby making economic or military coercion a piece of cake that the rest of the world will ignore.

On the other hand, part of me wonders what sort of possibility there may be for truly creative solutions. Many US professors I had talked to before were convinced China wanted nothing more than to "save face" on the Taiwan question. I wonder how true this is. I think you could talk people on Taiwan into a federalist "union," but China will have none of that; and likewise, the Chinese "one country, two systems" package won't fly here.

I've previously (and repeatedly) speculated on what an intermediate peace agreement would look like, but basically came up blank. I still believe it's unthinkable that the core issue (sovereignty) could be compromised by either side, so have a lot of trouble figuring out how the the intermediate agreement could be significant.

I think we are going to learn a lot more in the next year or two about the real plans of both the KMT and CCP. I think these are exciting times and that Taiwan will continue to maintain both its de facto independence & grow increasingly close to China on the economic and cultural fronts. I think the KMT will continue to be a bunch of dastardly authoritarian crooks while the DPP continues to be a bunch of whiners who can't even run candidates at the lowest levels or put together a compelling and comprehensive platform.

Time will tell.

ECFA and political negotiations

Taiwan's pan-blue bastion of English journalism, the China Post, editorialized thus on the 10th of March:

President Ma Ying-jeou has upheld his campaign pledge of “no unification, no independence and no war” and ruled out any prospect of peace talks with China, saying relations are too tenuous to consider discussing political or military issues.

Taiwan's protector the U.S., its own people and even its rival in Beijing endorsed Ma's “three-no” pledge, which helped him to win the presidency last March, defeating the ruling DPP's candidates of pro-independence platforms. The island's people, allies and even enemy all supported Ma's policy for status quo: a territory of the Republic of China.

All right. You will note a few things about this: first, the claim that Ma has "ruled out" the prospect of peace talks. This theme continues later in the editorial. And it is a very useful claim but there are some problems with it. Namely, it can't be true, and Ma hasn't said so much as he has stalled the topic of political negotiations. Why do I say that?

First, the ECFA economic deal is nearing completion, though the details have been withheld from the public, and there is good reason to believe it will be presented soon indeed. The legislature may or may not be given the right to review the legislation (Ma is trying to avoid that), but there would certainly not be time for a bottom-up referendum on the issue. Once that framework is signed, you can expect the Chinese banks to come here first and other direct Chinese investment to follow up. Since Taiwan already has so much invested in China, what will happen is that full economic integration will happen faster than anybody realizes, with only a few smaller issues like labor and agricultural imports remaining unresolved (those can always be smuggled anyway).

And while I can't find the link right now for the life of me, there was an article last week or so in a Western paper in which a Chinese professor is quoted as saying political and military talks will have to come soon, by summer at latest, because all of the economic and cultural issues will be done with by then. And that is certainly true. Contacts will probably start with some retired military officials.

The military question and political question cannot be separated, but you can expect some military resolutions first; I imagine that besides the missile build up freeze, you will have a tactical freeze on Taiwan's weapons purchases and the establishment of some contact lines and, when everything is going very well, perhaps a joint exercise or two -- aimed at the Senkaku islands/Diaoyutai? -- though that's certainly the most difficult thing to negotiate, even ignoring that it would make Japan and the US very squeamish indeed.

The question is, as I've blogged on before, when it comes to political negotiations, just what can be realistically expected? What sort of "intermediate settlement," as Hu hinted at in his speech marking the 30th anniversary of Chinese calls for reconciliation and peaceful unification, can truly be reached that would satisfy both sides? I still find it impossible to wrap my head around any serious progress on this front, and both sides have been tactically very quiet on this issue.

CECA FTA CEPA ... but no WTO or ASEAN

The proposed Comprehensive Economic Cooperation Agreement (CECA) between Taiwan and China has been a main focus of the news over the last few days. Read today's Taipei Times article on the subject here. Note that since no formal negotiations on this topic have begun, there is no substance or specifics that can be debated at this time. One favorite quote from the Washington Post article on the subject:

In an interview with the Taipei Times published Friday, Ma seemed to imply that the agreement is a certainty, but he hesitated to respond directly to questions about whether signing it would be tantamount to acknowledging that Taiwan belongs to China.

"As to how the international community perceives the issue, it depends on the stances of different countries," Ma said. "Some countries agree with us, and our allies won't think Taiwan becomes part of communist China when it signs an agreement."

Now to translate some information from blogger Weichen, who takes an ideological tone but has some good information:

Is the CECA an FTA?

The group around Ma Ying-jeou who are selling out Taiwan, who intend to hasten the unification of the countries of China and Taiwan, are strongly insisting on signing a CECA, an important step in the march to unification. This news [link mine] was reported by the Washington Post and created a political firestorm. Ma Ying Jeou of Sell Out Corp. and the Chinese Annexation Group are both working on damage control, and on the front lines of that effort is Li Fei (李非), [deputy director of the Taiwan Studies Center at Xiamen University who the Washington Post quotes as saying the CECA is "a start toward full cross-strait economic integration and a necessary condition for marching forward toward final unification."] Li Fei has now clarified his statement and said the Washington Post misquoted him.

[Note: I just reviewed Li Fei's clarification and it appears the Washington Post quoted him fairly; the main problem seems to have been Taiwanese media rewriting and distorting headlines.]

Our Ministor of Jokes [Economic Minister] even said that the CECA is just an FTA. But this really is funny, since in the book previously written by [MAC chair] Lai Shin-yuan (賴幸媛), she stated a CECA is a completely open FTA, which is to say that CECA would keep Taiwan's economy at a slightly greater distance from China's economy than an FTA would [I don't really follow the logic here]. Ma Ying-jeou, the brains behind Sell Out Corp., has said that a CECA is a "third method" that is somewhere between an FTA and a CEPA, which is to say that a CECA would bring Taiwan's economy closer to China than an FTA would. Three people all have three entirely different explainations, so which one actually describes a CECA?

Now Sell Out Corp realizes they've been busted, but they are in denial, so they're planning on just changing the name from CECA and treating the public like idiots. First they wanted to sign a CEPA, then only after being criticized did they say they wanted a CECA instead. Whatever name they use now, it's still the same thing.

Weichen finishes the post by showing an editorial in the super-blue United Daily News that blames the DPP for confusing the CECA with an FTA -- which is especially hilarious now that the Finance Minister has said they are the same thing.

My own thoughts on the CECA: it does appear that many Taiwanese businesses, with our without investment in China, are convinced that in order to remain competitive on exports to China or imports into Taiwan, CECA is absolutely critical. Of course they'd love to get the deal with all ASEAN countries and sign an FTA with Japan, the US, and Korea as well. But they see that as much more difficult -- in large part due to China's pressure.

So I think there are very legitimate reasons to be concerned about increasing over dependence on China, but I also sympathize with business concerns and hopes for elimination of tariffs. As long as labor doesn't factor in, and safety measures are taken on food products especially, I think the CECA would probably be a good thing on balance and in the long run.

What the unemployment numbers don't say

ICRT:

Statistics from the Xinzhu Science Park seem to indicate the situation
involving companies asking employees to take unpaid leave could be worsening.

According to numbers from the Park administration today, about 100,000
workers and operators at the Park have been forced to take unpaid leave as a
result of the global economic recession....

According to the survey, the number of unpaid leave days averages one to
two days per week.

This is even worse than it sounds for a lot of people. I know workers in Pingtung who can't collect unemployment because they technically have a job -- already tough to find -- but who are asked to take off 3 months of the year on unpaid year. The workers then do this in shifts so that they all have at least some income more of the time.

Frankly, this unpaid leave things sounds like a twisted implementation on traditional leftist calls for spreading the work around to give people more free time and help create full employment.

200,000 workers on unpaid leave

From ICRT:

The Council of Labor Affairs has said that it believes over 200-thousand
workers across Taiwan have been affected by the policy of unpaid leave since
last December.

According to Labor Minister - Wang Ru-xuan - some 23-per cent of the nation's
companies which hire more than 200 workers have reduced working hours -
requiring employees take unpaid leave - or slashed salaries in order to cope
with financial difficulties.

Roundup

A number of things worth rounding up from the last few days. It's been a busy month at work so I don't have time for too many comments, but check these out:

Sunday

The probe that warrants probing

Questions on why the police came to my home

Monday

COA criticized over response to H5N2

PRC touts US$19 billion financing for Taiwan firms (ruh roh!)

Ma repeats ‘region-to-region’ comment

ROC flag’s removal from NCKU forum sparks controversy

Thanks for your hard work, see you later

I don't really know if this is the right move, but I have an instinctual distaste for this kind of policy adjustment. Again, from ICRT:

The Council of Labor Affairs says that it will review its policies governing
the hiring of foreign workers in an effort to safeguard job opportunities for
Taiwanese nationals and to ensure protection of their rights during the
current economic environment.

In a prepared statement ... the C-L-A said that as its current policy on
foreign worker recruitment is based on the nation's unemployment rate - which
is rising - it could begin to give priority to pushing employers to hire
local workers rather than overseas nationals

The statement added that the C-L-A will review the number of foreign workers
recruited to Taiwan and their qualifications .. and will also begin enhancing
the monitoring of the proportion of national to foreign workers.

The C-L-A also reiterated that the current policy of admitting foreign
workers must not impact negatively on labor conditions and job opportunities
for Taiwan nationals.

According to the C-L-A, there were 365-thousand foreign workers in Taiwan as
of the end of March this year - representing 3.5-per cent of Taiwan's working
population. Among these 198-thousand were industrial workers and the rest
were caregivers.

Inheritence tax to be cut

Taiwan News:

The finance committee of the Legislative Yuan yesterday completed the first reading of the draft revisions to the Inheritance and Gift Tax Act, reducing the tax rate to a single level of 10 percent from the existing maximum of 50 percent, but having yet to determine relevant tax exemption amounts.

CEPA between Taiwan and China

It still looks on track, and I expect it will be on the December agenda of the next SEF-ARATS meeting. The name may change, but the content won't much.

Perspective on vouchers

Read this FEER article on Japan's plan to give everyone vouchers in a similar amount to the ones being proposed in Taiwan; they roundly condemn the effort as cynical, populist and completely ineffective.

McCain: Obama's a socialist!

The rhetorical vitriol out of the McCain camp is completely insane. Both party leaderships supported the recent socialist bailout of major banks.

If the contrast is with completely free markets, both major parties of the United States have, without fail, been promoting "socialist" policies since the founding of the country (before the term was even around!). If the contrast is with at least marginally laissez faire policy, then it's pretty hard to argue we've seen that in the last 60-80 years, depending on how you're looking at it. So I really wish these guys would give it a rest.

Every wealthy modern state is a modern welfare state, a socialist democracy. And every wealthy modern state also allows the markets to operate in a very wide range, with great latitude on free trade and pricing.

Unless you're quite principled about the economic matters and count yourself as a Libertarian or Anarchist, I think the only questions are really (1) what policies are desirable and sustainable (2) who do they help and to what degree, and (3) are the policies encouraging the behavior we'd like to see.

Ma optimistic on economy

ICRT reports:

President Ma Ying-jeou is upbeat on the local economy ... saying Taiwan is
expected to post growth of 4.8 pct in 2008 despite higher oil prices and the
resulting surge in import prices.

The projection is higher than the government's latest forecast of a 4.30
percent increase in gross domestic product this year.

Ma, who marks his 100th day in office today ... is quoted as saying the
government's recent string of deregulations concerning trade with China is
unlikely to have an immediate effect.

However, he did note that at least 17 Taiwan-invested companies listed in
Hong Kong have shown interest in seeking a home listing or issuing Taiwan
depositary receipts.

Ma also said he is not worried about the smaller-than-expected number of
mainland tourists recorded since July as the Chinese authorities are ready to
allow visits to Taiwan in September.

Ma government to lower lots of taxes

Or that's the plan, anyway. I heard some details on ICRT this morning and can't recall the numbers, but they involved reducing the corporate income tax, tax paid by foreigners working here, reducing and eliminating the inheritance and gift tax in some cases.

Now the Milton Friedman Foundation has been running an ad like crazy for a few weeks now about how lowering taxes will improve Taiwan's economy. That ad has not gone over well universally, but I think it will probably have a powerful effect on how people think about this issue. I mean, taxes are never popular.

I myself find these issues really, really complex and don't like to make blanket statements on them. Except, of course, for the fact that taxes are in effect legalized robbery. But putting aside my dreams of a non-coercive, stateless society, the government is going to have to make its money somehow ...

Thank you Doug

Young, that is.

Taiwan is aiming to open five sectors of its economy to mainland Chinese by the end of the year, as part of a campaign by a new China-friendly administration to boost growth, media reported on Saturday.

The five areas are the financial, economic, transport, human resources and land sectors, Taiwan's two Chinese language business dailies reported, citing Premier Liu Chao-shiuan.

Not included was the real estate sector, the Economic Daily reported, although the two-month-old administration of President Ma Ying-jeou has said it would eventually like to open that sector to mainland investors as well.

Liu's announcement was the latest in a string of new policy initiatives announced by the fledgling Ma administration aimed at boosting the local economy by forging closer ties with the fast-growing Chinese economy.

China has claimed self-ruled Taiwan as its territory since the end of the Chinese civil war in 1949 and pledged to bring the island under its rule, by force if necessary.

Real estate bubble ahoy!

The Ma government has a plan to encourage young people (20-39) to marry and have kids: give them a chance to have no interest on a home loan, with the subsidy covering up to NT$2 million [edit: the subsidy is not NT$2 million, but simply makes a loan of up to that amount zero interest for a couple years]

Doesn't this sound very, very much like the cause of the sub-prime mortgage problem? People who can't really afford a house buying one thanks to zero interest on the early years of their payments? And we'll already have Chinese investors/speculators entering the market ...

Update: A thoughtful reader notes ...

[This measure] doesn't seem that unreasonable to me at all. Government subsidies in form of tax exemptions and low interest loans have been in place for the better part of the last century, in many not too die-hard stoneage capitalist societies. It has been in TW before as well under KMT as under DPP rule (as far as I know). Anyway - it has been in place in Germany, other Western countries and I suspect even the US for a long time. To many good effects. It has helped millions of working class people to own their homes.

To link this to the current sub-prime crisis seems an unfair shot to me. That was created more by the hands of unscrupulous wonnabe bankers. To avoid this rip-off of the working class by the banks there has been the model of 'buiding societies' around since (in England) the 1750s, that may be more of a history thing, but in Germany these societies, called 'Bausparkasse', a basicially co-op banking system, enabled millions of families an affordable home over the last 100 years.

During the 1970s and 80s traditional banks took on this challenge by developing their own models, some corruption and mismanagement scandals within the co-ops did their other part, which means that the difference between traditionell banking and co-ops is rather murky now. To understand the scale of the scandal you have to know that corruption was almost unheard of in as well German unions as in the government beaurocracy before the 1980s.

Which is even more important in this perspective is that of most lower or middle class Germans lost all their other savings, be it cash, stocks, government bonds or insurances through several crises like WWI, inflation 1923, Great Depression and WWII.

Btw, as far as I read in the Mandarin article the benefit of course isn't 2mn NTD but affects a zero interest rate up to that sum, which is a quite a difference, and I think you should be precise when you talk numbers.

Premier: Even after commodity price rise, we'll stil be lowest of the four dragons

How convenient to remember that now and not a month ago.

Econ Min. Chen Tian-jy (陳添枝): 6% growth impossible this year

This comes as no surprise, as Ma's camp has already backed off of this, his central election promise and policy. It was always a pretty impossible goal, especially considering the global economic consideration. But it just goes to show how very much like 1984 the world is -in terms of cognitive dissonance. If Chen's in charge, less than 6% economic growth is his fault; if Ma is, it's the global economy.

I try not to take economic promises from politicians seriously, but the people who do sure manage to practice a lot of mental gymnastics.