Observation: Taiwan Uneasy about Closer Mainland--HK Economic Partnership

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Last updated at: (Beijing Time) Friday, July 18, 2003

Observation: Taiwan Uneasy about Closer Mainland--HK Economic Partnership

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Chinese Premier Wen Jiabao and the Hong Kong Special Administrative Region (HKSAR) Chief Executive Tung Chee-hwa lately chaired the signing ceremony of the Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA).

The signing of mainland/HK CEPA drew high attention in Taiwan and a spate of reports from the island's major media hailed it as a "generous gift" presented by the mainland to Hong Kong at the sixth anniversary of the latter's return to the motherland.

The Arrangement, viewed as a starting point of a big China economic sphere, will provide some practical help to Hong Kong's economic recovery and development and bring new opportunities for the region's economic restructuring. In the meantime, the said media strongly demanded Taiwan authorities to sign a CEPA with the mainland in order to sharpen the island's economic competitive edge.

Taiwan businessmen in mainland feel massive impact and pressure

Taiwan businessmen in the mainland showed both envy at and complaint about the mainland/HK Arrangement. What they envy is that their HK rivals would be more competitive in and could earn more money from the mainland; while their complaint is that compared with other overseas-funded enterprises, Taiwan businesses have to brace themselves to solve any problems they encounter.

LinMark Group, which is usually regarded as the biggest Taiwan business in Hong Kong, said that CEPA, as a whole, is useful to Taiwan business in Hong Kong, but the mainland will open its market in 2005 and Taiwanese businesses would lose the opportunity to be the first to enter the mainland market if they need a long time to work their way into it.

"With closer ties with the mainland Hong Kong businessmen would get preferential treatment in more and more sectors such as real estate, banking and insurance, plus their quick business mind and rich experience, they will find much more convenience on the mainland market, which means a great threat to Taiwan businessmen whose future operations would become increasingly difficult," said Zhang Hanwen, president of Taiwan Businesses Association of Dongguan, Guangdong Province.

In fact, many Taiwan businessmen criticized the Taiwan authorities for clinging to its dead-end "Taiwan Independence" ideology and making the cross-Straits relations more intense. Being the victims bearing the brunt of the consequences and seeing Taiwan aliening itself from the big China economic sphere, these businessmen called upon their authorities to find ways to tackle the problem as soon as possible.

A call for opening of direct shipping links and singing of CEPA with mainland

Under the circumstances of Taiwan authorities' rejection of the one-China principle and the impossibility for the signing of a mainland/Taiwan CEPA, people from various circles on the island strongly demanded their authorities to clear away the obstacles imposed on Taiwan enterprises as soon as possible and speed up the opening of cross-strait three direct links of trade, mail and air and shipping services so as to make Taiwan business more competitive.

Taiwan Commercial Times said in an editorial that the mainland's establishment of closer business and trade relations with Hong Kong "deserves attention". This is particularly true in the service sector, in which Taiwan businessmen can enjoy preferential treatment if they make investment in the mainland through Hong Kong, this will attract Taiwan businesses to take Hong Kong as a springboard for the inland service market.

From a medium- and long-term point of view, the mainland's CEPA signed with Hong Kong and similar CEPA talks with Macao will greatly speed up the integration of the inland, Hong Kong, Macao economies, and gradually expand its influence on neighboring countries; while Taiwan, if it fails to gain a proper position and a participating opportunity in the integration of the East Asian economy, is bound to be gradually "marginalized".

In an editorial titled "Associations on a closer Hong Kong/mainland business and trade relation", local paper Economic Daily called on the Taiwan authorities to lift bans on cross-Straits cargo shipping and navigation at an early date to enable Taiwan products to meet their mainland rivals at a lower price and in a more convenient way; and at the same time actively establish a more friendly and mild political-economic relationship with the mainland, and try hard to sign a CEPA so as to make Taiwan enterprises more competitive and free the island from risks of being isolated.

On June 29, Chen Shui-bien's economy advisor Vincent Siew suggested direct chartered cargo flight before opening of cross-Strait direct air and shipping links, which immediately received enthusiastic response from industrial and commercial circles of the island. Chairman of Taiwan Medium and Small Sized Enterprise Association Day Sheng-tong and Chairman of Industrial Association Lee Chen-chia said that Taiwan's yearly transit trade via Hong Kong stood at around US$ 40 billion, and company owners had to pay additional 70 billion NT dollars as transit cost, so direct cross-Strait shipping links could help cut enterprise costs and shorten goods transit time.. On June 30 KMT "legislator" Chang Hsiao-yen proposed his "plan of cross-Straits direct chartered cargo flights", in which he advocated regular chartered flights without stopovers in Hong Kong or Macao, and a three-month trial operation starting from October, he also called on Taiwan authorities to consider related business as soon as possible.

Taiwan authorities seeking for FTA with the US

Despite feeling the impact on Taiwan businessmen by the mainland/HK CEPA, the Taiwan authorities insist on having its own way, unwilling to adopt measures beneficial to cross-Straits trade.

Taiwan "minister of economic affairs" Lin Yi-fu admitted that the signing of mainland/HK CEPA did generate an impact on Taiwan which was originally on the same competitive conditions with Hong Kong ; however, the cross-Straits business and trade policy is part of mainland policies and Taiwan now has no plan for discussing a free trade agreement with the mainland. He also said that whether to consider the signing of CEPA is a political question rather than a pure economic one. And senior officials of the "Mainland Affairs Council" pointed out that the CEPA exerted an impact particularly on the island's service sector, for instance, the banking industry was badly hit. Fu Don-cheng, director of economic affairs of the Council, said that CEPA is a "one country, two systems" model and so is not applicable to matters between Taiwan and the mainland.

It is worthy of note that proceeding from their tactics of rejecting economic integration with the mainland and countering it on the strength of the United States, the Taiwan authorities have been desperately seeking for Free Trade Agreement (FTA) with Panama, Singapore and the United States in particular. Since assumption of office Chen Shui-bien has repeatedly sent his ministers to the United States for FTA talks, but the two parties remain divided on issues such as intellectual property protection and opening of the agricultural products market, and the talks were also crippled by US worries about detriment to US-China relations.

Generally speaking, the signing of mainland/Hong Kong CEPA is a special arrangement under the "one country, two systems" principle and the World Trade Organization (WTO) framework, and reflects a closer economic relationship between China as a sovereign state and Hong Kong as a separate customs territory, and demonstrates the care and support for Hong Kong from the Central Government and the fellow folks of the motherland. For Taiwan, the CEPA has doubtlessly added to the mainland's attraction to Taiwan businessmen and the appeal of "one country, two systems" to Taiwan people. The best illustration of this lies in the heated discussions on cross-Straits economic integration and free trade zone from various communities in Taiwan and their demand for signing CEPA with the mainland.

By PD Online Staff Member Li Heng

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