Why Taiwanese protestors are wrong on the China trade pact

Beijing's attempts to ingratiate itself with Taiwan through a favourable trade pact may have failed to convince student protestors but the country can't afford to pass it up.

Taiwanese students have occupied the debating chamber of parliament for the sixth day, protesting against the proposed services trade agreement with mainland China which would see closer economic ties across the Taiwan straits.

Police have tried unsuccessfully to dislodge students from the chamber and fortunately there has been no bloodshed. The Taiwanese government under President Ma Ying-jeou has showed considerable restraint in dealing with the unruly protestors who stormed the parliament last Tuesday night.

So what are their grievances? The students believe the government is trying to push through a services trade agreement with mainland China which would damage the job prospects of young Taiwanese who are now demanding direct dialogue with President Ma.

However, many people including members of the ruling Nationalist Party in Taiwan as well as the government in Beijing see the services trade agreement as largely in favour of Taiwan. For example, under the agreement Taiwan only has to open up 64 sectors to Chinese companies but China has to open up 80 sectors to Taiwan. In addition, Taiwan reserves the right to apply many barriers and restrictions.

In essence, Beijing made Taiwan a special deal that other countries would kill to get. Beijing, who is known to be a tough negotiator, has made all these concessions to Taiwan in order to curry favour with the island country’s electorate.

But in Taiwan, there is deep-seated anxiety about closer economic integration with China. The mainland is already Taiwan’s largest export market. It accounts for more than 40 per cent of Taiwan’s total exports and is also the largest investment destination. There are also over one million Taiwanese working and living in China.

One retired senior Taiwanese official told Business Spectator that China was like a giant water tower next to a small swimming pool, which was Taiwan. If Taiwan didn’t apply restrictions on the tower, it could suck the pool dry.

Many Taiwanese fear that China’s efforts to enmesh the island country into its economy are a sinister plot to achieve its ultimate goal of reunifying the divided straits via stealth. The main opposition party, the Democratic Progress Party, has been resolutely against any moves to foster more interactions with China including innocuous things like allowing more tourists to visit Taiwan.

The opposition party has no discernable China policy except to demonise the ruling Nationalist Party as a Trojan horse for Beijing. The cross-straits relationship sank to a nadir under the previous DPP government when it pursued a hugely destabilising and futile independence agenda that annoyed both Washington and Beijing.  

On the other hand, the ruling Nationalist Party believes it is hugely important for Taiwan to foster deeper economic ties with China. The island country’s has seen its export-oriented economy under pressure from a worsening global trade environment and from competitors like South Korea.

President Ma, who has significantly improved the cross-straits relationship, believes Taiwan cannot afford to cut itself from the world’s second largest economy that also happens to be right at its doorstep. He is also conscious that his greatest legacy in the office is likely to be improved relations with China. There is speculation that President Ma will meet President Xi Jinping in a summit this year.

The student opposition to the services trade agreement shows the limits of Beijing’s effort to ingratiate itself with the Taiwanese. Many favourable concessions are seen as sinister plots. The Chinese government is simply not winning the hearts and minds of the Taiwanese.

The Democratic Progress Party has shown itself again to be incapable of having a rational position when comes to dealing with mainland China, which is arguably one of the most important policy objectives for any Taiwanese government. Its obstructionist policy and tactics only serve to polarise the country.

Though it is important for the Taiwanese government to minimise the impact of the services trade agreement, it simply cannot afford to forgo the huge comparative advantage it has in China. It would be stupid to turn down the first mover advantage handed to you on a silver platter.

The agreement is crucial for Taiwan’s economic future. President Ma is right to push the agreement ahead despite the occupation of the parliament by rowdy student protestors.  

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