ECFA debate marred by faulty reasoning
Taiwan Today, Taipei
ECFA debate marred by faulty reasoning
8 July 2011
Source： China Times
One year after the Economic Cooperation Framework Agreement was signed by Taipei and Beijing, Taiwan’s opposition Democratic Progressive Party has declared the ECFA "myth" busted, while the ruling Kuomintang continues to tout its many benefits.
In politics conflicting views may be possible, but in economics objective facts and analysis rule. Critiques of ECFA—claiming it has resulted in a decline in the average salary, an increase in the wealth gap, reduced foreign investment and a drop of 61 percentage points in exports to mainland China in the first quarter of the year—are all based on the misuse of statistics or misinterpretation of the data.
The DPP maintains that salaries have reverted to the level of 12 years ago, but fails to see that any criticism of ECFA should focus on comparing data pre- and post-ECFA. According to a survey by the Directorate-General of Budget, Accounting and Statistics, the average salary in April was up 1.2 percent year on year, and in the first four months of the year the average salary had increased 4.08 percent over the same period last year.
As to the large wealth gap, the DPP cited the increase in low-income families and individuals nationwide in the first quarter of 2011 compared to the second quarter last year, conveniently forgetting that this rise is mainly due to a looser definition of the poverty line and adjustments to the standard for minimum cost of living.
The key statistic on the gap between rich and poor comes out each August, so figures for this year will not be available until over a year from now. Moreover, ECFA’s early harvest program for tariff reductions only took effect January 1. Could the pact be so influential that in just a few months it caused a huge rise in the number of low-income families?
The widening wealth gap is a trend that started 11 years ago. Clearly, any charge that ECFA has exacerbated the situation is premature.
The assertion regarding exports to mainland China is an even more classic example of the misuse of data. As a result of the global recession beginning in the fourth quarter of 2008, Taiwan’s exports fell 30 percent in the first quarter of 2009, with exports to mainland China and Hong Kong down 40 percent. But as the economy recovered, exports to the two regions jumped 75.6 percent in the first quarter of 2010.
To claim that ECFA is ineffective because exports to mainland China and Hong Kong grew only 14 percent this year, far below last year’s growth, is either ignorant or a willful misrepresentation. In fact, exports of products on the early harvest list have increased at rates high above the average.
ECFA is a free trade agreement between two economies, and although its effects vary by industry, its benefits for the overall economy of each signatory are beyond doubt. Otherwise, more than 270 FTAs of various types would not have been inked worldwide over the last dozen years. If the deal is not useful, why does the DPP keep harping on the necessity for the government to conclude FTAs with the EU, U.S. and other countries?
What really requires attention is the situation of less competitive industries, and their workers, that could be negatively affected by ECFA. It would be more constructive for both the ruling and opposition parties to concentrate on how to help these potential victims, rather than engaging in a war of words about the value of ECFA. (THN)
(This commentary originally appeared in the China Times July 4.)
