Struc­tural re­forms nec­es­sary to fur­ther lib­er­al­iza­tion

The China Post - - COMMENTARY - BY AL­FRED TSAI

LET­TER TO THE EDITOR

In the era of glob­al­iza­tion, more and more coun­tries are forg­ing bi­lat­eral and re­gional trade agree­ments, in­clud­ing the Trans-Pa­cific Part­ner­ship (TPP), in or­der to ben­e­fit from re­duced cus­toms du­ties, more lib­er­al­ized flow of cap­i­tal and per­son­nel as well as in­creased em­ploy­ment op­por­tu­ni­ties. These re­cent de­vel­op­ments have largely ex­cluded Tai­wan for po­lit­i­cal rea­sons and have taken place while Tai­wan is ex­pe­ri­enc­ing post-in­dus­trial eco­nomic pains char­ac­ter­ized by slow growth, ris­ing in­equal­ity, stag­nant wages, per­sis­tent un­der­em­ploy­ment and po­lit­i­cal grid­lock as growth driv­ers shift away from in­put and ef­fi­ciency to­wards busi­ness in­no­va­tion.

This has raised con­cerns that Tai­wan’s econ­omy could be­come in­creas­ingly marginal­ized and less glob­ally com­pet­i­tive, which could un­der­mine fu­ture growth and stan­dards of liv­ing. Es­pe­cially in in­no­va­tion-driven economies, there is no guar­an­tee that the eco­nomic fruits will be eq­ui­tably shared in­stead of con­cen­trated in the hands of a few. Politi­cians in de­vel­oped coun­tries seem pow­er­less to pre­serve col­lec­tive pros­per­ity in the face of these dan­gers. Tai­wan faces all of these prob­lems with unique cir­cum­stances of po­lit­i­cal and eco­nomic in­se­cu­rity.

Fur­ther lib­er­al­iza­tion is nec­es­sary to pre­vent marginal­iza­tion. But lib­er­al­iza­tion stim­u­lates a struc­tural read­just­ment of an econ­omy, ac­cel­er­at­ing the de­cline of sec­tors and en­cour­ag­ing the growth of oth­ers. The ques­tion for Tai­wan’s busi­nesses is there­fore how they should con­tin­u­ally re-engi­neer them­selves so they may de­liver prof­its to their share­hold­ers and jobs for Tai­wan’s res­i­dents and for the gov­ern­ment, what it should do and not do to en­sure an en­vi­ron­ment in which pros­per­ity can be sus­tained and fur­thered. The au­thor sug­gests that Tai­wan should un­der­take fur­ther struc­tural re­forms con­cur­rently to im­prove the econ­omy’s flex­i­bil­ity in re­spond­ing to the chal­lenges of lib­er­al­iza­tion.

First, Tai­wan needs to ad­dress its prob­lems of so­cioe­co­nomic in­equities to make forg­ing a do­mes­tic con­sen­sus po­lit­i­cally pos­si­ble. One ap­proach is to con­sider fur­ther re­form­ing public goods and ser­vices like the ed­u­ca­tion sys­tem, health in­sur­ance, so­cial wel­fare, public in­fra­struc­ture and in­come and cap­i­tal gains tax struc­tures to com­pen­sate for the dif­fer­ences in wealth and mo­bil­ity and en­sure more equal op­por­tu­nity. In par­tic­u­lar, en­abling ed­u­ca­tional op­por­tu­ni­ties and hu­man cap­i­tal through more holis­tic ad­mis­sions mech­a­nisms, en­hanced ed­u­ca­tion in public schools and ru­ral ar­eas, and in­creased sub­si­dies for dis­ad­van­taged fam­i­lies can help pro­mote greater long-term equal­ity, so­cial mo­ti­va­tion and na­tional achieve­ment.

Sec­ond, Tai­wan should de­fine its strate­gic po­si­tion, re­build eco­nomic cred­i­bil­ity and as­cer­tain a ne­go­ti­at­ing strat­egy for its in­dus­tries. Ac­cord­ing to Har­vard Busi­ness School economist Michael Porter, Tai­wan al­ready has a highly in­no­va­tive econ­omy with core fun­da­men­tal strengths. Based on this foun­da­tion, some fu­ture di­rec­tions for Tai­wan might in­clude trans­form­ing and mar­ket­ing Tai­wan as an at­trac­tive site for re­search and de­vel­op­ment, a wel­com­ing, trans­par­ent, and highly ef­fi­cient cli­mate for in­vest­ment, the eas­i­est place in Asia to do busi­ness, a se­cure tech­nol­ogy gate­way to main­land China, a world-class cen­ter for lo­gis­tics and busi­ness ser­vices, a bas­tion for knowl­edge and ed­u­ca­tion or a re­gional hub for in­for­ma­tion. On the other hand, the gov­ern­ment can for­mu­late con­crete ap­proaches to uti­lize and build upon com­par­a­tive ad­van­tages of entrepreneurship, in­cen­tives for for­eign in­vest­ment and qual­ity of the ser­vices sec­tor. Fur­ther­more, busi­nesses can con­tinue to im­ple­ment in­ter­na­tional stan­dards and prac­tices.

Fi­nally, Tai­wan should demon­strate that it has the po­lit­i­cal com­mit­ment and abil­ity to lib­er­al­ize its econ­omy and meet the high stan­dards of in­te­gra­tion. Tai­wanese so­ci­ety needs to form con­sen­sus and prin­ci­ples to guide Tai­wan’s long-term strat­egy and ob­jec­tives on cross- strait eco­nomic re­la­tions. For ex­am­ple, the DPP with strength­ened pop­u­lar­ity should aban­don its boy­cott po­si­tion and as­sume a more con­struc­tive role in lead­ing and mon­i­tor­ing crossstrait af­fairs. The party should proac­tively leg­is­late the su­per­vi­sory pro­vi­sions for cross-strait agree­ments and rat­ify the trade in ser­vices pact. It should also agree to the sign­ing of the trade in goods pact with main­land China and ad­vo­cate for its ear­li­est pas­sage. This will help make Tai­wan more com­pet­i­tive against sim­i­lar com­peti­tors like South Korea for ex­port mar­kets.

Cross-strait re­la­tions has been and will re­main a key driver of Tai­wan’s econ­omy. Since he first took of­fice in 2008, Pres­i­dent Ma Ying­jeou has made im­prov­ing Tai­wan’s re­la­tion­ship with main­land China a pri­mary ob­jec­tive. Over the past six years, the two sides have con­cluded some 21 agree­ments, in­clud­ing the sig­na­ture Eco­nomic Co­op­er­a­tion Frame­work Agree­ment (ECFA) in 2010. Such ef­forts mark im­por­tant steps in nor­mal­iz­ing, lib­er­al­iz­ing and in­sti­tu­tion­al­iz­ing the crossstrait re­la­tion­ship so as to cre­ate the nec­es­sary pre­con­di­tions for Tai­wan’s fu­ture par­tic­i­pa­tion in Asia’s eco­nomic in­te­gra­tion.

Lib­er­al­iza­tion and in­te­gra­tion will pro­vide Tai­wan’s econ­omy with a strong ve­hi­cle to fur­ther struc­tural re­forms and re­build con­fi­dence. Tai­wan’s path to lib­er­al­iza­tion via the TPP, for in­stance, is not easy, and it can­not tra­verse that path on its own. This is be­cause Bei­jing and in­ter­na­tional re­al­i­ties will con­tinue to pose sig­nif­i­cant chal­lenges. But this has al­ways been true for Tai­wan.

It is thus the au­thor’s ar­gu­ment that there are vi­able means for Tai­wan to in­crease its odds in re­mov­ing or cir­cum­vent­ing these ob­sta­cles. A log­i­cal and sequential ap­proach is par­tic­u­larly sig­nif­i­cant. If Tai­wan can pre­vail over such chal­lenges as forg­ing do­mes­tic con­sen­sus, en­hance the cred­i­bil­ity of its eco­nomic com­mit­ments and de­velop its own ne­go­ti­at­ing strat­egy, it will then be eas­ier for the United States and other coun­tries to sup­port Tai­wan’s par­tic­i­pa­tion on eco­nomic grounds and re­sist Bei­jing’s op­po­si­tion. Al­fred Tsai cur­rently at­tends Columbia Univer­sity, where he is study­ing eco­nom­ics and po­lit­i­cal science.

Newspapers in English

Newspapers from Taiwan

© PressReader. All rights reserved.