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More Money, More Problems? Taiwan Opens Door to More Chinese Business

Protest against the Service Trade Agreement in July, 2013. Figure from the CC: NC.

Protest against the Service Trade Agreement in July 2013. Photo from the CC: NC.

The Taiwanese and Chinese governments have signed a number of bilateral agreements on economic cooperation since 2010, with the latest Cross-Strait Service Trade Agreement signed in June 2013. As the negotiation between the two governments have taken place in a black-box, many are worried that unrestricted entry of mainland capital poses a threat to Taiwanese culture, freedom of expression and even national security even though China is a huge market for Taiwanese businesses.

To address the concerns, civic group Democratic Front Against Cross-Strait Trade in Services Agreement has led several protests and convinced the Legislative Yuan to hold public hearings [zh] on the latest Service Trade Agreement signed [zh] in June 2013.

The public hearings have started in the Legislative Yuan in November 2013. So far more than 14 rounds have been held and more people from different service sectors will be invited to offer their view. The open discussion has raised public awareness on the political consequences of the economic cooperation. Indeed and many concerned citizens have picked up the discussion on their own blogs and websites.

Unequal agreement

Upon reviewing the terms in the latest trade agreement signed between Taiwan and China, professor Show-Ling Jang from the economics department of National Taiwan University pointed out [zh, pdf] that due to the huge difference in the scale of each country's economy and the “hidden rules” embedded in the terms, the agreement is neither fair nor equal:


There are tons of hidden rules in China and foreign competitors cannot play a fair game in China. For example, in the Service Trade Agreement, the terms require [foreign investors] to build partnership and share holdings with their mainland business partner. Such an arrangement will force our corporations to transfer their technology and intellectual property to their Chinese partners.

此外,中資來台並非單純商業考量,還夾雜政治戰略目的,我方竟開放攸關國家安全的服務業(如通訊服務業、交通運輸業等), 十分離譜!

In addition, Chinese capital is not purely commercial when entering Taiwan. There are political and strategic considerations. It is outrageous that the Taiwanese government has opted to open up services that concern national security, such as communication and transportation services [for Chinese capital and investment].

Political satire of the "black box" agreements signed between Taiwan and China governments by etblue

Political satire of the “black box” agreements signed between Taiwan and China governments by etblue

Censorship practice erodes freedom of speech

The authoritarian nature of the Chinese government and its censorship of expression has worried publication industries in Taiwan. During the public hearings, many publishers and bookstore owners believed that the agreement will end up eroding freedom of expression in Taiwan. For example, the owner of a small bookstore, Shiao-Shiao, pointed out [zh] in the hearings that unless the publishers were submissive to China's censorship, their books would never be distributed in mainland China:


The Chinese government has very strict control over publication as the publishers in China are all national corporations. The few small independent publishers need to buy “book numbers” from the national corporations to publish their books. There is no way that China's government will allow Taiwanese publishers to enter China. Whereas in Taiwan, our government's policy favors big publishers, [once the publication industry is open to China capital] the cultural diversity in Taiwan would be affected.

In fact, as pointed out by movie director Hong-Hong, upon entering mainland China, Taiwanese cultural industries have started to self-censor their work:


China is not a free and democratic country. In recent years, many Taiwanese working in culture-related industries have entered China, and we can see how they have started to self-censor their works.

Fu-Yi Chou, the CEO of Laiho Culture Foundation and Museum, made a suggestion during the public hearings regarding the exemption of culture-related industries from trade agreements:


“L’exception culturelle” is a worldwide consensus now. France and Canada led the discussion in UNESCO and passed the Convention on the Protection and Promotion of the Diversity of Cultural Expressions in 2005. While “l’exception culturelle” has already been put into practice worldwide, why does our government ignore it? Why didn’t the Ministry of Culture say a word about it? If so, why do we talk about a nation based on our culture?

Political motivation and security threats through trade

Indeed, the relationship between businesses and government in mainland China is so close that quite often economic activities are closely connected with political aims. Yu-Tsang, an engineer and a blogger, followed the discussion in the hearings and expressed concern on his blog over the political intention of China's investment in Taiwan:


Taking into account political considerations, the Chinese government may subsidize their corporations to invest in Taiwan. In fact, it is possible that politics is the main objective for Chinese corporations coming to Taiwan. Therefore, it is very important to prevent political subsidy when we discuss about the Service Trade Agreement with China.

Some even worried that when Chinese corporations enter the Internet service industry, personal privacy and national security would be endangered. Professor Ying-Dar Lin from the National Chiao-Tung University gave a warning to the Taiwan government:

可能會發生設備業者透過後門, 在服務業者不知情的情況下盜取用戶通聯與監聽特定用戶通訊.

It is possible to create a backdoor in the network's facilities [for intelligence agencies] to get around Internet service providers to steal user data and monitor specific users’ communication.

Putting aside political speculations, as Taiwan's economy is composed of predominantly small- and medium-size enterprises while their mainland counterparts are giant national corporations, the difference in economic scales makes it impossible for an equal playing field. Professor Show-Ling Jang explained [zh]:



In Taiwan, the service sector is composed of 935,000 enterprises. 86 percent provide non-knowledge-intensive services and the average number of staff in these enterprises is 4.2. Compared to the US (15 staff) and Japan (8.6 staff), most of our enterprises are very small.

Taiwanese and Chinese speak the same language, and we are geologically close to each other. However, the size of the economies and labor conditions are so different. China's huge capital flow and low labor costs will bring an adverse impact to our employment market and labor income structure.

Backdoor for immigration

As the agreement allows China corporation to recruit a certain number of overseas staffs according to their investment scale, some are worried that it will create a backdoor for mainland Chinese immigration to Taiwan. Professor Show-Ling Jang explained how the agreement will serve as a migration channel:


Based on this agreement, a Chinese corporation can arrange two staff members to stay in Taiwan if their investment reaches 200,000 US dollars, and they can arrange more employees to stay in Taiwan if they invest 500,000 US dollars for each person up to seven people. Compared to the rules for skilled immigration in other countries, the rules adopted in this agreement are quite generous… Since there is no restrictions on their expertise and no limitation on the period of residency, it functions as a de facto migration channel.

The Economic Cooperation Framework Agreement (ECFA) between Taiwan and China was signed in June 2010, followed by the Bilateral Investment Agreement signed in August 2012. The latest Service Trade Agreement was signed in June 2013. According to an online survey conducted by a civic group, Big Citizens Is Watching You, among the 61.6 percent of the 2,259 respondents who have some knowledge about the Service Trade Agreement, more than 97.4 percent do not support it, 38.1 percent of the respondents have no knowledge of this agreement, 0.3 percent do not have an opinion, and only 1.6 percent who know about it support it.

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