DPP Perspective on the Cross Strait Trade in Services Agreement

Overall background on the CSTiS controversies

1.     The government's credibility has been called into question for not delivering earlier promises on ECFA, promises which include higher growth, more jobs, more foreign and domestic investment, better income distribution, etc. In fact, all indicators show otherwise. There is a deep public distrust toward the government argument that CSTiS will bring higher growth (of a negligible 0.025%, or US$5b); rather, the public worries about the potential impact on their livelihood. The government keeps arguing that the agreement will yield a more beneficial rather than negative impact (利大於弊), but never addresses the exact nature of the impact. Moreover, the government promise of coming up with a fund of NT$95b for compensation reinforces the public's worry that the government is not telling truth about the agreement's impact.

2.     The process of concluding the CSTiS agreement was not transparent. Sectors, members of LY including the speaker, and the opposition were all kept in the dark and this raised a high degree of public anxiety. This is one of the major criticism against the government over the agreement (黑箱，or black-box decision making). The government's argument that the agreement can be discussed but cannot be changed caused even more concern among the public leading to speculation as to whether there is any hidden agenda or secret promise by the Ma Administration to China. Because of the sensitivity in cross-strait relations, what the Ma Administration has been doing makes the people worry that one day it will sign another agreement with China and the people will have no say over it and cannot change it. President Ma and some KMT officials have remarked that the commodity agreement negotiations are about 80% complete. But Ma and his government are committing the same non-transparent mistake again and this will almost guarantee another round of public anger.

3.     On March 17, Chang Ching-chung, the KMT Chairman of the LY Interior Committee, rushed through the agreement and announced that the review process was completed and sent to the floor for reference (存查，not for review or approval備查或審查).  This ignited the public uproar and the uproar was not instigated in any way by the DPP. This is the immediate cause for the student occupation of the LY chamber. Chang’s action was in direct and complete violation of the internal LY agreement brokered by Speaker Wang on June 25, 2013 to review the CSTiS substantively.  This agreement was clearly stated in the Legislative Yuan Gazette and has binding effect according to Chapter 12 of the Law Governing LY Members Exercising Duty (立法委員職權行使法).

4.     There are two chairmen to each one of the LY committees in Taiwan. In the LY virtually unbroken tradition, when one chairman signs up to review a bill, that bill will stay with him/her unless there is an agreement to transfer. After the DPP chairman of the LY Interior Committee Chen Chi-mai signed up to review the CSTiS on March 12, which was carried in the LY Gazette (立法院公報), the bill should have been left to Chen to chair throughout the review process. Consequently, when the KMT’s Chang tried to cut in on March 17 to declare that he would also review the bill, it was seen as an extremely hostile act in the LY, no less than a declaration of war. The subsequently published LY Gazette did not recognize this particular session. The LY Gazette (立法院公報) can be found online. By the same token, when Chang declared again that he would review the CSTiS in the week of March 31, it was also an act of hostility, and was against the LY record carried it the Gazette. In other words, accusing the DPP of obstructing the LY process is not correct; the opposite is true, no matter how polite Chang has become under public fire.

5.     On August 5, 2013, Speaker Wang brokered another LY bi-partisan agreement to hold 20 public hearings.  The purpose of this agreement was to thoroughly review details of the CSTiS in a manner that should have taken place before the CSTis was signed.  In that LY internal agreement, which was also carried in the LY Gazette giving it legal effect, both the KMT and the DPP agreed to hold 10 hearings each. The chair of the Interior Committee rotates weekly between the KMT and the DPP, and, therefore, each chairman arranges hearings for his week. The KMT chair, Chang Ching-chung, arranged for up to 3 hearings in a single day and finished them rather quickly. There were bitter complaints from those who attended about his handling of these hearings and the lack of a substantive discussion in the hearings. The DPP committee chair, Tuan Yi-kang, arranged one public hearing for each of the rotational weeks he served as the chair.  These hearings went into great detail and took many hours to finish.  These hearings were highly appreciated for being serious and fruitful. This is why the hearings took almost the whole session in the Fall of 2013, not because the DPP was trying to stall the process. The DPP wanted to have the kind of hearings needed to fully understand the details of the CSTiS. Accusing the DPP of trying to stall the process, as President Ma has stated, is incorrect and a politically motivated mis-statement aimed at the opposition.

6.     The KMT came up with a compromise, after the crisis started, to substantively review the agreement in the joint committee, with the joint committee to be chaired by Speaker Wang. But it is clearly stated in the LY internal rule that committee meetings, including those of a joint committee, are only chaired by committee chairs, not the Speaker. The Speaker of LY only chairs the plenary sessions and whole-parliament committee on emergency decrees. The KMT’s “compromise” actually is illegal. Accusing the DPP (or the students) for not accepting the KMT compromise is far from reality, and accepting it would be inconceivable. (Speaker Wang did not even want to answer the question as to whether he would accept that KMT “compromise”.

7.     Ma’s responses to the students’ request, again and again, only made the students more angry. For one instance, the students argue for a constitutional conference to strengthen Taiwan’s democracy but President Ma decided to hold an economic conference instead at the urging of business leaders. The younger generation is the victim of cross-strait opening that has seen the unemployment rate much higher for the young and their average salary very low. For Ma to meet with the business leaders and agree to their suggestion of holding an economic conference is a very hostile act against the younger generation, and is only making the deadlock more difficult to disentangle. Ma has to change to bring about a solution. Any blame on the DPP for instigating the situation is far from reality, and does not help in any way resolve the current deadlock.

8.     Cross-strait relations may be temporarily halted for the time being because of the public uproar, which is caused by President Ma’s desire to rush CSTiS through the legislative process. Beijing might still try to help Ma, but realistically, any help to Ma will only raise more suspicion of the Taiwanese of Ma and may turn more Taiwanese against China. This may play into Beijing’s calculation about dealing with Ma, whether it is over the commodity agreement, Zhang Zhe-jun’s visit to Taiwan, or a Ma-Xi meeting.

The CSTiS Agreement itself needs revision
1.     In Article 3, the agricultural services' phrase should be removed to safeguard Taiwan’s agricultural technology from being stolen by China.

2.     In Article 7, information disclosure concerning China’s state owned enterprises should be added so as not to allow their huge operations to overwhelm Taiwan. 

3.     In Article 20, the dispute settlement mechanism should include the mechanism that exists within the WTO, since both Taiwan and China are members in the organization and the WTO mechanism should not be excluded.

Major concerns over the granted items in the Appendix
1.     Inequality:
In numbers of cross-border trade and e-commerce: Taiwan opens 47 items and China only 17;
In the mode of investment: Taiwan opens up sole ownership, partial ownership and joint-venture, but China does not open sole ownership;
Taiwan is fully opened in all granted items, but only Fujian and Guangdong are opened, for 10 items, within China;
Restrictions in opened items: China set restrictions on some of the items, with funeral service excluding cremation as an example.
2.     Unequal competition: China’s SOE’s are huge and Taiwan may not have a chance against them in competition.

3.     Grass-root economic activities may be endangered: community stores with low-threshold of skills such as barber shops, hair beauty saloons, laundry stores, etc. may stand to lose and this affects the bottom strata of Taiwan society.

4.     National security concerns.

Specific examples of items that need to be renegotiated
1.     Social care/welfare institution: Taiwan’s institutions are, by law, non-profit, and in China they can be profit-making businesses. But in the agreement, when Taiwan’s social care institutions invest in China, they are still to be non-profit, however China’s investment in Taiwan can be profit-making.

2.     Telecommunication: this is a serious national security concern. The US, India, Canada, Australia, Israel, etc. have excluded Hua-wei for reasons of national security. Taiwan faces a direct threat from China and there is no reason why Taiwan should not exclude telecommunication for national security reason.

3.     Geological survey: also for national security reasons, Taiwan should not be open for China’s investment in geological and environment surveys including surveys in coastal areas and the ocean-bed.

4.     Printing: In Taiwan, which is democratic, everything goes when it comes to printing. But in China, special permits from the government are required to operate, and the Chinese government does not issue permits to any foreigners. (In addition, the Chinese in Taiwan may print material that could constitute attempts to propagate on behalf of the Chinese government or affect Taiwan’s public discussions on issues, etc.)

5.     Funeral service: in China cremation is the most common method in use, but China bars cremation to Taiwan’s investment. At the same time, China can invest in all modes of funeral services in Taiwan.

6.     Advertisement: advertisement in Taiwan’s mass media can ultimately affect the direction of reporting and editorials. The media market in Taiwan has become very competitive and the mass media is susceptible to the pressure of advertisement. The experience in Hong Kong’s media market is more than obvious and Taiwan should not repeat it.

7.     Personnel movement with investment: for every US$200,000 of Chinese investment, 3 managers or white-collars can come to Taiwan. This is way too unrealistic for Taiwan people's comfort level given the sensitivity of cross-strait relations. Canada has recently barred Chinese investment immigration because of false identification. It is inconceivable for Taiwan not to follow suit.

8.     Financial sector: China can invest up to 10% in banks or financial control institutions, 15% in those that have invested in China or those that are yet to be listed for stock exchange, and 20% in bank branches. But the ownership in Taiwan’s banking and financial institutions is diverse, and most of the institutions are actually controlled by relatively small percentage share. In 8 out of the total of 16 financial control firms in Taiwan, the owners (and the ones who actually run them) have less than 10% shareholding. China Trust Financial Control (中信金控) is said to be owned by Mr. Ku, but he has only 8% of the shareholding. If China’s state owned banks are allowed to invest in Taiwan up to the full limit, they will actually be able to run most of Taiwan’s banking and financial control institutions. Because of cross-strait sensitivity, any sensible decision maker in Taiwan would never allow this to happen.

Conclusion
1.     The DPP supports free trade, open markets, and participation in the TPP. Based on the same belief, the DPP does not outright oppose to a service trade agreement with China. But because of the sensitivity in cross-strait relations, the DPP argues that the government needs to conduct assessment, consultation, negotiation, and review in a more transparent and patient manner, which might be slow, but it will certainly be better than causing an uproar which stalls the process all together. In short, when it comes to cross-strait negotiations and agreement, slow but steady is the best possible way to go.

2.     Conceivably, there will be more agreement with China in the future after the CSTiS Agreement is ratified by the LY, possibly with revisions and renegotiations. To ensure a more transparent process and a better or smoother procedure throughout, a cross-strait agreement oversight law is required. There seems to be an internal consensus now, and the LY should proceed efficiently with the legislation on an oversight mechanism for the all subsequent agreements to follow. The DPP now agrees to the principle of legislating the supervision as soon as possible, and to allow the new legislation to be applicable to the controversial CSTiS. This might be the ultimate way to end the current deadlock.

3.     The Ma Administration should be more aware of the public anxiety over cross-strait matters. President Ma should be aware that the people may consider it a nightmare to wake up to a new agreement with China in which they have no say and have no right to make any changes.



(prepared by Dr. Joseph Wu, DPP representative to the U.S. and executive director of the Police Research Committee)

DPP Perspective on the Cross Strait Trade in Services Agreement