Taiwan: Using tragedy for benefit

The killing of Taiwanese fisherman Hung Shih-Cheng by the Philippine Coast Guard was clearly a tragedy. Nevertheless, the speedy announcement of sanctions and the equally rapid deployment of Taiwan naval warships to the site of the incident was an overreaction bordering on intimidation and saber rattling. All of which was done before any investigation had been completed. Moreover, it was an attempt by President Ma Ying-jeou to boost his low national popular support in order to deal with the crucial challenges confronting Taiwan. Regionally, Ma’s playing of the incident sought to build support in Southern Taiwan where his Nationalist Party (Kuo Min Tang) has historically been weak and where the deceased hailed from.

Taiwan’s economy has become too dependent on the mainland market. The signing of the Economic Cooperation Framework Agreement (ECFA) in 2010 saw exports to China (and Hong Kong) absorb 29% of all Taiwan exports for the year. In 2012, 40% of Taiwan exports went to China. For the year, Taiwan enjoyed a $95 billion surplus in cross strait trade. However, overall annual GDP growth predictions for 2013 have been less impressive, being reduced to 2.4% from 3.09%. The China market remains important to Taiwan, but it’s beginning to lose profitability. Chinese officials are imposing higher labor standards calling for higher wages to be paid, and just as Western companies are concerned about protecting intellectual property, so is Taiwan. Hence, companies are beginning to move back to Taiwan.