'Common market' is bad economics, worse politics

The call by Kuomintang presidential candidate Ma Ying-jeou and running mate Vincent Siew for a "cross-strait common market" with the People's Republic of China as their core "long-term" vision has sparked considerable concern among grassroots voters and has become a rare "hot" issue in the March 22 presidential campaign.
Democratic Progressive Party rival Frank Hsieh has launched a flurry of intensive criticism of the KMT duo's plank as promoting a "one-China market" which would inevitably open Taiwan's agricultural and labor markets to PRC competition and undermine the livelihood and sustainability of Taiwan's economy.
In the wake of this assault, Ma has backpedalled and now insists that a future Ma government would ban the importation of PRC agricultural produce and would not allow the entry of PRC workers. In an election forum Friday, Ma stated that he advocates not a common market but only the normalization of economic exchanges with the PRC regime.
Nevertheless, there is evidence in print, including in the KMT's official program, the party and its candidates have advocated a "cross-strait common market," including public references by Siew to this concept as equivalent to a "great Chinese market" and a "one China market."
Moreover, even if set in the long-term as Ma claims, the pursuit of a "common market" will drive the direction of economic policy under Ma in ways that far transcend the narrow scope of "normalization of cross-strait economic and trade relations."
As noted in a previous editorial (February 22, 2008), the notion signals "bad economics" for Taiwan that could literally cause Taiwan citizens to "drink poison" in pursuit of a mirage of faster economic growth.
Even the econometric analysis performed by the Chung-Hwa Institution for Economic Research and cited by Siew in support of his concept shows that the minor 0.41 percent boost to gross domestic product that would be provided by entry into a common market would not be sustainable since it would come at the cost of declining production in Taiwan's high technology industries, including informatics, telecommunications and services, as well as agriculture.
Moreover, Ma and Siew fail to make any reference to the actual experience of other territories, notably Hong Kong, which entered into a "close economic partnership agreements" with the PRC in 2003.
According to an analysis by the Hong Kong Federation of Trade Unions, Hong Kong has become even more "hollowed out" in terms of industry and technology employment and even more polarized in terms of income distribution as only business owners and professional and managerial employees have gained in income while middle and working class households find their income declining in absolute terms.
Reciprocal nature
Ma's claims that his future government would ban PRC produce and workers also fly in the face of the reciprocal nature of trade and economic pacts and rest entirely on Beijing's "goodwill" to allow Taiwan to erect barriers against PRC dumping of "black heart" defective and dangerous foods and products.
But if the economics of closer cross-strait association are uncertain at best, the political consequences of following the KMT prescription would be truly catastrophic.
For example, Siew has claimed that the promotion of a cross-strait common market as "equivalent to using economic cooperation as a force to maintain regional collective security and to strive for peace through institutionalized economic cooperation" as he claims occurred in the case of the evolution of the European Union.
With this statement, Siew confirms the accuracy of his own self-assessment that "it would not be suitable for me to handle overly political matters" since his background is as "an economic bureaucrat."
Indeed, both Ma and Siew seem blind to the fundamental preconditions which underlaid the EU's evolution, including the fact that participation voluntary and restricted to democratic constitutional states which recognized each others sovereignty and shared common values of democracy, peace, rule of law and respect for human rights and which were roughly similar in size and levels of national income.
Moreover, each stage of the process was carried out through intensive negotiations, the results of which were approved by national parliaments and, in most cases, submitted to the citizenry of the participating countries for ratification by national citizen referendum.
Also, none of the countries involved dared to declare, as the PRC does with relation to Taiwan, that they had the "right" to attack other European states for a good reason, namely the previous existence of a post-World War II "collective security" system under the hegemony of the United States in the form of the North Atlantic Treaty Organization.
In contrast, Ma and Siew view relations between Taiwan and the PRC in isolation from the rest of the world, a conception that would leave Taiwan subject to the PRC's not so tender mercies.
In our view, Ma and Siew should either retract their advocacy of a "common market" with the PRC or clearly elaborate the mechanisms which will provide Taiwan with national, defense and security guarantees before entering into such talks with Beijing and cease trying to foist their wishful thinking on our people.