Anti-Services Pact Furor
Business Owners Have Their Say
CommonWealth Magazine interviewed entrepreneurs in those sectors that stand to be directly affected by the controversial Agreement on Trade in Services. The views they shared may surprise you.
Business Owners Have Their SayBy the Editorial Department
From CommonWealth Magazine (vol. 544 )
The Cross-strait service trade pact is like a magic mirror.
Supporters of the Cross-Strait Agreement on Trade in Services (CATS) look in the mirror and see Taiwan as a little giant brimming with confidence. Having built the bridge of the cross-strait pact, Taiwan can stride ahead to open the gates to the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) and move forth into a wonderful realm free of trade barriers, where everyone enjoys the pleasures of global competition to pluck the fruits of economic growth. They fret that the "sunflower" student movement is forcing the majority to submit to the will of a minority.
Those opposing the pact see Taiwan in the mirror as a midget that is about to get abducted by China, the world's second-largest economy. If the agreement is inked and goes into effect, the Trojan horse will get through the gates, and it will be far simpler for China to just buy Taiwan with its money instead of taking it by force. They insist that democracy is priceless, and that the interests of big corporations should not be allowed to ride roughshod over those of small- and medium-size businesses and the general populace.
Magic mirrors do not tell you the truth. In a magic mirror one's desires and fears obscure one's true self. CommonWealth Magazine interviewed a variety of business owners who would be affected by the service trade pact, some positively, some negatively, and discovered a complex but very real tableaux of mixed feelings: the presumed beneficiaries are not necessarily in favor, whilst those who are presumably threatened are not necessarily opposed.
Nick Wang, General Manager of 86 Shop:
Only with the service trade pact can we have a pact on trade in goods, and this will open up the China market.
(86 Shop, the largest beauty and cosmetics seller on Taiwan's Yahoo Auctions, chalked up NT$430 million in revenue last year.)
I very much welcome the cross-strait service trade agreement.
China's consumers love cosmetics products like eyeliner and facial masks from Taiwan. For them, the images of Japanese, Korean, and Taiwanese products are on the same level.
For my products to reach across the strait, they have to get past assorted roadblocks. First is documentation approval, after which you get an import license, then wait nine months for product testing, and then taxation certification. And the tariff rate is 30 percent. If the trade in goods agreement goes through, it will lower tariffs, and reduce and eliminate import barriers.
Taiwanese people can buy things directly from (the Chinese auction site) Taobao now, because we have totally opened up. In the future, if China no longer applies restrictions against Yahoo! Kimo or PC Home, then Chinese people will be able to shop directly on Taiwan-based shopping platforms.
Elimination of barriers is all good. The trade in goods agreement, which is the next step following the service trade agreement, would mean true free trade.
[Finance (Securities, Banking, Insurance)]
Ho Show-Chung, Chairman of SinoPac Holdings:
The "Asia Cup" starts with China.
(SinoPac Holdings, Taiwan's fourth-largest privately run financial institution, has assets worth over NT$1 trillion.)
If you want to play in the "Asia Cup," of course you must start with China. That market of 1.3 billion people is just as important as the combined five hundred million population of Southeast Asia.
What advantages do Taiwan's financial institutions enjoy? First, Taiwan's financial market liberalized many years before China's, so it has plenty of experience to respond to the marketization of interest rates that is on the horizon for China.
Second, Taiwanese-invested banks offer more refined, thoughtful services than their Chinese competitors. Moreover, small- and medium-sized enterprises have difficulty securing loans from local state-operated banks in China, yet this is a major strength of Taiwanese financial firms.
In addition, the differences in interest and exchange rates between the major worldwide currencies of the US dollar and the Renminbi have produced liquidity in financial instruments. Taiwan-invested banks can flexibly employ cross-border financing to service customers' global operational needs.
I am for the quick passage of the service trade agreement, because when it was signed last June, China offered better terms to the Taiwanese finance industry than Hong Kong's CEPA. Unfortunately, after such a long delay, Hong Kong has come back from behind.
Li Yongting, Director of Rayark Gaming:
Gaming is a global business by nature.
(Rayark, a mobile phone gaming company founded three years ago, now employs a staff of 28. At one point it attracted more new users in Taiwan than Angry Birds with its Crytus music app.)
For an emerging, independent mobile game developer, the Cross-Strait Agreement on Trade in Services has no impact. Our products are available on the iTunes store and Google Play, so we have always gone directly to consumers around the world.
Many popular mobile games in Taiwan come from Chinese companies. Similarly, Rayark has consumers across the strait.
However, for major Taiwanese on-line gaming companies, China is full of restrictions. If you are looking to localize, then all sorts of approval restrictions and administrative measures pose obstacles to development.
Right now mobile games are growing the fastest. Governments around the world have not been able to respond quickly to the app wave, so there are no related regulations or import/export restrictions at the moment.
In the virtual world, we start doing global business as soon as a new game is born.
Books.com.tw and TAAZE Founder and Chairman, Terry Chang:
Publishing is a matter of national security.
One major difference between the publishing industry and other industries is that in China publishing is a totally controlled industry in terms of speech, and all publishing houses are state run. Consequently, the impact of the cross-strait service trade agreement on Taiwan's publishing industry is more complicated and far-reaching, going well beyond considerations of pure commercial interests.http://cw1.tw/CW/images/article/C1396864870744.jpg
Published materials only get into consumers' hands through sales channels. A store screens and selects titles before consumers get to see books and magazines there. If the day comes that our bookstores are funded and operated by Chinese interests, would we ever be able to find books critical of China's policies?
Due to this chilling effect, no one in the publishing industry would dare go ahead and sell any "contraband."
Then we would not have real freedom to publish in Taiwan, because Taiwanese publishing companies would come under the total control of the Chinese government.
To elaborate further, if books.com.tw with its five million members became a Chinese-invested venture, then all the information on book purchases by consumers would come under the possession of China. Would you feel good about your book purchases then?
Taiwan's publishing industry sales channels are all privately operated small- and medium-sized businesses, whilst the majority of China's publishing retail channels are large state-run groups. How can Taiwan's private capital compete with the power of China's state funding?
Opening up to Chinese businesses would be like throwing ourselves up against the rocks, putting our interests in peril with no tangible benefits until our own companies all go out of business or are taken over.
Or, in the not-so-distant future, Taiwan's publishing industry could be sandwiched between upstream printing houses and downstream distribution channels, both of which are owned by Chinese interests.
Under such scenarios, would there be any room left for publishers, real and virtual sales and distribution channels, or the large body of self-published or cultural-creative industry authors to survive?
[Healthcare and Medicine]
Tzu-Bin Chu, Deputy Director of Taipei Medical University Hospital
I hope the agreement paves the way for Taiwan to enter China's healthcare market.
Under the terms of the agreement, China will permit Taiwanese business people to establish independently invested hospitals in China. However, such preferential terms have already been offered to Taiwanese business people prior to the pact; only now it would be formally enshrined in the agreement. Accordingly, there are no real tangible differences.
On the other hand, Taiwan would allow China to establish private hospitals in Taiwan as joint ventures. Chinese hospitals have dispatched officers to observe and learn about Taiwan's hospitals in hopes of bridging the gap with Taiwan's more advanced level of medical treatment and services. If the service trade agreement is not inked, they would still go on observing and learning.
If the agreement goes through, Chinese hospitals would look for cooperative partners in Taiwan to jointly invest in hospitals. This would greatly benefit marketing in China, attracting Chinese citizens to seek medical attention there. In addition, Taiwan could claim that the cost of medical administration and services should be apportioned according to shares in jointly invested hospitals, and profits shared with partnering hospitals from Taiwan.
As the public in Taiwan lacks confidence in China's healthcare and would likely be reluctant to seek treatment at such joint-venture hospitals, it would not have a substantive impact on the healthcare environment in Taiwan.
Perhaps some people are against signing the pact out of fear of a brain drain among medical professionals, but even with no agreement in place at this time doctors from Taiwan have crossed the strait to advise operations, and retired nursing professionals have gone over to oversee Chinese hospitals. Nevertheless, most only go for a short period. Very few are willing to live in China for extended periods.
Taiwan must make efforts to win over China's medical market. Explicitly listing Taiwan's medical equipment, IT, new medicine, and diagnostic testing businesses in the agreement will allow them to enjoy the same terms as Chinese vendors, so they can profit more fully from China's market.
Lai Chih-lang, President of Mentor
I'm not afraid – I want to rise up.
(Mentor has been operating in China for a decade, with 43 branches and five co-invested shops.)
I think many people have a lot of misconceptions about the cross-strait service trade agreement. It should be noted that it is open to management, not for Chinese stylists to come over and work in Taiwan.
Am I concerned about cutthroat pricing in Taiwan? Mentor does not resort to cutthroat pricing to compete in China. As a foreign-invested enterprise in China, we cannot apply for independent operator status, and legal restrictions demand that we file taxes in accordance with our actual income.
Taiwan's government takes the same approach, permitting investment but not labor to come in from China, so there is some measure of protection for Taiwan.
The real point of proposing the cross-strait service trade agreement is for Taiwan to expand outward – to compete beyond just China.
Taiwan has real strengths, and our service industry really does things at such a refined level. China has good infrastructure and facilities, but lacks on the services side compared to her Taiwanese counterparts in terms of design, attitude and friendliness in service delivery.
Instead of selling ourselves short, we should think about how we can apply our strengths and show the world what we've got.
Wang Ming-jen, Taipei Association of Travel Agents Legal Committee Convener
Improving tourism quality more urgent than opening up trade.
I have been in the travel industry for 37 years now, and to be honest people in the industry were not thoroughly consulted on the cross-strait service trade agreement before it was announced.
First, let's talk about allowing Taiwan to do business in China. Is China really that attractive to us? To set up there, you must conform to all of China's legal requirements and various local administrative regulations first. There are three types of travel agencies in China: booking agencies, domestic agencies, and international agencies.
For the first two years you are just a domestic agency. If you do well for those two years, you can upgrade to international agency status.
What Taiwan's travel industry wants is to win the foreign travel business of people in China, which is the truly profitable area. But first you have to out-compete the other domestic travel agencies. So my question is, for domestic travel in Taiwan, do you trust Taiwanese travel agencies or international ones? Members of the Taiwanese travel industry going across the strait must carefully estimate how long they need to outlay manpower and material resources before recouping their investments.
Now let's discuss allowing Chinese funding of travel agencies in Taiwan. Last year the number of overseas visitors to Taiwan exceeded eight million, among which Chinese tourists topped 2.87 million. The blind pursuit of volume, while ignoring the load on the environment, is like killing a chicken to take her eggs. Taroko National Park is now listed as a dangerous tourism area. We must keep in mind that raising the safety and quality of tourism is far more important than opening up.
What's more, the big Chinese travel agencies are either state-run or government-invested. Only 13 of Taiwan's 2600 travel agencies have capitalization of NT$100 million or more.
Of course, size isn't everything, and my agency has just begun running tours from Malaysia to Japan.
Policy formation should not have a regional slant. Taiwan should develop in all directions and be friends with everyone around the world.
(The opinions of the industry members above are theirs alone, and do not necessarily represent the views of their respective industries).
Translated from the Chinese by David Toman