Wednesday, April 13, 2011

Taiwan's Statistical Dodge

Taipei makes its trade case using Beijing's misleading numbers

With the use of optimistic economic numbers, Taiwan likes to dramatically illustrate the positive effects for the island of enhanced official cooperation with China.

But there's a problem: a Taiwanese university professor has been poking his nose into the numbers and he says that the Taipei government is relying on mainland statistics alone to paint an overly rosy picture of the landmark China-Taiwan Economic Cooperation Framework Agreement (ECFA), showing a steep increase in exports to the mainland.

Tung Chen-yuan, a professor at Taipei's National Chengchi University's Graduate Institute of Development Studies, cast his eye on the numbers after the so-called early-harvest list of goods subject to tariff concessions 539 Taiwanese products and 267 mainland products – went into effect Jan. 1 under the ECFA.

After the list, an object of considerable political wrangling between the ruling Kuomingtang (KMT) and its opponents, came online, the Ministry of Economic Affairs (MOEA) began placing advertising in local newspapers, boasting that “according to statistics,” the value of Chinese imports from Taiwan in January and February increased by 20.19 percent. It was further pointed out that the rise included a 28.47 percent increase in the value of products exported on the early harvest list.

For President Ma Ying-jeou's administration, it seemed like a pretty obvious win and that those railing against the trade deal with China were wrong. But Tung, the author previously of a sobering look at Taiwanese business people being victimized on the mainland, Doing Business in China Isn't All Roses, Asia Sentinel, Feb. 21, says the government is promoting a fairytale.

Here’s the catch: instead of the rather sobering economic data gathered by the Taiwanese authorities themselves, the KMT government has been presenting China's trade numbers as its own to make its case for the ECFA to its people.

“At first glance, it seems like the ECFA is having a dramatic effect,” Tung said. “But a closer look at the government's statistical data reveals that the ministry is misleading the public by using data from Chinese customs authorities to exaggerate the effect of the ECFA.”

Tung says he checked statistics from both Taiwan's Bureau of Foreign Trade and customs authorities, but didn't come across the same figures mentioned in the MOEA's advertisements. Eventually, he found the data tucked away on the MOEA's Web site. And only there was the source revealed.

“When estimating the effect of the ECFA, the foreign trade board had rejected Taiwan's own official data in favor of data from China, and it did so without giving any information on the origin of the data,” Tung says of his findings.

Soon, it became obvious to Tung why the MOEA chose to brush the Taiwanese data under the carpet. Taiwanese customs paints a very different picture.

“In January and February last year, exports to China and Hong Kong grew by 85.2 percent, and exports going directly to China increased by 103.8 percent, but in this year's first two months, exports to China and Hong Kong grew by a mere 17.2 percent, and of this, direct exports to China grew by only 21.7 percent,” says Tung.

In his eyes, it is clear that the growth in exports to China dropped sharply after the ECFA early harvest list took effect.

Tung further takes issue with the Bureau of Foreign Trade claiming credit for having developed markets other than China.

“It is praiseworthy, of course, that the China and Hong Kong proportion of Taiwan's exports dropped from 42 percent last year to 40.7 percent this year,” he states, “but doesn't it also prove that the ECFA is not having the intended effect?”

Tung claims that the ECFA's early harvest list has not only failed to lead to a growth in exports to China but that a less superficial look at the data concludes, in his view, that the trade pact provides China's exporters with a significant advantage.

“Imports from China and Hong Kong grew by 30.4 percent in January and February this year, a sharp drop from last year's 75.7 percent. However, imports from the US, Japan, European countries and the six major ASEAN member states dropped by even more, making it appear as if the ECFA is making China's exports to Taiwan more competitive,” says Tung

He finds that China's proportion of Taiwan's imports saw a marked increase from 13.9 percent last year to 15.9 percent this year.

Furthermore, Tung' argues that the Ma administration's claim that China’s free-trade agreement with the Association of Southeast Asian Nations (ASEAN), which came into effect on Jan 1, 2010, forced Taiwan to sign the ECFA is false.

“In January 2010, after the free-trade area between China and ASEAN took effect, China accounted for 32.3 percent of Taiwan's exports. After the ECFA took effect in 2011, China only accounted for 29.3 percent of Taiwan's exports.”

However puzzling his findings might be, Tung acknowledges that cross-strait trade is affected by many different factors, and that the effect of the ECFA should not be judged based on short-term changes in trade or on statistics alone.

Claims for dramatic improvements or changes based on the early harvest list, Tung says, are simply misleading and for the government to hype exaggerated data from Chinese customs authorities to the public is disingenuous.

Asked whether his analysis has caused a stir on the island's political landscape or forced the government to apologize as he demanded, Tung was unassuming.

“So far, my article was published in English, and a Chinese version will be published soon in a weekly journal. It has not yet raised discussions on political talk shows.” by Jens Kastner Asia Sentinel

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