Crossing the Straits
It’s tough to negotiate in public. As any politician can tell you, once you take a stand in public, you cannot back away or even slightly change that position without dire consequences. You’re called “wishy-washy” if you do.
Chinese flight landing at Taipei's Songshan Airport (That's the Grand Hotel in the background.)
Negotiation generally begins with two sides (or more) presenting “going-in positions”, i.e., a wish list of what your side would like to get. Starting positions are always extreme and beefed up because you know that you are going to have to be able to give something up during the negotiating process. The other side knows this, too, and presents an equally beefed up position. When both sides finish chuckling, they can begin to talk seriously. Somebody said that negotiation is the art of compromise, but you can’t compromise if you have made a public stand with your going-in position. A successful negotiation meets the core needs of all sides, usually paring away all the extraneous stuff in the going-in position. The goal is for all sides to be equally satisfied and dissatisfied, which is a concept lost on most media and definitely lost on political opposition. They tend to view negotiation as a battle in which one side wins and one side loses. The fallacy should be obvious; why would the “losing” side sign the resulting agreement?
I am not surprised that there is little information available yet about the Economic Cooperation Framework Agreement (ECFA) that is being negotiated between Taiwan and China. Nor am I surprised that Taiwan’s press and political opposition are pressing for everything to be publicly released. (Beijing has a somewhat tighter rein on its media and opposition.) In fact, the opposition DPP says it will bring 100,000 people into the streets of Taipei on June 26 to protest against the agreement – apparently on the assumption that, if you don’t know what’s in it, then it must be evil. I don’t know any of the negotiators involved, but I have worked closely with Taiwan’s vice president, Vincent Siew, who must be involved behind the scenes. Vincent is an experienced and canny negotiator, and I very much doubt that an agreement negotiated under his guidance will be bad news for Taiwan.
What is known about the ECFA? You can explore the many political debates, indeed the whole history of cross-Straits relations, but I want to focus on the business and trade implications of what, in essence, would be a free trade agreement between China and Taiwan. Both are Contracting Parties of the World Trade Organization, and both say that ECFA is being designed to be kosher under the WTO’s rules on FTAs. The objective of an FTA is to reduce trade barriers, something that generally brings net benefits to all parties. Net benefits are just that: net. That means that there will also be losers on both sides and a political and economic calculation needs to be made about which losses are acceptable when compared to the gains that will accrue. It is the job of an opposition party to identify the losers and to raise a ruckus. Most press also see that as their jobs, too, believing that bad news sells better than good news – even if the good news from a trade agreement far outweighs the bad.
The hardest job for a trade negotiator is often not the actual negotiation with another trading partner, but the larger negotiation that secures acceptance and implementation domestically. My toughest negotiations in the Tokyo Round were with other agencies in Washington, not with the French, the Indians or the Japanese. Then came the fight to get those agreements through the Congress, brilliantly done by Bob Strauss by tying them into one huge package in which the many winners clearly outweighed the losers. This is the job that Taiwan’s negotiators face in selling ECFA.
So, do we know who the winners and losers will be? No, because that is still being negotiated. This Sunday, Taipei and Beijing reached agreement on an “early harvest” list of products for which restrictions can be loosened in the near term. Chinese culture loves round numbers, so the early harvest is said to include 500 Taiwanese products that will get better treatment going into China, and 200 Chinese products that will receive those benefits in Taiwan. An early harvest list tells you that some real progress has been made, but that there is still substantial disagreement on many other products. The tough nuts haven’t been cracked and this is where you still need to negotiate in private. We don’t yet know what products are in the early harvest, but the opposition in Taiwan is already saying that automobiles are not included. That’s no surprise; autos are always politically sensitive. Look at the role of the U.S. auto industry and their associated unions in holding up the U.S.-South Korea FTA. Ironically, some in Taiwan’s media are reporting that automobile parts are included, along with petrochemicals and heavy machinery.
Progress is being made in other areas of cross-Straits relations. Direct flights are starting up between Taipei’s Songshan Airport and Hongqiao Airport in Shanghai. This connects the two dynamic city centers directly, while previous flights had been between the larger outlying airports at both ends of the route. My Taipei office was across the street from Songshan and I could walk to my flights. Convenient!
