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Business Times - 19 Oct 2009

Trade pact with China may put Taiwanese jobs at risk

(TAIPEI) Taiwanese who back a planned trade pact with China and those who oppose it agree on one thing at least - the agreement will have a major impact on the island's labour market.

While those in favour of the much-anticipated deal with Taiwan's giant neighbour say there will be massive gains, others fear it will wipe out jobs on a huge scale.

No one knows for sure what the consequences will be but the uncertainty unsettles those whose livelihoods may be at risk from the mainland's millions of underpaid workers.

'I'm in the dark, and I'm afraid my job will be affected,' said a Taiwanese auto worker, who only wanted to be identified by his surname Wu. 'I don't know what the agreement is about at all because the government has failed to give the full details.'

During Taiwan's boom years from the 1960s to the 1990s, unemployment was seldom on the agenda, but now it has emerged as a decisive political issue.

So far this year the jobless rate in the crisis-battered economy has been 5.82 per cent, nearly double the 2.99 per cent recorded as late as in 2000.

The government insists the trade pact with China, referred to as an 'Economic Cooperation Framework Agreement', will boost the flow of goods and personnel, raising annual economic growth by more than one percentage point.

Taiwan and China, split since a civil war in 1949, will reportedly hold informal talks this week on the trade pact - the fourth such meeting, which will aim for a timetable for formal negotiations.

Ahead of the talks, the Taiwan authorities have suggested that more than a quarter of a million jobs will be created by the agreement on a net basis.

'It's like a rose,' Premier Wu Den-yih said on Friday. 'Optimists see the flower, while pessimists see the thorns. The government has to look at both the flower and the thorns.' The flower, according to Mr Wu, is 350,000 new jobs, especially in chemicals, machinery and textiles, while the thorns are more than 80,000 jobs at risk in industries such as tiles and home electronics.

'The estimate of 80,000 affected workers is the worst-case scenario,' an official at the Council of Labour Affairs said. 'They won't necessarily all lose their jobs. Some will just receive on-the-job training, and their employers will have to streamline to enhance competitiveness.'

However, some analysts called the 80,000 figure unrealistically low, given the island's labour force of more than 10 million.

'What if more industries relocate themselves to the mainland for lower production costs once the pact is signed? That will really hit the job market here,' Mega Securities analyst Lucas Lee said.

Kenneth Lin, an economist at National Taiwan University, said the flow of Taiwan investment to the mainland - up from 0.5 per cent of the island's gross domestic product in 2000 to 2.6 per cent in 2008 - had a clear impact on jobs.

'With more and more investors moving to China, our jobless rate has averaged 4 to 5 per cent between 2000 and 2008, up from 2 to 3 per cent in the 1990s,' he said. -- AFP