Taiwan Needs to Defy Gravity

A lot of people think freer trade is generally good.  However, is that always the case?  I don’t think so.

First of all, in this world, region by region countries are forming trade bloc.  Now intuitively people think that is freer trade when in fact those are preferential trade.  IE.  Country A trade with country B,C,D, but still put up a high tariff against others.  The effect of this is not the same as pure free trade or openning to global market.  In this situation, for Taiwan to say yea, we will just lower tariff on everything to everyone is probably naive and stupid.

Secondly, there is “gravity” in international trade.  Trade flow will be larger between two countries if:

  • Economic size are larger
  • distance is closer
  • smaller impediments (common language, historical link, trade bloc, common currencies, …etc)

This way of looking at things might be a bit too simple for a complex problem, but the analogies offer great insight into the situation between Taiwan and China.  Also, this might not just be applicable to trade, but to other economic activities as well such as FDI and flow of capital etc.

It is obvious that the gravity between China and Taiwan is extremely high.  This is due to the large size of China’s economy, the close geographical distance, and the common language.  Now what the Ma government is trying to do is further increase the gravity between Taiwan and China by adding more preferential trade.  Before, there are even people in KMT promoting RMB in Taiwan.  The fundamental question is, is there a need for greater gravity between Taiwan and China?  Is there a need for greater trade flow between Taiwan and China?  I think the answer to these questions are NO.

Imagine Taiwan as a small spacecraft orbiting around 3 giant planets (China, Japan and USA).  However, Planet China has a great gravitational pull on spacecraft Taiwan due to the various reasons given above.  The spacecraft does have some anti-gravity mechanism, and it has enough speed when pass near China.  Furthermore both Japan and the US have gravitational pull on Taiwan as well, which prevent it from crashing into China.

However, recently Taiwan is losing its speed, and its anti-gravity equipment is getting older and failing.  Furthermore, planet China is growing in size.  Adding to this danger is that the captain of the spacecraft, elected by 70% of its crew, is an idiot and thinks that they should just get rid of the anti-gravity equipment because it is too noisy.  After they do so, spacecraft Taiwan just crash into China, killing everyone on board except, of course, the captain, who successful ejected with an escape pot and land safely on planet US of A.

…..

So, what Taiwan needs to do instead is maintaining the gravitational balance when flying between these three giant planets.  Right now the gravitational pull between China and Taiwan is too great, therefore, Taiwan needs a way to increase the gravitational pull between Taiwan and Japan, and Taiwan and the US to balance things out.  Or, there are other ways.  In any case, greater and greater gravity between China and Taiwan is not necessarily a good thing for Taiwan.

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1 comment so far

  1. A-gu on

    Fair analogy!


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