Hey Mr. President
All you congressmen, too
You got me frustrated
And I don’t know what to do
I’m trying to make a living
I can’t save a cent
It takes all of my money
Just to eat and pay my rent
I got the blues
Got those inflation blues…– B.B. King, Inflation Blues
About a week ago, I spoke to a Taiwanese who mentioned in passing that inflation was now a big problem in Taiwan. I didn’t want to contradict her to her face, but I was puzzled by her claim. Because when I go shopping, I can see that the price of orange juice is unchanged, that chicken prices are about the same, and the cost of a newspaper hasn’t gone up in years. Inflation? What inflation?
But that’s just anecdotal evidence. On Wednesday, the China Post wrote an editorial revealing that consumer prices of basic necessities have increased by 10% this year. Keep in mind that this is likely an overestimate, because consumer price indices have a difficult time reflecting improvements in quality of computers and other electronic goods. Nevertheless, it seems that at least some inflation is occurring, and the editorialists offered a few solutions. A few of their suggestions I agreed with, but there was one howler which merits discussion:
At a time when consumer prices continue rising with surging import costs, one effective way to counter the problem is to open up the domestic market particularly to China, a country on which we still impose sweeping restrictions for its products. Allowing in much lower priced mainland products may increase competition for domestic suppliers, but it will help offset a great deal of inflation, to the advantage of the consuming public.
Shazam! China to the rescue! Is there any problem from which Taiwan suffers that the Communist Party of China CAN’T solve? Rather than propose a hike in interest rates (the most effective inflation-buster known to man), the China Post calls for Taiwan to become even more dependent upon supplies from its mortal enemy. Surely, the economic dangers of such over-reliance should have been made clear to all by China’s recent decision to cripple Taiwan’s construction industry by eliminating gravel exports. *
Still, the basic idea of reducing inflation by allowing cheaper imports into the country is fundamentally sound, once one discards the notion that China (of all countries!) should be the source. Taiwan currently has about 25 diplomatic allies in the world, and opening its markets further to their products would both reward them for their friendship, as well as be a big help to the Taiwanese consumer.
Following this, Taiwan could also increase market access to the countries that it has military relationships with, such as America and Japan. Numerous people have informed me of the heavy import duties levied here on imported cars in order to protect the local auto industry. Giving the local consumer a break on the price of Fords and Toyotas would greatly outweigh the benefits from giving them a bit of cheaper Chinese agricultural produce.
But the list doesn’t end there. What of local democracies, such as the Philippines or Thailand? Do they not also have inexpensive exports? What about other developing countries? In Asia? In Africa? In South America?
(Heck, if you really want to scrape the bottom of the barrel, you could think about duty-free importation from Vietnam or Laos. Sure, they may be communist, but they don’t have 800 missiles pointed at Taiwan now, do they?)
All-in-all, I can think of at least a HUNDRED countries which Taiwan could open its markets to, and bring tangible cost-savings to the Taiwanese consumer. And yet, for some reason, the China Post‘s sympathy begins and ends with only one – the one country in the world that has sworn to annihilate the Taiwanese government.
Forever.
* The decision also highlighted the political subservience that accompanies economic dependence on Communist China as well. A Taiwan News editorial notes:
…the chairman for the Taiwan National Construction Engineers Industrial Association [said that since] the Constitution of the People’s Republic of China clearly stated…Taiwan was an inseparable territory of China and not a "foreign country," the supply of Chinese gravel to Taiwan should [therefore] not be interrupted. (emphasis added)
"We’re part of Communist China, always were. So please, please, please, give us our gravel!" the slavish Taiwanese construction leader cried.
And the China Post‘s response? Taiwan should just be a good little province and tighten the noose around its neck even further.
UPDATE (May 10/06): Just noticed that the price of bottled water that I usually buy here has risen from 22 to 25 New Taiwanese dollars.
I also noticed that President Chen and Central American governments are discussing free trade agreements with each other. An agreement with Guatemala may be concluded this month, and one with El Salvador may be signed in October. (From Chen talks FTAs with leaders of Central America from the May 9th Taiwan News. Sorry, no link is available.) Chen also announced that Paraguayan beef import quotas would be doubled, from 220 to 440 metric tons per year.
It seems then, that there is room for the Taiwanese government to help out the consumer, without following the China Post‘s advice of hitching an economic ride with Communist hatchet murderers.