Taiwan and Regional Trade Organizations: An Urgent Need for Fresh Ideas

Abstract

This essay provides an overall assessment of Taiwan's prospects for joining the Trans-Pacific Partnership (TPP) and recommends a series of potential options for how Taiwan can overcome the challenges related to gaining membership. The first section offers a brief overview of regional trade architecture in the Asia-Pacific region and Taiwan's place within that architecture. The second section details the challenges Taiwan faces in joining the TPP, both domestically and externally. The third and fourth sections describe the implications of Taiwan joining or being excluded from the TPP for cross-strait relations and U.S.-Taiwan relations, respectively. The essay concludes by identifying a path forward for Taiwan and offering policy recommendations that the island's leaders can use in their arguments that joining the TPP is in Taiwan's best interests.UNDERSTANDING THE ASIA-PACIFIC'S TRADE ARCHITECTURE AND TAIWAN'S TRADE RELATIONSThe Asia-Pacific's Trade ArchitectureAsian regional trade agreements-twelve and counting-range in scope from the world's most far-reaching trade agreement (the Australia-New Zealand Closer Economic Relations Trade Agreement) to narrower preferential deals (such as the Asia-Pacific Trade Agreement). The Asia-Pacific is also one of the most prolific regions when it comes to free trade agreements (FTA). Yet some have characterized these agreements as a noodle bowl of commitments and called into question their tangible benefits due to the effects of overlapping regulations and trade diversion.1There is debate about whether the proliferation of regional agreements has contributed to the inability to make progress on multilateral trade liberalization, especially as the Doha Round agenda recedes to a vanishing point.2 Concerns about the expansion of FTAs focus on the potential to undermine existing multilateral trade agreements. But the truth is that the companies most interested in open trade and investment regimes are indifferent about the package in which such benefits are delivered. The trend in the Asia-Pacific is clear: regional trade agreements are here to stay. The sooner nations and businesses accept this fact and adjust accordingly, the better offthey will be at maintaining competitiveness.The Association for Southeast Asian Nations (ASEAN) has signed FTAs with several Asian nations and has begun negotiations with China, Japan, South Korea, India, Australia, and New Zealand to form the Regional Comprehensive Economic Partnership (RCEP).3 While some in Taiwan-including President Ma Ying-jeou-have called for the island's participation in the RCEP,4 the reality is that it favors states that already have FTAs with ASEAN, putting Taiwan at a disadvantage. However, the TPP is more encompassing than the RCEP, and if Taiwan were to join the TPP, the impact of its exclusion from the RCEP would be lessened.A number of FTAs have emerged elsewhere in the Asia-Pacific, with the Korea-U.S. (KORUS) FTA being the most consequential for Taiwan. South Korea and Taiwan are major competitors in certain technology products, such as smartphones, but Taiwan's advantage has relied mostly on building factories in mainland China where it could find cheap labor. In recent years, that advantage has diminished because of South Korea's ability to create global brands and sign FTAs. The KORUS FTA, which was signed in June 2007 and implemented in 2012, has cut tariffs, expanded market access for services, improved regulatory transparency, streamlined the movement of goods, and strengthened intellectual property protection.5 South Korea has also signed FTAs with the European Union and China. In 2014, Taiwan's Ministry of Economic Affairs warned that once the FTA between South Korea and mainland China goes into effect, approximately one-fourth of Taiwan's export orders from the mainland may be diverted to South Korea.6 In addition, China, Japan, and South Korea have been working toward a trilateral FTA since 2012. …