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Scotched WTO talks bad for Taiwan

The collapse of the WTO talks last week will have a negative impact on Taiwan's international trade, officials and researchers said.

"The setback will push member countries to make bilateral or regional free trade pacts, putting Taiwan in a more unfavorable position given its diplomatic plight," the Bureau of Foreign Trade said in a report last week. "Taiwan hopes talks will resume and will actively participate in the negotiations."

The Doha round of WTO negotiations, which has been going on for five years, has been "suspended indefinitely," WTO Director-General Pascal Lamy said after the 149 members failed to agree on the liberalization of farm and industrial trade last Monday.

As expected, in response to the development many countries, including Japan and the EU, said they would step up efforts to clinch bilateral or multilateral free trade agreements (FTAs).

However, the positive side of the breakdown is that it will probably give the agricultural and service sector more time to transform or upgrade before a larger-scale market opening, said Kristy Hsu (徐遵慈), a researcher at the WTO Center under the Chung Hua Institution for Economic Research (中經院).

"Other member countries can easily walk away from the negotiating table and find their own free-trade partners, but for Taiwan, the world's 16th-largest economy, there is no game left to play if the WTO is unworkable" Hsu said.

Facing pressure from China, Taiwan's efforts over the past few years to ink bilateral FTAs with major trading partners, including the US, Japan and Singapore, have been in vain.

So far the government has secured FTAs with Central American allies Panama, Guatemala and Nicaragua. Though President Chen Shui-bian's (陳水扁) government has encouraged local businesses to make use of the three FTAs to enter the larger North American markets, the effect appears limited.

To enjoy zero tariffs or tax breaks, Taiwanese companies need to produce their goods in the three countries to comply with rules of origins of goods, Hsu said.

But the geography and investment environment are not favorable to Taiwan's industries, she added.

In addition, in Central or South American countries, agriculture and traditional industries account for the biggest portion of economic activity, but output values are much lower than the value-added high-tech products Taiwan aims to develop, Hsu said.

In contrast, China, using its strong economic growth, has scored a slew of victories in expanding economic cooperation and influence in the global community.

China, for example, is keen to increase its influence through a free-trade bloc with ASEAN, Hsu said. ASEAN is negotiating FTAs with China, Japan and South Korea, hoping this will become a catalyst for a wider East Asian free-trade zone.

And given that India, Australia, New Zealand, Russia and now the EU have shown an interest in the alliance, that zone could become such free-trade area in the world.

"As a country that is heavily dependent on exports, but is also mired in a predicament [because of such dependence], finding ways to benefit from cross-strait trade is becoming an increasingly important issue for the government," Hsu said.

China is Taiwan's largest trade partner. Bilateral trade accounted for 16.39 percent of total trade volume last year, valued at US$60.81 billion, according to government statistics.

Adding in trade with Hong Kong, the amount rises to US$93.41 billion.

In the five months to May, cross-strait trade rose 14.3 percent from a year earlier to US$33.89 billion, the Bureau of Foreign Trade said last week.

The figure accounted for 20 percent of Taiwan's total external trade, compared with 19.4 percent a year earlier, the bureau said.

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