On Oct. 8, ASEAN signed a joint agreement in Indonesia aiming at the establishment of a common market similar to the EU single market by 2020. It also included three non-ASEAN members -- Japan, China, and South Korea -- in the meeting to show that ASEAN will sign a free trade agreement (FTA) with the three in the future. This economic integration makes it seem as if Taiwan has become isolated.
Although Taiwan's neighbors have left the country outside this economic integration, the government has signed an FTA with Panama, revealing that Taiwan's export trade long has been moti-vated by the Pacific Ocean's eastern rim. The ultimate goal of the FTA with Panama is in fact the huge American market, and Panama is only a stepping stone to that goal.
The FTA, the first that Taiwan has signed based on an equal state-to-state relationship, was ratified by the Legislative Yuan on Oct. 1. According to official estimates, Taiwan's sea transport industry will be the biggest beneficiary, as Taiwanese industries can use the Panama Canal to develop North American transport markets.
The main impact on Taiwan will come from the deregulation of the agricultural products market.
More sensitive items will only see partial deregulation, with import tax quotas on 10 items, including refined sugar, bananas and pineapples.
Although the FTA will only make a limited contribution to the domestic economy, it is politically significant in that it is yet another international display of Taiwan's independent status.
Taiwan has been negotiating FTAs with Singapore, Japan and the US, but political intervention by China has repeatedly caused these negotiations to run aground. Although the signing of a FTA with the US is the top priority, it will be difficult to achieve in the short term due to the continued divergence between Washington and Taipei's views on Taiwan's deregulation of rice imports and intellectual property rights, as well as other complex political factors.
Taiwan is eager to sign a FTA with the US to highlight its international political status. Based on economic considerations, however, Taiwan is at a disadvantage, in particular where agricultural products are concerned.
As the world's largest exporter of Japonica rice, the US has long coveted the Taiwanese market. Taipei's policy for deregulating the rice market, which was submitted to the WTO early this year, states that the government's policy will change from applying import volume limits to applying an import tax quota. This has caused unhappiness in the US, which has requested a return to import volume limits and a guaranteed volume for US rice.
Washington's displeasure will have an effect on the progress of follow-up negotiations for and the signing of a FTA or a Trade and Investment Framework Agreement (TIFA). On Oct. 1, the convener of the president's economic advisory group, Vincent Siew (蕭萬長), traveled to the US to try to dispel US concerns and continue the work towards signing a FTA.
Meanwhile, Taiwan participated in its first WTO meeting as a member last month in Cancun, Mexico. The meeting ended in failure, due to differences on deregulation and agricultural subsidies, which means that the pressure on the government to cut agricultural subsidies and deregulate the domestic market will be applied at a later date.
This result of course caused happiness among agricultural policy agencies. It is not very strange that the chairman of the Council for Agricultural Affairs said, in a press conference given upon his return, "It isn't necessarily a bad thing for Taiwan that negotiations failed."
Judging from Taiwan's overall trade and economic negotiation strategies, however, the situation is worrying. It is not so strange that Minister of Economics Lin Yi-fu (林義夫), who led the delegation to Cancun, anxiously pointed out that the failure of that meeting will weaken the WTO, that the US and the EU with their great domestic markets and economic and trade power will turn to the bilateral or multilateral FTAs, and that, if this happens, Taiwan runs the risk of becoming marginalized. In fact, the credibility of the UN suffered as a result of the US' unilateral attack on Iraq.
Faced with such a complex international political situation and the dynamic development of global economic integration, should little Taiwan use group-to-group style multilateral negotiations in the WTO to safeguard its interests? Or should it sign an individual FTA with the US to safeguard its trade relationship with Washington?
This political choice must only be made after giving consideration to which strategic position the country wants internationally. In particular given the new situation where the US has become the "benevolent hegemon" of the international community, Taiwan must re-evaluate its past emphasis on WTO entry as a substitute for its inability to join the UN.
Cheng Kuo-chung is a Democratic Progressive Party lawmaker.
Translated by Perry Svensson
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