On Feb. 27 the 10 ASEAN members inked a free-trade pact with Australia and New Zealand called the ASEAN-Australia-New Zealand Free Trade Agreement, a 245-page document. Under the agreement, tariffs on 96 percent of products from Australia and New Zealand exported to ASEAN countries will gradually be eliminated by 2020, while other more “sensitive” products will either face reduced tariffs of 5 percent or be excluded from the agreement.
On March 5, in his official visit to Australia, South Korean President Lee Myung-bak met Australian Prime Minister Kevin Rudd and agreed to launch formal bilateral negotiations on a free-trade agreement (FTA), the first round of which is set to begin in May. South Korean officials said that after the two countries sign an FTA, South Korea’s major exports such as cars and machinery parts are expected to increase. A joint study by private-sector experts from South Korea and Australia also showed that a bilateral trade agreement would increase the two countries’ GDP figures by US$29.6 billion and US$22.7 billion respectively.
This holds several lessons for Taiwan.
First, South Korea has become a member of ASEAN Plus Three and Australia has signed an FTA with the ASEAN organization. It is clear, however, that while Australia has become a free-trade partner with ASEAN, it does not mean it will automatically become a free-trade partner with South Korea.
Negotiations on an FTA between the two countries are still required. According to such logic, if Taiwan were to sign an FTA or an economic cooperation framework agreement with China — which is also a member of ASEAN Plus Three — it would be an overstatement to say that Taiwan could take advantage of that and join the ASEAN market or enjoy the same free-trade treatment with ASEAN members China does in the current international trade system.
Second, both South Korea and Australia are fairly strong economies. Although Australia is similar to Taiwan in terms of population size, South Korea does not ignore the Australian market, despite it having only half the population of its own country.
Even if its largest trade partner is China, South Korea has not pinned its economic development on the Chinese market, nor has it signed a free-trade pact with China. Instead, Seoul has sought to promote more of its products in Western countries such as the US and Australia, fully aware that income and purchasing power are keys to boosting economic growth.
By contrast, in Taiwan, both academics and politicians almost unanimously argue that relying on China is necessary to revive Taiwan’s economy.
Third, Australia and South Korea remained transparent and open when making important decisions regarding economic development and explained to the public the items to be discussed at the negotiation table. Australia and South Korea have also remained far more conservative and serious in the timetable for their negotiations. They have yet to give a fixed date for the conclusion of negotiations, although they have said that the first round of bilateral FTA negotiations would begin in May.
By contrast, the Taiwanese government has not made public the contents of its proposed economic agreement with China and has rushed to settle the negotiation timetable. This is hardly an optimal approach to defending national interests in international economic and trade talks.
Bill Chang is a certified public accountant and a doctoral candidate at the University of New South Wales in Australia.
TRANSLATED BY TED YANG
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