In my recent book, The East Asian Economic Integration Regime and Taiwan’s Strategy (東亞經濟整合與台灣的戰略), I suggested that the government first draft a comprehensive global economic integration strategy that could also serve as a basis for its cross-strait economic integration strategy. However, the Ministry of Economic Affairs (MOEA) issued a press release on May 20 rebutting my argument, saying I had misunderstood WTO regulations.
With the ASEAN Plus One (China) free trade zone scheduled to start operating next year, President Ma Ying-jeou (馬英九) has stressed the need for the two sides of the Taiwan Strait to sign an economic cooperation framework agreement (ECFA) as soon as possible to prevent Taiwanese industries from being marginalized. But to date, the government has not provided a full ECFA evaluation and policy plan, nor has it drawn up complementary measures to assist industry transformation and establish a mechanism for the ruling and opposition parties to reach a consensus on the issue.
As an ECFA is a framework agreement lacking in substantive economic integration details, it could easily set off speculation as to what it entails, which could in turn lead to political and economic disputes. If the government pushes ECFA talks dealing with a framework for comprehensive economic cooperation, it will only make it difficult to reach a consensus between the ruling and the opposition parties, various industries and the two sides of the Taiwan Strait, thereby delaying urgent consultations for certain industries. Instead, the two sides could first engage in negotiations on liberalizing select industries to solve the pressing problems of sectors that may be adversely affected by the launch of the ASEAN Plus One.
An economic pact with China will only intensify conflict and societal concerns. Over the past year, Taiwan has signed nine economic agreements with China. The Ma government has said that an ECFA with China would entail the integration of ongoing consultations.
However, the two sides can continue to engage in economic talks without an ECFA. My suggestion is adopting a multi-pronged approach to cross-strait economic integration consultations. The government should first promote cross-strait industrial preferential trade agreements, continue to push for normalization of cross-strait economic relations and cooperation consultations, and then organize cross-strait free-trade agreement (FTA) talks or similar negotiations.
The MOEA, however, said in its press release that Taiwan and China could not engage in separate industrial talks without signing an economic agreement because both are WTO members, making an ECFA with China necessary. This criticism misses the point of my suggestion that the two sides should prioritize signing an industrial preferential trade agreement.
There are three WTO regulations providing for economic integration among member states: Article 24 of the General Agreement on Tariffs and Trade regarding trade liberalization in commodities; Article 5 of the General Agreement on Trade in Services regarding trade liberalization in services; and the Enabling Clause, which permits trade preferences targeted at developing countries.
Article 24 provides a legal basis for FTAs, which states that duties are eliminated on “substantially all” the trade between the constituent territories “within a reasonable length of time.”
The Enabling Clause, which was adopted in 1979, provides another legal basis for developing countries to enter into preferential trade agreements that may cover a very limited range of products and lower — not abolish — tariffs between member states. Moreover, developed countries are allowed to give preferential treatment to poorer countries. As of the end of March, a total of 29 regional trade agreements have been signed in accordance with the Enabling Clause.
The question is whether Taiwan is considered a developing country under the WTO framework, which would allow it to sign an industrial preferential trade agreement with China by citing the Enabling Clause. The WTO charter does not discriminate between developed and developing countries among member states and each member defines its own status. For example, South Korea and Singapore signed three trade agreements, including the Asia-Pacific Trade Agreement in 2002 and the ASEAN-China Free Trade Area, in accordance with the Enabling Clause.
When Taiwan joined the WTO in 2002, the government defined Taiwan as a developing country. The following year, then-minister of economic affairs Lin Yi-fu (林義夫) declared that Taiwan was a developing country at the WTO Ministerial Conference in Cancun, Mexico. Therefore, Taiwan, which attended the Doha Round of WTO negotiations as a developing country, can sign a cross-strait industrial preferential trade agreement with China, citing the Enabling Clause aimed at reducing and exempting tariffs for some industries.
Tung Chen-yuan is an associate professor in the Graduate Institute of Development Studies at National Chengchi University.
TRANSLATED BY TED YANG
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