It is not a surprise that states realigning their stance in international meetings has been viewed as an important sign of a power shift in international politics. This week’s APEC summit in Yokohama and the G20 summit in Seoul will provide an example that reveals the complex implications of the recent changing economic landscape in the global economy. Since Taiwan is not a G20 member, our participation in APEC is especially critical in this changing economic climate.
The global economy has experienced some significant changes since the 2008 global financial crisis. A slow US economic recovery suggests that the importance of the US, as the major engine pushing the global economy forward, has gradually declined.
The latest set of policies reflecting US self-interest has increased the divergence among developed countries on economic issues and has reduced the prospects for reaching a consensus in the two upcoming international meetings. For example, Washington’s proposal to set current account targets as a solution to address the global economic imbalance has been opposed by Berlin and Tokyo and the US Federal Reserve’s second “quantitative easing,” using US$600 billion to buy US Treasury bonds, triggered widespread concern last week among emerging economies, who worry this will lower the value of US dollar and undermine the competitiveness of developing countries.
Third, recent political disputes and strategic interactions between major powers also reduce the chances of achieving a consensus on resolving the global imbalance. For instance, the recent territorial dispute with Japan led China to send a vice finance minister instead of its finance minister to the APEC finance ministers’ meeting in Kyoto last weekend.
While tensions in East Asia appear intensified, China has launched its diplomatic offensive in Europe. During his four-day European visit earlier this month, Chinese President Hu Jintao (胡錦濤) signed US$20 billion in contracts with French President Nicolas Sarkozy and US$1 billion deals with Portuguese Prime Minister Jose Socrates. In particular, Paris’ strategy to build a close relationship with Beijing, as it plans ahead when it takes over the G20 presidency next year to push global financial reform, could further weaken US efforts to address China’s currency issue.
Taiwan needs to take advantage of the APEC summit to promote regional collaboration on a mechanism under APEC to build a stronger and resilient global financial system. Since Taiwan is excluded from the “Chiang Mai Initiative,” a nascent form of financial cooperation by ASEAN Plus Three, it is crucial for Taiwan to use APEC’s non-exclusive principle to bypass China’s objection for participating in multilateral financial cooperation.
More importantly, after signing the Economic Cooperation Framework Agreement with China, Taiwan should use this opportunity to enhance and deepen its participation in international economic cooperation.
Strengthening Taiwan’s role in APEC financial initiatives will not only improve Taiwan’s collaboration with other APEC economies on monitoring transnational capital flow, but also facilitate financial stability in the region and diminish any adverse impact of “currency wars” on Taiwan’s economy.
Taiwan’s economic future should not merely rely on passive responses to the changes in the global economy.
Taiwan should act proactively in participating in the process of rule-making in international meetings and fully utilizing its available means to maximize its national interests. Despite APEC’s voluntary and non-binding principles, Taiwan’s active involvement in APEC’s financial reforms will contribute to regional financial stability and enhance its financial cooperation with other economies through bilateral or multilateral dialogues. Hence, we hope that the Taiwanese delegation at the APEC summit can seize this valuable opportunity and work prudently to ensure Taiwan’s interests in this uncertain global economic environment.
Eric Chiou is an associate research fellow in the department of international affairs at the Taiwan Institute of Economic Research.
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