Sun, Oct 16, 2011 - Page 8 News List

EDITORIAL:Taiwan must work toward FTAs

In recent years, the forces of globalization and regional economic integration have driven many nations to pursue investment arrangements, regional trade pacts and free-trade agreements (FTA) with each other in a bid to strengthen economic cooperation and further expand their market reach. Taiwan is no exception, as arranging such trade deals would help to increase economic competitiveness while avoiding the marginalization of its industries.

However, the nation’s efforts to ink FTAs with other countries have yielded hardly any concrete results over the years, thanks to various economic and non-economic factors as well as China’s opposition to countries signing such deals with Taiwan.

Therefore, Taiwan’s signing of the Economic Cooperation Framework Agreement (ECFA) with China in June last year once again raised the government’s and many people’s expectations that Beijing might allow more nations to talk about FTAs with Taiwan. Unfortunately, this has not happened, even though the Ma administration maintains that it was the ECFA that helped pave the way for Taiwan to sign an investment protection accord with Japan last month.

Whether one agrees or disagrees with the government’s ECFA rhetoric, the US Congress’ passage of the US-South Korea FTA on Wednesday, like the EU-South Korea FTA that took effect on July 1, prompted some of the nation’s major industries to call on the government to accelerate negotiations with China to expand the ECFA’s “early harvest” program in order to offset the impact of the US-South Korea FTA.

The US-South Korea FTA puts pressure on the government to speed up negotiations for signing FTAs with Taiwan’s major trading partners while avoiding over-reliance on trade with China.

Moreover, as a result of the free-trade pacts that South Korea has signed with major trading partners in recent years, it has become a magnet for foreign investment, as investors look to take advantage of the benefits of those FTAs, which include greater market access and lower duties — a move that puts Taiwan at an even greater disadvantage.

Although “FTA” seems to be the latest buzzword on the economic front and it is especially important to Taiwan — where exports account for about 75 percent of GDP, compared with the 25 percent of GDP shared by domestic consumption and investment, according to government data — negotiations with major trading partners are a time-consuming process, and people should not have unrealistic expectations. FTAs will not appear overnight.

Another reason for Taiwan’s lack of progress in signing FTAs is that the nation has still not coordinated the opening of local markets, concerned about the possible impact on the agricultural sector and small-sized manufacturers. Any talk about forging an FTA with the US without resuming US beef imports is also unthinkable, and the issue would certainly raise eyebrows here in terms of food safety and public health.

Therefore, prior to securing FTAs with Taiwan’s trading partners, the government needs to communicate more with the public and domestic industries about the benefits and drawbacks of such agreements. In the meantime, the government must also devise policies to help affected industries adapt to the challenges brought about by future trade liberalization.

Businesses must also develop strategies to deal with greater competition. If they cannot differentiate their products, develop niche markets and move up the production ladder, they are doomed to fail — with or without FTAs.

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