China, South Korea and Japan have made a joint declaration of their intention to begin trilateral free-trade talks later this year. This is a major milestone in trade relations between the Northeast Asian economic superpowers. These three nations are crucial to Taiwan’s own economic development and the impact on Taiwan of a regional free-trade agreement (FTA) between them would far outstrip that of the ASEAN free-trade area, to which Taiwan is also external.
Taiwan relies on foreign trade and needs to remain competitive in all areas, be it sourcing raw materials, manufacturing orders or sales. Globalization means that regional trade cooperation is increasingly important and yet at every turn, Taiwan is turned away by nations fearing intimidation by China. The only international trade organization Taiwan is actually able to participate in, the WTO, does give Taiwan certain privileges and guarantees, but as regional trade integration becomes more important, Taiwan is in danger of being marginalized.
How to open up new markets and remove impediments to trade are part of a government’s responsibilities. President Ma Ying-jeou (馬英九) is aware of the danger to Taiwan’s long-term economic development posed by an FTA between China, South Korea and Japan. To avoid Taiwan’s further marginalization, he instructed the Cabinet yesterday to speed up trade negotiations with other countries and to pursue regional economic integration.
Being aware of a problem, however, is not the same as being able to solve it. The government signed the Economic Cooperation Framework Agreement (ECFA) with China in June 2010 in the hope of using it as a way to access international markets. In fact, it tried to persuade the public that it was a good idea by saying the ECFA would remove obstacles to signing FTAs with other countries and even allowing Taiwan to join ASEAN Plus Three. Since then, however, the only agreement Taipei has signed was an investment agreement with Japan in September last year. There are ongoing economic cooperation talks with Singapore and New Zealand, but so far no agreement is in sight. Once again, Ma has failed to deliver.
Meanwhile, Taiwan and the US have not conducted negotiations on economic issues under the bilateral Trade and Investment Framework Agreement (TIFA) in five years due to a prolonged dispute over US beef imports. Neither are the two sides likely to resume talks in the foreseeable future, given the mess the government seems to be making of the issue. Last year, US President Barack Obama endorsed the Trans-Pacific Partnership (TPP), a major regional economic regime that Taipei originally desired to be a part of, and which would have finally broken the stranglehold China has on Taiwan. Ma managed to throw cold water on this, however, by saying that joining the TPP was one of the goals of his “golden decade,” something he wanted to see in the next 10 years. Since then, the idea has been placed on the back burner.
The Chinese Nationalist Party (KMT) and Democratic Progressive Party (DPP) are approaching the problem from two completely different directions and with completely different methodologies. The KMT wants to gain access to international markets through China and the DPP wants to gain access to China through international markets. Considering it has proven a challenge even to sign an investment agreement since the inking of the ECFA, let alone signing FTAs with other countries, it is difficult to see how the KMT envisages Taiwan getting into ASEAN Plus Three or the proposed FTA between China, South Korea and Japan. Ma is hoping his second term will establish his historical legacy. Hopefully he does not make a mess of it and go down in history as the man who botched Taiwan’s future.