When he met with former US national security adviser General James Jones, President Ma Ying-jeou (馬英九) reiterated his hopes that Taiwan could join the Trans-Pacific Partnership (TPP) within eight years. This display of Ma’s concerns and hopes for Taiwan’s economic future is praiseworthy. The problem is that his entire government lacks any executive capabilities — all they do is sit around and dream. That may feel good, but it will not get you into the TPP.
The government officials in charge of Taiwan’s bid to join the TPP had best be truthful with Ma and not wait until the follow-up talks to the Economic Cooperation Framework Agreement (ECFA) turn out to be fruitless a few years down the road to say that any hope of Taiwan joining the TPP is just a pipedream and that all of Taiwan’s goals of further integration into the international economy system have fallen apart.
At the moment, many government officials hold three absurd ideas: The first is that free-trade agreements (FTAs) are solely the responsibility of the Ministry of Economic Affairs and that if talks fail, it has nothing to do with their own agency.
The second idea is that the government has a responsibility to direct and protect businesses operating within its jurisdiction and to do so for as long as possible. They want to maintain the status quo as much as they can and think that it is a lot safer not to be the first to give up on an industry if it turns out that it has to fold in the end.
The third idea is that the higher current tariffs or non-tariff barriers are, the more room for maneuver Taiwan will have during talks with other nations, and so because talks are already transpiring, there is even more reason not to decrease trade protection measures.
These thoughts reflect the absurdity of Taiwan’s current approach to trade protection. Apart from the 830 agricultural products that China is prohibited from exporting to Taiwan, there are many high tariffs on imports from other regions that do not make any sense. For example, Taiwan imposes a 500 percent tax on velvet antlers, a 338 percent tariff on peanut oil, 173 percent for pineapples, 100 percent on bananas, 60 percent on mangoes, about 40 percent on oranges and even 17.5 percent on wheat flour, a basic necessity.
Taiwan has an overall tariff rate of about 6 percent and the average tariff rate for agriculture products is roughly 16 percent. These shockingly high rates are a constant fixture in the economy and harm the rights of Taiwanese consumers and impede their ability to survive economically. However, senior administration officials ignore these issues and permit less senior officials to spoil and protect businesses, insulating them from international competition and damaging the nation’s competitiveness.
Then what usually happens is that when the government is asked to lower tariffs during talks with other nations, Taiwanese businesses exert pressure and complain so the government ends up chickening out and using “public opinion” as an excuse for its refusal to lower tariffs, or alternatively, it ends up signing an FTA that is “free” only in name. This is what can be expected when a nation has an entire government that is unwilling to take responsibility for its actions, a situation this is very likely to continue.
Compared to the hard work South Korea and other advanced countries have put in to securing free trade, Taiwan’s flippant attitude toward signing FTAs has caused it to be overlooked and derided by many countries. For example, for the South Korea–US Free-Trade Agreement, Seoul promised to spend US$100 billion over a decade to help its agricultural sector carry out reforms.
Until now, Taiwan has not made any sort of budget for the industrial transformation that would result from signing FTAs. Taiwan has not eased any protectionist barriers or made any economic adjustments, instead thinking that if it is to sign these agreements, it cannot possibly deregulate every area of its industry. There have been reports that a certain Southeast Asian leader close to Taiwan was flabbergasted to find that during negotiations, Taiwan did not seem to understand what it wanted or what it was prepared to offer, and its total absence of any negotiation strategy made that nation’s team wonder whether to laugh or cry. The EU was more blunt, saying that it does not think Taiwan is not ready to be in such a deal yet.
Even China has a think tank of 800 people dedicated to FTAs, with 400 involved in active research. In Taiwan, there are less than 20 such researchers and the budget allocated for the task is nowhere near enough to yield any true understanding of such deals. Not only does Taiwan underestimate the complexity of FTAs, it is also often disregarded and looked down on by other nations during talks due to a lack of research on its own and on the counterpart’s industries. Sometimes, Taiwan is even taken advantage of because it does not understand the prevalent international trends involved in the agreements.
If the government gathered together the several hundred Taiwanese academics with expertise related to international economics and gave them enough resources to conduct one or two years of research, there might still be a chance to rectify this problem. Otherwise, continuing to pander to China and asking it to forgo benefits for the sake of Taiwan will be of no use and the nation will continue to dream about joining the TPP.
Tu Jenn-hwa is an assistant professor in the Graduate Institute of National Development at National Taiwan University.
Translated by Drew Cameron
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