Following his re-election, the focus of US President Barack Obama’s foreign policy strategy will be the country’s “pivot” to Asia. This is a policy that is bound to lead to competition with China. In such a situation, Asian nations will have to choose sides, with only the lucky ones being able to be close to both. Taiwan, currently latched on to China, will have to quickly study its options.
On Monday, Obama met with the leaders of the 10 ASEAN states and signed an economic cooperation initiative that promised to strengthen investment and trade cooperation. Beginning this year, a summit between US and ASEAN leaders will become an annual occurrence to pave the way for a strategic partnership. The US-led Trans-Pacific Partnership (TPP) is already moving along and the US is hoping that it will be expanded and create an Asia-Pacific free-trade area that would help connect Asia with Latin America through the US.
China is also making a great effort to co-opt the ASEAN countries, and at an event at the ASEAN summit to mark 15 years of cooperation between China, Japan and South Korea, Chinese Premier Wen Jiabao (溫家寶) said that China was in favor of holding Regional Comprehensive Economic Partnership (RCEP) talks. This arrangement is aimed at establishing a free-trade area and reduce the dependence of Asian countries on the troubled West.
The RCEP framework includes 16 countries in the Asia-Pacific region — the 10 ASEAN countries plus China, India, Japan, South Korea, Australia and New Zealand — and hopes to create the world’s largest free-trade area. The economies of these 16 countries total almost US$20 trillion, and their trade and economic production makes up one-third of global production.
It is quite odd to see two such economic entities in the Asian region. Membership is largely overlapping and there are only minor differences in entrance requirements. The difference between the TPP and the RCEP is that the TPP does not include China, the world’s second-largest economy, although China is seen as playing the main role in the RCEP. This makes these two organizations the main focus of economic competition between China and the US.
The problem is that Taiwan is not a member of either organization. When these organizations take shape, Taiwan — whose economy revolves around exports — will be marginalized. These organizations are just getting started and are still wrestling with each other, which means that we will have to wait and see what happens next. If Taiwan is able to join one of the two organizations, the impact on its trade will be mitigated. Membership of both would bring a further level of security.
Taiwan has expressed a willingness to join the TPP and Trade and Investment Framework Agreement negotiations with the US have been resumed. The two countries are making progress toward signing a free-trade agreement, although there is still a long way to go.
Taiwan and China have signed the cross-strait Economic Cooperation Framework Agreement, but the relationship between the two sides can be both friendly and antagonistic: China may at any time change its mind and use its economic strength to pressure Taiwan. This is of course why Taiwan’s policy of putting all its eggs in China’s basket is not very clever.
Since the TPP and the RCEP still have not been able to come to terms with each other, Taiwan’s government and opposition must act now to find a way to break through its economic marginalization in the region.