This logic may explain why FTA talks between China and Japan are so arduous and highlights why Taiwan’s free-trade engagement with China is so unusual. Therefore, selecting trading blocs or FTA partners is not just a question of economic calculation, it is also a strategic choice and ultimately a political decision.
An FTA can be a game changer. However, it would be misleading to see FTAs as a panacea for a state’s long-term economic illness and to alleviate its eroding industrial capacity. After all, the core of a country’s economic strength lies in its industrial competitiveness in the global economy, which usually stems from robust and balanced development of innovation, technology, human capital, entrepreneurship, a business-friendly environment and so forth.
If the solid combination of these factors could be compared to a strong pair of wings allowing a state’s economy to fly, the FTA would be like the wind beneath the wings, facilitating the state’s economy to perform better and to fly higher into the sky.
As policymakers ponder over how to boost Taiwan’s economy through more FTA initiatives, they had better keep a strategic understanding of the FTAs in mind, which could help to avoid unwarranted illusions and actually improve the efficacy of free-trade treaties.
Eric Chiou is a deputy head for FTA and Regional Integration at the Taiwan Institute of Economic Research’s Economic Development Strategic Planning Center.