The nation’s economy relies on trade and 60 percent of GDP comes from exports. However, exports have declined continuously for 15 months. The general public is concerned with the situation and hope that President Tsai Ing-wen’s (蔡英文) government will be able to find a solution.
If Taiwan can join the Trans-Pacific Partnership (TPP) — an economic and political alliance — it could help boost Taiwan’s exports and increase GDP by an estimated 1.95 percent.
Tsai, in her inaugural address, expressed her ambition for Taiwan to join the TPP and the Regional Comprehensive Economic Partnership (RCEP).
However, with the Democratic and Republican US presidential hopefuls both opposed to the TPP, there is increased uncertainty about when the partnership would take effect, which could in turn delay Taiwan’s chance to enter the pact.
While that uncertainty remains, the nation’s exports cannot remain stagnant. The Tsai government enjoys a special rapport with the US, which does not want Taiwan’s relations with China to be too close. To avoid Taiwan’s continued economic reliance on the Chinese market, while at the same time navigating the complexity of multilateral negotiations, the government should sign a free-trade agreement (FTA) with the US that includes lower tariffs, deregulation of the services industry, and bilateral investment and tax agreements. This would help revitalize Taiwan’s stagnant economy and job market.
So far, the number of FTAs Taiwan has signed is far behind that of its main competitor, South Korea. Three years after the US and Seoul inked such a pact, South Korean exports to the US have grown to more than US$70 billion in volume, which is having an increasingly significant impact on Taiwan’s trade.
Taiwan must get ahead by obtaining better tariff treatments.
Former president Ma Ying-jeou’s (馬英九) administration managed to resume talks with the US over the Trade and Investment Framework Agreement (TIFA) by agreeing to allow import of US beef containing traces of ractopamine. Whether the Tsai administration will be able to ink an FTA with the US by partially allowing imports of US pork containing traces ractopamine will be a major challenge.
A member of Tsai’s administration recently said in an interview that by adjusting the auction system for the sale of live pigs and developing a traceability system allowing customers to identify the source of pork, US pork imports would fail to compete with local pork and barely have an impact on local pig farmers.
Democratic Progressive Party lawmakers in favor of allowing US pork imports containing traces of ractopamine have expressed the same view.
If the plan works, it would be a major boost for the government: It would it significantly increase the public’s confidence and benefit the economy while the nation waits for the TPP to take effect.
If the government makes the strategic choice of joining the US and Japan in rejecting China and does not actively pursue talks over an entry into the RCEP, in addition to an FTA with the US, Taiwan’s representative to Japan could also enter into active talks with Tokyo to push for a Taiwanese-Japanese FTA in order to help Taiwan break away from its dependence on China.
An economic alliance with Japan would be beneficial to both nations and it would be a major breakthrough for Taiwan’s trade diplomacy.
Ma focused on the Chinese market, but the result of his neglect of risk management has been that Taiwan’s dependence on China has reached alarming levels.
Although the government has proposed a “new southbound policy,” as China is relying on trade cooperation and massive economic assistance to Southeast Asian nations, such as the RCEP, the “One Belt, One Road” project and the Asian Infrastructure Investment Bank, succeeding in this attempt is easier said than done. This means that finding ways of using FTAs to bring Taiwan, the US and Japan together in a closer economic alliance is an urgent matter.
Hopefully, the Tsai administration will be able to present a solution that will please, rather than disappoint, Taiwanese voters and avoids leading the nation down the path that has led to Japan’s two lost decades.
Du Yu is chief executive officer of the Chen-Li Task Force for Agricultural Reform.
Translated by Tu Yu-an and Perry Svensson
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