An ECFA could blind us all to the big picture

By Peter C.Y. Chow 周鉅原  / 

Thu, Aug 13, 2009 - Page 8

The controversy over the proposed economic cooperation framework agreement (ECFA) with China may have distracted attention from the resumption of negotiations between Washington and Taipei on a free trade deal.

Republican Congresswoman Ileana Ros-Lehtinen, a ranking member of the Foreign Affairs Committee, last week urged US Trade Representative Ron Kirk to promptly resume negotiations with Taiwan for a Trade and Investment Framework Agreement (TIFA) and for a US-Taiwan bilateral investment agreement.

A TIFA would provide strategic frameworks and principles for dialogue on trade and investment issues between the US and its trading partners. It could lead to further trade liberalization, such as a free trade agreement (FTA).

The US negotiated with Taiwan on a TIFA in 2007 and last year without success because of Taiwan’s refusal to lift restrictions on beef imports from the US. So, for those who care about Taiwan, Congresswoman Ros-Lehtinen deserves our appreciation for telling Kirk that TIFA negotiations with Taiwan should be resumed as soon as possible.

Taiwan has been a de facto player in East Asian integration through trade with and investment in ASEAN countries and China. However, because of the China factor, Taiwan has not been able to join any of the proposed trading blocs, whether it be ASEAN plus one or ASEAN plus any other number.

Given the severe challenges that result from being marginalized, Taiwan should grasp every opportunity to work with the US, which is also a player in East Asian integration, to break through the wall of marginalization.

What this means is that Taiwan should not just focus on an ECFA with China. In fact, implementing an ECFA without signing FTAs bilaterally and multilaterally elsewhere in the region would lead Taiwan to fall into the trap of the “hub-spoke” scenario described by Nobel laureate Paul Krugman, under which China would become the hub (or core) and Taiwan would become a spoke (or peripheral).

Resumption of TIFA negotiations with the US would be one step in the right direction in discussing a wide range of issues relating to trade and investment. Taiwan should not hesitate in responding if Washington suggests an immediate restart of talks.

A TIFA with the US would be conducive to furthering an FTA now that the US’ economic recovery is well under way and given that the administration of US President Barack Obama is paying due attention to the proliferation of trading blocs in Asia, and not just North Korean nuclear proliferation.

Taiwan needs to adopt a cosmopolitan view to understand that globalization is not the same as Sinicization. Taipei needs to sign individual FTAs with all of its trading partners, notably with the US, and not just an ECFA with China.

An ECFA with China will not serve as a panacea and may even result in the Taiwanese economy becoming peripheral to the Chinese hub.

Peter C.Y. Chow is professor of economics at the City University of New York and a research associate at the National Bureau of Economic Research.