Thinking pragmatically about TIFA

By Bert Lim 林建山  / 

Wed, Mar 20, 2013 - Page 8

The seventh round of US-Taiwan talks on a proposed Trade and Investment Framework Agreement (TIFA) officially resumed on March 10, having been stalled for five years. Overall, this round of talks has not brought Taiwan appreciably closer to signing a free-trade agreement (FTA) with the US, nor to entering the Trans-Pacific Partnership (TPP): It merely represents a tiny, cautious step forward.

The most significant result of this round of talks was that the US issued a joint statement with Taiwan on trade-related principles for the information and communications technology (ICT) services sector. The statement follows similar ones made by the US with the EU, Japan, Mauritius, Jordan and Morocco on trade-related ICT principles.

This ICT statement is the same as the one used in the recently announced US-ASEAN Expanded Economic Engagement, or E3 initiative.

It mostly emphasizes the strategic objectives for the governments on both sides to develop a transparent, open network environment under ICT supervisory regulations and establish free information flows between the two countries.

At the same time, the US and Taiwan have agreed to work together to issue similar joint statements with third-party countries in the future in a bid to establish global ICT norms.

As the US and Taiwan are main players in the ICT industry and have complete ICT industry chains, should these trade-related ICT principles become accepted and widely used by other countries in the future, Taiwan’s industrial competitiveness will be given a boost.

The reason the US is now willing to resume TIFA talks after a five-year hiatus is surely because it expects Taiwan to continue to act as a major importing nation for US agricultural goods, high-tech products, high-end consumer goods, creative products, technology trade and specialist business services, as well as to loosen import restrictions on US goods.

The US wants to use the TIFA to break through what it sees as the most stubborn aspects of Taiwanese trade protectionism in the agricultural and labor markets and service industry sectors.

At the moment, the US is preoccupied with Taiwan’s imports of US pork, fairness and price transparency in the Taiwanese rice purchasing system, compliance with WTO promises and open and fair distribution and pricing of pharmaceuticals and medical equipment.

The US is also concerned with changes to Taiwan’s National Health Insurance system, as they could impact the US pharmaceutical and medical equipment industry.

They also want a relaxation of restrictions on labor inflows, fewer restrictions on foreign professionals’ residency and working rights within Taiwan, reductions in income tax rates for foreign personnel working in Taiwan and a simplification of the application procedures for Chinese workers seeking employment in Taiwan.

Turning to intellectual property rights, the most important areas are the rights of authors, composers and publishers and confidentiality and anti-piracy efforts on the intellectual property rights of industrial technology. This is to facilitate more efficient technology trade.

In terms of opening up the services industry, the main goals are further deregulation of industry sectors, such as finance, transport and shipping and telecommunications.

It could be said that the US views the TIFA platform as a fundamental tactical approach and strategic tool for opening up Taiwan’s market, something that has not changed since the very first round of talks.

Taiwan’s rationale for seeking to resume TIFA negotiations is somewhat different. Taiwan is seeking the political benefits of an agreement, more so than the economic ones, hoping to gain political status as a sovereign country.

For Taiwan, this status is more important than a bolstered economic status or competitiveness in the global economy.

Taiwan is preoccupied with the idea that the resumption of talks will be a stepping stone to signing an FTA with the US and entering the TPP.

The government hopes that an FTA with the US will be the foundation for deals with other major trading partners, and perhaps even speed up the procession of joining the TPP — all of which will increase Taiwan’s international status and profile.

Furthermore, from within the TPP, Taiwan could form economic strategic alliances with other countries, and this could prevent Taiwan’s geopolitical and regional economic marginalization.

As Taiwan is primarily focused on the formal significance and political implications of the talks, and does not really have any real intention to open up any particular market, the TIFA talks to date have been mostly concerned with the economic benefits to the US.

The US has all the cards in determining which issues are discussed. The result is that even after all these stops and starts, any agreement remains elusive.

Looking forward, if the government wants to use the TIFA mechanism to hasten a potential FTA and membership of the TPP, it needs to be more enlightened when it comes to making substantial changes to opening up to foreign markets.

The best approach would be substantial economic deregulation, further opening up of markets and increasing Taiwan’s overall competitiveness through economic restructuring.

Bert Lim is president of the World Economics Society.

Translated by Paul Cooper