Joining the CPTPP requires planning

By Liu Da-nien 劉大年  / 

Sun, Mar 04, 2018 - Page 6

The final version of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is to be formally signed in Chile on Thursday, was unveiled on Feb. 22. Although the new agreement has a slightly narrower scope than its predecessor — the Trans-Pacific Partnership (TPP) — the high quality and depth of the barrier-slashing trade pact remain unchanged.

The agreement would enter into force 60 days after at least six countries announce that they have completed their domestic ratification procedures.

If the process adheres to the original schedule, the agreement could come into effect by the end of this year, which would mark an unexpectedly swift and effective transformation of the TPP, taking less than two years after the US withdrew from it.

The CPTPP is a comprehensive trade pact and its terms of entry are relatively open. After the agreement comes into effect, other countries are to be allowed to join.

Moreover, the agreement states that it welcomes “the accession of other States or separate customs territories.” Thus, a rather expedient entry possibility is reserved for Taiwan, which acceded to the WTO in 2002 under the name “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.”

Public opinion in Taiwan has mostly taken a positive view of Taiwan joining the CPTPP, but it should nevertheless be kept in in mind that once Taiwan applies for entry, it has to accept the pact’s regulations, which leave little space for making further adjustments.

In other words, Taiwan will have to equip itself with a highly free market, transparent legislation on trade and relevant regulations that are in accordance with the new trans-pacific trading pact.

Compared with the 11 prospective CPTPP member countries, Taiwan sits in the middle tier in terms of average income per capita. If Taiwan were to apply to become a CPTPP member, a relatively lower standard set by the agreement for members from developing countries would not be applicable to Taiwan.

Taiwan would be required to provide a zero-tariff trading environment for industrial products, while only a small portion of agricultural products could be exempted from tariff reductions, with the provision of a high-quality service industry being the most fundamental condition.

Also, some of the original members are likely to ask Taiwan to offer more open bilateral trading opportunities and to make some concessions as a kind of down payment for the opportunity to obtain a seat in the CPTPP.

The Taiwanese government must make all necessary preparations for joining the CPTPP by paying special attention to the potential effect brought upon domestic industry by the deregulation of the market.

Businesses should be counseled on how to deal with such changes beforehand, especially those businesses trading agricultural items that have been receiving higher trade protection, and guidance should also be offered to industries facing higher tariffs, such as car manufacturing, food processing, and textile and clothing.

Other fields in which adjustments and preparations need to be made include telecommunications, deregulating the market for employing skilled workers and transparent trade regulations.

It should also be noted that about 22 percent of Taiwanese exports are currently made to the 11 prospective member countries and the government must carefully assess the effect of the resulting tariff reductions.

China is unlikely to become a member of a trade pact that is so heavily influenced by the US. That being said, joining the pact agreement would require the approval of each existing member. If cross-strait relations remain unstable, China would undoubtedly pressure CPTPP members to prevent Taiwan from joining the pact. The government therefore must bear in mind the potential resistance likely to be thrown up by China.

The finalization of the CPTPP agreement is the brightest example among regional economic integration projects around the world this year. It is a good example of how the US’ withdrawal from the TPP has not affected regional economic integration efforts and has even accelerated the formation of other free trade agreements, including also the Regional Comprehensive Economic Partnership, which is currently under negotiation.

Many other countries have expressed a strong interest in joining the CPTPP and even US President Donald Trump has said that he does not rule out the possibility of rejoining the agreement, saying that he would take the issue into reconsideration.

It is evident that the CPTPP will continue to expand in the future. However, countries will not be satisfied with taking part in only one large free trade agreement. This all adds up to a weakening of the WTO, posing greater challenges to Taiwan, which has long complied with the organization’s regulations and heavily relied on the free trade environment it provides.

Liu Da-nien is director of the Chung-Hua Institution for Economic Research’s Regional Development Study Center.

Translated by Chang Ho-ming