If Taiwan does not become a member of the Trans-Pacific Partnership (TPP) it could become a much less important trading partner, a panel of experts said on Wednesday.
US economic interests find that it is “nice” to have Taiwan in the supply chain, but Taiwan could easily be squeezed out, said Derek Scissors, senior research fellow at the Heritage Foundation.
He said that if Japan, Malaysia and other regional trading nations win preferential treatment under the TPP then Taiwan “is going to get pushed out.”
This will be even more pronounced if South Korea decides to join the partnership.
“Taiwan needs to be a lot more aggressive than the island thinks,” he said.
It has a strong work force, good entrepreneurs and plenty of capital — but only 23 million people and no resources, Scissors said.
“Economics is all about looking at the available substitutes and Taiwan can be substituted real easy,” he said. “That is the fate of small countries.”
Scissors was a member of the panel organized by the foundation to discuss “Taiwan, Trade and the Trans-Pacific Partnership.”
In a statement announcing the panel, the foundation said that Taiwan’s economy would make it among the more developed in the 12 country TPP negotiations.
“It would seemingly stand to benefit from better integration into the global economy, especially in light of South Korea’s Free Trade Agreement with the US and other regional trade tie-ups,” the statement said.
However, the panel of experts agreed that it was unlikely that Taiwan would make the needed economic reforms to qualify for TPP membership any time soon.
Indeed, President Ma Ying-jeou (馬英九) has said that it will be eight years before the nation is ready to join the TPP.
The TPP is most likely not the answer for Taiwan — it is not ready to join the talks, said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics.
The foundation has been pushing for Taiwan’s inclusion in the TPP, said moderator Walter Lohman, who is also the director of the Heritage Foundation’s Asian Studies Center.
Lohman said that it was not clear that the administration of US President Barack Obama would support Taiwan’s entry without some kind of greenlight from Beijing.
“As much as I hate to say that, it is probably the case,” he said.
Eight years is too long for Taiwan to wait for TPP membership, US-Taiwan Business Council president Rupert Hammond-Chambers said.
A shorter timeline is essential to ensure Taiwan “does not fall further into China’s economic sphere,” he said.
Hammond-Chambers predicted that Taiwan’s 2016 election was going to be “tight” and “right down to the wire.”
In these circumstances, it is “highly unlikely” that in its second term the Ma government would undertake the economic reforms needed to move closer to consideration for TPP membership, he said.
Scissors said there was a “major danger” not fully recognized in Taiwan that if the nation waited too long to make the reforms needed for TPP membership, it would “lose.”
As a result, Taiwan could be on its way to being cut out of regional trade even more than it is now, he said.
The TPP could hold “lots of benefits,” but if Taiwan does not become a member then the partnership could be a “threat,” he said.
“It is possible that it will do significant harm to Taiwan’s competitiveness with existing TPP countries,” Scissors said.
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