A new analysis concludes that although difficult, it may be possible for Taiwan to join the Trans-Pacific Partnership (TPP) free-trade agreement.
“The various obstacles are indeed daunting,” Brookings Institution senior fellow Richard Bush said in the 13-page analysis.
“If Las Vegas or Macau bookmakers took bets on the chances of TPP success for Taiwan, they would surely be very long,” Bush said.
However, he has devised a six-step approach that — if followed in order — could greatly improve the prospects.
First, said Bush, the 12 countries that are party to the current TPP negotiations must complete an agreement or there will be no TPP option for Taiwan. Second, Taiwanese must reach a broad political consensus on why TPP membership is vital to the nation’s long-term economic competitiveness.
“There is no economic reason why Taiwan should not be included in the various emerging regional blocs tying Northeast and Southeast Asia together or tying Asian countries to markets in the Western Hemisphere,” Bush said. “The reason is entirely political: China’s desire to keep Taiwan’s international profile as low as it can.”
As a third step, Taiwan can and should restore its credibility with key trading partners, Bush said.
“Taipei must still eliminate a significant threshold obstacle to its becoming a part of TPP. That is, its poor track record over recent years in negotiating trade agreements,” Bush said.
Economic officials, he said, are seriously constrained by domestic political forces, he said.
Step four, is for Taiwan to develop a negotiating position and strategy for TPP, Bush said.
“This will perhaps be the most complex trade negotiation that Taiwan has ever undertaken, for reasons of both substance and process,” he said.
Concerning substance, the removal of non-tariff barriers will be difficult enough, given the likely resistance of domestic groups that benefit from such barriers, he said.
The fifth step is the variable most outside Taiwan’s control: China’s leaders must opt for fundamental economic reform.
“Taiwan must hope for a ‘sweet spot’ in Beijing’s calculus concerning economic reform,” Bush said. “The optimal situation for Taiwan is when China’s reformist leaders sincerely want to carry out fundamental change, but face stiff resistance from domestic interests, to the point that they cannot move forward on their own, even though they want to. In that case, external incentives can stimulate reform.”
As a sixth and final step, Bush says that Taiwan must leverage China’s accommodation.
If Chinese leaders make a political decision to block TPP membership for Taiwan, then entry is “highly unlikely” Bush said.
The US might be willing to judge Taiwan’s TPP negotiating position on its economic merits, but other member countries would be more likely to “succumb to Beijing’s political pressure,” he said. “That Beijing would mount political opposition by exerting pressure on the smaller members of TPP is a reality that cannot be wished away — it is an obstacle that must be circumvented.”
Just as China has shifted on TPP in general, it is also adjusting its view of Taiwan’s membership, Bush said. Now, at least in conversations with Taiwanese academics, Chinese counterparts are holding out the WTO model as a possible way for Taiwan to join TPP.
“That is, the PRC [People’s Republic of China] and Taiwan join simultaneously, as they did for WTO,” he said.