ANALYSIS: Academics say Taiwan needs trade liberalization

By Shih Hsiu-chuan  /  Staff reporter

Fri, Mar 15, 2013 - Page 3

Following the recent resumption of Trade and Investment Framework Agreement (TIFA) talks with the US, Taiwan must push for trade liberalization if the country is to keep pace with economic integration, academics said.

After a five-year hiatus caused by trade disputes related to US beef, Taiwan and the US on Saturday were back at the TIFA negotiating table, the platform established in 1994 for the two to resolve trade issues.

The negotiations led to the signing of two joint statements — on trade principles for information communication technology (ICT) services and on principles for international investment; the establishment of two working groups on investment and on technical barriers to trade — under the TIFA; and a consensus to work together under the WTO to accelerate negotiations to expand the scope of information technology agreements and to create an international services agreement.

Among issues that remain unresolved are US requests that Taiwan base its safety measures on pesticide residues in food on scientific evidence, bring its policy on livestock feed additive ractopamine in US pork in line with international standards, improves transparency for its rice import system, and reform pricing and reimbursement regulations for pharmaceutical and medical devices.

The US also raised concerns related to the protection of intellectual property rights and regulations to counter the theft of trade secrets.

Taiwan’s main requests were the establishment of a free-trade agreement (FTA) with the US and support for its bid to join the Trans-Pacific Partnership (TPP), the evolving US-led free-trade agreement in the Asia-Pacific region. Both were rejected.

Asked how he viewed the TIFA talks, National Central University economics professor Chiu Chun-jung (邱俊榮) said the challenge for Taiwan has just begun.

To engage with the US economically, Taiwan must extensively liberalize its economy, a path set forth by the US during the negotiations, Chiu said.

The US “kindly” refrained from pointing out Taiwan’s lack of effort to meet the high standards of an FTA with the US and of the TPP, but it has placed “enormous pressure” on Taiwan to further liberalize its ICT manufacturing sector and service sector and to open its market for US exports, Chiu said.

Conclusions reached during the talks were not only principles laid down by the US to urge Taiwan to adjust its economy, but also reminders to Taiwan that it “has a long way to go” to enable it to meet TPP obligations, involving various trade policies that the US sees as unfairly skewed against foreign players, he said.

For example, tax breaks for certain industries were deemed by the US as protection against foreign competition, as are the policies by which state-owned Chunghwa Post Co, which has a nationwide network of post offices, extends services to savings, loans, insurance and investment trust funds, he said.

Chiu said that Taiwan has no choice but to accept the principles because they were applied to US economic engagements with other countries.

The US-South Korea FTA, referred to by the US as a “gold standard agreement,” may serve as a useful reference for Taiwan to measure how far behind it is and as an outline of an action plan to meet the enormous range of challenges the country faces, he said.

It took South Korea 20 years to complete its liberalization process after it decided to pursue FTAs with its key trading partners as its long-term development strategy in 1990s.

Without an action plan, it would be impossible for Taiwan to sign up for the TPP in eight years, as President Ma Ying-jeou (馬英九) has proposed, Chiu said.

Mignonne Chan (詹滿容), adjunct associate professor at National Chengchi University’s International Doctoral Programs in Asia-Pacific Studies, said the TIFA talks have produced “desirable outcomes,” which she attributed to the signing of the Economic Cooperation Framework Agreement (ECFA) with China.

The conclusions reached in the TIFA talks heralded the possibility of Taiwan signing bilateral agreements with the US on investment and on trade in services and ICT products or even formulating plurilateral treaties within the WTO, which would provide “momentum to spur the nation’s economic growth,” she said.

Chan placed the importance of negotiation strategies and skills in subsequent TIFA talks over substantive issues to avail of benefits of the potential agreements.

As an example, Chan said that when the US demands Taiwan improve market access for its agricultural or food exports, Taiwan can request cooperation in tapping agricultural markets in third countries or in developing high-quality agricultural products in Taiwan to buffer negative impacts of opening up the agricultural market when an agreement on bilateral investment is negotiated.

Yen Chen-shen (嚴震生), a research fellow at National Chengchi University’s Institute of International Relations, said that the US did not refuse to support Taiwan’s bid to join the TPP when Deputy US Trade Representative Demetrios Marantis was asked about the US position at the press conference following the TIFA talks.

On the beef row that has hindered bilateral relations, Taiwan can only hope that the US positively addresses the FTA and TPP issues after restoring its trust in Taiwan through negotiations and investment, ICT products or the service sector through the so-called “building-block” approach, Yen said.

It is undeniable that Taiwan is “not ready” for liberalization to embrace the TPP, which demands comprehensive deregulation of industries and a high-degree of trade liberalization because Taiwan has done little to address the issues, he said.

Yen said he remained confident that the US will play an active role in pushing for Taiwan’s TPP membership as long as Taiwan continues to move toward liberalization because the TPP is connected with the US “pivot” to Asia “aimed at countering a rising China.”

Taiwan has expressed its wish for annual TIFA council meetings, but the US only set a goal for negotiations to take place next year.

Marantis said it is a “target” that TIFA council meetings be held annually, but “we will see how things go at the working group level.”

Liu Da-nien (劉大年), a researcher at the Chung-Hua Institute for Economic Research, said he placed more importance on whether Taiwan can properly address issues of concern to the US over the course of the year than what was agreed during Sunday’s talks.

As was the case in many other countries, a trade and investment framework agreement has acted as a platform between the US and countries in which the US has economic interests and could negotiate an FTA with, he said.

Only when there is constant progress at the working group level can Taiwan and the US perpetuate the mechanism, and thus pave the way for an FTA, Liu said.