Amid the current enthusiasm in Taiwan for the nation's imminent accession to the WTO, the growing trend of forming regional trade groupings such as Regional Trade Agreements (RTAs) and Free Trade Areas (FTAs), has yet to receive much attention.
Unlike the multilateral WTO, RTAs and FTAs are established bilaterally or by a limited number of states, which agree to abolish tariffs and other restrictions imposed on goods traded between or among themselves.
Singapore is one of the most proactive Asian-Pacific countries pursuing such pacts. In addition to its RTAs with Australia and New Zealand, it will complete negotiations and establish FTAs with Japan and the US by the end of this month.
Singaporean Prime Minister Goh Chok Tong commented during a visit to the US in June that the US-Singapore FTA is a "strategic economic cooperation project." Indeed, Singapore's effort in this regard should be viewed as part of its endeavors to reposition itself in the rapidly changing regional and global trading systems.
The fact that export-oriented Singapore is sparing no effort in pursuing these kinds of pacts should be of inspiration to Tai-wan. This is not just because of the trade benefits that RTAs and FTAs offer and the disadvantages of being excluded from them, but also because there is a concern that Taiwan could be excluded from economy-based regionalization in the Asia-Pacific region, in which China is one of the most important players.
The immediate benefits of such agreements are manifold. Trade between participants increases as a result of the elimination of most tariffs and non-tariff barriers; members would attract more direct foreign investment with fewer investment barriers and an enlarged market; and the improvement in trade conditions and the tariff-free environment would help to maximize the effects of the scale of the economy.
Recently established RTAs and FTAs, as noted by Jiro Okamoto, a researcher at the Institute of Developing Economies at the Japan External Trade Organization, have generated particular dynamism and can "help the structural adjustment of member economies."
RTAs and FTAs, moreover, also have political, diplomatic and security spinoffs. Singapore's keen interest in strengthening its bilateral relationship with the US and enhancing its political recognition and profile through the FTA is a case in point.
Apart from APEC, Taiwan has been largely excluded from regional organizations -- from the ASEAN plus three (China, Japan and South Korea) to the Boao Forum, which was opened last February in China.
According to Tu Chaw-hsia (杜巧霞), director of the international division of the Chung-Hua Institute of Economic Research, seeking to establish RTAs and FTAs with one or two East Asian countries may be a good starting point. Taiwan might be able to bypass obstructions erected by China by providing enough trade and economic incentives to potential partners.
Having had to concentrate its manpower and resources on its WTO membership bid, Taiwan has been left behind in the latest round of RTA and FTA proliferation. It is important to bear in mind that the WTO's multilateral system is not necessarily incompatible with RTAs and FTAs. In fact, many observers argue that all three serve different long-term and short-to-medium term functions and purposes, such that they can and should be pursued concurrently.
More research will be necessary before we know just how effectively the two systems will interact. But the lesson for Tai-wan is clear: The nation must catch up with its neighbors and more deliberations and resources should be devoted to this matter.
Wu Pei-shih is a freelance writer based in Taipei.
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