Beijing entered the WTO on Dec. 11, while Taiwan will become an official member tomorrow. As WTO members, Taiwan and China will further integrate with the global economy. However, membership will also have far-reaching repercussions for cross-strait business interactions.
For Taiwan and China, WTO membership and most-favored-nation treatment will protect both economies from discriminatory trade practices and barriers by other countries. This includes the annual US review for "normalized trade relations" with China. Moreover, it allows the two sides to establish trade relations and consult and hold discussions with other countries under the WTO framework.
Membership will also clear the way for their participation in WTO committees and the drafting of trade regulations. They will have a greater voice in discussions on environmental protection, labor affairs and competition issues. Other benefits include access to the dispute-settlement framework of the WTO and the ability to safeguard the rights and interests of domestic businesses through WTO negotiations.
Given the complementary nature of the cross-strait economy and the ethnic and cultural ties between the two sides, the trade and economic relations between Taiwan and China will probably grow under the WTO framework. To conform to regulations, Taiwan will need to amend various health and inspection measures and open its markets to non-sensitive industrial and agricultural goods from China. These opening measures, combined with lower tariff rates, will help exports from China enter Taiwan. Major improvements to China's legal environment for foreign investments, however, will reduce the trade and investment costs of Taiwanese companies in China. For example, the opening of the finance, insurance, telecommunications, commercial and foreign trade services will create new opportunities for Taiwanese firms to enter these sectors.
WTO regulations can also serve as a point of reference for reforming the cross-strait economic and trade system. They can also contribute to the institutionalization of these systems and bring the economic and trade regulations of the two sides into greater conformity with WTO standards. This will facilitate relaxing the restrictions on Taiwan's China-bound investment and the opening of direct cross-strait trade, postal and transportation links.
Still, more noteworthy is that the WTO will also provide both a forum for members to discuss multilateral trade affairs and rules as well as procedures for the settlement of trade disputes. Taiwan and China will not only be able to cooperate in the next round of WTO negotiations on issues such as market opening, anti-dumping, countervailing duties and even labor issues and competition policy, but will also have a negotiation channel to resolve disputes concerning bilateral trade agreements that may arise in the course of cross-strait economic and trade exchanges. This holds particularly true with disputes over the position that "transportation [including sea and air transportation] and regulations on enterprise investment in China do not necessarily need to come under WTO rules."
For this reason, during the Economic Development Advisory Conference, a consensus was reached to "open direct links for trade, postal service and communications between the two sides of the Taiwan Strait in accordance with the WTO accession process" and to "promote direct cross-strait transportation through cross-strait negotiations."
Moreover, President Chen Shui-bian (陳水扁) said "the entrance of both sides will help normalize trading relations in the future, facilitating closer exchanges and cooperation under the global framework of the WTO." Chen's statement expresses a hope that through dialogue under the WTO framework, Taiwan and China will be able to eliminate disputes arising from economic and trade exchanges.
However, a group of Beijing officials has repeatedly claimed that the WTO is an organization comprised only of sovereign nations and that Taiwan is simply a customs territory within China. They also said that they will not agree to handle cross-strait issues within the WTO or any other international organization. They repeatedly claim that Taiwan cannot sponsor WTO-related meetings and that the country is a "customs territory of China."
Objectively speaking, it would be a loss for Taiwan and China if the two are unable to hold discussions through the WTO. This is especially true as many Taiwanese companies are actively seeking opportunities to enter China's market and because Taiwan has decided to ease its "no haste, be patient" policy (戒急用忍).
The WTO regulatory framework and market-opening principles can offer an important reference in cross-strait negotiations on market opening and management principles in the telecommunications, banking, insurance, securities and other sectors. It can also be of use in regards to short-term stops by business visitors, methods of opening trade in services, and even the handling of investment disputes and the protection of investor rights and interests. They can also facilitate talks on the reciprocal usage and harmonization of economic, trading and intellectual property rights on the two sides.
The principles of openness, equality and reciprocity for which the WTO stands benefit world trade and economic development. In the same way, the authorities on both sides of the Strait need to break through the current political deadlock and find a framework for mutually beneficial economic and trade interactions based on equality and reciprocity, thereby opening new horizons for cross-strait relations.
Tsai Horng-ming is the deputy secretary-general of the Chinese National Federation of Industries.
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