Sun, Jul 21, 2002 page8

• Editorial: Free trade a national right

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  China's Vice Foreign Minister Wang Yi (王毅) and Deputy Director of the Taiwan Affairs Office Zhou Mingwei (周明偉) have both reportedly expressed concerns to Washington about a potential US-Taiwan free trade agreement (FTA) and the hope that the US would reject such a pact.

  As a WTO member, Taiwan has every right to negotiate and enter into trade agreements with other WTO members. The organization permits various types of regional economic integrations, such as the North American Free Trade Agreement (NAFTA) and the EU's customs union, because they further the WTO's long-term goal of global free trade. For example, in the case of an FTA, participants must eliminate all import tariffs on goods imported from other participants.

  Multi-lateral and bi-lateral economic integration efforts are on the rise among WTO members. Between 1948 and 1994, the WTO's predecessor, the GATT, received 124 notifications of regional trade agreements. Since the WTO came into existence in 1995, it has been notified of over 100 other arrangements covering trade in goods or services. Taiwan is simply the latest member to seek the benefits offered by such arrangements.

  Given its export-oriented economy, Taiwan has ample incentive to seek FTAs with not just the US, but with Japan, Singapore, Panama and many other nations. FTAs will allow Taiwanese goods to enter other signatory countries free of import tariffs, strengthening the ability of the goods to compete in those markets. Regional trade integration offers a host of other benefits as well, including the efficient re-allocation of resources and manpower due to the operation of market mechanisms, increased investment and technology transfers from other signatory countries.

  Even more importantly for Taiwan is the "trade diversification" effect that will result from the signing of FTAs with countries such as the US. Putting aside the issue of the political and military threats posed by China, it is utterly foolish for Taiwan to skew its trade and investment disproportionally toward any one country. Last year alone, Taiwanese businesses invested as much as US$3.14 billion in China, a 33 percent increase over the previous year. FTAs with other nations would help steer investment to other countries.

  The US has said it views FTAs strictly as an economic issue and that there is no need to complicate a simple matter. Beijing has, of course, accused Taiwan of having political agenda in seeking to sign a FTA with Washington. If seeking economic survival and prosperity is considered a political agenda, then participants of every other regional economic integrations, are also guilty, including China.

  Just last month, Shi Guangsheng (石廣生), China's minister of foreign trade and economic cooperation, warned of dire political consequences for any country that signs an FTA with Taiwan. Shi emphasized any trade relations with Taiwan must follow the "one China" principle. Not that anyone cares about this "one China" principle besides Beijing, but it is puzzling to see how an FTA with Taipei would violate that principle. Taiwan is labeled a mere "economic entity" under the WTO framework so any member who does follow the "one China" line can still deem Taiwan as such in signing an FTA with it.

  Now that China has made its threats, it will be interesting to see which countries succumb to its arm-twisting.

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