The US, Japan and 10 other Pacific Rim nations earlier this month reached an agreement on the Trans-Pacific Partnership (TPP), after about seven years of negotiations.
The agreement, which is still subject to lawmakers’ approval in individual nations before it can take effect, is to cover about 40 percent of the global economy and aims to eliminate more than 18,000 tariffs.
Taiwan is not part of the nascent 12-member trade bloc and this exclusion has raised concerns over the long-term impact on the nation’s international trade.
While South Korea is also excluded from the TPP, it has signed several bilateral free-trade agreements with TPP members to cushion a potential impact from its exclusion. Sadly, Taiwan lags far behind South Korea in this regard.
Both China and India last week appeared to speed up talks over the proposed Regional Comprehensive Economic Partnership (RCEP) — a 16-nation Asian equivalent to the TPP — for fear of losing ground to the US-backed multilateral trade bloc.
Unfortunately, Taiwan is not a member of the RCEP either, which has raised further concerns that the nation’s export-reliant economy could be marginalized as other nations in the region push for trade liberalization.
If Taiwan were able to join one of the two trade blocks, the impact on its trade would be mitigated; while a dual membership in both would offer a higher level of security. The government has said that it would like to join the TPP in its second stage of expansion and has prioritized joining the TPP over the RCEP, because China plays a less important role in the trans-Pacific bloc.
In terms of negative impacts on foreign demand, exclusion from the TPP would lead to a diversion of trade and foreign direct investment from Taiwan. Even so, do Taiwanese really understand what joining the TPP would mean, be it the positive or negative implications? Is Taiwan ready to participate in comprehensive, high-standard trade agreements such as the TPP?
In addition to eliminating 18,000 tariffs, the TPP also aims to set up a legal framework for the protection of intellectual property rights, enforce standards for labor regulation and environmental law, seek a common set of origin rules and create an investor-state dispute settlement mechanism that would allow companies to sue governments, among other issues.
The TPP would help boost Taiwan’s exports and expand domestic companies’ overseas activities. However, it would also mean the opening up of domestic markets and services, such as government procurement processes, the industrial sector, agricultural products and services, and financial services. This would have a negative impact on industries in relatively disadvantageous positions in both manufacturing and non-manufacturing sectors.
Hence, if the government decides that TPP would bring more benefits than harm in the long term, it would signify the arrival of major structural economic changes and legal revisions. Moreover, the government must carry out preparatory work to ease public concerns over what many see as a lack of transparency and public dialogue after the controversial cross-strait service trade agreement was inked with China, which led to the Sunflower movement in March last year.
Regardless of who wins the January’s presidential election, the government must not keep the public, or lawmakers, in the dark about TPP negotiations. Rather, policymakers must work hard to educate the public on the urgency of participation in the TPP and about what the government can do to help those in disadvantageous positions.
Being prepared would have a major effect on the outcome of Taiwan’s TPP bid, which is key to the nation’s economic prosperity and security in the long term.
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