Before the COVID-19 outbreak, the development of the multilateral WTO system was already experiencing problems.
Following the outbreak, the world has started to reflect on globalization, which has positioned China as the world’s factory. More people are now predicting that this pattern would be replaced by friendly bubbles focused on bolstering bilateral economic and trade relations between countries.
In other words, bilateral free-trade agreements (FTAs) will likely become increasingly important. Taiwan should make the most of this time when relations with the US are better than they have been for a long time to negotiate an FTA with Washington to open up new possibilities for the nation’s economic, trade and international status.
The COVID-19 pandemic has severed supply chains, and the imports and exports of certain goods are being constrained by other countries. This has prompted private businesses and governments to no longer make costs the only consideration when choosing their production base and planning their supply chains; they are now also weighing safety, independence and controllability when mapping them.
To better respond to the impact of sudden public health and geopolitical emergencies on the safety of their supply chains, production processes and links originally subcontracted to businesses in different countries are likely to be simplified, and production lines as far as possible brought back and handled internally by multinational companies. Shortening supply chains not only reduces risk, it also raises businesses’ demands on independence and control.
In the future, when businesses plan their supply chains and production bases, they will likely focus more on good bilateral relations.
If a whole production process cannot be a completed within a single country, businesses have to choose international partners, and they will likely prioritize partners in countries with the same value system or similar industrial and economic conditions.
Competition between countries over the dominance of new technology industrial chains will likely become fiercer, and protection of intellectual property rights of new technologies and standardization of industrial specifications become the focus.
This is also the main reason why the US has repeatedly restricted China’s access to key technologies and products, and also restricted personnel exchanges.
Although Taiwan-US relations are better than they have been for years, international trade is still a matter of give and take. The government must now work for the best interests of the country as a whole and offer fair compensation for industries that are hurt in the process.
The reason Taiwan a few years ago opposed a complete lifting of the ban on US pork and beef imports was that the government had not conducted an assessment of the health risk such imports pose, nor had it formulated a compensation package for domestic industries that would be affected. This is also the reason for the current policy differentiation between US beef and pork.
Following changes in the international situation, the government has reassessed the food safety risk and made appropriate plans for affected industries.
As the broader circumstances have changed, it is time to make a reassessment of what would be the most advantageous options for Taiwan.
Honda Chen is an associate research fellow at the Taiwan Academy of Banking and Finance.
Translated by Lin Lee-kai
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