Taiwan and the US held their second round of trade talks last month. Called the US-Taiwan Initiative on 21st-Century Trade, it is a major, groundbreaking event, but still there are nay-sayers suspicious of the US’ intentions who regard it as little more than a US version of the cross-strait trade in services agreement.
To prevent this distortion from gaining traction, I have outlined the background and some of the salient points of the initiative.
For several years, Western countries have been reassessing the pros and cons of globalization as steered by the WTO, examining two unintended consequences of that system.
First, China was allowed to join the WTO in hopes that it would make it a more open country. However, while it resulted in Beijing benefitting greatly from the WTO’s trade facilitation to achieve rapid economic growth, it also reinforced its hegemonic mindset.
Second, the WTO placed too much emphasis on market liberalization and paid too little attention to inclusive growth aspects, such as the environment, labor rights and fighting corruption. This has led to increasingly harsh criticism and calls to transform the way globalization operates.
One of the most important trends in this process has been friend-shoring, in which countries seek out and link up with “like-minded” strategic allies in the formation of international supply chains and developing markets, as well as pursuing more high quality trade agreements with progressive values to improve market resilience and risk resistance.
The US-Taiwan Initiative on 21st-Century Trade is a product of this new approach.
The initiative’s goals are clear, and yet the nay-sayers still distrust the US’ motivations, regarding it as a revamped cross-strait trade in services agreement, only between the US and Taiwan, instead of between China and Taiwan.
However, the two proposals are very different.
The reason the proposed cross-strait trade in services agreement was so controversial was that it only broached opening up markets and completely ignored progressive values such as workers’ rights, environmental protection and the promotion of small, medium and micro businesses. This, together with the huge size disparity of the Chinese and Taiwanese markets, different political systems, Chinese military intimidation of Taiwan and Chinese subsidies to state-owned firms, all added to Taiwanese concerns that the agreement would facilitate China’s annexation of the nation.
The US-Taiwan initiative, by contrast, seeks inclusive, sustainable growth that takes into account workers’ rights and environmental protection, and emphasizes fair competition without sacrificing other countries. In addition, as the digital economy is transforming trade practices, there needs to be measures in place to address the arrival of this new trade landscape.
The initiative could lead to a robust trade framework and political understanding that would deepen Taiwan-US economic and trade relations, promote mutual values and embrace new business opportunities.
Honda Chen is a senior researcher at the Taiwan Academy of Banking and Finance.
Translated by Paul Cooper
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