Taiwan is an APEC member and has for decades been a member of the WTO, but has not in recent years joined other regional trade blocs, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). This is due to political factors — especially member states’ concerns about tensions across the Taiwan Strait. At the same time, Taiwan faces obstacles in signing bilateral free-trade agreements with many other countries, having inked such deals with just a few countries such as Singapore and New Zealand.
The CPTPP is mainly composed of APEC member states, and its purpose is to promote market liberalization and achieve free trade. The RCEP is mainly composed of ASEAN member countries with the main goal of reducing tariffs and eliminating trade barriers. What is worth noting is that the US has remained absent from the CPTPP and the RCEP, even though Washington still aims to engage more with the Asia-Pacific region.
Instead, US President Joe Biden announced Washington’s plans for an Indo-Pacific Economic Framework at the East Asia Summit in October 2021. The Washington-led regional economic initiative was formally established in Tokyo in May last year, an indication that the US wants to deepen its integration with the Indo-Pacific region by collaborating with its democratic partners. Taiwan has not been invited to become a member of the Indo-Pacific Economic Framework, but the signing of an initial agreement under the US-Taiwan Initiative on 21st-Century Trade last week seemed to symbolize Taiwan’s inclusion in the framework.
The Cabinet’s Office of Trade Negotiations views the initial trade agreement between Taiwan and the US as the first fruit of the most wide-ranging and comprehensive trade negotiations conducted by Taipei and Washington since 1979. The agreement represents a historic milestone in the two countries’ trade relationship and serves as a critical step toward signing similar trade agreements with other major trading nations. It would also provide Taiwan with more opportunities to take part in regional trade blocs, including the CPTPP, the office said.
The initial agreement covers five chapters on customs and trade facilitation, regulatory practices, domestic regulation of services, anti-corruption practices, and small and medium-sized enterprises. Its main elements are measures to facilitate trade and investment flows, and expedite customs clearances of Taiwanese products in the US. The agreement focuses on administrative efficiency and does not cover tariff reductions or exemptions.
The two sides are expected to continue negotiations on the remaining seven chapters of the US-Taiwan Initiative on 21st-Century Trade, which range from agriculture, digital trade and labor to the environment, state-owned enterprises and nonmarket practices. Some officials and economists have said it is hoped that after negotiations on all 12 chapters have been completed, there would be a chance of signing a free-trade agreement, although Washington has not expressed an interest in signing any such deal with Taipei.
Therefore, the government should work on the practical aspects and first wait to see concrete results from the US-Taiwan Initiative on 21st-Century Trade. Instead of fantasizing about a Taiwan-US free-trade agreement in an unspecified future, the government should pave the way for more in-depth and constructive bilateral trade talks with the US to deal with issues that stand in the way of mutual investment, such as eliminating double taxation.
The government could also use the initiative as a stepping stone toward signing bilateral trade agreements with other countries, and therefore avoid marginalization.
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