The US took the first major step toward a possible free trade agreement (FTA) with Taiwan on Monday when an independent government agency held a hearing in which witnesses said the political benefits for Taiwan will far outweigh any economic benefits from the deal.
The International Trade Commission (ITC), which recommends trade policy to the US administration, was told that US exports to Taiwan would soar if Washington negotiated an FTA with Taipei. It was also told such an agreement would solidify ties between Taiwan and Midwest farm states, which would be among the main beneficiaries.
The hearing also heard that an agreement would enhance Taiwan's position in the global trading community and give it more legitimacy as a separate political entity, boosting its international stature.
But four major US industries which have long fought Taiwan -- motion pictures, rubber and plastic footwear, textiles and industrial fasteners -- urged the commission to reject the proposed FTA, charging unfair actions by Taiwan and its corresponding industries.
The hearing will be followed up later this week when the ITC sends a delegation to Taiwan as part of its investigation. ITC deputy project leader Jennifer Baumert and researcher Michael Barry will leave on Friday for a week-long visit to study Taiwan's economy and trade policies.
Chen Chien-jen, head of the Taipei Economic and Cultural Representative Office, Taiwan's unofficial embassy in Washington, said a FTA would accomplish three main goals.
"The agreement strengthens a historic relationship already of long standing; it keeps the US-Taiwan economic relationship growing in new directions that also lead to new areas of cooperation with the wide Asia-Pacific region, and it fosters common values of democracy and economic freedom across the Pacific," Chen added
He said that Taiwan's policies in terms of workers' rights, environmental protection, competition and consumer protection will serve as a "very strong model" to set precedents for other free trade agreements elsewhere.
He also cited the broader Asian region potential. He said a FTA could counter the recent economic turmoil that has beset the region "by solidifying stable trade and investment ties. Through this agreement, Taiwan would become the gateway for promoting closer and more reliable business ties with the rest of the region," Chen said.
A FTA would open up Taiwan's markets to US goods by ending tariffs and non-tariff barriers beyond the commitments Taiwan made by joining the WTO at the beginning of this year.
While it would also end such US barriers, witnesses at today's hearing conceded that Taiwan already enjoys almost unlimited entry into US markets.
Agricultural products apparently would be the most immediately affected by a FTA, said those familiar with the proposal. Taiwan would have to end its ban on the import of foreign rice, poultry and meat, and allow easier imports of other farm products now limited by law.
John Tkacik, a Taiwan economic expert at the Heritage Foundation, a conservative US think tank, said US exports to Taiwan would soar after such an agreement. Tkacik estimates US exports the first year under a FTA would rise to a record US$25 billion, well over the recession-depressed US$18 billion last year.
He also noted the political and diplomatic gains for Taiwan. "The closer US-Taiwan economic ties are seen in Beijing, the less likely Beijing will assume it can take military action against the island without involving America," he told the hearing.
"Beijing must then see that a resolution of Beijing-Taipei frictions must be based on enforcements, concessions and general good will, rather than threats of military force," he said.
"This is a compelling reason for Taiwan to go ahead with a FTA," even with the problems a FTA would cause some of Taiwan's agricultural and other economic sectors, he said.
Bonnie Richardson, a vice president of the Motion Picture Association of America and leading critic of Taiwan's piracy problems, said she opposes any FTA agreement until Taiwan clamps down on pirated DVDs and other media materials. She said Taiwan needs to take action now to enforce anti-piracy laws, calling recent actions insufficient.
Nevertheless, Richardson conceded that Taiwan's markets remain open to her industry's products, calling piracy the only barrier to market entry.
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