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TAIWAN COMING IN FROM THE COLD?
ANALYSIS, Barry Pearton*
27-06-2010
June/July 2010 ATI Magazine
FOR SO LONG a pariah in some diplomatic circles, Taiwan nevertheless ranks in the high teens as one of the world’s top traders – and it may be about to come in from the cold.
As this issue went to press, it seemed almost certain that China and Taiwan would sign off on a bi-lateral trade co-operation agreement by early July.
The agreement will then be ratified by the World Trade Organisation (both China and Taiwan are WTO members), and is expected to see Taiwan move swiftly to negotiate Free Trade Agreements with individual members of ASEAN, especially those who have their own direct agreements with China.
Taiwan has already had extensive talks with Singapore, and clinching of an FTA with Singapore may provide a model for other ASEAN members.
While Beijing is on the record as saying it is opposed to Taiwan developing official links with other countries in any form, establishment of trade agreements may fall into a different category – at least Beijing seems to be suggesting this in negotiating its own Economic Co-operation Framework Agreement (ECFA) with Taiwan.
For its part, Taiwan is on the record as wanting to also establish trade agreements with Japan, Korea, Australia, New Zealand, and, in the longer term, India, and it seems logical that the trade deal with China will be used as a cornerstone for some early diplomatic feelers.
Taiwan’s first imperative is to sort out trade relations with ASEAN, because the ASEAN+1 FTA, which came into effect from January this year, leaves Taiwan liable to tariffs of up to 10 per cent on everything it exports to China and ASEAN members.
Signing of ECFA will protect Taiwan on many export categories to China (which now accounts for some 44 per cent of Taiwan’s total exports, including 12 per cent to Hong Kong), but ASEAN cumulatively is also a significant market for Taiwan exports, making up some 15 per cent of the total.
At China’s insistence, ECFA in its infancy will be little more than a framework agreement. While China and Taiwan have reached consensus on an ‘early harvest’ list of goods and services to benefit from tariff cuts, tougher talks on issues involving intellectual property protection and, inevitably, political matters, have yet to come.
A cross-Strait committee to review progress on future negotiations will be part of the initial ECFA agreement.
The operating model seems in many ways to reflect a committee which co-ordinates and monitors ongoing talks between China and Hong Kong to progress concessions under their Closer Economic Partnership Agreement (CEPA). This has seen a number of co-operative measures, especially in terms of services, signed off in a series of agreements (CEPA 11, CEPA 111, CEPA IV etc).
China originally suggested negotiating a CEPA with Taiwan, but the proposed title was rejected outright by Taiwan on the grounds that Hong Kong was part of China..
In the initial ECFA sign-off, Beijing will offer tariff reductions on up to 500 export items from Taiwan with an annual export value of US$12 billion (some 15 per cent of Taiwan’s total exports to China). Taiwan will extend tariff reductions to 200 mainland Chinese products, with an annual export value of about US$3 billion. In 2009, Taiwan exported US$62 billion worth of goods to China, while importing goods from China worth US$24.5 billion. So the current balance of payments is heavily in Taiwan’s favour.
Separately from ECFA, China and Taiwan have agreed, over recent months, to extensive relaxation of curbs on cross-Strait travel and tourism, and have signed off on a series of MoUs relating to financial services. Foreign companies, including Taiwanese-owned companies domiciled in China, can now list on the Taiwan Stock Exchange. Taiwan is also planning to permit the entry of Chinese sovereign investment, although there will be restrictions. The Bank of China is planning to open for business in Taipei, and Taiwan will also allow mainland insurance companies and securities firms to enter. A number of Taiwanese banks will shortly move to full Branch operations within China.
But while China and Taiwan seem to be embracing co-operation at multiple levels, in some countries, Taiwan will still need to melt the diplomatic ice. The One-China policy seems set in stone.
Australia’s Mandarin-speaking Prime Minister, Kevin Rudd, as one example, has shown little interest in the Taiwan relationship, despite Taiwan being Australia’s eighth-largest export market (Australia’s exports to Taiwan fell by 21 per cent in 2009, in part due to the global economic crisis – and reflecting lower resource prices).
No Australian Minister has visited Taiwan during the first term of the Rudd government, breaking a convention established by Rudd’s Labor predecessors, Bob Hawke and Paul Keating, and continued by former Liberal leader John Howard, over two decades.
Taiwan’s relationship with India also remains somewhat distant, a situation which Taiwan wants to address. It sees India as potentially a significant trade and investment partner.
* Barry Pearton is Publisher of ATI Magazine |
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