The talks over expanding the number of members in the proposed Trans-Pacific Strategic Economic Partnership Agreement (TPP), which is directed by the US, made major progress at the recent annual APEC meeting in Hawaii. Not only did Japan, Canada and Mexico enter the talks, the original nine negotiating states also proposed a basic framework for the TPP that would set the tone for future norms on market liberalization and modes of negotiation.
However, because of its special international status and the “Beijing factor,” Taiwan has been left out of the current trend of countries signing bilateral free-trade agreements (FTAs). The signing of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China last year does not seem to have resulted in any major breakthroughs in this marginalization problem. At present, Taiwan has not signed any FTAs with its important trading partners and, therefore, naturally holds high hopes for TPP membership.
The TPP was originally established as a free-trade area involving Singapore, New Zealand, Chile and Brunei known as the Pacific-4 trade bloc. After the US began attempts to join it in 2008, the partnership agreement’s importance increased significantly. Australia, Peru, Vietnam and Malaysia have now also joined the negotiating table. At present the nine countries negotiating to join the trade agreement account for 26 percent of the world’s GDP and 17 percent of global trade volume. If Japan were added to the TPP, it would increase its percentage of global GDP to 35 percent, making it the largest free-trade zone in the world.
However, Japan’s entrance to the TPP would really only be significant in a geo-economical sense. If we think about other nations that could also join, like South Korea and the Philippines, the future scale and power of the TPP could even be enough to gradually deconstruct the Sino-centric regionalism prevalent among ASEAN countries and help the US use an Asia-Pacific framework to realize its major strategy in recent years: returning to Asia.
Not only is China the most important trading partner of the East Asian nations, it also overtook Japan last year to become Asia’s largest economy and its influence in the region is increasing day by day. The ASEAN-China Free Trade Area came into effect during the first half of last year and lately it has been said that China, Japan and South Korea are set to start talks with ASEAN about a possible “ASEAN Plus Three” next year.
The trend toward regionalism among ASEAN nations has weakened the US’ economic and political interests in the Pacific. The global financial crisis that raged through 2008 and 2009 also resulted in decreased US economic power and an increase in China’s economic power. The need for the US to use regionalism as a way of forging economic and trade links is more urgent than at any time in the past. Also, if the US’ economic growth stays sluggish for long, it is bound to have an increasingly difficult time upholding its global dominance and it could even become meaningless. Reciprocal TPP negotiations and deregulation must look very inviting for the US at this time, when it desperately needs to create new markets overseas and employment opportunities back home.
As the number of potential members grow, the formation of a TPP that includes the US will become difficult. However, as I have shown above, US ambitions to control the TPP cannot be ignored. What currently seems the most feasible way of establishing a TPP will be what the US is now calling for and what APEC has advocated — a free-trade area of the Asia-Pacific (FTAAP) with 21 member states.
What we must realize is that despite the close links and their shared membership, the TPP is not part of the formal APEC system. While the TPP clearly states that it welcomes APEC members to join the agreement — the result of an open accession clause — this does not mean APEC members like Taiwan or “Chinese Taipei” can automatically become TPP members. This is obvious from what has transpired in the past few years, when Taiwan’s attempts to gain acceptance into the partnership agreement have been ignored each time.
The only way Taiwan would have a chance of taking part in such agreements would be via an FTAAP organized under an APEC framework and which would be the result of a partnership agreement or some other similar measure.
Formation of the TPP is very far off and even if Taiwan is eventually able to join, it would be of no help in solving the thorny issues Taiwan faces.
For example, Taiwan’s major trade competitor is South Korea, which has already signed FTAs with ASEAN, the EU and the US. In regions where FTAs have been signed, 35.6 percent of South Korea’s exports now enjoy tariff reductions and if we add to this list the agreements being negotiated and that are expected to be concluded within the next two years, this figure will reach more than 60 percent.
While many electronic goods are exempt from tariffs because of information-technology agreements, Taiwan’s many traditional industries, in particular petroleum and textile products with low levels of differentiation, will be affected by South Korea’s FTAs because of their limited price flexibility.
Honigmann Hong is an assistant professor in National Tsing Hua University’s China studies program.
Translated by Drew Cameron
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