Sun, Jun 02, 2024 page8

• Taiwan’s CPTPP bid prospects

  • By Tran Tri Mong Tuyen
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  President William Lai (賴清德) highlighted Taiwan’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) during his inauguration speech, noting ongoing efforts to establish bilateral investment agreements with democratic nations globally and enhance trade partnerships.

  Taiwan’s official application to the CPTPP, which was made in September 2021 less than a week after China applied, presents a complex decisionmaking context.

  Former president Tsai Ing-wen’s (蔡英文) attempt during her second term to secure CPTPP membership sets the stage for Lai’s continuation of this pursuit. Just prior to the inauguration, Minister Without Portfolio Jenni Yang (楊珍妮) advocated at the APEC Ministers Responsible for Trade Meeting for stringent trade standards alignment with CPTPP criteria.

  Taiwan aims to address unfair trade competition, urging cooperation among APEC members.

  The CPTPP has 11 members: Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Accession to the CPTPP works on a consensus basis, and given these nations’ economic significance to Taiwan, representing more than 24 percent of its international trade, integration is vital for sustained economic growth and export expansion.

  Taiwan’s prospects for CPTPP accession are bolstered by strong backing from key nations like Japan and Australia, who have publicly voiced support. Canada, currently holding the chair, is also inclined to lend its support, although the ultimate decision rests on member consensus.

  Notably, Taiwan enjoys significant economic ties with three Southeast Asian powerhouses — Vietnam, Singapore and Malaysia — ranking among its top 10 trading partners. Singapore and New Zealand’s existing free-trade agreements with Taiwan indicate potential support for accession.

  Moreover, Taiwan’s bilateral investment agreements with Japan, Vietnam and Malaysia serve as further foundations for cooperation.

  As Lai mentioned, Taiwan would further deepen trade partnerships, so it is expected that the nation’s existing economic ties with these three Southeast Asian countries would strengthen under his leadership.

  This would be beneficial for Taiwan’s accession to the CPTPP, continuing the efforts of the previous president.

  Achieving consensus among the members would be the most difficult part of the process, especially for Southeast Asian countries, given that China is still their largest trade partner and there are ongoing conflicts in the South China Sea.

  Singaporean Minister of Foreign Affairs Vivian Balakrishnan stated that the CPTPP welcomes Taiwan’s application, but also addressed the political complications of Taiwan’s bid to join the trade bloc.

  Taiwan and Singapore’s economic relationship is robust and mutually beneficial. Singapore, with its prominence as a financial and logistics hub, complements Taiwan’s strengths in innovation and technology. This symbiotic dynamic is reflected in their trade rankings, with Taiwan standing as Singapore’s fourth-largest trading partner and Singapore ranking as Taiwan’s sixth-largest trading partner as of last year.

  The reduction of tariffs under the CPTPP is poised to bring substantial benefits to trade relations between Malaysia and Taiwan. Currently lacking a preferential trade agreement, this tariff reduction is anticipated to break down barriers and lower the cost of goods between the two.

  Despite this absence, Taiwan has consistently ranked among Malaysia’s top 10 trade partners since 1995, with bilateral trade reaching US$22 billion in 2020 despite the challenges posed by the COVID-19 pandemic.

  Taiwan’s expertise in Fourth Industrial Revolution (IR 4.0) sectors such as big data, augmented reality, the Internet of Things (IoT) and cybersecurity is crucial for Malaysia’s industrial development. The reduction of tariffs under the CPTPP is anticipated to boost Malaysian IR 4.0-centric sectors by eliminating tariffs on Taiwanese imports.

  This move would encourage more Taiwanese investment in Malaysia and the ASEAN region, contributing to job creation and enhancing Malaysia’s industrial capabilities and competitiveness globally.

  Vietnam is in a more difficult position than the other two ASEAN countries because it still has disputes with China in the South China Sea.

  Taiwan has been a long-term economic partner of Vietnam since the 1990s and has consistently been among the top five foreign investors in Vietnam, even surpassing China. Taiwan stands as Vietnam’s fourth-largest investor and fifth-largest trading partner, with investments exceeding US$37 billion, surpassing the combined foreign direct investment (FDI) from 27 EU countries.

  In the current global economic and geopolitical climate, Taiwanese companies are actively pursuing and expanding investment and business collaborations with Vietnam. An example of this is the Vietnam-Taiwan Business Forum and the Vietnam-Taiwan 2024 International Investment and Trade Promotion Exhibition, which took place on April 8. This event signifies Taiwan’s strong interest in Vietnam.

  Vietnamese Deputy Minister of Planning and Investment Tran Duy Dong highlighted the World Taiwanese Chambers of Commerce’s choice of Hanoi as the venue for this global enterprise event, showcasing Taiwan’s commitment to fostering economic and investment cooperation with Vietnamese businesses and investors.

  Despite a global decline in FDI, Taiwanese investment in Vietnam doubled last year, exceeding US$2 billion.

  This reflects a growing trend of Taiwanese companies investing in Vietnam, with a presence in numerous provinces and cities.

  Major Taiwanese electronics firms like Foxconn, Wistron, Qisda, Pegatron, Compal and Quanta have all made substantial investments in Vietnam. Over the past three decades, Taiwanese investment has evolved significantly, transitioning from labor-intensive sectors like textiles, footwear and furniture to high-tech electronics industries.

  Taiwan’s global leadership in semiconductor manufacturing aligns with Vietnam’s focus on developing its semiconductor industry and integrating into regional and global technology supply chains.

  This convergence presents vast cooperation opportunities between Taiwan and Vietnam, particularly in the semiconductor sector.

  Even in the absence of official diplomacy, the economic ties between Taiwan and these three Southeast Asian countries are very strong. Taiwan’s accession to the CPTPP would bring significant benefits to these Southeast Asian nations, even though the decision is not easy.

  The CPTPP aims to strengthen the rules-based international system and enhance supply chain resilience, crucial pillars for prosperity in the Pacific region amid recent disruptions due to the pandemic and geopolitical factors. Taiwan, as the largest supplier of semiconductor chips crucial for electronics and manufacturing, plays a pivotal role in global supply chains.

  Lai’s emphasis on high-tech and innovation positions Taiwan as a key player in these supply chains, especially as the world shifts toward 5G and the IoT.

  Given these dynamics, it is likely that Southeast Asian countries would approve both Taiwan’s and China’s applications to join the CPTPP.

  This aligns with historical precedents seen in organizations like APEC and the WTO, where both China and Taiwan are members. This approach can yield mutual benefits without stirring political sensitivities.

  Tran Thi Mong Tuyen is a scholar at National Cheng Kung University. She was a former MOFA fellow and visiting scholar at National Taiwan University.
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