Thu, Jul 25, 2024 page8

• Taiwan-EU trade deal is possible

  • By Franz Jessen
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  On Thursday last week, European Commission President Ursula von der Leyen was re-elected in Strasbourg, France. Before her re-election she gave a speech to the European Parliament and published a document entitled “Europe’s Choice: Political Guidelines for the Next European Commission 2024-2029.”

  Her statement attracted headlines in Taipei and Beijing. In Taiwan, it was welcomed, whereas the Chinese Ministry of Foreign Affairs said the commission president was “playing with fire.”

  The part of her statement that sparked such different reactions was of course about Taiwan.

  Von der Leyen focused on the Indo-Pacific region in a way that previous European Commissions have not. She said it had become a decisive region for the world’s future and that she intends to work with Japan, South Korea, New Zealand and Australia to secure the supply of critical minerals and technologies there — including with collective efforts to deploy the full range of their combined statecrafts to deter China from unilaterally changing the “status quo” by military means, particularly over Taiwan.

  President William Lai (賴清德) congratulated Von der Leyen on her re-election and expressed his appreciation for her “steadfast support for peace and stability in the Taiwan Strait.” The Ministry of Foreign Affairs also congratulated her, highlighting her recognition of Taiwan as a key Indo-Pacific partner, adding that Taiwan was referred to for the first time as an important partner in the Indo-Pacific region in the joint report “EU Strategy for Cooperation in the Indo-Pacific,” released in 2021.

  The reaction from Beijing was fierce. It reacted not only to the explicit support for Taiwan — and implied criticism of China — but also to the four countries mentioned in Von der Leyen’s political statement, which China sees as future closer partners to a NATO in the Indo-Pacific region, a step which Beijing opposes.

  China sees the EU as “meddling and trying to join forces in the Indo-Pacific” region, and did not hide its dissatisfaction.

  Von der Leyen’s statement on Taiwan was in itself not new. She has spoken along similar lines before. The novelty was that the reference to Taiwan was included in the written policy statement for her re-election.

  Meanwhile, on the other side of the Atlantic, former US president Donald Trump spoke very differently about Taiwan. In a Bloomberg Businessweek interview published on Tuesday last week, Trump made it clear that should he win the election, Taiwan would have to pay for US protection against Chinese military aggression. He likened the US to that of an insurance company that is not being paid by Taiwan. In addition, on the economic front he accused Taiwan of having taken almost 100 percent of the US semiconductor industry.

  It is striking to see the differences in the approach toward Taiwan by Trump and by Von der Leyen. These differences also raise questions as to the extent the EU policy would be adjusted if Trump were re-elected. Under a Trump presidency, the EU and NATO could expect dramatic pressure from the US to boost their own defenses as the US would bring down its commitments to defend Europe. This in turn would reduce the EU’s ability to engage in further away regions, such as the Taiwan Strait, because the priority would shift to defending the EU against possible additional Russian aggression.

  In the Bloomberg Businessweek interview, Trump called Europe “lovely,” but that Europeans “treat us violently.” In other words, on the economic front, Taiwan and the EU can both expect a rough ride from a possible Trump administration.

  This raises the question of whether the time is right for the EU and Taiwan to bolster their economic relations to protect against possible turmoil in international trade.

  Substantially enhancing trade relations between Taiwan and the EU should not only be in the area of supply chain resilience, but should be in the form of an ambitious trade agreement. The EU and Taiwan (and for that matter China, too) can expect to be on the receiving end of a new US trade policy if Trump were to be elected. Therefore, Taiwan and the EU would be looking to develop new export markets if the Trump tariffs are implemented, as he has announced they would be.

  Given the political affinity between Taiwan and the EU it would also be quite natural for the two to seek a formal trade agreement between them.

  For this to happen, Taiwan might have to take bold market-opening steps to convince the EU that a trade agreement would be substantial, but is that not a small price to pay for the overall economic and political benefits of an EU-Taiwan trade agreement?

  Here Taiwan should look at the recent free-trade agreement between the EU and Vietnam, which has already proven to be a success. In addition, Taiwan can look south where the EU and the Philippines are negotiating a free-trade agreement. This would give Taiwan a good idea of what level of ambition is required for the EU to engage in such negotiations.

  The EU is already Taiwan’s fourth-largest trading partner and Taiwan’s largest source of foreign investment. Taiwan enjoys a large trade surplus of more than 16 billion euros (US$17.33 billion). Overall trade in goods amounted to almost US$74 billion last year, Taiwanese government data showed. Taiwanese exports were dominated by the semiconductor industry.

  A substantial trade agreement would further strengthen the economic relations between the democratic partners. The Chinese reaction would of course be an important factor, but as long as a trade agreement is strictly held within the EU’s “one China” policy, then Beijing would have no solid reason to oppose a closer trading relationship between Taiwan and Europe, especially if such an agreement in part is a reaction to a more restrictive US approach to international trade.

  Franz Jessen is a Ministry of Foreign Affairs fellow in Taipei and attached to the Institute for International Relations at National Chengchi University.
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