Taiwan should prioritize entering the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as it could be isolated from two major regional trade blocs if China joins it first, the Chung-Hua Institution for Economic Research (CIER) said in a report published earlier this year.
As China controls the Regional Comprehensive Economic Partnership (RCEP), it would be virtually impossible for Taiwan to join it, the Taipei-based think tank said in a report commissioned by the Mainland Affairs Council on the effects of regional integration, a US-China trade dispute and COVID-19 on the government’s New Southbound Policy.
With 15 member nations — China, Japan, South Korea, Australia, New Zealand and the 10 ASEAN members — the RCEP is the largest trade bloc in the world, despite India opting out of the agreement in 2019 citing concerns about over-reliance on China.
Hong Kong has also voiced its desire to join the bloc formed last year to serve as a gateway between ASEAN and China, a proposal that received enthusiastic support from Beijing at last week’s virtual Belt and Road summit.
China at last year’s APEC leaders’ meeting also voiced its intention to join the main rival to the RCEP, the CPTPP, which was formed under Japanese direction in 2018 after the US withdrew from the Trans-Pacific Partnership.
If China succeeds in joining the 11-member trade agreement, it would “not be good news” for Taiwan, CIER said in its report, recommending that the government seek to join the bloc as soon as possible to avoid “future variables” that could hinder its acceptance.
Both blocs are likely to add new members, potentially harming the nation’s export competitiveness and especially its ties formed through the New Southbound Policy if it cannot join at least one of them, it said.
Regional economic integration through bilateral trade agreements has long affected Taiwan’s exports, and the situation would continue to worsen if Taiwan cannot better integrate with the region, the report said.
The smaller scope of tariff reductions and the longer grace period to lower them under the RCEP as opposed to the CPTPP mean that short-term effects on the nation’s exports would be limited, but it could erode its competitiveness in the medium and long term, it said.
After the start of the US-China trade dispute, many repatriating Taiwanese businesses complained about the nation’s weak export competitiveness in the absence of free-trade agreements, it said.
Besides joining the CPTPP as soon as possible, which most experts agree affords the greatest opportunities to Taiwan, the think tank also recommended negotiating bilateral agreements, particularly the much-anticipated Trade and Investment Framework Agreement with the US whose negotiations restarted in June after a five-year hiatus.
However, including Taiwan in multilateral talks rather than pursuing bilateral agreements is more attractive for individual governments, as it is less likely to incense Beijing, it said, adding that joining the CPTPP could be a breakthrough for Taiwan’s trade ties with nations covered by the New Southbound Policy.
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