Asian Free Trade Circle: Taiwan Must Not be Excluded
China Times editorial (Taipei, Taiwan, ROC)
November 23, 2012
Summary: Recently ASEAN leaders held a summit in the Cambodian capital of Phnom Penh. Each of these governments evinced a pragmatic "economics first" attitude. They actively promoted free trade agreements (FTAs). An Asian free trade bloc is rapidly forming. The Republic of China government must not allow Taiwan to be excluded from this bloc, and isolated. Otherwise it will be increasingly marginalized. Exclusion from this bloc will be highly detrimental to its national growth.
Full Text below:
Not long ago several Asian governments found themselves facing off against each other over the sovereignty of Dokdo Island, the Diaoyutai Islands, and other islands in the South China Sea. But recently ASEAN leaders held a summit in the Cambodian capital of Phnom Penh. Each of these governments evinced a pragmatic "economics first" attitude. They actively promoted free trade agreements (FTAs). An Asian free trade bloc is rapidly forming. The Republic of China must not allow itself to be excluded from this bloc, and isolated. Otherwise it will be increasingly marginalized. Exclusion from this bloc will be highly detrimental to its national growth.
Recently South Korean President Lee Myung-bak landed on the island of Dokdo. The Japanese refer to the island as Takeshima. His landing touched off a sovereignty dispute between Japan and South Korea. Relations between Mainland China and Japan are tense due to a sovereignty dispute over the Diaoyutai Islands. Observers initially assumed that free trade negotiations between Mainland China, Japan, and South Korea would run aground due to these disputes. But the three governments were not deterred by the territorial sovereignty disputes. They announced the official start of trilateral FTA negotiations during an ASEAN meeting between Mainland Chinese, Japanese, and Korean trade ministers.
Mainland China, Japan, and South Korea will begin the first round of negotiations next year, in March and April. They will establish a Free Trade Region encompassing Mainland China, Japan, and South Korea. It will be the third-largest regional market in the world. It will include a population of 1.5 billion. It will include the world's second and third largest economies. Its gross domestic product (GDP) will be valued at 14.3 trillion US dollars. South Korea estimates that over the medium to long term, its GDP growth rate will increase by 1.45 percentage points.
Mainland China, Japan, and South Korea and other ASEAN members, sixteen altogether, will officially begin negotiations over a comprehensive regional economic partnership (RCEP) early next year. Those ready to join the RCEP include 10 ASEAN nations, Mainland China, Japan, South Korea, Australia, New Zealand and India.
The United States has been promoting its Trans-Pacific Strategic Economic Partnership Agreement (TPP). It hopes to deepen economic cooperation and trade relations with countries in this region. It hopes to consolidate U.S. influence in Asia. It hopes to avoid a shift in power from the US to Mainland China. But Mainland China and South Korea chose not to join. Japanese Prime Minister Yoshihiko Noda made membership part of his election platform. But the Democratic Party may lose and be forced to hand over power after the general election in December.
To avoid losing the upper hand, U.S. President Barack Obama spoke with ASEAN leaders. He approved the expansion of economic exchanges between the US and ASEAN. He hopes to increase trade and investment relations between the United States and the 10 ASEAN countries. He hopes the TPP will pave the way for ASEAN countries to participate in this United States initiative. Current TPP members include Singapore, Brunei, Malaysia and Vietnam. The United States hopes that the other six ASEAN countries will join as well.
But for other countries in Asia, strategically and economically, Mainland China is becoming more important than the United States. One reason is geographical. Mainland China is right in front of them. Exchanges are extremely convenient. Another reason is economic. The US has been in recession for years. Its fiscal house is not in order. It pays less than Mainland China. A third reason is markets. The population of Mainland China is enormous, its buying power is great. Governments make trade-offs. They have their own calculations. They look to see who can offer them the best deal.
Political struggles call for one to take a stand on principle. But to promote the national interest, one must often avoid confrontation. One must actively and pragmatically promote economic and trade relations. One must demonstrate flexibility. One must use one's chips as effectively as possible, to ensure national prosperity. For example, Mainland China, Japan, and South Korea are fighting bitterly over the Dokdo and Diaoyutai Islands. But this has not prevented their fiscal and economic officials from participating in free trade negotiations.
Now take Taiwan. It has expressed a desire to join the TPP. But TIFA negotiations with the United States must be restarted. A Taiwan-US free trade agreement is a long way off. It is even farther off than the TPP. Singapore was the first country to begin signing FTAs with others. But so far negotiations have not led to agreements. The only completed agreements have been ECFA between Taiwan and the Mainland.
FTA negotiations are complex. In particular, imports of agricultural products are sure to impact local industry. Negotiations must proceed cautiously. Otherwise they may lead to a domestic backlash. Taiwan's FTA negotiations have been so slow that people have become impatient.
Mainland China, Japan, and South Korea are officially launching free trade negotiations. Negotiations over RCEP are also set to begin. An Asian free trade bloc is forming. Taiwan's economy is heavily dependent upon trade. It must not allow itself to be excluded from these FTA circles. Otherwise its plight will be even more difficult. According to the Ministry of Economic Affairs, the Mainland China, Japan, and South Korea FTA will cause Taiwan's exports to fall by 1.17%. The decrease in real GDP will be 1.155%. That is over 130 billion NT dollars. Once the RCEP is signed, the estimated impact on Taiwan will increase to between five and ten percent. This is a time of economic recession. Such numbers are salt rubbed into the wound. How can one not be frightened?
Other economies are benefitting from dramatically reduced tariffs. Taiwan meanwhile, must cope with higher capital costs and barriers to trade. Other economies are benefitting and assisting each other. Taiwan meanwhile, must go it alone. Our economic competitiveness is being affected. The government must accelerate the pace of FTA negotiations. It must seek participation in regional free trade blocs. Time waits for no man. We cannot afford to fall behind. An Asian free trade circle is forming. Taiwan cannot afford to wait. He who hesistates is lost.