TIFA: First Test for New Cabinet
United Daily News editorial (Taipei, Taiwan, ROC)
February 6, 2013
Summary: The government's new fiscal policy cabinet is gradually taking shape. Everyone is looking forward to cooperation between the old and new cabinet members. They hope the cabinet can make a fresh start. Two major issues need to be addressed immediately. One. Talks are about to resume for the Taiwan-US Trade and Investment Framework Agreement (TIFA). Two. Cross-strait trade agreement negotiations are about to become a touchstone for the new cabinet. A cross-strait agreement is nearing completion. TIFA is about to begin. These are real tests for the new cabinet.
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The government's new fiscal policy cabinet is gradually taking shape. Everyone is looking forward to cooperation between the old and new cabinet members. They hope the cabinet can make a fresh start. Two major issues need to be addressed immediately. One. Talks are about to resume for the Taiwan-US Trade and Investment Framework Agreement (TIFA). Two. Cross-strait trade agreement negotiations are about to become a touchstone for the new cabinet. A cross-strait agreement is nearing completion. TIFA is about to begin. These are real tests for the new cabinet.
TIFA is a platform for Taipei and Washington to deal with bilateral economic and trade issues. Taipei and Washington may have other channels of communication for individual issues. But TIFA is the only high level, formal, consultative mechanism between Taipei and Washington that encompasses all ministries. It is a means by which we can join the Trans-Pacific Partnership Agreement (TPP). Therefore we must succeed. Failure is not an option.
TIFA is still a long way from becoming a free trade agreement (FTA). But it can serve as a starting point for a Taipei-Washington FTA and TPP. TIFA has two main functions. One. It enables negotiations over individual issues such as insurance agreements, inspection standards, and e-commerce cooperation. It strengthens bilateral economic and trade relations. It lays a cornerstone for a future FTA. Two. It gradually eliminates economic and trade barriers between Taipei and Washington. It helps us gains future TPP membership.
But the relationship between Taipei and Washington is asymmetrical. For us the goal of TIFA is a Taipei-Washington FTA. But for the U.S. a Taipei-Washington FTA is not its preferred solution. Therefore Washington focuses more on the elimination of trade barriers. Put simply, Washington gauges our determination to liberalize by how vigorously we eliminate trade barriers. This also determines whether TIFA can become the mechanism for normal dialogue.
Consider the nature of Taipei-Washington trade barriers. Some people look forward to further liberalization by both sides, based on commitments to the World Trade Organization (WTO). Others seek the fulfillment of WTO obligations. To the former, Taipei must voluntarily engage in self-examination and implement reform. Otherwise, the failure to do so will become an obstacle to a future Taipei-Washington FTA or TPP. To the latter, Taipei must fulfill its obligations. Therefore Washington considers its demands entirely righteous. Failure to fulfill these obligations will be the main source of pressure. These matters issues cannot be delayed until negotiations over an FTA or TPP. They must be to resolved in advance. Only then will we be in a sound negotiating position. Only then can we hope to gain future TPP membership.
The trade barrier Washington is most concerned about is for clenbuterol or ractopamine treated U.S. pork. This is the most controversial issue. It is likely to be the most difficult issue during renewed TIFA talks. Under WTO rules, the maximum amount of ractopamine residues allowed in meat products should be based on international standards. If the importing country has different eating habits, or wishes to set more stringent standards, it must cite scientific evidence.
The U.S. beef imports controversy early last year was actually an advance skirmish in the battle over US pork imports. In the U.S. beef imports case, the government eventually cited scientific arguments and the residue limits specified by the United Nations Codex Alimentarius Commission (Codex). It established open standards. But the Codex international standards also apply to pork, chicken, duck, and other poultry products. Therefore past claims that ractopamine is safe also apply to pork. Never mind that we have already accepted international standards for beef. If we want pork treated differently we must summon up even more scientific evidence.
Domestic beef production accounts for only 7% of domestic beef consumption. The market is also segmented. Domestic beef is mostly isothermal. Therefore opening up the market to U.S. beef is unlikely to impact the domestic beef industry. Even then, it generated enormous controversy. Pork is the public's most important meat product. Domestic pork production meets 94% of all domestic pork demand. US pork, especially organ meats and pigs feet, are priced much lower than domestic pork. The impact from increased US pork imports would vastly exceed the impact from US beef imports. A backlash is predictable. Moreover the government has already committed to treating beef and pork differently. It cannot take back what it said. This makes a solution even more difficult.
Three responses are needed. One. TIFA is a "framework agreement." We hope ractopamine is not on the early harvest list. First build the framework. Then deal with this issue later. That would be best for both sides. Two. Our eating habits differ from people in the West. Ractopamine treated U.S. beef has been allowed in. But restaurants all over display "We serve only Australian or New Zealand beef" signs. This can be cited during negotiations with Washington. Three. US pork can in fact be imported. It is merely that they must not contain ractopamine. Therefore there is still room for negotiation. Washington need not make a fuss over this issue.
But most importantly, we must improve the quality of domestic pork and of its marketing. A Taipei-Washington FTA or TPP means a more open environment. We may enjoy a temporary buffer period. But eventually US pork will have to be allowed in. Therefore we must strengthen our competitiveness. That is the only way for long-term development of the pork industry. Ultimately we will have to solve the problem with a "We use only domestic pork" approach.