Wednesday, July 10, 2013

Taiwan New Zealand FTA: First the Mainland, then the World

Taiwan New Zealand FTA: First the Mainland, then the World
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
July 11, 2013 

Summary: The Economic Cooperation Agreement between Taipei and Wellington has been signed without a hitch. Cross-Strait relations should have no trouble keeping up with the times. Taipei's desire to join the TPP and RCEP will no longer be a distant dream.

Full text below:

Yesterday the Republic of China and New Zealand signed an Economic Cooperation Agreement (ECA). This is the first free trade agreement (FTA) signed with a developed nation or a nation with which Taipei lacks diplomatic relations. The agreement has considerable symbolic significance. Taipei and Beijing recently signed TISA. The signing of the ECA between Taipei and Wellington was completed without a hitch. This may soon be followed by an Economic Partnership Agreement (ASTEP) between Taipei and Singapore. These agreements prove that the Ma administration's "First the Mainland, then the World" strategy was correct and feasible.

New Zealand is Taiwan's fourth largest trading partner. Bilateral trade volume is not large. Last year trade amounted to 1.2 billion US. Taiwan's imports from New Zealand are mostly dairy products, fruit, frozen beef and mutton, and other agricultural products. Taiwan's exports to New Zealand are mainly petroleum products, machine parts, bicycles, and other industrial products.

Once the Taipei Wellington Economic Cooperation Agreement goes into effect, tariffs will be gradually reduced over a 12 year period. According to estimates, GDP will increase approximately 600 million US. Total employment will increase 6,200 person years. Manufacturing will increase 0.19%. Services output will increase 0.06%. These sectors are the principal beneficiaries. Agricultural output will be reduced by 0.29%. This sector will be the most negatively impacted. But as experts have pointed out, New Zealand is in the southern hemisphere. Their agricultural seasons are the opposite of Taiwan's. New Zealand's agricultural products are subject to tariff quotas or sub-annual tariff reductions. Products imported to Taiwan from Chile and Australia may be squeezed out. Therefore, the initial impact will be limited. Nevertheless, opening up Taiwan to agricultural imports is a sensitive issue. The authorities must communicate with farmers and the legislature to minimize controversy.

The Economic Cooperation Agreements between Taipei and Wellington, and between Taipei and Singapore have been signed without a hitch. The two countries account for only a small percentage of ROC foreign trade. But internally, the two agreements underscore the government's determination to promote FTAs. They also reduce public concerns about the TISA agreement between Taipei and Beijing. Externally, they may reduce other countries' political concerns over FTAs with Taipei. This is highly significant. Now our greatest concern is what should the government do next? With which countries should it negotiate FTAs? How can it promote Taipei's participation in the TPP (Trans-Pacific Strategic Partnership Agreement) and the RCEP (regional comprehensive economic partnership)?

Beijing sees signing FTAs and participating in regional economic integration as the prerogative of a sovereign state. By exercising that prerogative, Beijing has established two political prerequisites for Taipei. One. Taipei must first conclude negotiations over ECFA and related agreements with Beijing. It must establish a free trade relationship across the Taiwan Strait. Two. Before Taipei negotiates and signs FTAs with others, it must first sign FTAs with Beijing. So far Beijing has signed FTAs with Pakistan, Chile, Peru, Costa Rica, Iceland, and Switzerland. In 2010 Hong Kong and Wellington signed a Closer Economic Partnership Agreement. Therefore from Beijing's perspective, once Taipei and Bejing signed TISA, the way was cleared for Taipei and Wellington to sign an ECA. The ASTEP signed between Taipei and Singapore was also acceptable to the Mainland. If it can be signed before the trade in goods agreement between Taipei and Beijing, then Beijing will have offered Taipei a gesture of goodwill.

The first batch of countries Taipei will negotiate FTAs with will of course be its main trading partners. These include the United States, the EU, Japan and the ASEAN countries, but not Singapore. Beijing's political framework however, may impose limits. Some have noted that the government intends to sign FTAs with Chile and Switzerland. Switzerland signed an FTA with Beijing only recently, on July 1 of this year. Chile and Switzerland conduct less trade with us than New Zealand and Singapore. Yet negotiations were more time-consuming. Taiwan's exports have been negatively impacted by South Korea's FTAs with other countries. South Korea is the ROC's primary rival. The ROC's FTAs with Chile and Switzerland are clearly not enough to increase our competitiveness vis a vis South Korea.

We must ensure that our "First the Mainland, then the World" strategy continues to bear fruit. The Ma administration must breakthrough and join the TPP and the RCEP. In late May, Beijing's Taiwan Affairs Office Director Zhang Zhijun told the United Daily News the solution includes two keys. One. Quickly conclude ECFA follow-up negotiations, and increase cross-Strait economic cooperation. Two. Improve cross-Strait communications, because the process of communication is simultaneously the process of establishing cross-Strait political trust. Zhang Zhijun's statement did not depart from the Mainland's political framework. But it underscored a degree of flexibility in Beijing's approach to problem solving and policy formulation.

The Ma administration should accelerate negotiations over the cross-Strait trade in goods agreement and dispute settlement mechanisms. The highest priority is public peace of mind. The administration must ensure the smooth implementation of a full range cross-Strait policy blueprint, TISA, and a cross-Strait trade in goods agreement.

The government must remain forward-looking and pragmatic. It hopes to join the TPP and RCEP. It must improve cross-Strait communication. It must facilitate multipary dialogue and communication. It must emphasize the "big roof concept of China." It must promote regional cooperation and mutual trust. It must ensure Taipei's participation in regional economic integration.

The Economic Cooperation Agreement between Taipei and Wellington has been signed without a hitch. Cross-Strait relations should have no trouble keeping up with the times. Taipei's desire to join the TPP and RCEP will no longer be a distant dream.

2013.07.11 03:47 am











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