China Times Editorial (Taipei, Taiwan, ROC)
October 7, 2015
Executive Summary: Two images compete for our attention. On the 4th of this month, the 12 member states of the US-led TPP (Trans-Pacific Partnership) announced the conclusion of substantive negotiations. On the 6th of this month, Democratic Progressive Party Chairman Tsai Ing-wen, who may well become president next year, left for Japan, to increase her International capital, strengthen Taiwan-Japan relations, and kick off her "New Southern Policy". Within the Great Game of Nations, Tsai Ing-wen's New Southern Policy offers both visible opportunities and hidden risks.
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Two images compete for our attention. On the 4th of this month, the 12 member states of the US-led TPP (Trans-Pacific Partnership) announced the conclusion of substantive negotiations. On the 6th of this month, Democratic Progressive Party Chairman Tsai Ing-wen, who may well become president next year, left for Japan, to increase her International capital, strengthen Taiwan-Japan relations, and kick off her "New Southern Policy". Within the Great Game of Nations, Tsai Ing-wen's New Southern Policy offers both visible opportunities and hidden risks.
The TPP required 10 years to complete. It is the most closely watched regional free trade organization in recent memory. It is an important chess piece in the global geopolitical struggle. The 12 Member States of the TPP account for 36% of global GDP, and 30% of global trade volume. When it was established in 2006, the TPP included only four small nations, among them Singapore and Brunei. The United States joined later, then took control. Backdoor listing enabled Obama to "return to Asia", to keep Asian countries on a short leash, to be used as pawns countering the rise of Mainland China. TPP member nations include Japan, the world's third largest economy, as well as Canada, Chile, Mexico, Peru, Australia, Brunei, Malaysia, New Zealand, Singapore, and Vietnam. Mainland China is excluded.
Mainland China however, has adopted countermeasures. In 2010, the ASEAN plus One free trade zone was established. More importantly, this year Mainland China established the Asian Infrastructure Investment Bank (AIIB). Mainland China's One Belt, One Road offers a wealth of business opportunities. Central Asia, the Middle East, Europe, Southeast Asia, and India in South Asia, all fall within the One Belt, One Road. Mainland China dominates. The RCEP (Regional Comprehensive Economic Partnership Agreement), currently being negotiated, is another Mainland China-led regional economic and trade organization intended to counter the US. Needless to say, the United States has been excluded from these.
The 10 ASEAN nations include 600 million people. Their overall share of global GDP is less than 4%. But over the past 10 years, the share has grown steadily. Traditionally, by means of the Asian Development Bank, Japan has maintained total control over ASEAN. Since the establishment of the Mainland China and ASEAN Free Trade Area Zone however, bilateral economic and trade relations have bloomed. Mainland China is ASEAN's largest trading partner. It is the region's largest source of foreign investment. In response to the AIIB, Japan has added 100 billion USD to Asian Development Bank accounts. Obviously it seeks to dominate ASEAN and South Asia economic and trade relations.
Taiwan is caught within this Great Game of Nations, which presents both risks and opportunities. For Taiwan, its best strategy is the one adopted by the Southeast Asian nations, New Zealand, and Australia. It is to seek the best of both worlds, avoid offending either side, and to join every economic and trade organization it can, in order to maximize its economic benefits. If one cannot have it both ways, then at least one should avoid offending either side. Otherwise, one will have to bet the farm on one side. Bet wrong and suffer the consequences.
Tsai's New Southern Policy Tsai seeks to hitch a ride with Japan and the United States, to jointly develop ASEAN, South Asian, and other markets. Taiwan High Speed Rail may join forces with Japan to help other Asian nations build high-speed rail systems. Chen era Foreign Minister James Huang is the director of the DPP International Department. Huang says that previous Southern Policy programs focused on investor relations. The New Southern Policy is more diverse. It addresses industry, tourism, youth entrepreneurship, culture, agriculture, medicine, and fisheries. It is more policy-oriented. It seeks to introduce regional talent to Taiwan, in two-way exchanges. James Huang believes these are "promising". He believes the prospects are limitless.
This is a pretty picture. But let us not forget the hidden risks. Taiwan has already tried the Southern Policy three times. The only time the results were anywhere near satisfactory, was the first time. The Asian financial crisis, coupled with Mainland China's economic rise, eventually rendered the Southern Policy unsustainable. Tsai proposes a New Southern Policy. True, it coincides with Mainland China's economic slowdown. The economic situation in Southeast Asia and South Asia, mainly India, may look better. It may promise opportunities. But Mainland China's economy is likely to get back on track next year, Southeast Asian nations face another wave of emerging economy shocks. Whether India's growth is sustainable remains to be seen. If Taiwan bets the farm on the New Southern Policy, the results could disappoint. That is the first risk.
The first Southern Policy was implemented over 20 years ago. Since then, international trade has undergone major changes. Mainland China is already the world's second largest economy. Its trade and economic power within ASEAN has tripled. Whether alone or with Japan, can Taiwan really compete with the Mainland? No one knows. That is the second risk.
What the New Southern Policy most needs is entrepreneurial will and competitiveness. The government can exert little influence, let alone lead. Consider linguistic differences, cultural differences, market size, and market prospects, as well as one's existing network of people. How companies respond to the New Southern Policy remains to be seen. That is the third risk.
Finally, a bird in the hand is worth ten in the bush. Taiwan is highly dependent upon exports to the Mainland. It should explore other markets and diversify. The New Southern Policy presents a few opportunities. It may be worth a try. But developing new markets is risky. They can easily fail. At times like these, one must first protect existing markets. No matter who comes to power, cross-Strait economic and trade relations must come first. They account for the largest share of Taiwan's exports. Taiwan will not be able to join the TPP for several years. Realistically it has no alternative. Only the MTA can prevent Taiwan's trade marginalization. Under the Great Game of Nations, the New Southern Policy seeks new opportunities. But we must also avoid the risks. Otherwise they could easily outweigh any benefits.