Free Trade Zones: Regional and Local

Free Trade Zones: Regional and Local
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
December 24, 2012

Summary: Free Trade Zone plans will soon be finalized. The government is participating in the Pan-Pacific Partnership Agreement (TPP). This is an important step in Taiwan's transformation into a Free Trade Island. But economic liberalization is a difficult and complex task. It must proceed step by step. It must be effectively promoted and carefully planned.

Full Text below:

Free Trade Zone plans will soon be finalized. The government is participating in the Pan-Pacific Partnership Agreement (TPP). This is an important step in Taiwan's transformation into a Free Trade Island. But economic liberalization is a difficult and complex task. It must proceed step by step. It must be effectively promoted and carefully planned.

Taiwan's economic development is a tale of economic liberalization. During the 1960s, it negotiated an economic bottleneck. The economy underwent its first large-scale liberalization. Taiwan took a giant step toward a market economy. During the 1980s, a massive trade surplus built up between Taiwan and the United States. This led to economic liberalization, open markets, and a significant reduction in tariffs. During the mid-1990s, we aspired to join the World Trade Organization (WTO) and to become an Asian-Pacific Regional Operations Center. We liberalized our economy, including financial services, and adopted international standards.

Back then, we liberalized three times. Today the Ma administration confronts a grim economic future. Its plight is similar to what it was back then. In 1993 the government countered an economic slump by promoting a private sector stimulus package. The six-year National Development Plan created a serious fiscal deficit. The global economic center of gravity quickly shifted to Asia, including ASEAN and Mainland China. This liberalization gave Taiwan's economy a shot in the arm. The program loosened constraints. It prescribed an Asian-Pacific Regional Operations Center. This would serve as a pilot program for a Free Trade Zone -- one which would include the entire Taiwan region. The Ma administration is thinking along the same lines with its Free Trade Zone.

Unfortunately the program establishes a Special Administrative Region. From a planning perspective, incremental regional liberalization and limited local liberalization are very different matters. In practice, implementing tariff exemptions on imported goods within an SAR is difficult. Unless one applies Export Processing Zone bonding, it fails to provide a test case. The service sector requires market access. A market that is open only inside an SAR holds no attraction for industry. Some service industries serve global or regional markets. These include finance, shipping, and professional services. These service industries cannot be limited to any particular geographical region. Feasibility studies have been conducted. The Asian-Pacific Regional Operations Center was eventually revised in accordance with industry requirements. It was replaced by an incrementally liberalized Asia-Pacific Regional Operations Center.

The Free Trade Zone is a TPP pilot program. It faces the same problems as the Asian-Pacific Regional Operations Center. The TPP is incompatible with a geographically delimited and incrementally liberalized SAR. It is incompatible with zero tariffs in import goods  or a comprehensive liberalization of the service industries. Should the Free Trade Zone be changed into a virtual SAR? Should it be changed into an incrementally liberalized Free Trade Zone? Or should it remain a geographically delimited SAR? Should the government choose another, more viable project to demonstrate incremental liberalization?

In order to join TPP as soon as possible, the government must promote the Free Trade Zone. It must adopt a two-pronged approach. It must simultaneously promote the Taiwan Regional Free Trade Zone and the Designated SAR Local Free Trade Zone. It should draw from international free trade agreements (FTAs). Some goods and services are global in nature. They cannot be confined to certain geographical regions. They must be granted incremental tariff cuts and market openings. The government should adopt a Regional Free Trade Zone approach. It should allow vulnerable industries to gradually adapt. The rules for personnel transfers, the introduction of foreign professionals, technicians, and senior managers, should must be Taiwan wide. This is essential for industrial restructuring and upgrading.

The government can establish SARs for industries with development potential. It can provide support and new administrative models. These would serve as local pilot programs to promote future comprehensive opening. . Cross-Strait relations are unique. The gap between the sizes of the two sides' economies is great. Large numbers of Mainland-funded enterprises and Mainland professionals could arrove on Taiwan. To alleviate such concerns, the government can implement cross-Strait economic cooperation in the SAR pilot program zones first. It can substantially relax restrictions on investments by inland enterprises and the entry of Mainland professionals. It can establish a favorable balance in capital and talent flows. This would benefit both sides by establishing a win-win cooperative model, one that would incrementally applied to Taiwan as a whole.

The purpose of the Free Trade Zone is to prepare ourselves for TPP membership. Therefore it must not include non-standard, non-universal, preferential treatment. It must not include tax relief, cheap land, and foreign labor employment privileges. Relying on incentives to attract corporate investment, in preparation for economic liberalization, amounts to a contradiction in terms, and has no value as a pilot program.

In sum, the Free Trade Zone must integrate past experience with future ambition. It must begin with a regional pilot program and expand outward. It must begin with a local pilot program while striving for a breakthrough. It must enable us to join the TPP and become a Free Trade Island. 

自由經濟：全區示範或局部示範
【聯合報╱社論】
2012.12.24 02:48 am

「自由經濟示範區」規劃案將於近期內定案，這是政府為參加「泛太平洋夥伴關係協定」（ＴＰＰ）、進而建設台灣成為「自由貿易島」所跨出的重要一步。惟經濟全面自由化是一艱鉅複雜的工程，如何按部就班、有效推動，須有周密思考。

台灣經濟發展可說是一部經濟自由化歷史：一九六○年代為突破管制經濟的瓶頸，推動第一次大規模經濟自由化，大步邁向市場經濟；一九八○年代因應台美巨額貿易順差，推動第二次經濟自由化，大幅降低關稅及開放市場；一九九○年代中期為加入世界貿易組織（ＷＴＯ）及發展「亞太營運中心」，推動第三次經濟自由化，大幅開放金融及服務業巿場，積極和國際接軌。

回顧當年推動笫三次自由化經驗，和今天馬政府面對的嚴峻情勢，有很多雷同之處。一九九三年政府為因應景氣持續低迷而推出以促進民間投資為宗旨的「振興經濟方案」，當時考量六年國建計畫導致嚴重財政赤字問題，又鑑於全球經濟重心正快速轉移到包括東協及中國大陸的亞洲地區，因此特從自由化切入，為台灣經濟尋找新的動能。該方案除著重在制度面鬆綁外，也提出規劃「亞太區域營運特區」的政策方向，作為自由貿易區的試點，再擴大實施到整個台灣地區。此一構想和當前馬政府「自由經濟示範區」思考方向幾如出一轍。

問題在於劃設特區的構想，在規劃過程中即有漸進式的「全區自由化」和限於特區的「局部自由化」兩種不同的政策思辨。在實務上，貨品進口關稅減免除非是類似加工出口區的保稅概念，在特區單獨實施既難管理，亦無示範效果。服務業講求的是市場可及性，在範圍有限的特區內開放市場，對業者不具吸引力；以全球或區域市場為目標的服務業如金融、航運等專業服務業，更無法以地理區域作為分隔。經過可行性評估，「亞太區域營運特區」最後被依產業特性規劃、漸進式自由化的「亞太營運中心」所取代。

現在作為ＴＰＰ試點的「自由經濟示範區」，和當年「亞太區域營運特區」面臨類似問題，因為ＴＰＰ重心正是實務上不適合在地理特區進行局部試驗的進口貨品全面零關稅和服務業大幅開放。那麼，究竟「自由經濟示範區」應否改為虛擬特區，作漸進式自由化的「全區示範」？或仍維持地理特區，另行擇取可行項目作自由化的「局部示範」？

我們認為，為及早達成加入ＴＰＰ目標，推動「自由經濟示範區」應從台灣全島的「全區示範」和劃設特區的「局部示範」雙管齊下。參考國際間廣義自由貿易協定（ＦＴＡ）涵蓋的範圍，針對須面向全球、不適合在特定區域實施的貨品及服務業貿易自由化，宜採漸近調降關稅及市場開放方式，進行「全區示範」，讓弱勢產業能夠逐步調適。在人員移動方面，對外國專業技術人才及高階經理人的引進，亦應盡可能全台灣適用，才有利於產業轉型升級。

另一方面，政府可劃設特區發展具潛力的未來性產業，提供配套協助及全新的行政管理模式，作為將來全面推廣的「局部示範」。另因兩岸關係特殊且經濟規模差距極大，為降低陸資企業及大陸專業人才大量來台的可能顧慮，亦可在特區內進行兩岸經濟合作先期示範，大幅放寬區內陸企投資及引進大陸專業人才限制，建立有利資金、人才雙向平衡、互利雙贏的新合作模式，再逐步推廣至全台灣。

必須注意的是，自由經濟的示範特區既是為加入ＴＰＰ作準備，就不應給予各種非常態、無法全面適用的優惠待遇，包括減免租稅、廉價土地、外勞雇用特權等，因為：若靠各種獎勵措施吸引企業投資，和為經濟自由化調適作準備，完全背道而馳，毫無示範意義的存在。

總而言之，「自由經濟示範區」須有總結過去經驗、開創未來願景的企圖心，從「全區示範」逐步擴大基礎；從「局部示範」力爭重點突破，以為加入ＴＰＰ及建設「自由貿易島」設定完善、可行的路徑圖。