September 26, 2013
The Stimson Center: Taiwan’s Trade Politics
Alan D. Romberg: Director of East Asia programs, Stimson Center
Dr. Ho Szu-yin: Professor, Tamkang University
Since joining the World Trade Organization (WTO) in 2002 Taiwan has managed to forge only one meaningful trade pact, the Economic Cooperation Framework Agreement with China. The East Asia region is quickly developing global economic powers and Taiwan’s neighbors, such as Japan, South Korea, and the developing RECP trade agreements are working to promote economic development and establish Free Trade Agreements throughout the region. These developments threaten to exclude Taiwan and diminish the country’s influence in the region and on the global scale. Taiwan’s GDP is largely dependent on trade and it is essential that Taiwan continue to develop its trading, join new trade blocs and forge new, more advantageous, deals. However, despite the urgent need, expanding the country’s trade is proving difficult, due to both internal and external factors.
Dr. Szu-yin indicated that passing trade deals is difficult in Taiwan due to the country’s political framework, the public’s perception of the government, and a general concern that Taiwan will lose its independence if it relies too heavily on foreign trade. A recent study conducted by Dr. Szu-yin, with help from the Election Study Center, found that over 75% of Taiwanese citizens believe their taxes are spent on wasteful projects, 40% don’t trust the government to act in the public’s interest. With such low trust in the government it is hard to convince the public of the need to reform national practices for the sake of more advantageous trade deals, like joining the Trans-Pacific Strategic Economic Partnership (TPP). Dr. Szu-yin called on the government to do more to engage and educate the public on new policy initiatives, such as making the legislative process more transparent.
However, Dr. Szu-yin also described the ineffective labyrinth of government legislators, ministers, and committees, which must approve any trade agreements on an article-by-article basis, as being one of the crucial hindrances in creating new trade deals. The current legislative process in Taiwan is slow, non-transparent, and ineffective. A recent attempt by Dr. Szu-yin to approve agricultural trade with the U.S. needed to be approved by three separate ministries (agriculture, health, and economic affairs), which would then, if approved, pass it on to a divided parliament, and then have party leaders vote on the deal behind closed doors in the Caucus Consultation Committee (a committee made up of two members from each caucus in the parliament). Dr. Szu-yin described this method of governing as ineffective and demands too much effort and coordination from different sectors of government and places the final decision in the hand of a select few. A new, more efficient and transparent, method of passing legislation is needed so that Taiwan can conduct international business in a quick and orderly fashion
These internal factors are not the only thing holding up Taiwan’s trade policies. Dr. Szu-yin identified China as a major obstacle in Taiwan’s attempts to establish regional FTA agreements. As the largest economy in the region, and second largest in the world, China has considerable clout in economic negotiations and exert influence in deals that threaten its special relationship with Taiwan. China, which stresses that it and Taiwan are a single country, treats any FTA deals regarding Taiwan as having serious political implications. China dominates trade in the East Asia region and so is able to exercise influence and impede attempts by Taiwan to engage in the RECP and other regional deals. Though China insists it would like to see Taiwan’s economy grow and develop it does so on the stipulation that Taiwan’s trade be conducted through China, that they act as a single body, and thus kill Taiwan’s independence.
Dr. Szu-yin pointed out that the fear of China using trade to steal Taiwan’s independence could be avoided by pursuing membership in the TPP rather than the regional RCEP. However, Taiwan’s inner workings are not effective enough to instigate the necessary institutional changes that could make the TPP a reality. The coordination that would be necessary between ministries is not there, the transparency and communication from the parliament and the higher up Caucus Consultation Committee are not enough to assure the public that they are acting in their greater interest, and the lack of an efficient up-down voting process with which to pass legislation make future deals unlikely. Dr. Szu-yin was skeptical that Taiwan could pass these deals and take part in the developing regional trade. However, it is clear that Taiwan must do something to address the changing region, doing nothing will result in stagnation and decline, a risk must be taken to progress Taiwan’s standing in the region and on the global economic stage.