Taiwan's free trade
troubles By Mac William Bishop
TAIPEI - Hardly a day goes by without some news
about free trade agreements (FTAs). Right this minute,
tired trade officials somewhere are undoubtedly
hammering out the final details of a bilateral trade
pact. Taiwan officials wish they could say the same.
Establishing an FTA, or an economic pact that
lowers and eliminates some tariffs on some goods, is a
definite accomplishment in the realm of economic policy,
and therefore much prized by politicians, who then can
point to expanding investment and prosperity (they
hope). Taiwan is no different.
In 2003, Taiwan
had approximately US$143 billion in exports, and $119.6
billion in imports. It is a member of the World Trade
Organization (WTO) and thus obliged to reduce tariffs
and open markets under its accession agreement. Taiwan
also has thousands of economic agreements of various
types, as do most countries, but most are very specific
accords, ie, ships from one country can fish in
particular waters of a particular country at a
particular time. What an FTA can do is take all of these
things and consolidate them into one neat package.
Taiwan's politicians and business leaders are no
different than their counterparts elsewhere, despite the
fact that Taiwan's claim to statehood is vigorously
disputed by one of the world's most influential emerging
markets: China. Of the United Nations 191 member states,
only 27 recognize Taiwan as a sovereign state, thanks to
Taipei's lavish checkbook diplomacy and despite
Beijing's efforts to isolate the country diplomatically.
Still, Beijing needs Taiwan's investments. China isn't
necessarily trying to block all of Taiwan's
international accords, but it is trying to tighten the
diplomatic noose. Beijing didn't really mind when Taiwan
joined the WTO, so long as it didn't join as the
"Republic of China" or "Taiwan". So Taiwan joined as
"The separate customs territory of Taiwan, Penghu,
Kinmen and Matsu".
Despite trading all over the
world, Taiwan has only one FTA, with Panama. Many
nations, eager to enter the burgeoning China market, are
reluctant to enter into such FTA pacts that recognize
Taiwan as a sovereign entity, lest they alienate
Beijing.
The political dispute with China over
political connections and unification has had rather
unfortunate results for Taiwan's efforts to expand its
markets and boost its trade. Most recently, this can be
seen in Taiwan's efforts to negotiate a bilateral FTA
with Paraguay.
China outmaneuvers Taiwan on
Paraguay FTA The "Paraguay Problem" should stand
as a textbook example of the proper application of soft
power in a multilateral international institution in
order to further a nation's diplomatic goals.
Unfortunately for Taiwan, however, China is adroitly
outmaneuvering the island, which Beijing often claims is
an unruly prodigal province.
Taiwan has a mere
27 diplomatic allies, or countries that have established
formal state-to-state relations with Taipei. Most of
these were acquired through the liberal use of dollar
diplomacy, although Taiwan's Ministry of Foreign Affairs
officially denies that such financial inducements are
sanctioned, or indeed, even necessary.
One of
these allies is Paraguay. Taiwan provides more than
US$20 million in investment, lending and technical
assistance projects to that Latin American nation, and
it is attempting to expand business ties with Paraguayan
companies and to increase investment in small- and
medium-sized enterprises, or SMEs.
Taiwan is
working to expand its economic influence in South
America through negotiations with Paraguay over a
bilateral FTA. Later this month, starting next week on
July 19, Taiwan's minister of economic affairs, Ho
Mei-yueh, will lead a delegation to Asuncion. She will
try to push the stalled negotiations forward, but few
analysts think she will succeed.
"The
[Taiwan-Paraguay] talks are in trouble," said deputy
director-general Wu Chin-mu of Taiwan's Ministry of
Economic Affairs' department of South and Central
America.
The problem is China and its influence
with Argentina and Brazil. Both countries recently sent
high-level delegations to Beijing and both are members
of Mercosur, the South American Common Market, a
regional body designed to facilitate trade in South
America. Paraguay and Uruguay are also members.
"Paraguay has to obtain the consent of all the
members of Mercosur to be able to sign an FTA with
Taiwan," Wu said. And that consent isn't likely to be
forthcoming.
Argentina, Brazil pressuring
Paraguay to recognize China Argentinean President
Nestor Kirchner spent the first week of July traveling
to China, where, among other things, he reportedly
assured Beijing that his government was working with
Brazil to pressure Paraguay into switching its
diplomatic recognition from Taiwan to China.
Trade agreements are central to this issue.
"China ... wants to sign an FTA with Mercosur,"
Wu explained. "It says that Paraguay is the problem. It
wants Paraguay to become its ally."
At the
moment, the government in Asuncion is not receptive to
pressure from Brasilia and Buenos Aires. In fact, some
observers say, the obvious attempts to influence
Paraguay's foreign policy have only reinforced its
support for Taiwan.
Not all of Taiwan's
aspirations are being thwarted by Beijing, however.
Taiwan has managed to sign one free trade agreement.
Last August, after a round of marathon negotiations
begun nearly a year earlier, Taiwan and Panama signed an
FTA, Taiwan's first - and so far only - such agreement.
Still, most of Taiwan's effort in terms of trade
negotiations has been toward inking a pact with
Washington. The key obstacle to a Taiwan-US FTA is not
Beijing, however, but intellectual property rights (IPR)
infringement.
At a recent speech hosted by the
American Chamber of Commerce in Taipei, the outgoing
economic and trade chief of the American Institute in
Taiwan, William Weinstein, said foreign companies lost
$452.7 million in copyright piracy in Taiwan last year
alone.
US: Taiwan flouts intellectual
property rights Weinstein said that IPR
infringement, in addition to travel and trade
restrictions and opaque government procurement
processes, were the biggest hindrances to the US
acceding to a free trade deal with Taiwan. The US,
despite China's consistent protests, maintains de facto
relations with Taiwan and has promised to come to its
defense if necessary.
Weinstein's message wasn't
falling on deaf ears in Taipei. The US has consistently
complained of these issues to Taiwan, and most analysts
say that the number one priority for Taipei is
tightening the government's lax protection of
copyrights.
Substantial progress is being made.
On Saturday, July 10, Taiwan's government officially
closed one loophole that had existed in its copyright
protection laws for almost 40 years. The loophole
allowed any movie released before 1965 to be exempted
from copyright protection laws: hence the huge number of
classic films - everything from Casablanca to
The Hustler - that were available in Taiwan's
street markets, each for less than one US dollar.
Now that the loophole has been closed, the films
are no longer considered exempt from the copyright
protection laws, and companies such as Evervision Corp
and AV Book Corp will be forced to seek other forms of
revenue.
As a result of such progress, there has
been talk that the US is considering removing Taiwan
from its "Special 301" watch list of IPR violators.
Rhetorically, President Chen Shui-bian's
administration has made a Taiwan-US FTA its primary
trade focus. At the end of May, Premier Yu Shyi-kun
announced that the government was setting up a "special
task force" - a standard phrase employed by the
government, which cynics say signifies that nothing will
happen - to expedite the trade negotiations with the US.
What a "special FTA negotiation task force"
means in practical terms is certainly open to question,
but nonetheless it played well in the media.
In
many respects, the true purpose of an FTA is as
political as it is economic. As Premier Yu himself said
when announcing the task force, "We might not benefit
much from the agreement, but we're bound to be worse off
economically, politically and diplomatically if we don't
pursue it."
If Chen ever does sign a trade pact
with the US - something analysts say is virtually
impossible before the US presidential elections in
November - you can be sure that Taipei will waste no
time in turning its success into a propaganda whip with
which to beat its hobbyhorse: the supposedly
debilitating (for Taiwan) effects of increased
cross-Strait economic interaction.
Mac
William Bishop is a journalist based in Taipei.
Comments or queries may be sent to
mwbtaiwan@hotmail.com.
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