Page 2 of 2 Cross-strait ties grow amid storms
By Terry Cooke
China completed a flurry of trade deals with ASEAN and other trade partners
excluding Taiwan. In Taipei's thinking, a trade deal with the US would not only
bring some direct benefits to its robust trading relationship with the US, it
would more importantly provide cover for ASEAN and other potential trade
agreements to strike their own deals openly with Taiwan.
From the US standpoint, however, existing obstacles must first be removed for
there to be any possibility of entering into negotiations for a US-Taiwan FTA.
First, the US has long required thresholds of progress by Taiwan in the
existing US-Taiwan Trade and Investment Framework (TIFA) talks as a
precondition to considering a possible US-Taiwan FTA. Those thresholds have
not yet been met with respect to certain intellectual property right
protections and various sector-specific issues.
More fundamentally, the global economic crisis and the transition in the US to
a Democratic administration in the executive branch have added new
uncertainties to the FTA roadmap for Taiwan. Politically, President Barack
Obama does not yet have fast-track trade negotiating authority from Congress.
Economically, the global downturn has prompted closer scrutiny by the US
government of all such trade deals.
The multilateral perspective
With the Doha round of WTO trade talks stagnant, there has been a pronounced
tendency for regional and bilateral deals to proliferate and fill the void.
This tendency has been especially evident in Asia, with China acting as the
belle of the ball. The China-ASEAN FTA is the most notable of many trade
agreements forged recently by Beijing. Taiwan, by contrast, appears to be the
wallflower in China's dance with regional trade partners.
Taiwan's predicament largely stems from its lack of UN membership as well as
the deterrent effect of Beijing's long-standing effort to marginalize Taiwan's
international space, which is a cause of considerable local anxiety and
frequent press commentary. For most of 2008, Taiwan continued to pin its hopes
on the possibility of entering into FTA trade talks with US as a way of
reassuring potential trade partners in the region through US "legitimization".
As 2008 ended, however, the Ma administration's approval rating began to
reflect the country's deteriorating economic indicators. Accordingly, external
factors - including the current stasis in the Doha round, proliferation in
regional trade deals from which Taiwan is excluded, and the uncertainty
concerning the future priorities of the Obama administration during its
transition - stoked the coal beneath the ECFA.
The ECFA undertaking, with roots as far back as 2000, and carefully cultivated
by the KMT leadership during its pair of trips to the mainland in 2005, began
to blossom this spring because Taipei recognized an acute need to boost its
economic competitiveness and because Beijing had given the KMT assurances
through the existing cooperative dialogue process.
In fact, Beijing's posture of dropping opposition to Taiwan gaining observer
status at the World Health Assembly improves this particular cross-strait
dynamic considerably. On the one hand, China gains recognition, amid concerns
of a swine flu pandemic, for showing responsibility as a global stakeholder,
overdue as such a gesture may be. At the same time, anxiety in Taiwan over its
international marginalization is relieved to some extent while providing a
political boost to President Ma's policy of cross-strait engagement.
The global perspective
The Ma administration presided over one of the country's largest drops in
economic growth prospects, which was severely dented by successive months of
year-on-year drops in exports close to 50%. The EFCA represents its best
near-term option for reviving the economy.
For China, whose preoccupation with "split-ists" has shifted to Tibet since
Chen Shui-bian and the DPP's departure from power, the EFCA promises two
benefits worth pursuing: 1) a closer economic embrace with "Taiwan
compatriots"; and 2) enhancing international perception of China as a
responsible economic stakeholder in the region.
For the US, the vital triangular partner to cross-Strait stability, the EFCA is
broadly in line with the longstanding policy of encouraging cross-strait
commercial engagement.
It perhaps required the shock of an economic downturn to position Taiwan and
China for the next level of mutual engagement and economic integration. While
joint entry into the WTO was immeasurably important to both parties as a
confidence-building measure, Geneva has not served as an arena to directly
advance bilateral rapprochement. While economic integration has proceeded apace
to meld the two countries' information technology sectors into a nearly
seamless global supply chain, integration of many other sectors (such as
agriculture, tourism, transportation, energy, petrochemicals, and advanced
semiconductors) has been impeded by political opposition and various national
security concerns.
While the global financial crisis may have pushed Taiwan and China
significantly closer in their economic relationship, neither party should
ignore the key lessons learned from the crisis.
The deliberate ECFA process seems to be structured on a shared recognition that
cross-strait economic integration needs to be pursued in a measured and
balanced fashion, not as a pell-mell rush. The staged scheduling of the ECFA as
first an informal topic and then a formal topic at successive rounds of the
high-level cooperative dialogue process is largely designed to allow time for
public opinion in Taiwan to recognize the need for, and to help shape the final
form of, this outcome.
In the final analysis, the ECFA appears to represent a recognition in both
Taipei and Beijing that they need to work together to co-manage the impact of
the global economic crisis by adding previously insulated sectors of their
respective economies to the cross-strait grid.
Notes
1. The term China in this article refers to the area under the control of the
government in Beijing.
2. See "A Cross-Straits Common Market - Working Together to Build Prosperity in
the Asia-Pacific Region" by Vincent C Siew, click
here.
Merritt T (Terry) Cooke, PhD, is the principal of www.terrycooke.com, a
professional speaking and corporate seminar/scenario enterprise. He is also
founder and chairman of GC3 Strategy, an international market development
consultancy targeting green energy/technology opportunities in Greater China.
He has served as director for Asian Corporate Partnership at the World Economic
Forum and is a career member of the US Senior Foreign Commercial Service.
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