Taiwan and the Trans-Pacific Partnership

On November 20th, the Center for East Asia Policy Studies at Brookings held an afternoon symposium on the subject of Taiwan and the Trans-Pacific Partnership. The symposium was the culmination of a project that my colleague Joshua Meltzer and I had conducted on the subject. We produced three working papers, the results of which we presented on the 20th, and Taiwan and American specialists offered their perspectives on the issues that we raised. The highlights of the afternoon came at the beginning and the end. At the outset, Vincent Siew, Taiwan’s vice-president from May 2008 to May 2012 gave a keynote address. At the end, Taiwan’s current deputy minister for economic affairs, Francis Kuo-Hsin Liang, who has day-to-day responsibility for Taiwan’s trade negotiations offered his comments.

In our working papers, both Joshua and I inventoried the high bar that TPP represents for any country wishing to join, especially Taiwan. TPP’s high standards, which require changes in trade policy both at and behind borders, are daunting in and of themselves, but they often affect the interests of domestic economic constituencies and public perceptions. Each aspiring TPP member must ensure that negotiating partners have confidence in the credibility of its commitments. And Taiwan has the special problem of China, which seeks to limit its international participation, particularly in organizations and groups of which China is not already a member (as is the case with TPP).

What was illuminating about the presentations at our November 20th symposium was the degree to which Taiwan, which is not yet within the circle of economies negotiating TPP, is already preparing for the day that it will be inside the circle.

Thus, in the course of his remarks, former Vice President Siew laid out a clear rationale for why Taiwan needs to be a part of TPP, as difficult as that will be:

Taiwan’s external economic relations are highly skewed and imbalanced towards integration with Mainland China but marginalization to the rest of the world. The risk of marginalization undermines people’s confidence on Taiwan’s economic prospects and discourages domestic and foreign direct investments in Taiwan, at a time when Taiwan needs these investments the most to improve its structure of exports and move to higher value-added goods and services to tackle the challenges of slowed economic growth, stagnated wage increases, and deteriorating income inequality. . . .

First, Taiwan’s economy is facing a challenging period of transition, where a TPP membership will provide Taiwan with a strong external stimulus and vehicle to carry out structural reforms and rebuild people’s confidence on Taiwan’s economic prospects. Market liberalization and economic confidence will be conducive to investments that are critical to Taiwan’s long-term economic competitiveness.

Francis Liang had some interesting things to signal what Taiwan is already doing to prepare for TPP. Among other things, it has:

• Established a taskforce within the government on negotiating FTAs, chaired by the premier.
• Created a special committee under this taskforce; the Committee for Industrial Advisory Work  is a mechanism to conduct outreach and dialogue with industry and academia.
• Begun to adjust its trade policies, legislated and otherwise, to TPP standards through its FTA negotiations with Singapore and New Zealand, which are already negotiating TPP.
• Created an inter-agency task-force to review the commitments and regulatory changes in FTAs to which Taiwan is not a party, such as the Korea-U.S. FTA, and assess what changes Taiwan will have to make in its own policies conform. 

Vice-Minister Liang ended his review by saying, “I have the confidence to share with all of you that Taiwan is ready to apply for TPP membership, when the window of opportunity becomes available.”

Finally, I had premised my scenario for Taiwan’s entry into TPP on China’s leaders concluding that having to meet TPP’s standards would be a useful way of stimulating badly needed domestic economic reform in China. In this regard, it is worth noting that Ms. Hu Shuli, the editor-in-chief of Caixin and one of China’s most influential commentators, has recently stressed the link between TPP and domestic economic reform in China.