Taiwan and Regional Trade Organizations: An Urgent Need for Fresh Ideas

Executive summary

This essay assesses Taiwan’s prospects for joining the Trans-Pacific Partnership (TPP) and recommends options for how Taiwan can overcome the challenges related to gaining membership.

Main argument

Taiwan is an important exporter and investor in the Asia-Pacific, but its economic role in the region is diluted by its exclusion from regional trade deals, which have increased in both number and significance. As more free trade and regional trade agreements are signed, Taiwan needs to find ways to knit itself into the region’s economic and commercial fabric. The most significant—and timely—region-wide trade liberalization deal is the TPP. For Taiwan, the benefits of TPP membership would be twofold: (1) TPP standards would necessitate broad reforms, making the island more competitive, and (2) membership would create trade diversification, thereby reducing economic dependence on the mainland. Taiwan now has an opportunity to take the necessary steps toward membership. If it does, the island will improve its competitive position in the region. But if it remains a bystander, its competitiveness will erode. TPP membership would enable Taiwan to retain and improve its status as a strong economic player in the Asia-Pacific.

Policy implications

• • Taiwan should work on the TPP areas where it can achieve success, such as the services sector. This approach will allow it to build public support for more difficult reforms in agriculture and investor-state dispute settlement.

• • Taiwan should not view the TPP as a competition with China. Taiwan’s membership should be considered on its own merits.

• • Taiwan should engage in bilateral discussions with TPP nations—especially Japan, which has publicly supported Taiwan joining the negotiations—to explore how to reform its economy so as to be prepared for engaging in a follow-on round of negotiations for potential new members.

• • Taiwan should continue to pursue closer economic cooperation with the U.S. through the trade and investment agreement framework and work to resolve outstanding issues, especially in the agriculture sector.

This essay provides an overall assessment of Taiwan’s prospects for joining the Trans-Pacific Partnership (TPP) and recommends a series of potential options for how Taiwan can overcome the challenges related to gaining membership. The first section offers a brief overview of regional trade architecture in the Asia-Pacific region and Taiwan’s place within that architecture. The second section details the challenges Taiwan faces in joining the TPP, both domestically and externally. The third and fourth sections describe the implications of Taiwan joining or being excluded from the TPP for cross-strait relations and U.S.-Taiwan relations, respectively. The essay concludes by identifying a path forward for Taiwan and offering policy recommendations that the island’s leaders can use in their arguments that joining the TPP is in Taiwan’s best interests.

Understanding the asia-pacific’s trade architecture and taiwan’s trade relations

The Asia-Pacific’s Trade Architecture

Asian regional trade agreements—twelve and counting—range in scope from the world’s most far-reaching trade agreement (the Australia–New Zealand Closer Economic Relations Trade Agreement) to narrower preferential deals (such as the Asia-Pacific Trade Agreement). The Asia-Pacific is also one of the most prolific regions when it comes to free trade agreements (FTA). Yet some have characterized these agreements as a “noodle bowl” of commitments and called into question their tangible benefits due to the effects of overlapping regulations and trade diversion.¹

There is debate about whether the proliferation of regional agreements has contributed to the inability to make progress on multilateral trade liberalization, especially as the Doha Round agenda recedes to a vanishing point.² Concerns about the expansion of FTAs focus on the potential to undermine existing multilateral trade agreements. But the truth is that the companies most interested in open trade and investment regimes are indifferent about the package in which such benefits are delivered. The trend in the Asia-Pacific is clear: regional trade agreements are here to stay. The sooner nations and...