Taiwan very much wants to be a part of the Trans-Pacific Partnership and needs the U.S. onboard with the idea – a partnership that Beijing feels much different about.

A visiting high-level delegation from Taiwan, comprising top government officials and corporate representatives, expressed a “strong interest” in joining the Trans-Pacific Partnership (TPP), pointing out that the island republic had intense economic and business ties with many of the TPP member states, including the United States.

The delegation, led by Francis Kuo-Hsin Liang, who is the chairman of the Taiwan External Trade Development Council (TAITRA) and a former Taiwan deputy minister for economic affairs, recently visited New York and Washington DC where it attended the SelectUSA Investment Summit.

In an interview with the AJOT in New York, Liang pointed out that Taiwan had “strong credentials” to become a TPP member. “We have very close ties with the U.S. with which we have several accords, including the Taiwan-U.S. Innovation Partnership. Taiwan has also facilitated U.S. companies set up base in Taiwan and thus enter the Asia-Pacific region,” Liang maintained.

Win-win for All

Describing Taiwan’s membership in the TPP as a “win-win for all”, the TAITRA chairman called on the U.S. to assist Taiwan in joining the TPP. “The TPP is important for Taiwan’s economy because of its huge volume of foreign trade and strong economic and business ties with the majority of the TPP countries,” he said. The TPP region accounts for roughly 35% of Taiwan’s external trade.

Francis Kuo-Hsin Liang – Chairman of the TAITRA
Francis Kuo-Hsin Liang – Chairman of the TAITRA

Juggling with figures, Liang pointed out that Taiwan had advanced to become the world’s 18th largest trading economy and the 10th largest among the 21 member countries of the Asia Pacific Economic Cooperation (APEC). Citing the Swiss-based International Institute for Management Development’s 2013 report, he said that Taiwan was the world’s 11th most competitive economy worldwide and the 3rd in the Asia-Pacific region. “It is the third best place to invest, according to the August 2013 Business Environment Risk Intelligence (BERI) report,” he added. Trying to substantiate his “win-win-for-all” contention, Liang went on to say that Taiwan’s inclusion in the TPP, according to a 2013 study prepared by the Chung-Hua Institution for Economic Research, would lead to an overall gain of US$ 77.98 billion in social welfare for all the members.

Dangling a carrot in the form of “five big advantages” for all the TPP members from Taiwan’s TPP membership, Liang said that Taiwan offered a rich, hi-tech savvy human resource base with well-qualified experts, a large number of whom have doctorate degrees and could augment innovation through research and development.

Secondly, Taiwan was building industry clusters particularly in sectors such as machinery, petroleum, etc., providing complete vertical integration, which was vital for success.

The third advantage was Taiwan’s ability and prowess, as one of the top ten countries in the Global Business Index, to provide customized IT solutions.

Fourthly, Taiwan’s laws, geared to economic liberalization, could be quickly adjusted to attract foreign investors.

Fifth, Taiwan provides comprehensive protection to intellectual property rights; it has been removed from the U.S. Special 301 list.

All the TPP potential members are among Taiwan’s important trading partners. In 2014, Taiwan’s exports to the collective TPP market reached US$103 billion, accounting for roughly one-third of Taiwan’s total exports. Taiwan’s exports to the TPP countries grew by 3.37% in 2014, higher than the 2.7% growth in its total global exports. Research by Taiwan based Chung-Hua Institute for Economic Research showed that if Taiwan is included in the TPP, its GDP would grow by 1.95% as against a decline of 0.27 if it is excluded from the group. Taiwan’s exports would grow by 5.65% and its imports by 7.61% if it joined the TPP as against declines of 0.13 and 0.26 in exports and imports respectively, if it was excluded from the TPP.

Taiwan’s Role in Asia-Pacific

Liang also pointed out that Taiwan played an important role in the Asia-Pacific regional supply chain, reminding that it had established long-term strategic alliances with major international brand names and forged “inextricably cooperative relations” with all the TPP members.

“Taiwan is the gateway to one of the world’s busiest transportation arteries. Its location has profound commercial and strategic significance,” one delegation member said, citing the island’s vertical supply chain ties in the textile/apparel sector with some TPP members, including Vietnam, the U.S., Japan, etc.

“If, for example, the TPP adopts a ‘yarn-forward’ rule of origin and Taiwan is not in the TPP, it would adversely affect not only Taiwan but all TPP members’ current textile and apparel supply chains,” he argued.

But Taiwan is also keen to forge closer economic ties with the United States and the remaining TPP for political reasons. After achieving close economic and trade ties with the mainland, which has become the island’s number one trading partner, Taiwan finds itself in a precariously asymmetric dependence on the mainland which, many strategists caution, could have political ramifications for the island republic’s status quo – Taiwan’s de facto independence - even though Beijing rejects the concept of independence for Taiwan and insists it should return to the “motherland”.

Another factor that makes Taiwan resist China’s bear hug is the economic slowdown facing the latter, along with soaring labor and production costs.

China’s declining competitiveness as a manufacturing center is reflected both in market analysis and the rising migration of domestic and foreign investors to other low-cost sites. Taiwan, which has invested heavily in setting up manufacturing units on the mainland, is now trying to diversify by increasing its trade and business interaction with the USA and others.

China’s Position

However, some U.S. experts fear China could try to block Taiwan’s TPP membership, even though China has, so far, not indicated its intention to join the TPP and is pushing its own Regional Cooperation Economic Partnership (RCEP). Other experts counter that China has “absolutely no locus standi” on Taiwan’s TPP membership.

Be as it may, the TPP itself has become a casualty in the U.S. – at least for now - amid the ongoing Presidential election campaigning, with both the candidates Donald Trump (Republican) and Hillary Clinton (Democrat) saying they would block the agreement. Indeed, the U.S. has not ratified the TPP agreement although many of the other member countries have already done that and are waiting to take the next step to the formal enforcement of the agreement.

The 12 TPP members, comprise, initially, of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam, will create a “mega-regional” bloc with a combined US$28 trillion GDP. Besides Taiwan, countries such as Indonesia, the Philippines, South Korea and Thailand have also expressed interest in joining the TPP.