TPP and Taiwan’s Trade Policy

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Resource: http://www.ustaiwanconnect.org/

Taiwan announced its interest of joining TPP in September 2013 and discussed joining TPP in the 8th TIFA conference with the US in April 4th this year. Obviously, Taiwan urges to seek more opportunity to join any regional trade agreement while it currently signs very few FTAs, covering less than 6% of total trade; and its competitors, such as Korea, Japan, Singapore, are negotiating to join TPP, ASEAN, RCEP.

TPP is important to Taiwan since TPP members dominated 36% of total trade in 2011, while China and Hong Kong are of 29%. Among TPP members, the US is Taiwan’s second largest export country, which generated $15.2 billion trade deficit with Taiwan in 2006. 33.5% of the manufactured products that Taiwan exports to the US (textile, electronics, machinery, auto parts, and steel products) are subject to different level of tariffs; while almost all these products would be tariff-free under the Korea-US FTA by 2014.

Not only tariffs matter but also to ensure trading relationship with partners. Take textile industry for example, “yarn forward” requires all the TPP nations to use a TPP-members’ product of yarn to receive a duty-free access. If “yarn forward” is adopted for TPP countries that trade with Taiwan, Taiwanese textile can no longer export to such countries.

In addition, TPP can enhance investment and collaboration of TPP countries by removing non-tariff barrier and seeking a closer integration. TPP countries, especially the US, Malaysia, Singapore, and Vietnam, are Taiwan’s major outbound of investment besides China. With the membership of TPP, Taiwan can initiate a domino effect to sign more FTA with other countries and participate in more regional integrations, such as RCEP and ASEAN. On the other hand, entering TPP can diversify the risk of relying major part of trade with China, which accounts nearly 40% of Taiwan’s export.

However, joining TPP is still a long way to go for Taiwan and shadowed by several uncertainties. Taiwan is still undergoing several FTA negotiations and thus needs more efforts to join a regional integration which is more complicated in economic effects and needs higher standard of requirements. Otherwise, the pace of liberalizing Taiwan’s market seems to slow down, after large protest to cross-strait agreement and import of US pork and beef. While Taiwan’s government cannot persuade Taiwanese that liberalization is beneficial and legislative sector cannot process bills efficiently, it causes inconsistent policy making and decrease credibility for negotiation. Also, China’s attitude should be another factor. If China insists that Taiwan has to join TPP after China, the same principle applied in the WTO negotiation, Taiwan needs to wait several years until China fulfills TPP’s requirement.

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Resource: http://www.naharnet.com/stories/en/42767

Reference:

1. The Trans-Pacific Partnership and Taiwan’s Future Development Strategy

2. Wikipedia

3. TPP Rules of Origin for Textiles and Apparel – “Yarn-Forward”

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