THE TTALK QUOTES 

On Global Trade & Investment

 

Published Three Times a Week By

The Global Business Dialogue, Inc.

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No. 71 of 2014 

THURSDAY, OCTOBER 23, 2014     

 

   

Filed from Portland, Oregon  

     

Click here for Tuesday's quote from the Director-General of the WTO.
TPP: TAIWAN WANTS IN

"How could you ignore Taiwan?  My dear friends, lots of people think we're still a tiny, dinky island as part of mainland China.  We are such a big trading partner to you and the rest of the world."

Lyushun Shen
August 18, 2014  (publication date)
CONTEXT
Mr. Shen is Taiwan's (Republic of China) representative to the United States, and the office he heads, an embassy in all but name, is the Taipei Economic and Cultural Representative Office in the United States.  He and his colleagues are pushing hard to have Taiwan become the next member of the Trans-Pacific Partnership.  That was the thrust of the very helpful piece on "Ambassador" Shen and TPP that Politico's Doug Palmer and Adam Behsudi published on August 18.  And it was that article which was the source for today's quote.

We are not sure how close the current TPP countries are to concluding a deal.  If they are as close as some reports suggest, we should have an outline of an agreement in just a few weeks.  And Taiwan is not trying to slow that process down.  She is not seeking to join the current negotiations but rather to be among the first in line to sign on to whatever TPP deal is struck, once there is a deal.  As Palmer and Behsudi put it, "Shen is hoping to position Taiwan to join the agreement as part of a second group of countries after the initial deal is reached."  According to Mr. Shen, "This is a must" for Taiwan's future development.

COMMENT
Today's topic is one of those that sets the mind racing in a hundred directions.  We'll limit our comments, however, to three areas: politics (geopolitics),  possibilities, and pork.

TPP is often described as a template for the future - especially the rules it seeks to establish in areas from investment to protections for intellectual property rights to disciplines over state owned enterprises.  Its architects want those rules to have a wide remit, and they have frequently talked about the desirability of having others join or dock on to TPP, once the initial deal has been struck. 

History suggests that might be easier said than done.  Yes, the GATT-WTO has grown from 23 to 160 members over the past 66 years, and the EU - clearly more than a trade agreement - has grown from six members to 28 in almost the same time frame.   Beyond that, the landscape of accessions to trade agreements is rather barren if not empty.   So the fact that Taiwan is already raising its hand to join TPP should be a welcome development. 

Geopolitics.  Alas, things are more complicated than that.  The Wikipedia entry on Taiwan is as good a place as any for the start of that discussion.  On balance, we think Wikipedia does a great job, but we know it has its critics.  We suspect for example that China's President Xi Jinping would strongly object to this first sentence in the Wikipedia article on Taiwan:

"Taiwan, officially, the Republic of China, is a sovereign state in East Asia." (Emphasis added.)

And Taiwan itself feels the weight of China's views. As Mr. Shen commented to Politico.  "The Chinese Embassy can fly flags outside.  I can't."   More to the point, Taiwan has a relatively small number of diplomatic allies and only two free-trade agreements - one with New Zealand and one with Singapore.

Possibilities. That's a problem, because FTAs are setting the trade patterns of the future, and Taiwan's 23 million people live in a heavily trade dependent economy, one whose competitiveness will surely erode if it is locked out of the agreements that are shaping the trade patterns of the future.  So yes, Taiwan wants to join TPP.  She also wants to knit together a broader web of free-trade agreements.  Last Friday's Sydney Morning Herald, for example, carried a story with the lead:

"Taiwan has confirmed its desire to forge a trade deal with  Australia."

The article quotes the spokesperson for the Taiwanese government, Lih-chyun Sun, who addressed the China issue head on. He said:

"While mainland China's economic rise has indeed made it an important trade partner to many countries, Taiwan by no means requires the mainland's approval to enter into trade talks with neighbours."

We don't know where this aspiration will lead.  Specifically, we don't know how interested Australia is in an FTA with Taiwan.  Doubtless that will become clearer in the weeks ahead.

And Pork.  Returning to Taiwan's interest in TPP, even the most casual observer of the TPP process will have noted that countries don't just join, any more than tennis players just walk on to the court at Wimbledon.  The contestants have to earn their spots and the grounds have to be prepared.  In the case of Taiwan and TPP, one prerequisite, it seems, is a bilateral investment treaty between the United States and Taiwan.  According to Rupert Hammond-Chambers, the president of the U.S.-Taiwan Business Council, the negotiations on that agreement have stalled over pork.  Writing in yesterday's Wall Street Journal, he said,  "U.S. trade negotiators and members of Congress are demanding changes to Taiwan's pork-import regime before they will allow negotiations over a [bilateral investment treaty] to progress."

Conclusion. Our understanding is that, at the core of that issue, is ractopamine, a growth hormone fed to U.S. pigs and banned in Taiwan.  Your editor eats a lot of U.S. pork and has no hesitation in recommending more of it to Taiwanese consumers.  Yet it does seem odd to us that such an important negotiation would be blocked by such a technical issue or more accurately such a small volume of trade.  There also seems to be something of a double standard here.  After all, the U.S. is negotiating an FTA with the EU, and Europe restricts imports of products with ractopamine.

The Taiwanese we have talked to recently seem to think it is all about pork, and yet we have to wonder if there isn't more at play here.  In that context, we come back to this comment from the Australian academic, James Laurenceson: "There is only so much Taiwan can achieve in international forums without at least the passive acceptance of China."

But, of course, if the issue is China and not pork, then there is no solution to Taiwan's problem (or American farmers'), and less to TPP than the world is hoping for.
SOURCES & LINKS
Shen Shoots for TPP is a link to the Politico story that was the source for today's quote.

Taiwan Looks to Australia takes you to the Sydney Morning Herald article on this issue referenced above.

Pork and the Investment Treaty is a link to The Wall Street Journal article by Rupert Hammond-Chambers mentioned above.

Taiwan is the Wikipedia entry on Taiwan quoted above.

The Political Dimension is a link to a paper by Richard Bush of the Brookings Institution on what it would take for Taiwan to join TPP.

Editorial Note:  Unless otherwise noted, the names of individuals mentioned in these pages are presented in the general English language pattern of first name followed by last name or given name followed by surname.


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