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asia policy implications The implications of Taiwan joining the TPP would be substantial and affect its relations with both the mainland and the United States. As Tsai Ing-wen has argued, Taiwan must “articulate an open and forward-looking strategy for the future” that is “premised on robust economic, defense and people-to-people relationships with the U.S., in parallel with a comprehensive and principled engagement with China.” 24 The following discussion considers the potential implications of Taiwan’s TPP membership for both cross-strait and U.S.-Taiwan relations. Implications for Cross-Strait Relations China already has its own preferential trade framework with Taiwan. President Ma signed the ECFA with China in 2010 in the hope that it would entice other nations to follow China’s example. Taiwan’s economic cooperation agreements with New Zealand and Singapore give credence to this view. But if China did not already have FTAs with New Zealand and Singapore, it is unlikely that Taiwan would have been able to sign these agreements without opposition from Beijing. China’s stance on multilateral agreements is somewhat murkier. It has not clearly stated its intentions to join the TPP, nor has it taken a stance on the possibility of Taiwan joining. Such uncertainty is itself a diplomatic tool—one that Beijing is likely to continue to use. Assuming, however, that Taiwan does eventually seek to join the TPP, framing this decision as an issue of economic necessity—as opposed to an effort to distance itself from China—will be important. TPP membership would allow Taiwan to diversify its trading partners, which would benefit Taiwan both economically and strategically. Although TPP membership would reduce its economic dependence on the mainland, a more economically secure Taiwan, whether led by the DPP or the Kuomintang, would be in a better position to maintain cordial relations with the mainland. By engaging diplomatically with the mainland out of choice rather than necessity, Taiwan could negotiate from a position of strength, which may provide greater flexibility in compromise and cooperation. In addition, an economically prosperous and competitive Taiwan benefits the mainland, which is the island’s biggest trading partner. So too, Taiwan’s companies are a significant source of mainland FDI and an important class of mainland tax payers. 24 Tsai Ing-wen, “Taiwan Can Build on U.S. Ties,” Wall Street Journal, June 1, 2015 u http://www.wsj. com/articles/taiwan-can-build-on-u-s-ties-1433176635. [ 78 ]
nealer and fimbres • taiwan and regional trade organizations Third-country investors look at how Taiwan firms are performing as a more transparent surrogate for Chinese industries. Diminished upside for Taiwan businesses and heightened risk communicate uncertainty about the mainland to global markets. By contrast, a Taiwan that is economically marginalized, and thus weakened, may be less willing to forge closer ties with the mainland. Taiwan leaders certainly would be operating with less flexibility. For Beijing, this puts unification (without coercion or force) even further away. Implications for U.S.-Taiwan Relations Taiwan was the United States’ tenth-largest trading partner in 2014, with more than $63 billion worth of goods in bilateral trade. 25 Yet although U.S.-Taiwan trade and investment flows are strong and mutually beneficial, they continue to underperform expectations. 26 Despite conclusion of the TIFA, Taiwan’s equivocal approach to follow-through on implementation and the persistence of some import barriers have undermined the confidence of some U.S. firms and politicians. Conclusion of a bilateral investment agreement (BIA) could meaningfully restore some luster to Taiwan’s market. It would demonstrate Taiwan’s political will to improve the business climate for all foreign participants across multiple sectors by contributing to predictability and exerting downward pressure on investment protectionism. Even though a BIA is a clear priority of U.S. businesses in Taiwan, 27 there has been no meaningful forward motion since the creation of a 2013 working group on the matter. As U.S.-China negotiations on a bilateral investment treaty continue, it will be important for the United States and Taiwan to revive BIA negotiations to avoid the sense that Taiwan is a next-best choice. The TPP is an important part of the Obama administration’s strategy of rebalancing to the Asia-Pacific because it reaffirms U.S. commitments in the region. As previously stated, the inclusion of Taiwan in the TPP agreement would allow the island to diversify its trading partners, making it more economically secure. Trade diversification, however, would not only lessen 25 Tsai Ing-wen, “Taiwan Can Build on U.S. Ties.” 26 William T. Wilson, “Market Solutions Should Be Central to U.S.’s Taiwan Policy,” Heritage Foundation, Backgrounder, no. 2930, August 1, 2014 u http://www.heritage.org/research/ reports/2014/08/market-solutions-should-be-central-to-uss-taiwan-policy. 27 American Chamber of Commerce in Taipei, “Background Information: U.S.-Taiwan Bilateral Investment Agreement (BIA),” January 27, 2015 u http://www.amcham.com.tw/ government-public-affairs/background-information. [ 79 ]
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is south korea in china’s orbit?
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