Groundwork key to effective FTAs
By Tu Jenn-hwa 杜震華
To avoid Taiwan being marginalized in the global economy, the government — apart from discussing a trade agreement with Singapore — plans to continue its efforts to fully implement core components of the cross-strait Economic Cooperation Framework Agreement (ECFA) involving trade in goods and services. In addition, it has expressed a strong desire to join the Trans-Pacific Partnership (TPP) within a decade.
However, although the government has expressed a strong interest in signing further trade agreements, it has not done enough preparatory work.
Recent free-trade agreements (FTA) worldwide have encompassed a wide variety of sectors, and they have all attempted to use strategic planning and close cooperation to bring about long-term goals, such as economic growth, systems innovation and collaboration. In contrast to more traditional FTAs, they have not just been about tariff reductions on goods and the liberalization of the service sector.
When considering such agreements, there are many issues that Taiwan should discuss. It must be decided to what extent products that are excluded from free trade are limited in order to obtain the greatest economic benefits. The government especially needs to consider how agriculture should be included so as to establish regional agricultural systems that minimize the risk of supply and demand imbalances.
Another issue is how place of origin rules should be designed so as to avoid strict regulations diminishing the benefits brought about by free trade. We also need to think about how trade remedies could help make up for insufficiencies in WTO rules without becoming a further barrier to trade.
In addition, we need to identify differences between how Taiwan and other countries regulate and implement product and certification standards. Should standards be mutually accepted or should we demand that other parties meet our higher standards?
Moreover, should we have flexible agreements that can be adjusted as demands change? Should the service market adopt a “positive” or “negative” list system? Would rules of origin for the service sector allow companies of lesser quality establish long-term market share in Taiwan? How should we deal with unfair competition when dealing with the large state-owned enterprises of another party? To what extent should we open up the country to businesspeople on short-term work visits? How should we regulate investment, trade facilitation, government procurement and competition policies? Should intellectual property rights be protected at all, or should they be given expanded protection?
We also need to think about which countries we wish to sign agreements with, and in what order.
These are just a few of the issues that need to be thoroughly investigated. We need a deep understanding of the conditions in Taiwan and the countries we sign agreements with, as well as the experiences of other signatories after they have signed agreements, to help make well-informed decisions. Therefore, be it for the ECFA or the TPP, the breadth and the depth of research required by the government is vast. Even the slightest error could result in future regrets.
At the moment, the Ministry of Economic Affairs handles such matters and is searching out the opinions of the relevant industries and authorities to use as a basis for the discussion and negotiation of agreements. While the government has also commissioned research organizations to study these issues, it has not dedicated enough resources and manpower to the task. Moreover, some obvious discrepancies between ministries have not been addressed and it seems solutions to problems are only sought when a problem is encountered at the negotiation table. Response measures for disadvantaged industries, such as the farming and labor sectors, that should have been proposed long ago are still not forthcoming.
The negotiation methods used in the past for agreements with Central American countries could still be used in situations that would result in a reasonably small impact.
However, agreements such as the ECFA and TPP will have a much greater impact and involve major structural economic changes, making methods such as stacking and induction less viable. We must come up with forward-looking, strategic, top-down, deductive approaches that will enable us deduce in which order items should be negotiated, as well as different trade-off models.
I suggest that the Cabinet appoint ministers without portfolio to represent the government and lead the related ministries, think tanks and experts in carrying out in-depth research into various industries to develop the best strategies for each situation. They should also work to understand the discrepancies that exist between different government agencies and execute the Cabinet’s policies via strategic planning.
We must not figure things out as we go because, apart from wasting time and falling behind our competitors, it would also result in a lack of structure, allowing the other party to direct the talks.
Because we rushed things during the ECFA talks and did not conduct sufficient research, China was in almost total control and a lot of points that should have been included are missing. We cannot afford to make the same mistakes with the remaining parts of the ECFA and with the TPP.
Tu Jenn-hwa is an assistant professor at the Graduate Institute of National Development at National Taiwan University.
Translated by Drew Cameron
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