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Developing a strategy for an FTA with the US

Taipei Times, Taiwan

Developing a strategy for an FTA with the US

By Tsai Horng Ming

10 April 2007

The US recently concluded a free-trade agreement (FTA) with South Korea. Under the agreement, more than 90 percent of bilateral trade in industrial and consumer goods will become duty-free three years after it comes into force, with remaining tariffs eliminated within 10 years. Council for Economic Planning and Development (CEPD) estimates show that the FTA between the US and South Korea will have an estimated US$2 billion impact on Taiwan, or approximately 5 percent of its total exports, a spokesman of said on Tuesday.

In fact, the agreement will have a domino effect. Regional economic integration will become the major strategy for countries to strengthen their economic competitiveness and attract foreign investment.

As for Taiwan, China’s macroeconomic development strategy and the "one China" principle have had a negative effect on Taiwan’s participation in the process of regional integration.

Facing Chinese obstructionism, the manner in which Taipei enters FTA negotiations with Washington will be of utmost importance. This strategy can use the WTO’s legal system and institutions to develop the FTA with the US.

Washington wants a tighter trade bloc in the region, mostly among APEC members. Its FTA strategy, which focuses on the political, economic and strategic, is meant to protect its interests in the region by developing more dialogues with ASEAN member states.

For its part, Taiwan can use its own prestige in areas such as economic liberty, market openness and geopolitical status as trading chips to highlight the value of regional trade investment. A Taiwan-US FTA would support the formation of an APEC-wide FTA, from which regional development could ensue.

To demonstrate its political will to the US, Taiwan must offer a comprehensive economic liberalization plan and adopt a more realistic strategy to overcome political obstacles. Giving more importance to creating a trade and investment framework in which Taiwan and the US can evolve would be a way to achieve this.

Beside the protection of intellectual property, rice import quotas and limits on access to the nation’s pharmaceutical market, Taiwan can offer cooperation on regional investment, ICT standards, financial supervisory systems and training.

The nation needs to build the communication mechanism whereby it can enter into talks with US entrepreneurs in favor of a Taiwan-US FTA.

Tsai Horng ming is the deputy secretary-general of the Chinese National Federation of Industries.