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No san-tong, no U.S. FTA

China Post, Taiwan

No san-tong, no U.S. FTA

2 August 2006

The U.S. has bluntly warned the pro-independence government of President Chen Shui-bian that it will not negotiate a Free Trade Agreement (FTA) with Taiwan unless the island opens san-tong (three direct transport links) with the mainland, the island’s biggest export market.

Japan and Singapore, Taiwan’s other two most important economic allies, have also refused talks with Taipei on the same subject.

Given Taiwan’s traditional close military and economic relationship with the U.S., the island is a convenient beachhead in America’s overall strategy to contain China economically and militarily. American companies have been advised to tap the mainland’s resources and markets via Taiwan, enhancing the democratic island’s role in checking the growing might and clout of an authoritarian China.

But since 10 years ago when then President Lee Teng-hui introduced the "Go Slow, Be Patient" policy to curb Taiwan’s economic integration with the mainland, the hope to build a hub of anything on the island has faded. And Taiwan’s economy has since stagnated.

Despite its rhetoric, Beijing’s opposition to a U.S. FTA with Taiwan is half-hearted because the pact would strengthen the U.S. reign over the island’s separatist leadership. The U.S. supports Beijing’s "one China" principle.

The U.S. business community is not enthusiastic about a trade pact with Taiwan because the island can’t help expand their economic interests in China, despite its cultural, language and geographical advantages.

East Asia is an increasingly integrated region economically, with China playing a growing leadership role.

"It is important that Taiwan not be economically isolated from developments in the rest of East Asia", Deputy U.S. Trade Representative Karan Bhatia told a hearing of the House International Relations Committee on East Asia FTAs on Thursday. Taiwan’s restrictions on trade and transport links with China have dampened support for an FTA from U.S. companies.

Bhatia delivered the same warning to President Chen personally when he visited Taipei in May.

The U.S. and Taiwan have had a trade and investment framework agreement since 1994. However, the Bush administration has been reluctant to upgrade this to a full-fledged FTA despite bipartisan support in the Congress, obviously for fear of boosting separatist morale. Instead, the U.S. entered into free trade talks with smaller economies like Malaysia and Thailand.

Japan and Singapore do not need a Taiwan bridge to expand economic and trade ties with the mainland. But the island’s separatist strategists hoped to take advantage of their goodwill to break the "one China" spell and advance the "two states" advocacies. Taipei insisted on signing the FTA pact under the name of "Taiwan" not the "Custom Territories of TPKM (Taiwan, Penghu, Kinmen and Matsu)" or "Chinese Taipei" as required by the World Trade Organization.

Both Tokyo and Singapore have refused to do that and declined further talks, blocking Taiwan’s access to the resources and markets of the ASEAN and the ASEAN plus Three.

Last week’s Conference on Sustainable Economic Development, the second in five years, failed again to pave the way for direct cross-strait flights and the easing of a 40-per cent cap on investments in China, which remains Taiwan’s most disfavored trading partner.

No wonder, few investors and businessmen would place their eggs in the Taiwan basket.