from Asia Unbound

Guest Post: Taiwan and the TPP: Don’t Count Your Chickens

February 15, 2012

AIT Chairman Raymond Burghardt greets Taiwan President Ma Ying-jeou at the Presidential Office in Taipei.
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Following the recent reelection of Taiwan president Ma Ying-jeou, media outlets worldwide have speculated about the president’s economic posture in his second term: Will he continue to advance relations with the mainland, or shift his gaze outward toward Taiwan’s neighbors in the Pacific? Hence, it is no surprise that the announcement of President Ma’s intent to join the Trans-Pacific Partnership Agreement (TPP) has been cast by the media as a hot button issue.

The U.S.-led TPP is an ambitious attempt by the Obama administration to revitalize U.S. commercial relations. The TPP, along with recently-passed trade accords with South Korea, Colombia and Panama, are intended to signify the United States’ economic revival.  The TPP has also been interpreted as a strategic calculation by the United States to counter China’s regional supremacy. In January, President Ma reaffirmed his intent for Taiwan to join the TPP as part of his “golden decade plan” for the island nation’s economy. But Beijing officials have warned that Taiwan’s participation in the TPP and in the Economic Cooperation Framework Agreement (ECFA), a recently-inked deal between Beijing and Taipei, would have to be mutually exclusive. “Are you sure that you want to join the [TPP] negations?” Wang Yi, director of China’s Taiwan Affairs Office, teased Taiwanese journalists. Articles in the pro-unification Taiwanese publication Want China Times touted Beijing’s economic leadership and urged Taiwan to collaborate with China “on a strategy to jointly promote regional economic integration through the EFCA, and establish a greater China free trade zone.”

Many media outlets have framed Taiwan’s desire to join the TPP as another flash point issue in the greater showdown between the United States and China. But for now, Taiwan’s hypothetical participation in the TPP is a moot point. Despite being the nineteenth largest economy in the world, Taiwan is fundamentally unprepared to join the TPP.

Perhaps the single largest obstruction to Taiwan’s TPP accession is its ongoing “beef” with the United States concerning Taiwan’s import restrictions on U.S. meat products. Taiwan currently bans the importation of U.S. beef if the presence of ractopamine is detected, a feed additive which is used to enhance the leanness of both cattle and pork. There has been international disagreement over the human health risk ractopamine poses. Despite recent dialogues between Raymond Burghardt, Chairman of the American Institute in Taiwan (the de facto U.S. embassy in Taipei), and the Taiwanese government, it is speculated that Taiwan will not budge on the issue until the Codex Alimentarius Commission (a UN/WHO entity) sets a global standard for trace levels of the chemical.

Disputes regarding agriculture are notorious for derailing trade negotiations. The recent ratification of the U.S.-Korea Free Trade Agreement is now in jeopardy, with Korea’s Democratic United Party  vowing to repeal the FTA  if it wins a parliamentary majority in the upcoming April elections.  This  platform is in part a response to the appeals of the small but powerful agricultural lobby in Korea, which views the current FTA as counter to national interests. In TPP negotiations, too, agriculture has already proved a divisive issue. Although Canada continues to express its desire to join, its membership is currently being blocked by the United States and New Zealand due to Canada’s subsidy of its dairy and poultry industries. Japan’s potential accession would also be complicated by, among other policies, its tariffs on rice and other agricultural imports.

The beef dispute between Taiwan and the United States is indicative of Taiwan’s protectionist tendencies, which, for the time being, will likely impede any meaningful trade advancement.  The services and labor markets in the export-oriented economy remain largely closed. Foreign service providers have long pleaded for an overhaul of prohibitive local licensing rules; and foreign workers are, by in large, not welcome there. Even President Ma has admitted that it would probably be ten years before his country could sign on to the TPP. Until then, the alleged U.S.-China standoff as it relates to trade with Taiwan is likely overstated.

Elizabeth Leader is a research associate at the Council on Foreign Relations.