FTA Policies in the FTA Policies in the Asia-Pacific and Asia-Pacific and Taiwan’s ChoicesTaiwan’s Choices

Christopher M. DentChristopher M. Dent

University of LeedsUniversity of Leeds

FTA Activity on the FTA Activity on the Rise…Rise…• Global expansion of FTA activity and Global expansion of FTA activity and

regionalism since the early 1990sregionalism since the early 1990s• Europe and Latin America as early main Europe and Latin America as early main

centres of new FTA activitycentres of new FTA activity• East Asia, US and Oceania only start to East Asia, US and Oceania only start to

catch up from the late 1990s onwardscatch up from the late 1990s onwards• Asia-Pacific witnesses the most intense Asia-Pacific witnesses the most intense

growth of FTA activity in the world growth of FTA activity in the world system during the 2000ssystem during the 2000s

• FTAs have significantly shaped the FTAs have significantly shaped the Asia-Pacific’s international economic Asia-Pacific’s international economic relations and business environment…relations and business environment…

Figure 1.1 Global Map of FTAs by Region (by end of 1997)

Europe (40)

North Africa and Middle East

(1)

Sub-Saharan Africa

(1)

Central and South Asia

(6)

Pacific America

(6)

East Asia

(0)

Oceania (1)

Western Hemisphere

(9)

Asia-Pacific

(7)

FTAs in region 30+ 21 – 30 11 – 20 0 – 10

FTAs between regions 10+ 5 – 9 3 – 4 1 – 2

(4)

(2)

(8)

Notes 1. Figures relate to FTAs signed under WTO Article XXIV and do not include ‘preferential agreements’ under the WTO’s ‘enabling clause’ for developing countries, or ‘service agreements’ under WTO Article V. 2. Pacific America comprises those Western Hemisphere countries with a Pacific Ocean coastline. Central and South Asia includes the Russia and Asian ex-Soviet republics, as well as the Commonwealth of Independent States FTA. Europe includes the ex-Soviet republics of Belarus, Moldova and Ukraine. 3. Figures include customs unions. By this time, Europe was host to five customs union agreements (European Community, EC – Malta, EC – Cyprus, EC – Andorra and Czech Republic – Slovak Republic) and the EU / EC also had a customs union with Turkey. Similarly, the Western Hemisphere region was host to three customs unions (CACM, CARICOM and MERCOSUR), Central Asia to one (EAEC), and Sub-Saharan Africa to one (SACU). Source: WTO and author’s own research.

Figure 1.10 Global Map of FTAs by Region (by end of 2005)

Europe (43)

North Africa and Middle East

(8)

Sub-Saharan Africa

(2)

Central and South Asia (11)

Pacific America

(14)

East Asia

(8)

Oceania (2)

Western Hemisphere

(24)

Asia-Pacific

(38*)

FTAs in region 30+ 21 – 30 11 – 20 0 – 10

FTAs between regions 10+ 5 – 9 3 – 4 1 – 2

(6) (2)

(2)

(4)

(8)

(2)

(1)

(4)

(7)

(16)

Notes 1. Figures relate to FTAs signed under WTO Article XXIV and do not include partial scope agreements under the WTO’s ‘enabling clause’ for developing countries, or ‘service agreements’ under WTO Article V. 2. Pacific America comprises those Western Hemisphere countries with a Pacific Ocean coastline. Central and South Asia includes the Russia and Asian ex-Soviet republics, as well as the Commonwealth of Independent States FTA. Europe includes the ex-Soviet republics of Belarus, Moldova and Ukraine. 3. Figures include customs unions. By this time, Europe was host to four customs union agreements (European Union, EU – Malta, EU – Cyprus and EU – Andorra) and the EU also had a customs union with Turkey. Similarly, the Western Hemisphere region was host to four customs unions (Andean Community, CACM, CARICOM and MERCOSUR), Central Asia to one (EAEC), and Sub-Saharan Africa to one (SACU). * Trans-Pacific Strategic Economic Partnership (TPSEPA) FTA between Singapore, Chile, New Zealand and Brunei counted as additional FTA link. Source: WTO and author’s own research.

(1)

(1)

Figure 6 Asia-Pacific FTA Projects (before 1998)

NZ Aus

US

Can

Mex

Ch

NAFTA

Aus – Australia Mex – Mexico Can – Canada Nc – Nicaragua Ch – Chile NZ – New Zealand CR – Costa Rica Pa – Panama ES – El Salvador Pe – Peru Gm – Guatemala US – United States Hd – Honduras

Pe

CR

Gm

Nc ES

Hd

AFTA

CACM

CER

Closer Economic Relationship

Brunei Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Mex - Northern Triangle FTA (ES, Gm, Hd)

Proposed

Studying

Negotiating

Concluded / Signed

Regional FTA

Pa

Figure 7 Asia-Pacific FTA Projects (by end of 2004)

K

J

C

S*

NZ* Aus

US

Can

Mex

Ch*

Th

HK T

Ma

P Nc

PICTA^

Mac

Ind

Gm

CER

Closer Economic Relationship

Pe

Pa CACM

CACM

ES

Hd

CR

Mex - Northern Triangle FTA (ES, Gm, Hd)

AFTA

AFTA

Aus – Australia Ma – Malaysia Br – Brunei Mac – Macao C – China Mex – Mexico Can – Canada Nc - Nicaragua Ch – Chile NZ – New Zealand CR – Costa Rica P – Philippines ES – El Salvador Pa – Panama Hd - Honduras Pe – Peru Gm – Guatemala S – Singapore HK – Hong Ko ng T – Taiwan Ind – Indonesia Th – Thailand J – Japan US – United States K – South Korea

FTA Phase Development

Proposed

Studying

Negotiating

Concluded / Signed

Regional FTA

NAFTA

Notes: * Pacific-3 FTA negotiating parties, later expanding to quadrilateral Trans-Pacific Strategic Economic Partnership (TPSEPA) arrangement in 2005. ̂PICTA (Pacific Island Countries Trade Agreement) involves the 14 Pacific Island Countries.

Col

Figure 8 Asia-Pacific FTA Projects (by end of 2008)

K

J

C

S*^

NZ*^ Aus^

US^

Can

Mex

Ch*^

Th

HK T

Aus – Australia Ma – Malaysia Br – Brunei Mac – Macao C – China Mex – Mexico Can – Canada Nc - Nicaragua Ch – Chile NZ – New Zealand Col – Columbia P – Philippines CR – Costa Rica Pa – Panama ES – El Salvador Pe – Peru Hd - Honduras S – Singapore Gm – Guatemala T – Taiwan HK – Hong Ko ng Th – Thailand Ind – Indonesia US – United States J – Japan Vn – Vietnam K – South Korea

Pa

Ma

P

Pe^

Br*^ PICTA

Mac

Ind

CER

Closer Economic Relationship

CR

Nc

Gm Hd

ES

Mex - Northern Triangle FTA (ES, Gm, Hd)

CACM

CACM

NAFTA

AFTA

AFTA

FTA Phase Development

Proposed

Studying

Negotiating

Concluded / Signed

Regional FTA

Notes: * Pacific-3 FTA expands to quadrilateral Trans-Pacific Strategic Economic Partnership (TPSEPA) project including Brunei as full negotiating partner from April 2005. ̂TPSEPA then expands to Trans-Pacific Partnership Agreement (TPP) involving

Australia, Peru and the United States in negotiations from March 2009. PICTA (Pacific Island Countries Trade Agreement) involves the 14 Pacific Island Countries.

Vn

Col

The Evolving Nature of The Evolving Nature of FTAsFTAs

• Traditionally, FTAs have primarily entailed the Traditionally, FTAs have primarily entailed the elimination of conventional trade barriers (e.g. elimination of conventional trade barriers (e.g. tariffs) between signatory partiestariffs) between signatory parties

• Have been around for a while. Last great spurts Have been around for a while. Last great spurts of FTA activity were 1860-1914 and the 1930sof FTA activity were 1860-1914 and the 1930s

• However, the portrayal of FTAs found in However, the portrayal of FTAs found in conventional economic textbooks are conventional economic textbooks are increasingly outdated…increasingly outdated…tariffs, etc now as less significant features… tariffs, etc now as less significant features…

more now about more now about commercial regulation commercial regulation and and other policy-related measuresother policy-related measures

FTAs are becoming increasingly FTAs are becoming increasingly heterogeneousheterogeneous

often ‘stretched’ into often ‘stretched’ into wider economic wider economic partnership agreements partnership agreements

FTA HeterogeneityFTA Heterogeneity• Each FTA is crafted in accordance to the Each FTA is crafted in accordance to the

political economic interaction between the political economic interaction between the trade partners concernedtrade partners concerned

• Agreements can vary significantly in terms Agreements can vary significantly in terms of:of:scope of commercial liberalisationscope of commercial liberalisationimplementation schedules and modalitiesimplementation schedules and modalitiescommercial regulation provisions, e.g. commercial regulation provisions, e.g.

investment, IPR, government procurement, investment, IPR, government procurement, rules of origin, standardsrules of origin, standards

economic co-operation provisionseconomic co-operation provisionsphilosophical or ideational approachphilosophical or ideational approach

• Dominant trade partners can significantly Dominant trade partners can significantly determine the overall framework and contentdetermine the overall framework and content

• This is often in accordance to their This is often in accordance to their preferred preferred ‘FTA model’ ‘FTA model’

• The large majority of FTAs in the region are The large majority of FTAs in the region are bilateralbilateral, consistent with the global trend, consistent with the global trend

• Notwithstanding FTA heterogeneity, Notwithstanding FTA heterogeneity, three main three main FTAs models FTAs models are evident: US, Japan, are evident: US, Japan, China/ASEANChina/ASEAN

• ASEAN as hub for ASEAN as hub for quasi-regional FTAsquasi-regional FTAs: with : with China, Japan, Korea, Aus/NZ, IndiaChina, Japan, Korea, Aus/NZ, India

• Plurilateral FTAsPlurilateral FTAs: Mexico– Northern Triangle : Mexico– Northern Triangle (2000) and TPSEPA (2005, expanding to TPP)(2000) and TPSEPA (2005, expanding to TPP)

• Many FTA projects are in effect Many FTA projects are in effect dormantdormant (e.g. (e.g. Mexico – Singapore), Mexico – Singapore), stalledstalled (e.g. Japan – (e.g. Japan – Korea), or have been Korea), or have been abandonedabandoned (e.g. US with (e.g. US with many SE Asia nations)many SE Asia nations)

Key Trends in Asia-Pacific Key Trends in Asia-Pacific FTA ActivityFTA Activity

• Trade partner selectionTrade partner selectionThe The club of ardent free trader nationsclub of ardent free trader nations: NZ, : NZ,

Aus, US, Canada, Singapore, Chile, Panama Aus, US, Canada, Singapore, Chile, Panama (Mexico, Korea, Peru as secondary members)(Mexico, Korea, Peru as secondary members)

Relatively Relatively small trade partners small trade partners often selectedoften selected‘‘Easy’ FTA partner options are Easy’ FTA partner options are running out for running out for

active FTA countriesactive FTA countries……• In the US, the Obama Administration is In the US, the Obama Administration is far more far more

circumspectcircumspect than its predecessor about FTAs than its predecessor about FTAs• Japan, China and others are looking more to merge Japan, China and others are looking more to merge

existing FTAs into existing FTAs into larger Asia regional arrange-larger Asia regional arrange-ments ments rather than create new FTA partnersrather than create new FTA partners

• BUT… large regional FTAs may prove unrealisticBUT… large regional FTAs may prove unrealistic• As result of the above, As result of the above, FTA activity in the Asia-FTA activity in the Asia-

Pacific is slowing downPacific is slowing down……• Existing FTAs may be transformed Existing FTAs may be transformed into into

different types of agreement, taking on new different types of agreement, taking on new content, etccontent, etc

ADB Survey of FTA Utilisation and Burden Impact, ADB Survey of FTA Utilisation and Burden Impact, 20102010

 Use FTAs

(%)

Plan to or Use FTAs

(%)

Burden Imposed by

multiple RoOs (%)

       China 45.1 77.9 6.3Japan 29.0 47.4 31.0South Korea 20.8 54.2 15.4Singapore 17.3 28.0 37.5Thailand 24.9 45.7 26.2Philippines 20.0 40.7 27.7

• FTAs are increasingly focused on FTAs are increasingly focused on commercial commercial regulationregulation: the rules and standards that : the rules and standards that determine the regulatory framework in which the determine the regulatory framework in which the trade and investment related activities of firms trade and investment related activities of firms take placetake place

• Core generic areas:Core generic areas:investmentinvestmentgovernment procurementgovernment procurementintellectual property rights (IPR)intellectual property rights (IPR)competition policycompetition policyrules of origin (RoO)rules of origin (RoO)industrial and other standardsindustrial and other standards

• Sector-specific areas: financial services, Sector-specific areas: financial services, telecoms, etctelecoms, etc

Commercial Regulatory Commercial Regulatory Provisions in Asia-Pacific Provisions in Asia-Pacific

FTAsFTAs

• Ascendance of commercial regulatory provisions:Ascendance of commercial regulatory provisions:tariffs and other conventional trade barriers tariffs and other conventional trade barriers

have fallen or become less importanthave fallen or become less importanttechnological and policy developments: the rise technological and policy developments: the rise

of services trade, open market competition for of services trade, open market competition for infrastructure and professional servicesinfrastructure and professional services

globalisation and the closer inter-linkage of globalisation and the closer inter-linkage of trade and investmenttrade and investment

foreign firm penetrability of the host country’s foreign firm penetrability of the host country’s domestic market in terms of business domestic market in terms of business operations as well as product salesoperations as well as product sales

• FTAs (and hence their rules and regulations) now FTAs (and hence their rules and regulations) now nominally cover around 40-50% of Asia-Pacific nominally cover around 40-50% of Asia-Pacific tradetrade

• US + Aus/NZ focused on US + Aus/NZ focused on regulatoryregulatory rights;rights; China and ASEAN on China and ASEAN on regulatory co-operation;regulatory co-operation; Japan, South Korea and Singapore a mix of the Japan, South Korea and Singapore a mix of the twotwo

FTA FTA Provisions Provisions

on IPR: on IPR: Singapore and Singapore and Thailand FTAsThailand FTAs

FTA FTA Provisions on Provisions on Investment: Investment: Singapore and Singapore and Thailand FTAsThailand FTAs

• Commercial regulation provisions of FTAs can shape Commercial regulation provisions of FTAs can shape the economic and business environment in various the economic and business environment in various ways…ways…shaping the very nature of international business shaping the very nature of international business

competition (and ‘free trade’): more defined by competition (and ‘free trade’): more defined by regulatory parameters rather than the elimination regulatory parameters rather than the elimination of conventional trade barriers, e.g. tariffsof conventional trade barriers, e.g. tariffs

conferring distinct regulatory preferences, e.g. on conferring distinct regulatory preferences, e.g. on govt procurement ‘offer’ thresholds, RoO govt procurement ‘offer’ thresholds, RoO generallygenerally

dominant FTA partner shapes the domestic dominant FTA partner shapes the domestic regulatory regime of others, e.g. US and IPRregulatory regime of others, e.g. US and IPR

rules of origin and configuration of supply chains rules of origin and configuration of supply chains and international production networksand international production networks

FTAs extending beyond compliance to WTO FTAs extending beyond compliance to WTO accords, e.g. on TRIMS, TRIPS, GPAaccords, e.g. on TRIMS, TRIPS, GPA

• Approach towards FTA commercial regulation will Approach towards FTA commercial regulation will primarily depend on development capacity factors…primarily depend on development capacity factors…

Taiwan’s Future FTA Taiwan’s Future FTA Choices?Choices?

The ECFA FactorThe ECFA Factor• ECFA is currently a sub-FTA arrangement (partial ECFA is currently a sub-FTA arrangement (partial

or ‘early harvest’)… plans to graduate to full FTA?or ‘early harvest’)… plans to graduate to full FTA?• China as Taiwan’s largest trade partner, so ECFA China as Taiwan’s largest trade partner, so ECFA

is Taiwan’s most potentially important FTA optionis Taiwan’s most potentially important FTA option• Will ECFA become one day like the Aus – NZ CER?Will ECFA become one day like the Aus – NZ CER?• ECFA the key to unlock Taiwan’s other FTA ECFA the key to unlock Taiwan’s other FTA

options…options…

New FTA Partner SelectionNew FTA Partner Selection• Japan and South KoreaJapan and South Korea: very viable, potentially : very viable, potentially

large gains… similar industries and development large gains… similar industries and development level, shared views on agriculture protectionlevel, shared views on agriculture protection

• SingaporeSingapore: easy option, limited gains… may : easy option, limited gains… may help to leverage deal with ASEANhelp to leverage deal with ASEAN

• ASEAN: ASEAN: viable, gains will depend on substance viable, gains will depend on substance of agreement signed (very unpredictable), may of agreement signed (very unpredictable), may take some time to negotiate… separate take some time to negotiate… separate bilaterals or singular regional approach?... bilaterals or singular regional approach?...

• United StatesUnited States: possible… be prepared to wait, : possible… be prepared to wait, US demands will be high on commercial US demands will be high on commercial regulation, backlog of unratified FTA bills regulation, backlog of unratified FTA bills already at Congress, may suggest Taiwan joins already at Congress, may suggest Taiwan joins the TPP…the TPP…

• Trans-Pacific Partnership (TPP)Trans-Pacific Partnership (TPP): cross-: cross-regional FTA in talks, expanding membership regional FTA in talks, expanding membership but little chance of success unless significant but little chance of success unless significant compromises madecompromises made

• European UnionEuropean Union: viable, not so demanding as : viable, not so demanding as US on commercial regulation, easier on US on commercial regulation, easier on agricultural protection, may have to wait until agricultural protection, may have to wait until EU-ASEAN deal doneEU-ASEAN deal done

• Other possiblesOther possibles: New Zealand, Australia, : New Zealand, Australia, Chile, Mexico, Peru, ASEAN member statesChile, Mexico, Peru, ASEAN member states

What kind What kind of FTAs for Taiwan?of FTAs for Taiwan?• The extent to which Taiwan will The extent to which Taiwan will have a have a

choice choice on this will depend on the FTA on this will depend on the FTA partner (FTA models issue, e.g. US)partner (FTA models issue, e.g. US)

• Deep evaluation required of what kind of Deep evaluation required of what kind of agreements will agreements will best serve Taiwan’s best serve Taiwan’s interestsinterests: economic, business, political, : economic, business, political, energy security, etcenergy security, etc

• Different kinds of FTAs will be signed Different kinds of FTAs will be signed (heterogeneity) according to (heterogeneity) according to what is what is politico-economically feasiblepolitico-economically feasible

• The importance of keeping track of The importance of keeping track of trade trade policy innovation and ‘issue linkage’policy innovation and ‘issue linkage’, , e.g. energy, climate change relatede.g. energy, climate change related