ECONOMY

Taipei’s bid to join transpacific trade pact could be held hostage by Beijing

Last week, Taiwan’s longtime president Tsai Ing-wen made a move leading her back to the beginning of her career when she was trade negotiator: by applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership just days after China did, Taiwan has created a situation that mirrors the two countries’ accession requests to the World Trade Organization more than 30 years ago.

The duelling bids are a déjà vu not just for Tsai. CPTPP’s 11 members now have to discuss bilateral trade issues of concern with both candidates, and their trade ministers will have to decide whether to formally start negotiations with Beijing or Taipei, or both.

Just like in 1990, when Taiwan applied to join the WTO’s precursor the General Agreement on Tariffs and Trade (Gatt), Taiwan is much closer to conforming to the trade pact’s standards than China is. Over almost a decade, Taipei has prepared an application to join the transpacific trade pact, from deregulating its service sector to opening up licence exams to foreign lawyers, to strengthening intellectual property rights protection. Taipei has also been conducting informal consultations with all 11 CPTPP members.

China, on the other hand, is on a trajectory away from an open economy. The EU Chamber of Commerce warned last week that “signs that China is turning inward — as can be seen in its . . . aim to increase self-reliance, and even achieve self-sufficiency, in parts of the economy, are a real cause for concern”.

Mireya Solís, director at the Center for East Asia Policy Studies at the Brookings Institution, says that China will struggle to meet CPTPP’s requirements on limiting the power of state-owned enterprises and ensuring basic labour rights. “There is a wide gap between core CPTPP standards and China’s extant commitments in other trade agreements,” she wrote last week.

Just like in 1990, handling the two applications is first and foremost a matter of politics. In an exact parallel to the two countries’ WTO accession effort, China has already demanded that the trade bloc reject Taiwan’s application, reminding its members that Beijing “resolutely opposes the Taiwan region’s accession to any official agreements and organisations”.

Trade experts argue that this contradicts WTO principles. “In the WTO, it follows from the treaties that you sign as a customs territory that you have the right to sign bilateral trade agreements,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, who wrote the first feasibility study for a bilateral trade deal between Taiwan and the EU a decade ago.

He argues that Beijing’s acquiescence to Taiwan’s trade deals with Singapore and New Zealand and Beijing’s own bilateral trade deal with Taipei several years ago further undermine China’s objections to Taiwan’s participation in CPTPP.

But Taiwan’s attempt to join CPTPP could be held hostage by China’s application as happened in the WTO. It took almost three years for the Gatt to establish a working party handling Taiwan’s accession bid. It started its proceedings under a political deal stating that all parties had agreed there was only one China, and Taiwan’s accession should not be completed until after China had joined. It took 11 years for Taiwan to get WTO membership.

“In the CPTPP, it is most likely going to be either both or neither,” said a trade expert who was involved in China’s WTO negotiations on behalf of an EU member. “We recognised this in the WTO when we negotiated the settlement under which China was admitted first.”

The big difference is that over the two decades since the two countries joined the WTO, China has become a superpower. That gives it more sway over its counterparts in negotiations to join the transpacific trade pact. But Beijing’s penchant for bullying tactics with the help of its economic might is also making other governments increasingly wary.

How China’s and Taiwan’s CPTPP membership bids move ahead will therefore be a test for how far Beijing’s economic coercive powers reach.

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