The Magazine

Free Trade at Last?

Time to stop holding Taiwan at arm's length.

Jun 2, 2003, Vol. 8, No. 37 • By GREG MASTEL
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Considered from the perspective of business strategy, an FTA would allow U.S. companies to better compete in Taiwan with their rivals in Japan and Europe. Taiwan could even develop into a gateway through which U.S. companies might better access other Asian markets. Furthermore, an economically stable, democratic country in Asia that is a strong ally of the United States has obvious value as a role model for other would-be democracies, including, at some point, China. Conversely, economic instability in Taiwan could destabilize the region and increase the likelihood of a U.S.-China-Taiwan conflict.

Some have argued the United States should hold back on an FTA with Taiwan because of outstanding trade issues, particularly intellectual property protections, which no one disputes is a serious issue. In fact, Taiwan is currently working to improve intellectual property protections for its own sake as well as to answer U.S. concerns. Considered from a tactical perspective, however, such problems argue for pursuing an FTA, not holding back. In the case of Mexico, the negotiations that led to an FTA provided a tremendous opportunity to address thorny issues relating to intellectual property and agriculture. Indeed, more progress would be made on behalf of intellectual property rights and, for example, export opportunities through FTA negotiations than by any other approach.

Of course, the real reason FTA talks with Taiwan are not already underway is fear of upsetting China. Indeed, Beijing would likely object to any FTA talks between the United States and Taiwan, but without justification. Taiwan is already a member of the WTO and the United States has negotiated many trade agreements with Taiwan over the years. Even now, Taiwan is negotiating FTAs with other countries, such as Panama. In short, a U.S.-Taiwan FTA raises no issues not addressed in other contexts.

There is no question China is an important member of the world community. Beijing sits on the U.N. Security Council and could, for instance, play a constructive role in containing North Korea. But this is no reason for the United States to slight a reliable friend and ally. Instead, we should continue pursuing a realistic and responsible framework for policy toward Taiwan that advances our mutual interests. The next step is building an economic bridge between Washington and Taipei in the form of a new free trade agreement, which will allow both countries to build their economies, encourage further reform in Taiwan, and cement a core relationship between free market democracies.

Greg Mastel is a fellow at the New America Foundation and the chief international trade adviser at Miller and Chevalier, Chartered (which provides international trade advice to the government of Taiwan).