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Free Trade with Free China

Instead of worrying about Beijing, the U.S. should let Taiwan into the WTO

Nov 8, 1999, Vol. 5, No. 08 • By GREG MASTEL
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The fate of China's effort to join the World Trade Organization is unclear; matters involving internal deliberations in Beijing usually are. There is always the possibility that China is waiting until the last minute to wrap up WTO negotiations, hoping that the Clinton administration's desire to build a record of achievement for its engagement policy will force Washington to lower the bar for WTO membership. The emerging consensus, however, seems to be that China is simply unwilling to tackle the domestic reforms that WTO membership requires.


In the spirit of "If I don't win, I'll take my ball and go home," China is also insisting that if it cannot become a WTO member, Taiwan cannot be allowed to join either. Surprisingly, the United States seems willing to tolerate this Chinese petulance, though doing so runs directly counter to U.S. interests. The United States should press for Taiwan's membership in upcoming WTO negotiations whether or not China is admitted.


This latest example of a convoluted and counterproductive stance toward the greater China region is but one of many strange results of the "one China" policy. Since its establishment in the 1970s, virtually every major assumption underlying the one China policy has dramatically changed: The Soviet Union has collapsed, ending the Cold War; Taipei has transformed itself from an authoritarian regime to a functioning democracy; and Beijing has moved from being a questionable ally to a possible enemy.


Still, the one China policy persists largely unchanged, and Beijing expresses outrage at even the smallest evolution in U.S. relations with Taiwan, as demonstrated by the yearlong tantrum following the visit of Taiwan's President Lee to his U.S. alma mater. As a result of this policy, the United States continues to refuse to allow senior Taiwanese officials to visit the United States or even leave their planes while they are refueling in Hawaii, senior U.S. officials are generally not allowed to visit Taiwan, and this summer the United States effectively sided with Beijing against Taipei when President Lee suggested that some changes in the Beijing-Taipei dialogue were long overdue.


Now the State Department seems poised to acquiesce to another unreasonable PRC demand pertaining to Taiwan. While China's unwillingness to embrace economic reforms such as opening its market to agricultural and manufactured imports and reforming state-owned enterprises has slowed its WTO application to a near standstill, Taiwan's application has moved along smoothly. From the outset of accession talks, Taipei agreed to accept the full WTO disciplines applied to developed countries -- something Beijing has steadfastly refused to consider. It also sought membership as a customs territory, not an independent country, to avoid offending Beijing. Largely because of Taipei's positive attitude, Taiwan has concluded bilateral WTO accession talks with all interested countries, including the United States, the European Union, and Japan.


Although China remains outside the WTO, Beijing has insisted that Taiwan not be allowed to join until it is admitted. This position is not only arrogant but also surprising, in that Hong Kong was allowed to enter the WTO as a separate entity before control reverted to China. Now China appears to be attempting to recruit allies like Hong Kong and Pakistan to work its will, although neither has any unresolved trade issues with Taiwan. Hong Kong, in fact, concluded a bilateral WTO accession agreement with Taipei some time ago.


Taiwan has looked to the United States, as the de facto senior member of the WTO and the unofficial arbiter of such matters, to press the case for its membership in the run-up to the WTO ministerial meeting in Seattle at the end of November. The United States has long taken the position that the WTO is a trade organization, not a political one, and the applications for membership by China and Taiwan should be considered separately on their merits. Obviously, if that is the decision paradigm, Taiwan should now be admitted and Beijing remain outside until it is prepared to accept trade disciplines.


Recently, however, there have been disturbing signs that U.S. resolve is weakening on this issue. U.S. officials have begun to suggest that Taiwan's WTO membership requires unanimity of support among interested WTO members, a position that effectively gives Beijing, acting through Hong Kong or another surrogate, veto power over Taiwan's application.


Although it might help to prevent a fit of pique from Beijing, keeping Taiwan out of the WTO is not in the best interest of either the United States or the WTO. In return for admission to the WTO, Taipei has agreed to lower hundreds of tariffs and non-tariff barriers. This market opening would make possible hundreds of millions of dollars worth of new U.S. exports to Taiwan of products ranging from pork to sophisticated electronics. Taiwan already imports more from the United States than the PRC; in 1998, total U.S. exports to Taiwan were $ 17 billion, and the total for the PRC was only $ 14 billion. If Taiwan became a WTO member, it would certainly be among the most promising foreign markets for U.S. exporters.


Beyond that, the credibility of the WTO is at stake. The WTO was conceived as an unbiased policeman of international trade, which would facilitate expanding trade and arbitrate trade disputes without regard for outside concerns. If the WTO allows Taiwan to be excluded from its membership because of the entirely political concerns of a non-member, that credibility will be seriously damaged and the precedent will be set for future political manipulation of WTO negotiations and operations. If the body is used as yet another diplomatic forum for endless political machinations, it will soon become just another discredited international organization.


Clinton administration officials are correct in noting that the WTO is a multilateral body, and Washington alone cannot ordain Taipei's membership. If it chose to, however, Washington could challenge those countries that stand in Taipei's way on Beijing's behalf and recruit other WTO members to press Taiwan's membership. There is no guarantee that this initiative would succeed, but there is no guarantee that any of the other trade negotiating initiatives that the United States plans to pursue through the WTO will succeed either. Still, the United States persists in advancing controversial initiatives to eliminate tariffs on various industrial products and begin discussions on integrating labor and environmental issues into the WTO in the face of considerable, open opposition. Given the stakes for both the United States and the world, Taiwan's WTO application deserves no less an effort.


To put it simply, Taiwan has earned WTO membership. Against considerable domestic opposition, Taipei has pursued economic reform and built an open, vibrant market economy. It is clearly more qualified for WTO membership than dozens of countries that are now WTO members. The United States has a considerable amount to gain from Taiwan's WTO membership; but beyond that, admitting Taiwan is simply the right thing to do -- regardless of whether China is also a member. It would be a mistake to bow to Beijing's unreasonable and ever expanding interpretation of the out-of-date one China policy and quietly allow Taiwan to be unjustly denied a seat at the WTO table.


If the Clinton administration is unwilling to take up this cause on its merits, Taiwan's supporters in Congress are well advised to press the issue hard in the next few weeks. After all, the Constitution assigns Congress primary responsibility for international trade. This is a matter best not left to diplomats, who seem more interested in bowing to Beijing than advancing U.S. interests.




Greg Mastel is director of the Global Economic Policy Project at the New America Foundation.