The Magazine

Let's Trade with Both Chinas

Taiwan should be in the WTO, but if Beijing is in first, watch out

Apr 17, 2000, Vol. 5, No. 30 • By GREG MASTEL
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FRIENDS OF CHINA both inside and outside the Clinton administration are quick to assert that China's accession to the World Trade Organization will also mean WTO membership for Taiwan, as if the two actions were inevitably linked. But this is wishful thinking. China has acted for years to keep Taiwan out of the world trading system, and there are no grounds for believing that Beijing, once itself a member, will be any more hospitable to Taiwan.


On the contrary, there are grounds for expecting trouble. They begin with China's poor record of keeping its trade promises. Then there is Beijing's history of throwing up barriers in Taiwan's path, despite the latter's strong trade credentials and efforts at accommodating its giant neighbor.


Thus, to avoid formally challenging China, which claims sovereignty over it, Taiwan in 1990 applied for admission to the world trading system as a customs territory, not an independent country. A similar formula had been used to bring Hong Kong into the trading system in 1986. Ignoring this good-faith gesture, China has acted through surrogates -- notably Hong Kong, since Beijing's takeover there in 1997 -- to block the admission of Taiwan, even though Taipei has diligently completed bilateral negotiations with all of its trading partners.


The United States and other democratic countries have failed to confront this obstructionism. When pressed about it, Clinton administration officials cite an unwritten understanding they have with Beijing that Taiwan will join the WTO once China is a member. So confident are they that China will keep its word that they routinely list Taiwan's joining the WTO among the benefits of China's eventual membership, even though this unenforceable understanding has no more status than a whispered promise, a promise whose existence China has never squarely and publicly acknowledged.


Recent reports in the Taiwanese press are not reassuring. They cite unnamed Chinese sources who say that China might bar Taiwan's entry by insisting on some last-minute deal-breaker, such as a requirement that Taiwan change the name on its application to acknowledge Beijing's sovereignty. Such a move would be not only an affront to the United States, but also a blow to its economic interests. Taiwan is, and is likely to remain, a much better export market for the United States than China. Last year, Americans sold $ 17.6 billion worth of exports to Taiwan and only $ 12.6 billion to China; American farmers, in particular, exported more than twice as much to Taiwan ($ 1.5 billion) as they did to China ($ 750 million). And in the future, Taiwan is much more likely than China to meet its commitments to opening its market further.


If the administration were serious about securing Taiwan's entry to the WTO, it would obtain a specific, public commitment from China that Taiwan's application will be accepted simultaneously with China's. Instead, there is a good chance that the diplomatic maneuvering on this issue will occur late this year -- in the last days of the Clinton administration, when the White House is eager, perhaps overeager, to cement its legacy on China. To make matters worse, by then, key Clinton personnel may already have departed, creating a situation ripe for a mistake or a last-minute Chinese deception.


Plainly, Congress alone can devise a solution binding on both this president and his successor. And the means is at hand: Congress should pass a law making Taiwan's admission to the WTO a precondition for China's permanent normal trade relations with the United States. Until such a statute can be passed, meanwhile, Congress should make it clear to the Chinese through lesser measures -- resolutions, letters, and public statements -- that any duplicity regarding Taiwan would jeopardize China's trade relations with the United States.




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