Taiwan's dual challenges in joining the CPTPP

(MENAFN- Caribbean News Global)

By Henry Walsh

Since both Taiwan and the People's Republic of China (PRC) announced their intentions to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in September 2021, discussions about their relative chances of success have largely centered around a binary construct: economic policy and geopolitics. Attention to and skepticism of the PRC's application has centered on its ability to adhere to the agreement itself, in contrast to Taiwan's CPTPP application, discussion of which has identified geopolitics as the major obstacle.

While the PRC will need to convince CPTPP countries that watering down the agreement is worth enhanced access to its market, Taiwan's ambitions will rely on convincing CPTPP members that the benefits of Taiwanese accession outweigh the risks of upsetting Beijing. Although Taiwan is far closer to CPTPP compliance than the PRC, there are also significant steps that Taiwan would have to take before coming into line with the terms of the agreement. Therefore, Taiwan faces a double challenge: managing the geopolitical sensitivities surrounding its application, while also enacting reforms that move Taiwan closer towards CPTPP compliance.

The CPTPP application process

The first step in applying to become a member of the CPTPP is to submit an application to the depositary, New Zealand. Next , the CPTPP members will decide whether or not to proceed with the application by establishing an Accession Working Group (AWG). Within 30 days of the first AWG meeting, the applicant country must submit its list of proposed market access offers, followed by a long negotiation process. If the applicant country can come to an agreement with all CPTPP members, it will receive a formal invitation to join. However, consensus among all members is required . While Malaysia, Brunei, and Chile have not yet ratified the CPTPP and are therefore not yet parties to the agreement , their positions will be taken into serious consideration.

An additional procedural question that has arisen is whether the PRC will join first, as was the case in its World Trade Organization (WTO) accession, or if the PRC and Taiwan will join simultaneously, as was the case with the Asia-Pacific Economic Cooperation (APEC) forum.

If the PRC is to join the CPTPP first, it will have an opportunity to block Taiwan's entry altogether. However, if both Taiwan and the PRC are able to join, they will need to liberalize trade towards each other. The concerns here for Taiwan are both economic and security-based. The enormous size of the PRC's economy would pose an increased threat to Taiwanese producers, and growing PRC investments may exacerbate concerns of economic interdependence in Taiwan that contributed to the 2014 Sunflower Movement. Furthermore, liberalization may allow PRC entities to get closer to critical Taiwanese technologies in spaces such as semiconductors, which may ultimately be of concern to Taiwan's national security.

Geopolitical challenges

Taiwan's ambition to join the CPTPP will continue to be something that the PRC vehemently opposes. While no CPTPP member country has told Taiwan that it will not be allowed into the agreement, overcoming geopolitical challenges will be the hardest task facing Taiwan. When it comes to individual countries' reactions to Taiwan's application, CPTPP member states have largely remained silent on the matter. Apart from Japan's statements of support, the closest thing to an official sign of support for Taiwan has come from Singapore's assertion that“any economy that is willing and able to meet the high standards” can join (New Zealand has issued a similar statement ).

While the reason for this silence may be an aversion to upsetting the PRC, simple diplomacy may provide further explanation. On one hand, a statement supporting Taiwan's application would anger Beijing. On the other hand, according to GTI Senior Non-Resident Fellow Riley Walters (whose own article on Taiwan and the CPTPP can be read here ),“CPTPP members want to be diplomatic—meaning they generally won't say whether they support or oppose any one country/economy joining CPTPP in an effort to temper expectations and not presuppose the outcome of negotiations.

I wouldn't say it's necessarily based on offending the PRC.” In this sense, Taiwan can remain confident that silence from CPTPP members does not necessarily reflect a deference to the PRC. However, Taiwan can and should continue to meet privately with each member as it had been doing prior to submitting its application, leveraging the benefits of its membership both from an economic and standards-setting perspective.

Challenges in complying with the CPTPP

Although Taiwan is much closer than the PRC to meeting the standards of the CPTPP, work remains to be done. In addition to introducing badly needed reforms to its labor market, and other areas, Taiwan should eliminate bans on certain agricultural products and adopt a high standard of trade liberalization. These two requirements will be the largest challenges Taiwan faces in fully complying with the CPTPP. With regard to the first measure, Taiwan's ban on agricultural imports from five Japanese prefectures following the 2011 Fukushima nuclear disaster has been a persistent rough spot in Taiwan-Japan relations. According to former Director of the British Trade and Cultural Office in Taipei Michael Reilly ,“Japanese support for [Taiwan's] application is essential.” However, Taiwan's progress on lifting the ban on Japanese agricultural products has been“slow,” said Reilly.

Despite Japan's consistent support for Taiwan's CPTPP ambitions, the issue remains difficult. While both President Ma Ying-jeou (馬英九) and Tsai Ing-wen (蔡英文) have attempted to make progress on the issue, the primary force keeping the ban in place has been Taiwanese voters, whose broad opposition to its lifting has been used by opposition parties against Tsai. Although chief trade negotiator John Deng (鄧振中) has acknowledge d the importance of lifting the ban, convincing the Taiwanese public (86 percent of whom support the ban), will be extremely difficult. If the Taiwanese government is unable to resist domestic pressure against its lifting, it will be up to Japan to decide how it wants to proceed with support for Taiwan's CPTPP bid.

It will also be difficult for Taiwan's protected agricultural sector to stomach the market liberalization aspects of the CPTPP. Member countries impose almost no tariffs on each other and for Taiwan to join, it will need to eliminate 99 to 100 percent of its tariffs. Doing this will be easier in some ways than others. Taiwan already has free trade agreements with Singapore and New Zealand , and tariffs on the major imports from Malaysia and Brunei are also quite low. However, the remaining CPTPP countries all export agricultural products to Taiwan. To take Vietnam as an example, the country faced tariffs of around 100 percent on the roughly 13 million kilograms of rice it exported to Taiwan in 2021.

For Taiwan to join the CPTPP, it will need to eliminate the high tariffs it imposes on agricultural goods. This means that farmers in Taiwan could face pressure from imports of fruit and fish from Chile and Peru, vegetables from Vietnam and Japan, pork from Canada, and a list of other imports from CPTPP countries.

Of course, Taiwan should still join the CPTPP if given the opportunity. While its domestic agricultural industry may face challenges from foreign exporters, increased overall trade would lead to a two percent increase in GDP, according to government projections . Additionally, having to allow Japanese food imports and eliminate protectionist trade policies are not reasons to not join the CPTPP; they are simply challenges that Taiwan must face in pursuit of its membership.

Conclusion

Although Taiwan may not currently be perfectly compliant with the CPTPP, and while reaching this level of compliance may prove challenging in some areas, Taiwan is much closer to compliance with the CPTPP than is the PRC. Taiwan does not provide massive levels of support to its state-owned enterprises, its environmental regulations have become relatively robust in the decades since industrialization, and its labor rights issues are solvable. Most importantly, Taiwan has demonstrated itself to be a cooperative player on global issues. While the geopolitical challenges Taiwan faces in joining this trade agreement are substantial, the fact remains that Taiwan's admission into the CPTPP would be beneficial for all member economies.

It is a commonly held and understandable viewpoint that Taiwan's participation in multilateral organizations should be encouraged on the ideological basis that Taiwan is a free and open democracy that believes in rules. However, Taiwan's membership in the CPTPP agreement can also be considered on entirely pragmatic grounds. Allowing Taiwan to join the agreement would bolster the standards the CPTPP promotes, and lead to increased trade. The more Taiwan can show that it can and will comply with the rules of the CPTPP, the more valuable a potential partner it will become, and the harder it will be for CPTPP members to reject its application.

The main point: In addition to significant geopolitical challenges, Taiwan's application to join the CPTPP faces challenges in terms of compliance with the agreement. As Taiwan continues to carefully navigate the diplomatic aspects of its accession, it should take further steps to assure that its economic policies are completely in line with CPTPP standards.

Henry Walsh was a Fall 2021 Intern at the Global Taiwan Institute.

This article originally published by Global Taiwan Institute Vol. 7, Issue 1, January 26, 2021, Global Taiwan Brief.

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