Prospects for Taiwan and the TPP

Container ship docking at the port of Keelung in Taiwan. Perhaps there is something about playing hard to get. The more difficulty existing participants have concluding the Trans-Pacific Partnership (TPP) negotiations, the more eager outside countries have been to join. Taiwan is the latest aspirant: President Ma Ying-jeou has made the pursuit of TPP membership a top priority. It is not especially difficult to see why Taiwan would want to join the TPP; it is somewhat harder to see how it might pull off the feat.

Taiwan is eyeing major competitor countries that have either already won preferential access into the U.S. market (Korea) or are in a position to do so (Japan, through the TPP). In low-margin businesses such as electronics, a small tariff preference can prove significant. As a commercial power in the Asia-Pacific, Taiwan would like to be a part of discussions that could potentially set trading standards in the region for years to come. Not only that, but Taiwan would achieve a free-trade agreement with the United States—a long-time goal.

Had TPP proceeded along earlier, more optimistic schedules, it might have wrapped up in the fall of 2011 when the United States hosted the annual APEC (Asia-Pacific Economic Cooperation) meeting. Instead, that summit was only able to produce an outline of an agreement. The delay ultimately provided an opening for major new entrants to slip in—namely, Canada, Mexico, and Japan. While the involvement of those countries had initially been deferred with the admonition that negotiations were near conclusion and new entrants could not be accommodated, the slow progress made it diplomatically awkward to postpone their entry. Plus, new members had the virtue of increasing the economic significance of the TPP, even if they introduced new obstacles to reaching a deal at the same time.

What does this mean for Taiwan’s potential to participate? It is not at all clear that Taiwan will have an opportunity to press its case for TPP membership before the current negotiations conclude. In that case, it will be reliant upon an accession process that has not yet been defined. Taiwan’s hopes rely upon further delays in concluding the TPP. The more trouble the agreement encounters, the better Taiwan’s chances.

While there is nothing Taiwan can do to guarantee itself entry, there is a three-pronged strategy it could follow to maximize its chances:

  1. Hug Korea tight. If there is to be an opening for new entrants, Korea is likely to be a leading contender. Although Korea did not push for TPP membership during talks to conclude the U.S.-Korea FTA (KORUS), it would nonetheless be a natural candidate for entry if the possibility opens up, since it now has its own FTA with the United States. Taiwan could make the case to current TPP members that its economic interests are similar to Korea’s—they compete in many of the same sectors, such as consumer electronics—and that the pairing is natural.
  2. Make life easy. Taiwanese trade negotiators have the reputation of vigorously advocating for their national interests. While it is natural to press for one’s own interests, to reserve the right to do so in the TPP context will deeply unsettle existing participants. There were concerns that the admission of Japan would seriously complicate the talks, given its sensitivities about agriculture and history as a tenacious negotiating partner. Those fears now appear justified. Thus, Taiwan must choose between pledging docility in TPP negotiations and asserting the right to vigorously promote its interests, but doing so from outside the negotiations.
  3. Placate the mainland. The People’s Republic of China (PRC) has kept a wary eye on the TPP, sometimes viewing it as unlikely to succeed while at other times seeing it as an aggressive encircling movement. For many TPP participants, China is a major business partner that they do not seek to antagonize. Considering the importance of the mainland in Taiwan’s economy, a major reaction against Taiwanese TPP membership could undo many of the agreement’s benefits. This does not mean that Taiwan needs the PRC to enthusiastically endorse its membership; it just needs the PRC to refrain from objecting. Taiwan could make the case to the mainland that, in light of their extensive economic relationship, Taiwanese membership could give the mainland a kind of entrée into the TPP. Whether or not that was discussed, the recent cross-straits discussions were encouraging.

Even with an optimal strategy, Taiwan will need TPP negotiations in the immediate future to progress poorly enough to eventually stall and thereby provide an opening for Taiwanese accession. Yet the negotiations cannot go so awry that the TPP falls apart altogether.