Monday, November 5, 2007


A birds-eye view of the Industrial Technology Research Institute in
Hsinchu County, Taiwan [image courtesy of Taiwan Journal]

. . . many of our global competitors are actively seeking to "lock-up" East Asia's fast growing economies into economic relationships that exclude the United States and U.S. firms, it is worth reflecting on this trend.

Today, there are 176 free trade agreements in existence in the Asia Pacific region alone, and many more either under negotiation or consideration.

  • China already has an FTA with ASEAN that covers goods, and a comprehensive services FTA between the two parties will enter in to force[sic] in July. In addition, the Chinese are actively negotiating or have proposed FTA discussions with, among others, Korea, Japan, India, Australia, New Zealand, the GCC, Pakistan, and the South African Customs Union.
  • Japan has concluded FTAs with Singapore, Malaysia, and the Philippines, and is considering engagement with the major players within Asia.
  • India has implemented FTAs with Thailand, Singapore, and Sri Lanka and, as the aforementioned facts indicate, is actively entertaining discussions with the region's larger economies.
  • Demonstrating that the interest in establishing trade deals in Asia is not limited to the region itself, the EU is actively courting partners that include China, India and. . .Korea.
  • We are witnessing efforts to construct an exclusive Asia Pacific regional free trade bloc – so-called ASEAN +3 or +6 arrangements.

A number of these FTAs unfortunately do not constitute high standard, comprehensive FTAs of the variety that we have negotiated. However, they do afford preferential trading positions to the companies of these countries, and do have the effect of placing U.S. businesses, workers, and farmers at a relative disadvantage in accessing fast-growing East Asian markets. One potential effect of this web of agreements is to encourage U.S. companies seeking to compete in these markets to relocate production to those countries.

- from the testimony of Ambassador Karan Bhatia, Deputy U.S. Trade Representative to the House Ways and Means Trade Subcommittee, 20 March 2007

Although the above excerpt is from testimony given by DUSTR Bhatia to the Trade Subcommittee regarding a free trade agreement with Korea (KORUS), Mr. Bhatia's words ring just as true when one considers the need for a Taiwan-U.S. free trade agreement (TUFTA) and, indeed, further trade agreements with many countries in the East Asia-Pacific region.

Without lowered tariffs and higher levels of economic cooperation with key countries in the region, American industry and economic interests will increasingly be edged out of the Pacific Rim marketplace. In order to remain competitive, the United States ought to act to increase its free trade portfolio in this region, and a good place to start would be agreements with strong regional players -- like Taiwan -- that pose relatively little direct competition to major American industries.

The beauty of a U.S.-Taiwan FTA is that each economy brings to the table strengths that the other lacks. Lowered prices on Taiwan-produced electrical components that are crucial to the electronics industry (and are probably in the computer that allows you to read this), will lower overall prices of electronics sold in the United States. Taiwan's investment and financial sectors will encounter added stability with the increased service quality brought about by improved competition from American financial service companies, and so on, and so forth. Even the Korea-U.S. Free Trade Agreement that Ambassador Bhatia so aptly endorsed in the Trade Subcommittee hearing is in some respects less attractive than TUFTA, in that any final form of KORUS will have to negotiate around headed competition between the large automotive industries that are so important to each country's economy.

Hence, we have here a few more reasons why Congress and the Administration should take more time to seriously look at and move towards the signing of a free trade agreement between Taiwan and the United States.

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