Taiwan Isolated amid New TPP Trade Talks

Taiwan Isolated amid New TPP Trade Talks
Credit: AP / 達志影像

What you need to know

Following the withdrawal of the U.S. in January, the Trans-Pacific Partnership agreement looked dead in the water. Yet with talks among the 11 remaining nations restarting in Japan and Vietnam, could a revised TPP leave the door open for Taiwan to join?

In early November, the 11 remaining nations involved in Trans-Pacific Partnership negotiations met in Urayasu, a coastal city southeast of Tokyo, to discuss the possibility of launching the agreement without the United States.

The U.S. withdrew from the proposed trade bloc in January, leaving Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam to continue negotiations.

What is the TPP?

The Trans-Pacific Partnership, known as the TPP, is a large, multinational trade agreement intended to lower trade barriers and open markets for its signatories. Similar in structure to the North American Free Trade Agreement (NAFTA) between the U.S., Canada and Mexico, the agreement promises economic benefits for member nations and, at least before the United States’ withdrawal, a mechanism for counterbalancing Chinese influence in the Asia-Pacific.

The agreement is not without its critics; some Taiwanese labor and industrial groups oppose the TPP, and during the 2016 U.S. presidential election, candidates on both sides voiced disapproval, a popular stance that contributed to Donald Trump’s victory.

Many considered the TPP dead without American leadership. However, as the recent talks in Japan show, the TPP may very well survive, even without American participation. As of publication, TPP negotiations at the Asia-Pacific Economic Cooperation (APEC) summit in Vietnam were hindered by reluctance from New Zealand, Canada, and Malaysia, while Japan continues to push for quick consensus.

Could Taiwan join the TPP?

Taiwanese officials have long wished to join the trade bloc, and even without American involvement, the current Democratic Progressive Party (DPP) government hopes to participate. Taiwanese membership, however, looks increasingly far-fetched.

Taiwan’s Fair Trade Commission (FTC) Commissioner, Dr. Honigman Hong (洪財隆), believes the TPP will still be beneficial for Taiwan even if it’s not a signatory. Many of the signatories to the TPP are either large trading partners (e.g., Japan, Singapore) or are targets of Taiwan’s New Southbound Policy (e.g., Vietnam, Malaysia).

Still, Hong notes, it would be best if Taiwan could actually join - though that's highly unlikely without American participation.

Hong is not the only expert to recognize that without American support, Taiwan has little hope of joining the trade bloc. Dr. Huang Kwei-Bo (黃奎博), who serves as Vice Dean and Associate Professor of Diplomacy at the College of International Affairs at National Chengchi University having completed a stint as a Ministry of Foreign Affairs official, agrees with Hong's assessment that Taiwan needs a U.S.-led TPP.

"A TPP without the U.S. is like a tiger with no teeth," Dr. Huang says.“[The TPP] still looks good in terms of GDP, population, and so on, but it is no longer powerful and attractive.”

Furthermore, the greatest benefit of the TPP for the U.S. and Japan — and thus Taiwan — was to be the creation of a trade regime that China would want to engage and possibly join in. Without the U.S. involved, China has no incentive to adjust its practices to the requirements laid out by the TPP, and the U.S. has no leverage with which to push back against Beijing’s efforts to block Taipei from membership.

With American backing (and that of other major powers), Taiwan might have had an opportunity to join.

According to former AIT Chairman and U.S. diplomat Richard Bush, the strategy for Taiwan to join would have to look very much like the conditions Taiwan agreed to in order to join the World Trade Organization in 2002, when the Clinton Administration was able to convince China to accept Taiwan’s membership.

However, “Taiwan is marginalized and cut off from international participation by Beijing,” Dr. Hong says. And while Japanese Prime Minister Shinzo Abe would likely be an advocate for Taiwanese interests, Tokyo simply doesn’t have the same clout with Beijing that Washington does.

As it stands, it seems highly unlikely there is a path for Taiwanese membership in the TTP.

“Mainland China will be opposed to it, given the sour cross-Strait relationship,” Huang notes. “Taiwan needs the endorsement of the U.S. and other major powers in the international community to participate meaningfully in these regional blocs.”

How will China respond?

One potential downside for Taiwan, according to Dr. Hong, is that without American leadership, the TPP will not have what Prime Minister Abe called a “pacifying effect” on the Asia-Pacific.

Furthermore, it will give Beijing more space to dictate rules for trade and finance in the region, in which case Taiwan will be increasingly left out. China has worked to limit Taiwanese engagement with other economies, and without the TPP and American leadership to counterbalance Beijing’s wishes, China will find it easier to isolate Taiwan.

“I think Beijing's current intention in the Asia-Pacific region is not to lead but to voice its views and wishes for the purpose of creating a favorable atmosphere where its words count greatly,” Dr. Huang says. And considering the frosty state of cross-Strait relations, Beijing’s words alone might be enough to limit outside engagement with Taipei.

Fate of the TPP and Taiwanese isolation

Still, the TPP might survive, albeit as a weaker iteration than many Asia-Pacific nations had hoped for.

This is not a foregone conclusion, however. With the election of a new government and concerns over foreign real estate investment, New Zealand is calling for a renegotiation that could put the whole agreement at risk.

Another issue is leaving space for the U.S. to join in the future. Southeast Asian nations stood to gain the most from the TPP with the U.S. as a member, but commitments to transparency, movement of data, and environmental and labor standards mean that without access to U.S. markets, TPP membership may be deemed too expensive for developing nations. Solutions to this problem include suspending some conditions until such time as the U.S. joins, but, again, these further negotiations leave room for the whole agreement to unravel.

In the meantime, a weaker TPP leaves makes more room for China to focus on and implement its regional economic initiatives and partnerships, including its “One Belt, One Road” program linking many Eurasian markets, the Asian Infrastructure Investment Bank (AIIB), and the Regional Comprehensive Economic Partnership (RCEP), seen by many as a Chinese-led alternative to the TPP.

And with more space for China to write the rules of Asia-Pacific trade and economic exchange, Taiwan will increasingly be left out until Taipei takes a more amenable approach to Beijing’s demands, including direct acknowledgement of the 1992 Consensus.

In short, while the TPP may survive, its current form isn’t much help to Taiwan and makes more room for Beijing to dictate the rules of the game.