"Update on U.S. Relations with Taiwan: the WTO Agreement and Its Context"

BG9811E | Date: 1998-05-05

On the afternoon of February 20th in Washington, TECRO Representative Stephen Chen and I signed an agreement concluding the market access bilateral negotiations regarding accession to the WTO of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu. Minister of Economic Affairs Wang Chih-kang and U.S. Trade Representative Charlene Barshefsky witnessed the agreement. In the seventeeth round of our talks, consensus was reached after eleven days of intensive negotiations during which both sides worked constructively to seize what both recognized was a golden opportunity to come to closure.

Readers of this magazine will be familiar with the economic benefits that Taiwan and the United States gain from this agreement: U.S. exporters of industrial products will achieve levels of market access comparable to that available in other developed countries. Broad access will be available to American providers of the full range of services, including financial and telecommunications services. U.S. farmers will see new markets for pork, chicken and other meat products that have never been open to any foreign imports. Consumers in Taiwan will find imported goods to be more affordable as tariffs decline. Government procurement of goods and services will be more transparent and thus enhance public trust.

As Taiwan companies are exposed more to global economic forces, they will become even more competitive and successful than they already are. Liberalization of the service sector will facilitate the development of the Asia-Pacific Regional Operations Center.

Like all successful trade agreements, this one constitutes a win-win outcome for the American and Taiwan economies. Moreover, because Taiwan is the world s fourteenth largest economy and one of the most active traders, the WTO will benefit from Taiwan's full participation.

I would like to thank the AmCham for the important role it played in encouraging a timely yet commercially appropriate conclusion to the bilateral negotiations. Through its "door-knock" activities and public statements, the Chamber has helped build public support for a good agreement. The USA-ROC (Taiwan) Business Council has made a similarly significant contribution.

The globalization and liberalization that the WTO is fostering will pose a challenge to all economies. As Taiwan entrepreneurs seek to preserve its worldwide competitiveness, they will have to continue to expand technological modernization of production on the island. As they do so, I believe that U.S. companies are far and away their best potential partners, for they offer alliances on terms that are better than any other firms. Important as the recent WTO agreement is in economic terms, its significance for the broader US-Taiwan relationship should not be ignored or minimized. America's role in facilitating Taiwan's entry into the WTO should be seen, first of all, in historical perspective. At key points in Taiwan's economic history, the United States has encouraged the island's authorities and its producers to take the risks of further integration with the world economy because, we believed, Taiwan would soon be better off as a result. The first major case was in the late 1950s when U.S. advisers proposed that Taiwan replace its import-substitution strategy of development with one of export-led growth-with spectacular results. The second came in the late 1980s when Washington urged an appreciation of the New Taiwan Dollar, which facilitated the movement of labor-intensive production offshore and the transition to technology-based production onshore. This recent agreement and Taiwan's ultimate accession to WTO will, I believe, be seen as the third major example of this positive American role.

The bilateral agreement is also confirmation of the commitment of two Administrations that the United States would address Taiwan's accession offer solely on its commercial merits. Steady progress had been made during the sixteen earlier rounds of negotiations, and Washington was ready to complete negotiations when early this year Taipei signaled that it was prepared to put on the table constructive offers on the most difficult issues.

And finally, the February agreement, and the progress toward Taiwan's WTO accession that it represents, is also significant in the context of more recent U.S. policy towards Taiwan. In 1994, the Clinton Administration conducted a Taiwan Policy Review, and decided to support Taiwan's participation in international organizations that did not require statehood as a prerequisite for membership. Given the WTO's centrality in the international economic system, the February accord represents an important achievement of that policy.

The commitment to address Taiwan's WTO accession on its merits alone has a broader corollary: that the United States will not sacrifice Taiwan's interests as it improves relations with the PRC. There should be no concern that US-PRC and US-Taiwan relations are somehow a zero-sum game. Indeed, the Administration believes that the historical record since 1979 shows exactly the opposite, that when US-PRC relations have been good, the unofficial relations between the United States and Taiwan have been good as well. Thus during the Clinton-Jiang summit in October 1997, despite the fears of friends on Taiwan that the United States would make concessions that were detrimental to Taiwan in order to ensure a successful summit, nothing happened to diminish the unofficial US-Taiwan relationship in any way or to change the nature of that relationship. We emphasized our abiding interest in a peaceful resolution of the cross-strait situation. The Clinton Administration continues to believe that the Taiwan Relations Act and the three joint communiques remain a firm basis for our unofficial relations with Taiwan.

Underlying the U.S. stance at the summit was the fundamental policy approach the United States has pursued since 1979: under the framework of the TRA and the US-PRC communique, to strike a balance in our relations with the PRC and with the people of Taiwan. I believe that record shows that the normalization of US-PRC relations in 1979 created an environment in East Asia that permitted positive change both internally and externally on both sides of the Taiwan Strait. Over time, the two sides began to reduce tensions and realize some of the potential for mutually beneficial economic and social cooperation. As this article goes to press (early March), Beijing and Taipei appear to be flexibly laying the groundwork for a restoration of cross-strait dialogue. This is a welcome development. Officials of the Administration have stated on a variety of occasions the key points of our approach to the cross-strait situation: Our abiding interest is in a peaceful resolution of the relationship between Taipei and Beijing through the direct interaction of the two parties.

The United States will continue to foster an environment that facilitates a peaceful resolution and reduces the potential for conflict. We continue to encourage both sides to resume dialogue and to avoid actions that might be misinterpreted by the other. The Administration has hoped that the two sides will seize opportunities to reduce tensions and to increase dialogue and exchanges as those opportunities emerge, and to display flexibility as they seek to restore stability and cooperation across the Strait. Should the current effort gain momentum, the lowering of tensions will serve the interests of people on both sides of the Taiwan Strait and enhance regional stability. That would be an outcome welcomed throughout the East Asian region.