In an effort to further liberalize the Korean Free Economic Zones, the South Korean government recently held Business Day 2014 from Dec. 3 to Dec. 5. The aim of the event was to attract foreign investment for South Korea’s eight FEZs. This came in the wake of a free trade agreement inked on Nov. 10 between South Korea and mainland China.
Taiwan has long regarded South Korea as its main trade rival, as up to 70 percent of the two countries’ exports overlap. The developments recently made by South Korea are a stark contrast to Taiwan’s progress. Although Taipei began trade talks with Beijing earlier than Seoul, South Korea is now ahead of Taiwan in establishing favourable economic ties with China. No tariff will be imposed on many Korean products exported to mainland China in the near future.
On the free economic zone front, Taiwan began planning its Free Economic Pilot Zones last year, while Korea initiated its FEZs 10 years ago. While legislation covering FEPZs is still under review in the Legislature, Korea’s FEZs have already begun to bear fruit.
Economic integration has become the norm on the global stage. This trend is especially visible in the Asia-Pacific region. According to the Asian Development Bank, the number of FTAs in effect grew from 36 in 2000 to 109 in 2013, and there are an additional 148 FTAs currently under negotiation.
FTAs cover more than 70 percent of regional trade. South Korea, Japan and Singapore have signed or are in the process of signing FTAs with other countries to such an extent that they will cover more than 80 percent of trade. Taiwan, on the other hand, has only signed six FTAs so far, covering roughly 10 percent of its trade with other countries. This is true despite the fact that the government has long treated economic integration as a flagship policy and has worked for years toward its realization.
The government’s inefficiency is not entirely to blame. Taiwan faces a tough challenge in the international community ― the China problem. Many countries that Taiwan has tried to ink FTAs with have declined Taiwan’s proposal, fearing that the move would undermine their relationship with China.
Only after Taiwan’s relationship with mainland China began to thaw in recent years did the island ink FTAs with Singapore and New Zealand. As such, how to deal with Beijing effectively is of paramount importance to Taiwan’s FTA situation and its economic development in the future.
Last year, Chinese President Xi Jinping commented on Taiwan’s efforts to seek economic integration: “In regard to Taiwan’s participation in international affairs, it may be conducted through pragmatic negotiation (with China) to make sensible arrangements.” Xi pointed out that Taipei and Beijing may “study together” to explore appropriate means and possible routes for Taiwan.
In the end, Beijing approves of Taipei’s economic integration engagements, but with preconditions. The Chinese government believes the economy and politics are inseparable issues. As Taiwan seeks to improve competitiveness and avoid being marginalized as the process of economic integration speeds up in the world, Beijing fears that it will also give Taiwan an opportunity to establish closer diplomatic ties with other countries.
Beijing fears that Taiwan’s closer economic relationships with other nations will ultimately lead to a “one Taiwan, one China” situation in which “two countries” become the de facto norm. As such, China has been very cautious about Taiwan’s endeavours to establish close economic ties with others.
Most nations in the world do not have the problem Taiwan has. They are free to pursue economic integration with far less resistance.
In order for Taiwan to establish FTAs with other countries, Taiwan must realise that the “China problem” is the most pressing obstacle and we should adopt a pragmatic approach to resolving the issue.
(Editorial, The China Post)
(Asis News Network)
