Red China’s Veto Power

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As policymakers scramble to develop economic escape routes and bulwarks against future crises, one consideration that should not be neglected is foreign trade. The ideal partner for a new free trade agreement (FTA) that benefits both sides, according to the Heritage Foundation, is Taiwan. Speakers at Heritage argued that not only does a free trade agreement with Taiwan make sense right now, but the international political environment is making the option increasingly realistic.

Walter Lohman, Director of the Asian Studies Center at the Heritage Foundation, hosted a discussion at Heritage on February 19th under the title, “Taiwan: Ideal Candidate for a Free Trade Agreement.”

The possibility of a free trade agreement with Taiwan has not inspired partisan contention as might be expected; in fact, free trade agreement proposals with Taiwan can count on support from both Republicans and Democrats. “This is an idea that has support on both sides of the aisle,” explained Lohman. “Everyone seems to agree it should be done. Members race every year to sponsor the resolution.”

And yet, an agreement has not been passed for a variety of small reasons, and because of one large, foreboding obstacle. “While there are economic difficulties and issues, they are not the main obstacle,” explained Chris Padilla, Former Undersecretary of Commerce for International Trade. “We all know what the main obstacle is, and it is political: it’s China. And I would say that in this regard, I think that [Taiwanese President] Ma Ying-jeou is taking the right approach. The right approach of strengthening cross-strait relations, of maintaining a relatively low profile.”

Padilla argued that, although the relationship could be called strained at best, Taiwan-China relations are improving, as well as U.S.-China relations. As these links grow stronger and more interdependent, a free trade agreement between the U.S. and Taiwan will be easier to achieve. He said, “To the extent that cross-strait relations between China and Taiwan are improving, and to the extent that economic links are growing across the Taiwan Strait, it will be easier politically for the United States to build a closer economic relationship with Taiwan.”

A free trade agreement with Taiwan makes sense for the U.S. for a variety of reasons. Diplomatically, Taiwan is an excellent candidate for a free trade agreement because it has an open economy, and because it is a vibrant democracy. Padilla went on to point out that “Taiwan is a large trading partner, Taiwan’s economy is very dependant on the United States, we clearly have an interest in supporting the vibrant democracy in Taiwan and… a healthy and vibrant economic relationship is also in U.S. strategic and national security interest.”

Padilla noted that despite its small geographic size, Taiwan is a top-ten U.S. trading partner, and is clearly suffering along with us as a result of the economic crisis.

A report released by Heritage in August, 2007, entitled “Free Trade with Taiwan is Long Overdue” detailed some of the reasons such an agreement is viable and why it could be so valuable. It reads, “Among other things, a U.S.-Taiwan FTA would increase U.S. auto, rice, poultry, and livestock exports and open a significant new market for new research medicines.”

“At the same time, a U.S.-Taiwan FTA would signal Congress’s displeasure with Beijing’s trade misbehavior and demonstrate U.S. resolve in shoring up the eroding geopolitical position of a major American ally.”

The report, which can be found at the Heritage website, details specific areas of trade that would benefit from a U.S.-Taiwan FTA and proposes several steps that the U.S. should take. It especially emphasizes the viability of an FTA with Taiwan:

“Taiwan stands out as an FTA partner that even free-trade skeptics can love. A U.S.-Taiwan FTA has the potential to boost American jobs in key manufacturing industries, with auto and business equipment topping the list. Taiwan has developed-country levels of trade, high labor and environmental standards, and solid health and intellectual property protections. Its market for U.S. goods still has considerable room for expansion, particularly in automobiles, agricultural products, and high-tech goods.”

Daniel Allen is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.