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Opinion / Op-Ed Contributors

Taiwan needs regional integration

By Dan Steinbock (China Daily) Updated: 2014-03-27 08:03

First of all, the CSSTA would allow Taiwanese businesses to broaden and deepen their economic expansion in the mainland.

Also, the ECFA focuses on goods, while the CSSTA stresses services. Goods are important in the early stages of economic development, whereas services are vital in the more advanced stages of development. The CSSTA supports Taiwan's efforts to move higher in the value-added chain, while boosting reforms that support the transition of the mainland economy from cost-efficiencies toward innovation-driven competitiveness.

Third, Taiwan's economic growth relies critically on exports. As a result, the CSSTA is vital to protect Taiwan's current sources of competitive advantage and to build new sources of advantage. Moreover, the pact does not include or support labor migration.

Finally, it also paves way for further economic integration with other nations in Asia, which is critical to Taiwan's future.

After the worldwide crisis of 2008/9, global economic integration has slowed, but regional economic integration has intensified, especially efforts toward free trade agreements in Asia. In the past, Taiwan's rapid growth relied on globalization. Today it must thrive with regionalization. After all, in 2012 the mainland and Hong Kong SAR accounted for more than 40 percent of all Taiwan's exports. Without these export destinations, Taiwan's export-led growth would collapse.

That same year, the United States and Japan accounted for 16 percent of Taiwan's exports. But in both countries, recovery is sluggish, which translates to fragile demand. In the future, much of global growth will be driven by the mainland and emerging Asia.

The intensified regional integration is reflected by the ongoing talks over the US-led Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) which includes the mainland. Meanwhile, ASEAN integration is accelerating toward 2015. In addition to these regional trade blocs, talks continue over bilateral free trade and investment agreements between different economies in Asia and the US or European Union.

Nonetheless, in Taiwan and elsewhere, economic success is challenging without adequate political consensus. Conversely, political determination without sufficient economic growth will only result in stagnation.

What Taipei needs is a political consensus that supports an economic pro-growth path. And that requires trade pacts with the mainland and the rest of the emerging Asia.

The author is the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and EU Center (Singapore).

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