Apart to Free Trade Agreements. The flagship policy

Apart from city-state entrepôts such as Hong Kong and Singapore, Taiwan is probably the most trade-dependent nation in the world. The WTO calculates its current trade/gdp ratio as 130.5, higher than Korea’s at 104.2, much more so the EU’s of 33.9. So it is no surprise that successive governments have placed a high priority on negotiating or acceding to Free Trade Agreements. The flagship policy achievement of the previous KMT administration was the Economic Co-operation Framework Agreement (ECFA) it signed with China in 2010, which was followed by bilateral free trade agreements with Singapore and New Zealand.

The present government under Tsai Ing-wen has made accession to the US dominated Trans-Pacific Partnership (TPP) a priority. In Taiwanese eyes the collapse of comprehensive multilateral trade negotiations under WTO auspices has given added urgency to this policy. Taiwan fears, with some justification, that Chinese pressure will make other countries reluctant to negotiate bilateral agreements and will also see it excluded from regional agreements, thereby placing Taiwanese companies at a disadvantage to their competitors.

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It is a logical enough objective. But is it sufficient, or even appropriate? Signature of the ECFA with China was – and remains – a controversial subject in Taiwan, principally because of the wider ongoing debate about the risks and benefits to Taiwan from dependency on China. But that debate risks obscuring a much bigger challenge that Taiwan must address which is its apparent loss of entrepreneurial dynamism. At one level even to suggest this may seem absurd. Taiwanese companies continue to dominate the global ICT sector, from smartphone and laptop manufacture through to semiconductors. Taiwanese enterprise continues to bring forth dynamic new companies such as Largan Precision, which now dominates the supply of camera lenses for smartphones.