Sunday, May 19, 2013

Taiwan Had Two Different Kinds of Engagement with ASEAN Last Week

Last week I was in Taiwan representing the American Society of International Law (ASIL) at the 2013 International Law Association-ASIL Asia Pacific Research Forum.  What was supposed to have been a quiet law symposium on dispute resolution turned into a major media event in Taiwan because of an unfortunate fatality resulting from a Taiwan-Philippine maritime clash last weekend.

Ed greets ROC (Taiwan) President Ma Ying-Jeou
Ed speaks at the ILA-ASIL conference

Again, this blog does not normally discuss ASEAN political-security issues, so I won’t go into the legal and political aspects of the dispute, other than to express  the general desire that the dispute be resolved peacefully.  However, one economic question that did arise was whether Taiwan could have invoked the economic measures it imposed on the Philippines if it had had a free trade agreement (FTA) with Manila.  For example, President Ma Ying-Jeou announced during our conference that Taiwan had suspended further processing of Filipino foreign workers, which if imposed indefinitely would adversely affect the Philippines. 

President Ma speaks at the conference
Press opportunity on the Taiwan-Philippine dispute

Well, of course, movement of persons (especially non-skilled workers) is not usually covered by ASEAN FTAs. Furthermore, as the experience of the Philippines during last year’s disputes with China showed, even the existence of FTA obligations does not prevent one party (China) from imposing unofficial blocks on trade in goods with another FTA party (the Philippines).  For example, China imposed phytosanitary barriers on the importation of Philippine bananas, which arguably contravened the ASEAN-China FTA.  Yet without going to dispute resolution, the Philippines would have little means to seek relief; since no party has ever invoked dispute resolution under an ASEAN FTA, including the ASEAN Trade in Goods Agreement (ATIGA), the likelihood of that is relatively remote (although the Philippines has shown willingness to seek international arbitration, such as through its recent request for arbitration on the South China Sea dispute through the UN Convention on the Law of the Sea).

Taiwan’s other major interaction with an ASEAN member last week was much happier. Singapore and Taiwan announced the signing of the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP), e.g., the Singapore-Taiwan FTA.  This represents the first FTA for Taiwan with an ASEAN country and its first major FTA since signing the Economic Framework Cooperation Agreement (ECFA) with China in 2010. The ASTEP will cover trade in goods, trade in services, investment, dispute settlement, e-commerce, government procurement and customs procedures.  The key benefits for Taiwan will be better market access for services, such as for its banks, as well as improved investment protection.

ASTEP thus fulfills a major promise of the Ma government in Taiwan regarding the ECFA, namely that normalizing economic relations with the mainland would end Chinese objections to Taiwan’s entering into FTAs with other countries.  ASTEP also serves as a template for Taiwan FTAs with other ASEAN members which are major destinations for Taiwanese investors, such as Malaysia, Thailand, Indonesia, Vietnam and, of course, the Philippines.  A more generalized ASEAN-Taiwan FTA will likely have to wait for the completion of the Regional Economic Comprehensive Partnership (RCEP) talks by end 2015 since (1) there would no be no point for ASEAN to conclude a bilateral FTA that would be superseded by the RCEP and (2) China would not want Taiwan to have terms that would be significantly different than what it would get under RCEP. 

In any event, ASTEP is a very positive step (pun intended) for Taiwan, which will hopefully help Taiwan get into the FTA game in Asia.