Over the past ten years a comprehensive network of bilateral FTAs has grown across Asia. However, Asia has many small economies, many countries are at different stages of development, and the legions of foreign-affiliated companies expanding overseas has led to the establishment of supply chains and value chains spanning multiple countries and regions. This has created opportunities to move from bilateral FTAs to economic integration which covers entire regions, and negotiations for just such agreements are already underway: the TPP and RCEP are two significant trends in the Asia-Pacific theater.
Taiwan has come late to the table when it comes to economic integration, due largely to political trauma and slow industrial adjustment within the region. Taiwan’s FTA coverage is markedly smaller than its neighbors at just 9.6%. Taiwanese authorities have established three policies to deal with this situation: (1) accelerate China-Taiwan ECA negotiations; (2) promote bilateral FTAs; and (3) join both regional economic integration agreements, i.e., the TPP and RCEP, at the same time.
This report analyzes the progress of Asia’s regional economic integration agreements, namely, the TPP and RCEP, and the state of Taiwan’s FTA strategy with its biggest trade partners: Japan (imports), China (exports), and Korea (industry rival). It also examines the effects of economic integration on industry, e.g., constraints on global expansion by Taiwan-based companies; supply and value chain facilitation; dealing with the “spaghetti bowl” effect; accelerating liberalization policy in service sectors; and FTA utilization ratio and limiting factors. Finally, the paper makes the following three proposals to Taiwan: (1) accelerate economic integration with mainland China; (2) commit fully to the WTO model and avoid unnecessary political strife; and (3) innovate regulations and simplify procedures related to rules of origin.