The American Spectator

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ESTIMATES OF THE LIKELY INCREASE in U.S. exports through an FTA run from about 15 to 30 percent. Among the U.S. industries that would most benefit from freer trade with Taiwan are agriculture, automotive, electrical equipment, and machinery. (The island state already is the fifth largest destination of U.S food exports.) American services, too, would gain: potentially significant opportunities would open in the education, financial, health, telecommunications, and transportation sectors. Indeed, an FTA would position U.S. enterprises to take advantage of Taiwan's ongoing transition towards a service-oriented economy.

Improved investment procedures would encourage additional financial flows in both directions. An FTA also would provide an opportunity to better protect intellectual property, a significant boon to U.S. firms.

Strengthening standards in Taiwan likely would aid U.S. producers in China, the great intellectual property (IP) cheater. Given the increasingly important role of Taiwanese business in China, better IP protection by Taipei would serve as an example for the PRC.

The island, with widespread economic penetration throughout Asia, would provide an obvious base for U.S. enterprises to expand their reach. More important, Taiwan's proximity to China and, more important, increasing economic integration with the mainland, would yield another beneficial effect. A Taiwan-U.S. FTA would indirectly boost American ties with the PRC, both investment and exports.

Taiwan enjoys cultural, family, and historical ties with the mainland; Taiwanese enterprises have become major investors in China. Taipei, as an innovation center, complements the PRC, a production center.

Moreover, since Beijing views Taiwan as part of one China, U.S. firms operating in Taiwan and investing in Taiwanese concerns might find improved access to the larger China market. This is likely to be of particular benefit to smaller U.S. enterprises which do not have the wherewithal of, say, a Boeing to easily breach the Chinese market.

OTHER, LARGER GEOPOLITICAL CONSIDERATIONS also favor an FTA. Taiwan is the great Asian anomaly, a not-quite country that remains a potential conflict left over from the Cold War. For nearly three decades Washington recognized the Republic of China, rather than the People's Republic of China, as the sole legitimate government of the mainland (plus Taiwan).

President Richard Nixon opened a dialogue with the PRC and President Jimmy Carter switched formal ties from Taipei to Beijing. Since then Taiwan has existed in an international twilight zone, a commercial powerhouse officially recognized by just a couple dozen small nations. Despite a population of only 23 million, Taiwan ranks 16th in the world in terms of trade. An FTA with the U.S. would strengthen Taiwan's position as it deals with a China determined to absorb the island.

Most obviously, such an accord would help grow the Taiwanese economy. Although the impact would be modest -- a study by Taipei's Chung-Hua Institution for Economic Research predicts a two percent increase in exports and .5 percent hike in GDP -- any boost would help Taiwan as it confronts its rapidly growing neighbor across the Taiwan Strait.

Moreover, the Institute for International Economics suggests that such an arrangement would further integrate Taiwan into East Asia. Enhancing Taipei's relative economic importance and thus its political profile would increase its neighbors' stake in regional stability.

Even long-time U.S. allies such as Australia and South Korea have no interest in being drawn into a conflict arising from coercive Chinese action against Taipei. The tighter Taiwan's links to surrounding nations, the higher the price everyone would pay in any military conflict. Although neighboring countries would be no more inclined to back Taiwan's desire for a separate identity, they would be more likely to press the PRC to rely on peaceful, evolutionary developments to bring Beijing and Taipei together.

A U.S.-TAIWAN FTA WOULD further demonstrate America's commitment to Asia as that region races past Europe in importance for America's future. Washington already has implemented free trade accords with Australia and Singapore and is negotiating one with South Korea. Similar agreements have been proposed for nations ranging from Indonesia and Malaysia to the Philippines and New Zealand. An FTA with Taiwan would further demonstrate the U.S. commitment to Asia. (Washington also should expand this approach to what remains the most important Asian economy, Japan, though the politics on both sides of the Pacific would be complicated.)

Unfortunately, opposition to free trade is rising in Washington, even among Republicans. However, the benefits of moving ahead with a U.S.-Taiwan FTA are too great to ignore. The issue is geopolitics as well as economics. Since "the great game" with China already has begun, Washington needs to use all the tools at its disposal to enhance its regional influence. That includes freer trade with America.

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Transportation, Education, Trade, Economics, Business, Military, North Korea