THE U.S. ECONOMY AND FINANCIAL MARKETS are now beginning to reel from the crisis in Asia that has spread throughout the developing world. As the crisis lingers and deepens, many of Asia’s leaders are questioning the value of globalization and open markets.
The response of the Clinton administration has been less than helpful. The president’s visit to China prompted a showy but failed effort by the U.S. Treasury to prop up Japan’s currency. And despite Clinton’s fawning courtesy to his Beijing hosts, China’s offer to remove a few barriers to trade as part of its effort to join the World Trade Organization was, according to the U.S.-trade-representative spokesman, “not responsive to U.S. interests.”
Clearly, a more effective policy response is needed to stem the rising tide against the liberal international economic order in Asia. A subtle but meaningful step would be to allow Taiwan, the orphan of the administration’s Asia policy, into the World Trade Organization. As the Republic of China, Taiwan was an original member of the GATT, the WTO’s precursor, but it lost its seat when Beijing swung back into the orbit of the West. Its efforts to rejoin have been stymied by the opposition of the Communist mainland.
President Clinton has so far acceded to the Beijing’s hostility to Taiwan’s entry into the WTO. But a realistic assessment of U.S. interests shows the value of reversing course. Moving quickly to grant Taiwanese membership in the WTO would give a boost to U.S. exporters, especially the foundering farm sector; it would send a signal that political and economic liberalization will be rewarded by Washington; it would help redress the balance in U.S. relations with Asia that the Sino-centric tilt in the president’s trip to Beijing upset; and it would provide inoculation against a drift toward economic nationalism in Asia.
It would certainly be a shot in the arm to America’s manufacturers and farmers to see Taiwan in the WTO. Taiwan is already one of our largest foreign markets, taking in over $ 20 billion in goods annually, 80 percent more than China. The economic miracle in Taiwan has produced per capita income of nearly $ 15,000, allowing annual purchases of almost $ 1,000 per capita of U.S. goods. In 1996, Taiwan bought more than $ 2 billion in agricultural products, $ 3 billion in electronic parts, $ 2.3 billion in chemicals, and nearly $ 500 million in data-processing equipment. In the last year, Taiwan has literally been an island of economic stability amid a continent in chaos, as its economy grows at 6 percent with a sound currency.
Despite these massive imports, Taiwan has protected markets in some sectors, a legacy of the economic nationalism and export-led strategy that prevailed in the past. Tariffs of over 40 percent are maintained on agricultural products such as fruit; the effective tax on imported automobiles is 60-100 percent. Import licensing is still required on hundreds of goods.
In return for admission to the World Trade Organization, Taiwan has agreed to reduce its tariff on agricultural products to 12 percent by 2002 and to lift its ban on imported pork and chicken. Tariffs on automobiles would be gradually reduced to 20 percent. The chemicals, computer, finance, and telecommunications industries would also benefit by Taiwanese adoption of the WTO’s free-trade disciplines. But the gains would be most dramatic for farmers, who have witnessed a 20 percent decline this year in sales to Asia, our largest export market by far for these products.
In addition to aiding U.S. exporters, accelerating Taiwanese entry into the WTO would send important signals to our trading partners and allies. Taiwan has evolved from an authoritarian, underdeveloped, and mercantilist economy to a fully democratic, prosperous, and much more open one in the short space of two decades. It has signed detailed agreements with 23 of 26 of the WTO parties with substantial interest in its accession. Only the United States and Europe, bowing to pressure from Beijing, have yet to sign accession agreements, despite having resolved nearly all substantive issues. Taiwan has further agreed to enter the WTO as a customs territory (similar to Hong Kong), undercutting any legalistic argument from China against entry as an independent nation.
Since Taiwan meets all conceivable tests for admission, we should politely inform Beijing that Taiwanese membership in the World Trade Organization will strengthen the very international economic order the People’s Republic of China itself seems so eager to join. Then we should work to complete Taiwan’s accession without reference to the stalled application of Beijing. U.S. trade negotiators could also suggest that the development of Taiwan provides an excellent example of what the international economic order is meant to promote, and offers valuable lessons to the mainland — especially the fruitful link between market economies and democracy.
Allowing Taiwan to enter the WTO would not only partially redress the U.S. tilt toward China, which is a matter of concern to nations as diverse as Japan, India, and Thailand; it would reaffirm the U.S. commitment to global trade liberalization. Resisting Beijing’s importuning that China should enter the WTO on concessionary terms also reinforces the message that economic (and not political) criteria are paramount for membership in the WTO.
Opening the World Trade Organization to Taiwan would be only a small step toward solving the Asian economic crisis, granted. But it would help combat the pessimism that impedes sound economic decision-making and facilitates a slide into protectionism. Such a slide in the 1930s had disastrous consequences. It is time for the U.S. to show leadership in strengthening the liberal economic order that has served the world so well, while at the same time doing some good for constituencies like domestic farmers and Asian Tiger nations that are recent converts to that order.
Thomas J. Duesterberg is a senior fellow at the Hudson Institute. He served as assistant secretary for international economic policy in the Bush Commerce Department.
