By Martin Banks - 9th November 2012
There are some important investment benefits which could be upgraded
Brian McDonald
A senior EU diplomat says the time is ripe to consider a free trade agreement (FTA) between the EU and Taiwan.
Brian McDonald, former head of the European economic and trade office in Taipei, said such a deal could produce "real trade advantages".
McDonald, who was in the post between 2003 and 2006, told this website, "There has been a substantial increase in the number of FTAs in the Asian region and between Asia and other major economic partners such as the EU and the US.
"Despite this flourishing of FTAs, Taiwan has not been included as part of this trend."
McDonald, who also served as ambassador and head of delegation of the EU to the Republic of Korea, said, "The recent FTAs between South Korea and the EU and US, as well as the foreseen FTA between the EU and Japan, could have a serious competitive impact on Taiwan.
"The Taiwanese economy is deemed to be a direct competitor to that of South Korea in certain fields given that they are technologically of a similar generation, and it is also the case that Taiwan competes with Japan."
Taiwan’s economy, he said, is a "typical" example of one which has been globalised for some time.
He said, "It is important that it be able to continue to benefit from the global economy as it is arguably more dependent on it than most, especially in the electronics sector."
He added, "An excessive focus for Taiwan on the Chinese market would not reinforce its global role.
"Although the Chinese economy is developing fast, it does not have the potential to keep the Taiwanese economy functioning as well as it has done as a global player. Taiwan must be plugged into the major developed markets to maintain its efficiency in the future.
"It has been rumoured that China would prefer Taiwan to be more integrated with its own market rather than the global market, but this is neither in Taiwan’s nor China's interest.
"It is rather in China's interest that Taiwan continues to play its global role.
"The negotiation of FTAs with major trading partners will also provide opportunities for Chinese companies looking to invest in Taiwan."
The retired diplomat said, "I think we have a responsibility towards Taiwan, not to leave it to one side. We need to negotiate a trade arrangement with it, preferably an FTA. This applies both to the EU and the US.
"There would be real trade advantages in such an agreement which have been calculated to be in the order of between €16-24bn for the EU.
"In addition to trade advantages there are some important investment benefits which could be upgraded.
"EU and US investments in Taiwan could better avail of Taiwan's privileged access to the Chinese market while retaining the protection of Taiwanese intellectual property laws.
"The possibility of the diversion of Chinese exports through Taiwan would however have to be handled carefully."
He added, "Taiwan's current political relations with the mainland will make for a more constructive relationship between the EU, Taiwan and China, as well as the US, especially if it is based on a more open trading relationship."
