Chin-yen Cheng is an MA student at George Washington University and an intern at the Global Taiwan Institute.
Even though President Trump has withdrawn from the Trans-Pacific Partnership (TPP), Japan, Singapore, and other countries are still planning to push for the TPP. With the United States no longer participating in the trade pact, the remaining TPP members should work to create a more inclusive as well as deeper forms of cooperation with other nations to secure a strong partnership. Taiwan should be included in the new TPP.
In the absence of the United States, now is the time for TPP members to consider including other economies in the partnership. Although Taiwan has expressed its willingness to join the TPP negotiations since 2011 and set up a policy preparation task force in 2014, Taiwan has not been included in TPP planning thus far. Moving forward, Taiwan should be strongly considered as a participant in the reconfigured agreement. The TPP negotiations were first initiated by New Zealand, Singapore, and Chile as the Trans-Pacific Strategic Economic Partnership alongside the APEC summit in 2002. In the subsequent 13 years, the negotiations were expanded, and eight other countries began to participate. The United States joined the negotiations in 2008, followed by Japan in 2013. The TPP was formalized in 2015. However, the United States officially withdrew from the Partnership in 2017.
In order to exert a comparable economic impact on the world, the TPP should include more partners. In the wake of US withdrawal, TPP members’ total global economic output has dropped from 37 percent to 13 percent (World Bank, World Development Indicator, GDP current price). Taiwan, as an export-oriented country, is a strong player in Asia that should be considered because of its crucial role in the global supply chain, its influential spillover effect on technology transfer and talents training in developing countries, and its sound intellectual property rights environment that has long secured investors’ interests.
Taiwan is the tenth largest trading partner of the United States, which–despite withdrawing from the TPP–is still an economy that TPP members will trade heavily with going forward. With Japan taking the lead in TPP enforcement, it is important to note that Taiwan is Japan’s fifth largest trading partner. with whom Taiwan maintains friendly relations. Taiwan is also in an important position both to help countries tap into the Chinese and Southeast Asian markets and also to support economic development with its potential spillover effects.
Taiwan’s Important Role in the Global Supply Chain
Taiwan has successfully established an important role in the global supply chain because of its original equipment manufacturing and original design manufacturing (OEM/ODM) contracting business models. The contracting business models enhance the efficiency of the supply chain by allocating and outsourcing the production of intermediate goods. According to Manufacturing Market Insider, based on the revenue gained, four out of ten top contract manufacturers were from Taiwan in 2017. Taiwan supports an efficient production process and high quality R&D talent, providing intermediate goods for advanced economies. Moreover, government incentives have brought in subsidiaries and contracts, mostly from the US and Japan.
Additionally, Taiwanese manufacturers are further investing in China and Southeast Asian countries to reach economies of scale. For example, the notable Apple supplier, Foxconn, is a Taiwanese company manufacturing in China. Also, Taiwan’s direct investment to Southeast Asia has increased over the years and with the New Southbound Policy, a further increase in investment is expected. Therefore, due to the intimate investment ties with important economies in Asia and Taiwan’s position in the global supply chain, including Taiwan in the TPP will benefit both advanced and developing economies.
Potential Spillover Effects on Technological Transfers and Labor Training
With more investment outflows from Taiwan, more potential technology transfer and labor training will help developing economies of TPP members to upgrade their industries. Taiwanese businesses have already contributed to economic development and industrialization in Southeast Asian countries. For example, Thailand, Malaysia, and the Philippines have seen an improvement of industrialization in production technologies, management skills, and marketing skills in manufacturing industries through Taiwan’s FDI investment since the 1980s.
The TPP-11 countries account for 31 percent of Taiwan’s investment outflows. The fact that Taiwan already has intimate investment ties with TPP member countries means that including Taiwan would only benefit them more, because existing investment barriers will be lifted. Additionally, China accounted for 40 percent of Taiwan’s outward investment by 2016; Taiwan reported increases of 0.6 percent and 23.1 percent on exports to China in 2016 and the first quarter of 2017, respectively. Despite the fact that China uses its economic leverage to restrict Taiwan’s international space, which has so far hindered it from joining the TPP, China itself maintains close trade and investment ties with Taiwan. Furthermore, China is also likely to benefit from Taiwan’s participation in TPP, given the high levels of trade and investment interdependence experienced by both sides of the Strait. Consequently Taiwan’s involvement in the TPP can offer member countries a means of accessing the Chinese market, which they otherwise could not because of China’s exclusion from the negotiations. With the intimate investing relations among Taiwan, China, and TPP countries, the interdependence of the economies in the region has become increasingly important.
Investment Ties with Taiwan and IPR Environment to Protect Investors in Taiwan
Possessing strong investment ties with China, Japan, and the United States, Taiwan provides a stable platform and gateway for countries to invest in, especially due to its sound IPR system that protects investors’ interests. Given the fact that intellectual property protection is one of the major concerns when investors consider opportunities in China, Taiwan has an obvious appeal: it provides a strong IPR environment for investment and access to the Chinese market. According to World Economic Forum 2017 Global Competitiveness Report, Taiwan is ranked third in Asia in terms of intellectual property rights protection, followed by South Korea and China.
Although Taiwan is not part of the World Intellectual Property Organization (WIPO), Taiwan not only follows key international agreements against violation of IPR, but also works to track counterfeited products from China. Additionally, despite the fact that some industries related to security and environmental protection are closed to foreign investment in Taiwan, most sectors of manufacturing are open and Taiwan has comprehensive laws aimed at solving investment disputes. Hence, given Taiwan’s advantageous location and sound regulatory environment, including Taiwan in the TPP agreement will reduce investment barriers and protect interests when investors invest in Taiwan.
As a strong economy in the Asia region, Taiwan can enhance and add value to the TPP plan in many ways. Taiwan should be considered in plans for a reconstituted TPP agreement, due to Taiwan’s crucial role in the global supply chain, technology transfers and skills training through investment, and its sound intellectual property environment. Forging more intimate relations with Taipei through Taiwan’s participation in the TPP will open the door to TPP member countries being able to reap greater economic benefits because of Taiwan’s access to the US, Japanese, and Chinese markets.
The main point: Countries in Asia still have hope for the TPP. They should include Taiwan in TPP plans because Taiwan can offer a valuable role in the global supply chain, it can provide technology transfers and skills training, and it can effectively protect intellectual property.
 Latest data accessed 4/27/2017
 UN Comtrade database, imports ranked 5th; exports ranked 4th. https://comtrade.un.org/data/
 John Q. Tian, Government, Business, and the Politics of Interdependence and Conflict Across the Taiwan Strait, 2006, P74
 Shelley Rigger, Why Taiwan Matters: Small Island, Global Powerhouse, 2011, P50
 An-Chi Tung, Henry Wan Jr. Jan, The Win–Win Outcome along the Evolving Global Value Chain, 2013