Impact on Taiwan

Accession to the WTO will undoubtedly benefit Taiwan in many ways. Especially, it will assure Taiwan of access to the world market and will deepen its integration into the world economy. However, accession would also mean much greater competition. On top of this, Taiwan's economy is facing a critical turning point. After decades of rapid economic prosperity as an export-oriented economy depending heavily on the world market, the world recession is, of course, a major factor affecting our economy today. At the same time, Taiwan is now faced with structural changes which are much triggered by the rapid global changes, the technology changes, and the emergence of other economies as competitors in areas where Taiwan once excelled. An apparent example is, of course, China. With WTO accession, this structural adjustment is to be expedited.

With so many changes going on, Taiwan has to consider its industrial strategies and make plans for the next five to ten years. The government has to restructure the agricultural sector, to make it less of a welfare burden, and at the same time, develop the sector into a competitive one in modern terms. The services industries have to be developed so that after a long period of protection, they can face the competition of today. While Taiwan is trying to catch up with people that are ahead, it has to be careful, so as not to be out-competed by people behind. The changes Taiwan is facing are enormous, and coupled with the slowdown of the economy, make some people back home lose confidence in the economy, in the government, and in the country. Therefore, the government has to educate its people and take confidence-building measures, so that, as people in more matured economies, they are able to cope with changes with the necessary degree of calmness.

Despite the challenges Taiwan is facing, I remain confident that the essential elements that have made Taiwan a success in the past few decades are still there. Its entrepreneurship, the level of education, the level of technology, management skills, Taiwan's democracy and political structure, and its diversified culture and open society are helping it to maintain competitiveness vis-à-vis the newly-emerged competitors. This is so despite the fact that Taiwan needs to continue to improve in every aspect of its economy and society, in order to maintain the gap between Taiwan and such competitors, and to maintain its significance in the world economy.

Impact on China

For China, WTO membership will also help its further integration into the world trading community. This could mean accelerating China's reform into a market-based economy, towards a more transparent and predictable market, which will in turn attract more foreign capital and resources. This will no doubt add impetus to and benefit China's economy in the long run.

China's accession to the WTO will amplify its problems associated with its economic development. WTO membership and rapid economic development in the last decade will inevitably result in adjustment problems, which in many cases mean unemployment, redistribution of wealth; this could entail social and political problems. In addition, China has to find a proper role for its military in a modern setting. Moreover, its regional imbalance, its urban-rural divide, its problems with minority groups, and distribution or re-distribution of power between local and the central governments may all be sources of its instability.

With this set of complicated and difficult problems, China has to move from an authoritarian to a democracy-based political structure, under which balance can be found between different interest groups, and mechanisms can be built in to resolve conflicts without resort to revolution or violence. China has to move at a speed that is commensurate with the change brought about by its economic growth and its integration into the world system. This is not an easy job. Failure to do so may not only slow down its economic growth, but can also have explosive effects on its fragile internal balance.

Peace and Stability in the Face of WTO Accession

The challenges facing Taiwan and China at this juncture are already enormous, even without the WTO. The adjustments that would follow the entries to the WTO will deepen the difficulties. If not properly managed, the short-term difficulties may become permanent, and the expected longer-term benefit will not be realized. Both governments need full concentration for their respective domestic reforms, and would expect least disruptions from the outside. Therefore, stable and peaceful cross-Strait relations are very much in the interest of both sides. China would not want the Taiwan issue to become a disruption to its internal balance; and Taiwan of course, would not wish to exhaust itself in dealing with the cross-Strait issues. Undoubtedly, properly established cross-Strait trade and economic ties would create benefits for both sides. China would benefit from our investments, and our businesses would benefit from the market and resources in China.

It is, of course, important to have the intentions to maintain peace and stability, and to understand the importance of establishing mutually beneficial trade and economic ties. However, this is still not enough. What is more important is for both sides to have the political will to overcome political difficulties and to maintain internal balance, so as to be politically ready to make joint efforts.

For Taiwan, I am pleased to say that after the election of December 1 for legislators and local magistrates, the political stability we have been waiting for is emerging. The Democratic Progressive Party (DPP), i.e., the ruling party, has obtained a renewed and reinforced mandate from the people, and is in a position to lead a political process which hopefully would eventually lead to a more sustainable political stability. We would also hope to see smooth political transition in China.

What is also important is to seek a proper framework, a venue for both sides to interact and to communicate, so as to build trust and confidence, and to avoid misunderstanding/miscalculation that may cause unnecessary disruption to the relationship. The WTO presents itself as a possibility, and the Taiwan side is prepared to explore such a possibility. I would also note that we do not consider WTO the only possibility; we have been making efforts, and will continue to make efforts, to find ways to re-establish the bilateral dialogue mechanism of the 1990s.

WTO Will Enhance Peace and Stability in the Relations

Globalization has proved to be a major stabilizing factor in cross-Strait relations and this trend will be furthered when the WTO moves forward with its trade liberalization agenda. Taiwan's economy has integrated into the international trading system for decades and its economy cannot sustain without changing with the global trend. The opening of China to the world in the last two decades has also made it a significant part of the world economy. Both sides will deepen their integrations with their respective WTO entries. The freer flow of goods, personnel, capital, and services between the two sides is not only bilaterally meaningful; it also has its multilateral dimension. The international business community will find the cross-Strait interactions very relevant to their interests, trade/commercial and otherwise. The two sides of the Taiwan Strait cannot simply ignore what the international community has to say as they rely on the world market for their exports, and foreign capitals for developing their economies.

The international community also has an interest in keeping peace and stability in the Taiwan Strait and peaceful resolution of the problem facing the two sides. This common expectation and interest of all parties concerned serves as a very important stabilizing factor in the relationship.

WTO Will Help Balance the Relationship Through its Multilateralism

It is obvious that Taiwan's economy is a much smaller one than China's, despite the fact that Taiwan's industrial development and level of technology are much more advanced. There is no doubt that China is trying to catch up. Also, Taiwan is a much smaller player in international politics, and presumably a politically weaker party in the bilateral relations. If both sides engage in trade and investment only in a bilateral setting, Taiwanese products and investors are very vulnerable to the likely discriminatory practices of the PRC authorities. The multilateralism of the WTO, as embodied in its most-favored-nation (MFN) principle and national treatment principle, offers protection to members who are smaller or weaker parties in bilateral relations or in the multilateral setting. MFN would mean whatever treatment, market access or otherwise, China offers to other members of the WTO is to be offered to Taiwanese traders and investors, and vice versa. National treatment would mean once Taiwanese products and services get into China's market, they will be granted treatment no less favorable than that the Chinese authorities offered to their own traders and investors.

WTO Will Provide a Structure and Regulatory Framework for Cross-Strait Trade Flows

Both sides have not had a real opportunity to jointly develop a framework and a set of rules between themselves in regulating the cross-Strait trade and investment. This is so, despite the fact that both sides had limited dialogue on the so-called "functional issues" in the 1990s. The intensity and volume of trade and investment flows between the two sides today are such that without proper joint efforts, there is always a danger of disorder and therefore, damage to the interest of traders and investors. The set of trade rules of the WTO developed over the course of a few decades can to a large extent apply to the cross-Strait trade, as both parties have made adjustments or committed to make adjustments to their trade regimes, to make them compatible with WTO standards. However, in certain areas such as SPS (sanitary and phyto-sanitary measures) and the recognition of standards, bilateral processes are still required to make the respective trade regimes of both sides compatible with each other. A transition is also required to bring the bilateral trade relations fully in line with the WTO requirements. Arrangements to be made for this transition also require consultation between the two sides.

WTO Will Provide Opportunities for Trade Officials to Interact in a Multilateral Context

WTO has a culture of its own and has its own language when trade officials communicate among themselves. Over the past ten years, the trade officials of both sides have had plenty of opportunities to interact with other members in their respective accession negotiations and therefore, have learned the culture and the language of the WTO. To many of them, what WTO symbolizes, such as trade liberalization, is a belief and a mission to achieve. I am sure trade officials on both sides responsible for the trade negotiations in the past few years share, to a certain extent, this feeling towards WTO. And these common background and feelings are exactly what is lacking in the cross-Strait relations today. This, I would hope, could help to initiate a process of confidence-building that will eventually make possible for both sides to have meaningful dialogue on a wider spectrum of issues in a perhaps non-WTO context.

The WTO could provide the opportunity for trade officials of both sides to discuss multilateral issues, together with other members. We will also have an opportunity to hold bilateral meetings which are a part of the multilateral market access negotiations; or bilateral meetings that would address difficulties arising from the application of WTO rules in a bilateral context, which may lead to a trade dispute. Of course, we do not rule out the possibility of facing China's trade officials in a dispute settlement proceeding of the WTO. These encounters could be driven by common interest on particular trade issues, e.g., we may be working with China's trade officials in the next multilateral round of agricultural negotiation, because we have common interest in a number of agricultural items, such as rice. We may be facing each other in an adversarial context when we have difficulties in each other's application of WTO rules, which may have the potential of developing into a dispute. The different encounters under the WTO and the intensity of contacts offer a great opportunity for each side to understand each other and to build trust and confidence.