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The 'win-win' New Zealand-Taiwan FTA

The 'win-win' New Zealand-Taiwan FTA

On the measure of FTAs signed, New Zealand's 'Asian Century' project is doing better than that of its larger, louder neighbour.

Last week, New Zealand became the first OECD member to sign an FTA with Taiwan. In 2008 New Zealand was the first OECD member to sign an FTA with Taiwan's larger, louder western neighbour, China (Switzerland recently became the second OECD member to do so). After eight years of negotiations, the Australia-China FTA still seems more in the tunnel than near the light.

The NZ-Taiwan deal is a diplomatic win for both signatories and potentially a diplomatic challenge for the Trans-Pacific Partnership.

For President Ma, it reaffirms his argument that Taiwan can use its 2010 Economic Cooperation Framework Agreement with China to expand Taiwan's 'international space' by negotiating free trade agreements with other states, and counters the criticism of ECFA that it would bind Taiwan closer to the mainland.

For New Zealand, it builds on the first-mover advantages of its FTA with China and reaffirms New Zealand's diplomatic pluck and agility. The long formal title of the agreement — The Agreement between New Zealand and the separate customs territory of Taiwan, Penghu, Kinmen and Matsu on Economic Co-operation (ANZTEC) — suggests the flexibility required of New Zealand to do the deal with Taiwan within the limits of New Zealand's 'One China' policy. For Singapore and others in the region negotiating or considering an FTA with Taiwan, the NZ-Taiwan deal is a fillip and a challenge to finish their own negotiations.

The biggest challenge, though, may be for the Trans-Pacific Partnership. The NZ-Taiwan deal, particularly as New Zealand is a founding member of the TPP, should reduce any diplomatic reservations other members have over Taiwan's stated interest in joining the talks.

Membership of the TPP would be a much greater economic and diplomatic win for Taiwan and President Ma. However, it would also require much more of Taiwan in terms of economic opening than the NZ-Taiwan FTA. So far, it looks like Taiwan is not ready to open up enough to pose a diplomatic challenge to the Trans-Pacific Partnership. Taiwan should learn some pluck and free-trade commitment from its newest FTA partner.

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