Taiwan’s new DPP Government to strengthen trade ties with Japan

TAIPEI – The incoming Democratic Progressive Party Government in Taiwan will reportedly seek early talks to establish a Free Trade Agreement with Japan.  The move would complement initiatives taken by the outgoing KMT Government to establish closer trade and diplomatic relations with Japan.

Taiwan and Japan signed a Fisheries Agreement in 2013 and a Double Taxation Agreement in 2015. An Investment Agreement has also been mooted. Because Japan does not officially recognise Taiwan, bilateral negotiations are conducted by the Association of East Asian Relations (AEAR) on behalf of Taiwan and the Interchange Association (on behalf of Japan).

Taiwan’s incoming President, Tsai Ing-wen, has prioritised her relationship with Japan, visiting the country on what was termed a friendship tour as recently as October. Closer relations with Taiwan are also in Japan’s interests, in particular in respect of Japan’s dispute with China over the Senkaku Islands. To some extent, China appeared to be using the outgoing KMT Government as a form of proxy  in seeking to cool China/Japan friction over the Senkakus.

In a research paper just published, global asset manager Nataxis says it seems clear that Tsai will try to reduce Taiwan’s very high economic dependence on China, and that in this, Japan should play a key role. “China, on its side, will put pressure on the rest of the world so that Taiwan finds it hard to diversify,” the research paper says.

Nataxis figures show that Mainland China accounted for 26% of all Taiwan exports as of November 2015, and Hong Kong for a further 14%, the US 12%, Europe 9%, and Japan coming in fifth at 7%.

At the APEC meeting in Beijing in November 2014, China played a trump card by announcing a free trade agreement with South Korea. The move caused angst in Taiwan, which competes directly with South Korea on some 80% of trade items exported to China. While it has since been revealed that the China/Korea FTA will be phased in over 20 years, Taiwan exporters are still disadvantaged.

Under the Kuomintang Government, Taiwan established FTAs with Singapore and New Zealand and has been negotiating with a number of other countries, including the Philippines. It is on record as wanting FTAs with Australia and the EU, and has been making a strong pitch for membership of the Trans-Pacific Partnership (TPP).
The DPP won in a landslide in Saturday’s election, taking 56.12% of the total vote and 68 of 113 seats in the Parliament, the Legislative Yuan. The outgoing KMT won only 35 seats, with nine seats going to other parties and one to an independent candidate.

Tsai, who is 59, will be sworn in as President on May 20. During a post-election news conference, she vowed to strengthen national unity in Taiwan and, in a nod to China,  to build a consistent, predictable and sustainable cross-strait relationship.

“We will work toward maintaining the status quo for peace and stability across the Taiwan Strait to bring the greatest benefits and well-being to the Taiwanese people,” she said.

When last in office, from 2000 to 2008, the DPP alienated a number of governments and senior diplomats, including those in the United States, because of its inflexible attitude to China. Observers say the DPP has learned from that experience and will adopt more pragmatic China policies. (ATI).