Asia, EU trade latest

EU Taiwan under-the-radar relations deepen but leave Taipei hungry for more

The European Commission’s 2015 Trade For All strategy promised Taiwan a bilateral investment agreement. Almost four years on, there is no sign of any such deal. There was indeed one caveat in trade commissioner Cecilia Malmström’s promise to Taipei: a similar deal with Beijing needed concluding first. Yet the conclusion of long-standing EU-China investment agreement negotiations is not yet in sight.

EU Taiwan investment ‘talks’ have never gone beyond preliminary ‘scoping’ discussions. Nonetheless, over the last two to three years, policy ties with Taipei have deepened.

“While the EU adheres to the ‘One China’ policy regarding Taiwan, meaning that the EU does not have formal diplomatic relations with Taiwan, our bilateral economic relations are very strong,” said MEP David Martin during a hearing in the European Parliament this week.

Consultations surge

Peter Berz, acting director for Asia at DG Trade said: “We have managed to create a well-structured bilateral consultations framework, almost on par with what we have with some of largest trading partners in terms of number and substance of meetings.”

The EU and Taiwan run a joint industrial policy dialogue, an intellectual property working group and four “technical working groups” covering technical barriers to trade, sanitary and phytosanitary issues, pharmaceuticals, and investment.

In bi-annual “mid-term meetings”, the European Commission and Taiwanese officials have tackled “trade irritants” and “business promotion”, said Berz. The EU and Taiwan will soon set up a new “digital economy forum” and “an energy cooperation mechanism”, the commission official told MEPs.

All these technical meetings are the more important as there is currently no prospect of Taiwan and the EU concluding any bilateral free trade agreement to liberalise trade and establish formal ground rules for trade.

Taiwan is an independent customs territory and a full member of the World Trade Organization. As such there is no legal obstacle in international law for launching trade negotiations with Taipei. “Trade policy does not preclude us from launching negotiations with Taiwan,” Berz said.

But the EU is simply not ready to go down that route. “Taiwan is not always an easy issue to discuss”, said Christophe Manet, from the European External Action Service.

That is an understatement. Beijing exerts a lot of political pressure on the EU and in all multilateral institutions to avoid that Taiwan be seen acting in any way as a sovereign independent state – signing international treaties is seen as such a sign.

Beijing considers Taiwan a breakaway region and is increasingly assertive with the island where the nationalist government took refuge in 1949 after the current communist regime took power on the mainland. One of Beijing’s stated objectives vis-à-vis the EU is to stop it from launching trade or investment negotiations with Taiwan. Cross-strait relations have deteriorated since the pro-independence party led by Ms Tsai Ing-Wen took power in Taipei in 2016. Neither the European Commission nor EU capitals want to rock the boat with Beijing.

Working around politics to tackle trade irritants

This means Taipei and EU officials try to work around the political obstacles to tackle trade an investment irritants.

“Standardisation is a particularly important area,” Berz explained. Taiwan not being allowed to become a full member of international standardisation bodies, Brussels sees engagement with Taipei authorities as crucial to avoid seeing trade barriers to its industrial products going up if Taiwan goes it alone in setting its standards.

The EU is asking a lot from Taiwan. For example it wants better renewable energy market access opportunities. The EU has gripes with Taipei’s long, complex and restrictive food authorisation practices, which affect EU beef, pork, poultry and fruit and vegetable exports. The EU also wants Taiwan to recognise EU organic product standards. EU investors based in Taiwan want an investment protection agreement to secure a more predictable environment for them.

Taiwan currently trades on simple WTO terms with the EU. This is an increasing problem for its exports as competitors such as Korea and Japan now enjoy preferential market access to the EU via free trade agreements. Taiwan is also regularly affected by the EU’s trade remedy measures, most recently the EU’s steel safeguard measures adopted last summer. It enjoys no formal channel to secure greater procedural fairness and transparency from the EU regarding these measures via specific rules in an FTA.

Taiwan is no longer insisting on an FTA with the EU. “We know the FTA [has a] certain high level of sensitivity. Therefore we scaled down [our demands],” said Jen-Ni Yang, director general for trade in Taiwan’s ministry of economic affairs.

But Taipei would now like to see the EU accelerate preparations for the investment agreement. It also wants to establish a more structured regulatory cooperation framework. “It can [be] base[d] on the regulatory cooperation chapter of the EU Japan Economic Partnership Agreement,” suggests Chien-Huei Wu, a professor at the Institute for European and American Studies at Academia Sinica in Taipei. “That would provide a transparent and predictable regulatory environment,” so professor Wu.

But will the EU ever sign any formal agreement with Taipei? MEPs from both main political groups such as David Martin and Laima Andrikiene are urging the commission at the very least to publish an impact assessment for a bilateral investment agreement with Taiwan. But commission officials remain non-committal.

EU Taiwan goods trade was worth € 50 billion in 2017 – about half the value of EU trade with South Korea. Services exchanges amounted to € 8 billion.

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