Taiwan’s pursuit of U.S. trade pacts threatens China’s dominance over island country

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WASHINGTON, Nov. 29 – With the United States and South Korea in the midst of free trade discussions, Taiwanese officials are pleading with the U.S. to expand trade with their government.

Such an agreement would likely result in economic gains for both regions, but U.S. officials risk threatening China’s dominance over the island’s economy if they adopt such an agreement, experts say.

Hu Sheng-Chen, chairman of Taiwan’s Council for Economic Planning and Developing, said trade with America is falling further to China — a trend perceived by many Taiwanese as an overdependence on China for economic stability.

“In the past, the U.S. was [Taiwan’s] number one trading partner,” he said. Now, “we are too dependent on the Chinese economy.”

Hu spoke Wednesday at the Center for Strategic and International Studies to advocate an expanded trade pact with the United States. His visit included talks with government officials. He declined to disclose the details of the talks, but said, overall, U.S. officials have had “sympathy for Taiwan.”

While Taiwan’s government is independent of mainland China, the Chinese government — as well as the United Nations and most countries — still recognize the island as a Chinese territory.

According to a Taiwanese official, China is Taiwan’s largest trading partner, accounting for 26.2 percent of the island’s total foreign trade.

A free trade agreement between the United States and Taiwan would result in a “triple-win situation” for the United States, Taiwan and China, Hu said. For “every $100 of exports [Taiwan] makes, $40 is earned by China,” he said.

However, some analysts say that U.S. officials should be careful about interfering in the tense political situation between China and Taiwan.

Justin Logan, a foreign policy analyst at the Cato Institute, a nonprofit organization that promotes free trade, said he “can’t imagine” China would look favorably on a free trade agreement between Taiwan and the United States.

Any actions that would further Taiwanese independence are seen as a threat to Chinese dominance over the region, Logan said. The Bush administration should be wary about pursuing such a trade deal with Taiwan because, while free trade would be advantageous to the economy, “you have to weigh the political costs,” he said. “It would certainly anger the Chinese very much.”

While the Taiwanese economy continues to grow, Hu said Taiwan faces possible economic isolation in the Asia-Pacific region. The country has been excluded from regional economic alliances because it is not recognized by most nations as an autonomous region. A free trade agreement with the United States would allow it to stay competitive in the global economy, Hu said.

Hu described Taiwan’s economic reform as urgent.

“The sky is falling on Taiwan this year,” he said.

In addition to exclusion from regional alliances, Hu said Taiwan needs to expand its service sector and overcome political isolation in order to have continued economic success. He said Taiwan could not achieve this success on its own, and that it needs an external push by the United States to expand trade.

“A marginalized and economically weakened Taiwan will not be in a position to contribute to the long-term stability of the region,” he said.

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