June 1, 2016
Cross-Straits Series: The Future of Trade in Taiwan
Atlantic CouncilBARRY PAVEL: Good afternoon, everyone, and welcome. I’m Barry Pavel. I’m the director of the Brent Scowcroft Center on International Security here. And thanks for coming to this very interesting event that’s part of our Cross-Strait Series. This event is on the future of train and the Trans-Pacific Partnership in Taiwan. And it’s supported by the Taipei Economic and Cultural Representative Office. We’re pleased to be co-branding this event with the Asia Society Policy Institute as well.
Cross-Straits Series: The Future of Trade in Taiwan
Vice President, Arnold Kanter Chair, and
Director, Brent Scowcroft Center on International Security,
Vice President and Managing Director,
Asia Society Policy Institute
Senior Vice President for Asia,
U.S. Chamber of Commerce
Nonresident Senior Fellow, Brent Scowcroft Center on International Security,
World Trade Editor,
Location: Atlantic Council, Washington, D.C.
Time: 12:30 p.m. EDT
Date: Thursday, May 26, 2016
Superior Transcriptions LLC
Cross-Straits Series: The Future of Trade in Taiwan
Vice President, Arnold Kanter Chair, and
Director, Brent Scowcroft Center on International Security,
Vice President and Managing Director,
Asia Society Policy Institute
Senior Vice President for Asia,
U.S. Chamber of Commerce
Nonresident Senior Fellow, Brent Scowcroft Center on International Security,
World Trade Editor,
Location: Atlantic Council, Washington, D.C.
Time: 12:30 p.m. EDT
Date: Thursday, May 26, 2016
Superior Transcriptions LLC
Certainly Dr. Tsai Ing-wen’s victory in Taiwan’s elections in January was an important milestone in the island’s democracy. Her vision is to reestablish Taiwan as one of the region’s most dynamic economic heavyweights. The main goal is to position Taiwan for inclusion in one of the most important trade deals in a very long time, the Trans-Pacific Partnership trade agreement, which we’re all watching closely. And the second round is upcoming.
Earlier this week President Tsai reiterated her determination to seek membership in TPP in the second round, in meeting earlier with the House of Representatives leadership. Taiwan has repeatedly expressed its desire to enter the TPP, but Taiwan’s reluctance to open its door to certain imports from the U.S. has raised doubts about some – among some of its determination to ease some import restrictions. It’s one of many issues I’m sure we’ll discuss today. But certainly the Tsai administration has been perceived as leaning forward more heavily towards easing such restrictions. We’ll see how this plays out over the next several months.
In addition to challenges regarding TPP, Taiwan’s economic growth was less than 1 percent in 2015, and it faces an assortment of economic challenges in the future. Certainly Taiwan, among many other economies, is heavily dependent on trade with China, and therefore vulnerable to China’s fluctuations. The Tsai administration will be focused on promoting innovation through smarter industrial policies. And it also hopes to substantially liberalized and diversify its trade and investment partners to moderate its exposure to China’s ups and downs, and find new sources of growth.
There’s also President Tsai’s look south policy, that emphasizes trade with other regional partners. And she is looking to encourage some Taiwanese businesses that have invested in the mainland to move home. So this is a newly inaugurated president establishing her positions and her policies on these issues. It’s a great time to be discussing sort of where things are and where the might go among these many issues. And we have a very great panel here of experts that will come at this from different perspectives and really give us the latest breaking insights on these topics.
So I think I’m going to go right into their bios. But first, a reminder, this is on the record. It’s a public event. And we are tweeting this from the account @ACScowcroft and the hashtag #ACAsia. Let me go into our excellent panel.
First, I will introduce Dr. Olin Wethington, who is a nonresident fellow in the Scowcroft Center. He’s done amazing work I strongly commend his publication with Bob Manning, “Shaping the Asia-Pacific Future,” with very specific recommendations on how the United States and its allies and partners should move forward on this issue set. Olin is also the founder and chairman of Wethington International, LLC, and has had vast experience in the U.S. government.
Ms. Tami Overby is senior vice president for Asia at the U.S. Chamber of Commerce and president for the U.S.-Korea Business Council. She leads Washington’s premier international policy team devoted to helping American companies compete and prosper in Asia’s dynamic marketplace.
Ms. Wendy Cutler joined the Asia Society Policy Institute as vice president and managing director of its Washington, D.C. office late last year. She focuses on building ASPI’s presence in Washington, which this should help a little bit at least – (laughs) – and on leading initiatives that address challenges related to trade and women’s empowerment in Asia, two very important issues. And she has had an illustrious career of nearly three decades as a diplomat and negotiator in USTR, most recently serving as acting deputy U.S. trade representative.
And we have Mr. Shawn Donnan – if I’m pronouncing your name correctly? Good. He is the world trade editor at the Financial Times, leading FT’s global coverage of trade and development. And he covers issues related to globalization, the IMF and World Bank, and contributes to coverage of the U.S. economy.
I think with that as introduction, I’m going to turn it over to you now, Shawn, thanks very much.
SHAWN DONNAN: Thanks very much. You’ve done all the hard work there, Barry. And for that, I thank you. This really gets at subjects that are dear to the heart of the FT, and hopefully all of our readers, and that is kind of – the economic and the strategic dance that we see out on the Pacific rim, and some big important economies and big economic relationships. Taiwan’s an economy that we have followed closely for decades, and have been fascinated with as it has progressed up the value chain. We have always had a healthy interest in Taiwanese politics as well. Back when I was based in Hong Kong and coordinating our Asian political and economic coverage, it was always remarkable how much time we spent talking about remarkable developments in the Taiwanese political scene.
And then clearly the TPP is something we are all watching closely. I won’t set the goal for this session to resolve the issue of whether or not the TPP will pass Congress, but that’s certainly something we want to – we want to discuss at one point. But clearly it is a long-term and very important project for the Obama administration, and getting it through over the next few months is really going to tell us a lot about America and its relationship with the world and with the Pacific.
And at that point, I’m going to get out of the way, because that really is my job here, is to be the retiring guy on stage and to let these three eminent folks share their wisdom. We’re going to start with Olin, who really wants to talk – is going to lay the kind of economic view, the ground work, and then we’ll move to Tami and Wendy. We’ll have some short introductory remarks, and then we’ll move to what I hope will be some brilliant questions from the floor. No pressure there. Olin, why don’t you kick us off?
OLIN WETHINGTON: Well, thank you. Thank you. That introduction suggests I’m probably going to start by telling you what you already know by way of a couple of overview comments. But preliminary to that, this session obviously, I think, presumes the – at least the likelihood if not the fact of TPP passage. And from my personal point of view, I would like to make that assumption. I find the geopolitical rationale certainly quite compelling. I think the economic rationale is there, although maybe subject to a greater debate. But I think the future – the future of TPP in this current domestic context is genuinely insecure. And at minimum, it has elongated the timeframe for its achievement.
But having said that, a couple of comments. First, a few things on Taiwan in the context of economics, particularly in the region. And then I’d like to say a couple of things about Taiwan in the context of institutional arrangements. And then a few things in the context of American interests, with respect to Taiwan and its economic position in the region. And then finally, maybe a couple of comments on the dynamics of the Beijing-Taipei relationship, and the implications of that for further integration of Taiwan into the regional institutional arrangements.
Certainly if one were in a boxing context, I think the striking thing about Taiwan’s economic position is we would say they’re punching well-above their weight. And as a finance guy, in a treasury context I would say they’re outperforming – far outperforming expectation. And what I mean by that is the obvious, what everyone, I think, has recognized, that the economic achievement of Taiwan the last three decades has been substantial. It is an open economy. It is a strong economy. It is a competitive economy. It is a private economy. And it’s a highly educated workforce. It has become, I think, an essential part of the global supply chain, particularly in electronics and in information technologies.
If one were to put that in a broader context, I think the impressive – an impressive element of Taiwan’s economic achievement, is that it has occurred in the context of political transition. And it has coupled open-market policies, a strong performance, with democratic institutions, with support for expression, with respect for human rights. And that combination, I think, gives lie to the sense that an ethnically Chinese society is incapable of democratic governance. Taiwan is certainly the opposite of that. It has proved its capability and its ability in the context of open and competitive democratic process to also maintain an open and competitive economy.
As you know, Taiwan is the sixth-largest economy in Asia. If one were to put that in a global context, depending on one’s measure, it ranks maybe 19th to 21st in terms of GDP, as well as GDP per capita. Within a TPP context there are only three of the 12 countries that are larger than Taiwan’s economy. And if one were to look at the APEC membership, Taiwan’s economy is larger than over half of the 21 APEC members. In terms of its competitiveness, again another noteworthy indicator, if one were to look at the World Economic Forum global index of competitiveness, Taiwan ranks number 15. And certainly a key driver of Taiwan’s economic performance has been its export potential. And in terms of its ranking globally against that measure, it is roughly, again, number 19 and surprisingly for a small island, number 19 in terms of imports.
So it is performing far beyond expectation, I think, has been despite current challenges – slower growth in the recent year or two – and major challenges ahead. But I think the striking feature of Taiwan in the context of Asia is the extraordinary achievement that its economic policy makers have attained.
Now, in the context of institutional positioning, I think it is fair to say – and I say this with conviction – that Taiwan’s participation in global as well as regional institutions in not aligned with its economic performance. In my view, that needs to change. It is obviously a full member in the Asian Development Bank. It’s a full member of the WTO. It’s a full member of APEC, although with some restrictions as to the nature of its participation. But when one moves beyond that to other arrangements, certainly on the trade front, Taiwan is party to a free trade arrangement with only two other Asian countries – Singapore and New Zealand. It has several arrangements with Central American countries. But it is not part of the mainstream, I would day, of economic integration in the region.
And there are many, as you know, international governmental organizations that Taiwan is not a participant in, and in areas where there is a global, certainly a regional interest in inclusiveness. And that would include, importantly, the World Health Organization. It would include in the security field Interpol. It would include the International Civil Aviation Organization. And it would include the recent U.N. climate change framework. So that misalignment, in my view, is the fundamental – on the economics side – the fundamental challenge that faces Taiwan, and countries that are committed – and include the United States in this comment – committed to Taiwan’s security, its democratic process and its economic prosperity.
The U.S. has had, as we all know, a clear commitment to Taiwan, both on the security side and on the economic side, since 1978, the Taiwan Relations Act. In my view, the U.S. needs to advocate a deeper institutional integration of Taiwan into the institutions of the region as well as globally. It is in American interests and I think in the interests of our allies in Asia, and I think in the interest of the global economy for Taiwan to be included more deeply. Inclusiveness – rules-based inclusiveness – should be, in my view, a guidepost for American interests in the region.
Now, what does that mean more specifically? I would reference a couple of things as far as U.S. approach to deeper integration of Taiwan in the region. First of all, I would say it should not wait until the TPP is in place. We don’t know, I think, at this point what the outcome of this domestic debate is. And we do not know what kind of renegotiation process might be entailed in giving it longevity. But I think it’s in the interest of the U.S. to join with Taiwan in a rather concerted, deliberate effort – structured effort to create a pathway toward greater structural adjustment within the Taiwan economy, an adjustment that will put Taiwan, should the moment come when regional arrangements are at its doorstep, to more easily become party to those arrangements. That’s number one.
I would say secondly the U.S. needs a more agile and more politically committed diplomatic path – diplomatic strategy to include Taiwan, one that seeks to reach out and also to garner the support of key allies within the region. The U.S. has had a strong security commitment to Taiwan, as we know. Peace and stability in the straits is essential to Taiwan and Asian economic interests and integration. And the U.S. should not view the security side as separate from the economic side. The security umbrella, the perception of a strong commitment to Taiwan on the security side is essential, I think, to accelerated integration on the economic side.
And lastly, I would say the U.S. in its presentation to Beijing – because this is not a bilateral dialogue; it’s a multiparty dialogue as to Taiwan’s closer integration into economic institutions – the U.S. should be saying to Beijing, take care to not lose the hearts and minds of the Taiwan people, that an alignment of views is necessary, that too harsh an approach, too much emphasis on form, on symbolic framework in the context of the Taipei-Beijing relationship may be detrimental to Beijing’s long-term interests.
Obviously the tone and health of the relationship between Beijing and Taiwan will affect the pace and scope of integration. The most recent point of contention is obviously in the context of President Tsai’s inauguration over the 1992 consensus. Should it be ambiguity or should it be greater clarity? In my view, the risks of form being elevated and the emphasis on highly symbolic framework risks undermining the development of cross-strait ties. Though there has been some threatening noises from Beijing, I do at the moment think this is not yet out of hand.
I would simply close this opening set of comments with reference to a famous statement of Henry Kissinger, when he said that for the sake of clarity, ambiguity may be required. And I think in the context of the current situation, that may well be the case. Let me stop there.
MR. DONNA: Olin, thank you very much. You’ve made very clear here in those lucid and wise words why you were a recipient of the Alexander Hamilton Award, the highest honor in the Department of Treasury. But I think our big question here is, does that mean you can get us tickets to Hamilton? (Laughter.)
Tami, let’s move over to you. Why don’t you walk us through really the U.S.-Taiwan trade relationship there, which is going to be important background to any future TPP membership and where this goes?
TAMI OVERBY: Well, thank you, Shawn. And I want to thank the Atlantic Council for he kind invitation, and to state publicly what a huge honor it is to be on stage next to my trade hero, Wendy Cutler. I watched Wendy negotiate the KORUS FTA and I thought she was the most skilled negotiator I had ever seen, until I watched her as acting assistant deputy USTR really conclude with the Japan piece of TPP. So she’s a rock star and I’m just honored to be here. (Laughter.)
But it is my pleasure to be here talking about Taiwan, one of Asia’s richest economies and a key player in the Asia-Pacific region supply chain. You know, as we – as Olin mentioned, Taiwan’s an active participant in the WTO and APEC, but they’re also participating in the trade facilitation – the Agreement on Trade Facilitation, the Government Procurement Agreement, the ITA, the Information Technology Agreement, Trade and Services Agreement, and the Environmental Goods Agreement. They’re also – in addition to the FTAs with New Zealand and Singapore, they in 2010 signed their ECFA, their cross-straits Economic Cooperation Framework Agreement with China.
The World Bank ranks Taiwan 11th globally in its ease of doing business in both 2014 and 2015. When we looked at other TPP countries, I’d like to note that Vietnam, Malaysia, Brunei, and Australia all rank below Taiwan in that World Bank index. As we know, Taiwan’s key sectors are very important to America. Technology manufacturing, including semiconductors, mobile chipsets, flat panels, and precision machinery. Other value-added products and services, including automotive, chemicals, plastics, textiles, and financial services.
For decades, the U.S. and Taiwan have enjoyed a very robust commercial relationship and strong two-way trade and investment flows. Key U.S. and Taiwan companies – I just want to highlight – we have Taiwan Semiconductor, Formosa Plastics, ASUS, Acer are large investors in the United States, among others. Going the other way, we have Micron, Corning, Microsoft, IBM, 3M and many other large U.S. investors are committed to the Taiwanese relationship.
The U.S.-Taiwan Trade and Investment Framework Agreement, or TIFA, is the principal vehicle for advancing our commercial ties. Signed in 1994, it remains the key mechanism for the trade dialogue between our two countries and covers a broad range of trade and investment issues. The 9th round of TIFA talks were completed last October, led by Deputy USTR Robert Holleyman and Taiwan’s Deputy Minister of Economic Affairs Cho. The TIFA talks included discussion on investment issues with Taiwan, and also about Taiwan’s aspirations to join TPP. TIFA could be a stepping stone to some of the things that Taiwan would need to do in order to enter TPP.
While Taiwan remains an attractive market for doing business, there’s still some significant policy concerns that the U.S. would like to see addressed. Agriculture – this is an old-standing issue. Taiwan still bans the import of U.S. pork containing ractopamine, a U.S. Food and Drug Administration-approved leanness enhancer. On the regulatory environment, a lack of transparency in the regulatory process is a key concern for American business. Some barriers include inconsistent regulatory interpretations, government bureaucracy, inadequate or outdated laws, and inconsistent application of the rule of law.
There is concern regarding regulations that are not in line with international standards. Major U.S. industries currently effected by technical barriers to trade include food, retail, cosmetics, medical devices, and pharmaceuticals. The State Department’s 2015 investment climate statement on Taiwan highlighted slow progress on the privatization of state-owned enterprises and foreign investment caps in telecommunication, TV, and transportation sectors. Aside from U.S. policy concerns, Taiwan also has a number of other trade challenges.
On the supply chain, Taiwan is highly integrated into Asia’s supply chain. Downstream manufacturing and assembly is done in China or Southeast Asian countries. Innovation design is happening in Western countries. And value-added intermediate goods and capital goods production is happening in Taiwan. Now, this was beneficial in the 1990s and early 2000s, but now Taiwan faces the threat of other countries trying to localize entire supply chains. President Tsai has announced that she plans to emphasize innovation as part of her economic agenda, the new model for economic development, and reduce Taiwan’s reliance on China as an export market.
In recent years, Taiwan has taken measures, including allowing cross-strait currency settlement and opening of direct flights between the mainland and Taiwan, to strengthen cross-strait ties. Taiwan is now developing into a local RMB hub, and is benefitting from increased travel and tourism. However, that overreliance on China has increasingly become a notable concern for Taiwan. Nearly 40 percent of Taiwanese exports go to mainland China. As a result, Taiwan’s economic performance has been effectively tied to the China slowdown. President Tsai has said she will seek new trading partners by diversifying Taiwan’s external economy towards ASEAN and South Asia.
The regulatory environment in Taiwan is a perennial concern for business. Taiwan has made strides towards regulatory transparency, but as just mentioned there’s still some concerns. Taiwan is implementing reform such as simplifying the process for obtaining construction permits and establishing electronic payments for certain taxes. Additionally, in 2014, Taiwan announced it would undertake significant liberalization steps in an effort to join regional trade blocs. In 2015, the Legislative Yuan passed amendments providing additional transparency for merger and acquisition transactions, and subjecting fewer investment applications to mandatory review.
TPP is the regional bloc that Taiwan has at the top of the agenda. Taiwan wants to join TPP. And recently President Tsai has made joining TPP a priority. She was quoted this week in the Taiwan media as saying: Taiwan will actively pursue the next tranche of TPP membership. In 2015 while in on the campaign trail, she was quoted by The Wall Street Journal, quote, “Ensuring Taiwan is ready for the future candidacy into the Trans-Pacific Partnership will be an important cornerstone of my economic policy,” end quote.
Well, why should Taiwan be included in TPP? Well, Taiwan’s trade volume with the 12 TPP members has reached $200 billion a year. Taiwan’s GDP is larger than 7 of the current 12 TPP members. Taiwan’s inclusion in TPP will increase the trade pack’s GDP by over $74 billion. Korea, Taiwan’s main trade rival, has an edge over Taiwan due to the Korea-U.S. Free Trade Agreement – thank you, Wendy – and other important FTAs that it has signed.
Korea’s entry into TPP with Taiwan still on the sidelines would shift the competitive balance further towards Korea, leaving U.S. companies with narrower sourcing options. Many of our global supply chains on the electronic side go straight through Taiwan. Taiwan’s inclusion in the TPP would raise trade efficiency in the region via lower tariffs and greater harmonization of rules. In short, we think Taiwan would add strength and scope to TPP.
Now, what does Taiwan need to do to join TPP? We believe that they would need to address standards on foreign meat imports, including U.S. pork and other non-tariff barriers pertaining to non-regulatory – non-transparent regulatory approval processes, particularly for services, pharmaceuticals, and medical devices. Taiwan could also look at the Japanese and South Korean experiences regarding market access issues in TPP and KORUS negotiations to become better prepared, and a more viable candidate for the second round of TPP inclusion – or just listen to what my friend’s going to tell you.
Taiwan can be proactive in promoting its candidacy for TPP membership by creating a high level TPP preparation taskforce within the executive branch to ensure individual ministries and agencies carry out the reforms needed and enable government leaders to issue clear directive and monitor progress. Taiwan could communicate the potential gains to trade – in trade to the Taiwanese people, and framing TPP as Taiwan signing FTAs with the 10 TPP countries they do not already have FTAs with and with significant trading partners.
As part of the outreach efforts to vulnerable sectors, the government should prepare trade adjustment assistance to help or upgrade those industries to a more competitive level. And lastly, Taiwan could reform its Administrative Procedure Act to provide more time for public feedback on laws and regulations and establish a central platform, like our Federal Register, for comment notification and require government responses to major comments. Those are just a few thoughts from the U.S. business perspective. And with that, I cede back.
MR. DONNAN: Yeah. I think you – I think you laid out what surely is the opening negotiating gambit there from U.S. business for inclusion. You also made it impossible for me to introduce our next speaker as anything but a rock star. Wendy, do you want to build on that and talk a little bit about how this can all work and where we go from here?
WENDY CUTLER: Well, sure. And thank you very much. And thanks for the Atlantic Council for inviting me to serve on the panel. I’m also really honored to be with Shawn, who is kind of, let’s just say, almost an institution at USTR in terms of trying to report the hard stories and ask the hard questions on the issues that we were working on. Olin Wethington, I’m sure he doesn’t remember this but I remember it, he was one of my first bosses at the Commerce Department. And I’m not going to tell you how many years ago. And Tami, while she’s saying that I was a rock star in Korea, she didn’t mention that she taught me everything I knew about Korea. So I felt – I’m very fortunate – when she was with Seoul, with the Chamber of Commerce there, during the FTA negotiations.
Let me just add a few points, and then maybe we can open the floor up. I think Olin and Tami have really set the scene for the discussions and the debate on the issue of Taiwan and TPP. Olin did a great job in kind of putting the – Taiwan’s economic growth and development in perspective. I would add now and just emphasize that from an economic perspective Taiwan’s facing a lot of serious challenges right now. Their economic growth is decreasing. Unemployment is increasing, particularly among the youth. They face demographic challenges. And they’re increasingly facing a world that – a world and a region that is entering into trade negotiations and trade agreements where Taiwan, as Olin mentioned, has not, you know, been fully integrated into.
I think all of this has led the new president, President Tsai, to be a firm advocate of Taiwan’s interest in joining the TPP. I’m intrigued that her background is trade. She was a trade lawyer, and knows trade inside and out. And so I can only think about some USTRs that would love to sit down with her. (Laughter.) In terms of where TPP is, I’m not going to get into the congressional perspective right now, but let’s keep it very high level. And that is that when TPP was concluded in October and signed in February, a number of economies put their hands up right away and expressed interest in joining. That included Taiwan. It included Korea, the Philippines, Indonesia, and others.
I had the pleasure at that time of working for the Asia Society and doing a lot of Asian travel around that time. And there was just a lot of excitement in the region. I think a lot of people wondered would TPP ever be concluded. And once it was concluded, people were really struck by not only its conclusion, but how comprehensive and high standard it was. And there was a lot of interest in joining. And I think there still is.
But I think that as the U.S. debate – congressional debate goes on and on, people are becoming a little more wary and maybe some of that excitement is wearing off a bit. And that concerns me. And so I think it’s very important that TPP get through Congress this year. And I’m extremely encouraged to hear that one of the issues of concern, the issue of financial services, seems to be on a path towards resolution between the administration, Congress, and the U.S. business community. I think that’s a very good sign.
When the TPP ministers met recently at the MRT, the APEC trade ministers meeting, and they meet on the margins regularly of APEC on this issue, not only did they update each other on where they all are with respect to their domestic procedures, but they also discussed countries and economies that are expressing interest in joining TPP. And in the statement they issued, they underscored that a number of countries are interested in joining TPP. They agreed to work bilaterally to ensure that those economies really understood the expectation of the current 12 TPP countries. And they also made clear that accession to TPP is not going to happen until entry into force of TPP.
And so when you think of accession then, one could conclude that maybe then the countries and economies that are interested in joining TPP should sort of wait and sit on their hands a bit. And that would be – my view is that’s exactly not the right strategy and that any economy that’s interested in joining TPP, including Taiwan, should really be active now laying the groundwork domestically and internationally for future participation. And the question’s often asked, well, what exactly should they be doing? Tami touched on a number of these issues, but let me put forward kind of my seven suggested steps for economies that are interested in joining TPP and what they should be doing now.
First, I think it’s really critical that the text and the market access schedules and all those other details be studied in detail. I know the TPP text is being translated, has already been translated in a number of languages all around Asia and around the world. And I encourage those in fellow trade ministries and other parts of the governments of the economies that are interested in joining TPP to study the text, kind of figure out what are their existing practices and what more would they need to do to really adhere to the high standards and to the provisions of TPP. When I was at USTR, Taiwan had informed me that since they didn’t have the TPP text, they were doing this with the KORUS text. And I think that is a good text. There are similarities between KORUS and TPP. But for anyone who’s delved into these texts really deeply, there are also important differences and important additions.
Second, and here Tami really did a great job, it’s important that bilateral issues of concern be resolved. I’m not going to go through the litany of issues that were outstanding when I was at USTR. I think Tami did a good job from a business perspective to share her thoughts. The issues are important themselves, but I would also add resolving these issues also demonstrates an economy’s really determination to deal with tough issues and to make those tough decisions because that – those kind of decisions are required when one enters into a negotiation as comprehensive as TPP.
In addition, number three, I think it’s really important that efforts are made to build support in the home economy. Here everything from preparing economic studies that underscore the gains to be secured by joining a trade agreement, versus losses that would be incurred by not joining are very important to undertake. And also, in terms of building support at home, consultations with stakeholders is critical. The need to hold hearings, to provide public notice, and really inviting comments from the public on what they view as the benefits and the losses – or their concerns about joining a trade agreement.
And third, I would say in terms of building support at home, it really needs to be a government-wide exercise. It can’t just be the trade ministry working and figuring this all out. These trade agreements now bring into play a lot of different ministries, a lot of them – I’ve seen this first hand – they don’t want to be part of these types of agreements, OK, because they’re largely – and many of them are filled with domestic bureaucrats who don’t want to make international commitments in these areas. And so I think it’s very important to have a government-wide exercise, include those ministries that would need to be part of the negotiation, and make sure that they understand and that they’re on board with the types of commitments that an agreement would require.
Four, I think it’s important to develop an effective negotiating structure to participate in a trade agreement as high standard and extensive as TPP. Here, I would hold out my experience with Japan as an example. I negotiated with Japan for many, many years. Sometimes I felt like I was negotiating with seven Japans because of different ministries at the table. And a lot of times they didn’t have the same position. But when it came to TPP, what they did is they brought all those ministries together under the leadership of a separate TPP minister, who reported directly to the prime minister. I’m not saying that’s, you know, the perfect example. In the U.S. we have USTR, which already serves those kind of centralized, coordinating trade functions. In the Korea deal, the trade ministry stayed in the ministry of foreign affairs, but it had a direct channel to the president during the negotiations. So there’s not one right structure, but it’s important that a structure be established to be able to achieve success in these negotiations.
Five, it’s important for the economy to build support in other TPP countries. And just speaking for the United States, countries and economies that are interested in joining TPP, they need to find their allies in the United States who are going to be their champions, whether in Congress or in the business community. Who is going to advocate their position?
Six, I think it’s important to consult bilaterally with other TPP countries. It’s been mentioned here that of the 12 TPP countries, Taiwan has agreements in place with two of the 12 countries, New Zealand and Singapore. And so it does have a substantial amount of work to do not only with those countries, but also with the other 10. It’s important that Taiwan fully understand the expectations and the concerns of the other TPP countries.
And finally, and I really want to emphasize this point and perhaps I’ll stop with this point, and that is a country or economy should not wait until they participate in TPP negotiations to undertake the reforms or changes that TPP calls for. A lot of what’s in TPP is really about opening and providing economic growth to economies and providing a platform for important reforms, whether it be services deregulation, increasing transparency, market-opening measures, et cetera. And a lot of these measures are very consistent with measures that governments and economies and countries are interested in anyway. By going ahead and implementing some reforms right away, not only does this help an economy proceed with economic growth and turn their economy around, but it also demonstrates their real seriousness in wanting to participate in a negotiation like TPP. And I think it would really gain the attention of other TPP countries.
So I would just like to stop with that, and just – you know, just underscore the point. I think a lot can be done now. I would hope that TPP enters into force as soon as possible so accession negotiations with others can begin right away. But, you know, we’ll have to see the timeline for that. But countries and economies that are interested in joining TPP should not waste time. Now is the time to undertake the steps, I think, that would help lay the groundwork for participation.
MR. DONNAN: Thank you, Wendy. And those countries now have – I think we need to come up with a headline for these, Wendy. The Wendy’s seven magical steps? I would love to see those on paper and built out – wonderful.
I’m not going to let you get away from the big question here, guys, which is, is this going to make it through Congress? And really, what are the consequences of the TPP not getting through Congress in the life of this administration, given the language that we’re seeing out on the presidential campaign trail? I’m going to start with you, Olin. You expressed some optimism, I detected there. So why don’t you –
MR. WETHINGTON: Well, I’m long-term optimistic, but short term, I think, pessimistic. I’m not of the view that it will get through this year, even in a lame duck session. I think that session is too squeezed with a lot of items on the agenda. And I think it’s going to be tough in this election context to undertake and be successful in the kinds of modifications some interest groups will require if they’re to lend their support ultimately to approval. That then kicks us into next year. And we don’t, obviously, know who the president is going to be at this point. And the polls are increasingly tightening.
But I’m assuming that in a 2017 context that this would not be one of the early issues, realistically, out of the box that the administration will put its political capital behind. Those of us in the trade field, economic field, may be disappointed in that. But for a new administration and the early going my guess is other matters rise higher on the political agenda. So there will be, I think, an elongation of debate, and I think also a process of renegotiation. Now, that may not entail wholesale changes to the agreement. If one goes provision by provision, one might find a variety of ways to close the gap between domestic interests now in opposition and the current text. There may be side arrangements. There may be unilateral arrangements that satisfy domestic interest that are short of textual change.
But I think that’s a process that will take some period of time. And my guess is we don’t see in that context congressional consideration until the second half of 2017, at the earliest. I would also add, as a personal thought, that the longer the process of reconsideration and possible renegotiation continues, the more options are opened for other approaches to trade liberalization in the region. And it might even be conceivable – again, depending on who the president is – that some reopening of negotiations – and I think countries, they won’t say it publicly, but my guess is Japan – in the end would go along with a reopening in some limited fashion of renegotiation. That one could even contemplate the addition – if that period if long enough – of additional countries to the arrangement.
MR. DONNAN: Wendy, do you want to respond to that? That’s a scenario that must have given you flashbacks.
MR. CUTLER: OK, let me address as someone who spent a lot of time with Japan during the TPP negotiations, I respect what you just said but I find it hard to believe that given the tough negotiations we had with Japan, and given that this agreement is now before their Diet and may be passed this fall, that they will be open to changes. In fact, one of the things from the TPP countries – all 12 of them, or 11 of them – they’re not interested in a renegotiation. And what they say is, if you want to open it up, the United States, you know what? There are things we want too.
And this isn’t a bilateral negotiation. So once – if the United States were to come to the table and ask for a provision to be opened up, each TPP country would come to the United States and ask for something. And it wouldn’t be the same thing. So the U.S. then would be faced with having to provide 11 concessions in 11 different areas. And all I can think of – and this is – going to the business community and saying: Guess what? We can get what we want, but this is how – this is going to be the price tag. And 11 other industries saying, we don’t want any part of this. And so for a number of reasons, I don’t think renegotiation’s possible.
That said, I was a USTR for many years. And we have, through the years many different approaches were used and found to address concerns raised by our constituents and raised by Congress. And as I mentioned at the outset today, it appears that the financial services concern right now in TPP is headed towards resolution. My experience is if the political will is there, these issues can be resolved pretty quickly. Everyone knows what they are. There’s a finite way to – you know, to address these concerns. Conversations are going on. And because of that, and also because of my view that this agreement provides so many benefits, I’m hopeful that we will find a way to get this agreement through Congress this year.
And in terms of the consequences if this doesn’t happen, I do agree that if it doesn’t happen by the end of the year it’s not going to be the first issue on the agenda for the next president. So the longer it would take to move an agreement like this, I think the less interested the other 11 countries are going to be in waiting for the United States to come around.
MR. DONNAN: And it strikes me that it wouldn’t even be on the agenda for the next president, given the language we’re seeing from some parts of the presidential campaign.
MS. OVERBY: I want to echo what Wendy said, and also what you just said. I have serious concerns if it’s not ratified this year, the risk for America exponentially increases going forward. And I’m also reminded that how quickly when the political stars align – and I’m thinking 2011 when literally in less than 10 days Korea, Colombia and Panama.
So I know it’s very difficult, but like Wendy, I am very encouraged by the positive signals we are seeing from the financial services issue. And I believe that the cost of inaction, not just from an economic and a commercial standpoint, which by the way is enormous, but also for America’s leadership and our brand. And I don’t mean just in Asia. The entire world is watching right now. So while I do believe it’s always darkest before the dawn, I believe we are going to do it.
Now, the U.S. Chamber – we don’t have an opinion on timing. We believe the substance drives that. And what I hope we’re beginning to see is the substance is moving. It is too important not to. We have a pro-trade president, a pro-trade speaker, a pro-trade majority leader, pro-trade chairman of both committees of jurisdiction. And I believe the members of Congress want to do what is in America’s best interests. And TPP is.
MR. DONNAN: I think on that note, why don’t we open it up to the floor? We’ve got just about half an hour left. Why don’t we take questions in kind of groups of three, if that’s OK? And we’ll start just halfway down towards the back, and then we’ll come back to the front row, just to make a change. So if you hold up your hand, the microphone will come to you.
Q: Hi. Leslie Griffin with UPS.
We’ve talked about commercial thresholds for Taiwan’s entry. And Tami mentioned some with respect to the U.S. and Wendy mentioned Taiwan would need to consult with other TPP parties. But I want to ask a question about the political threshold, and any comments anybody would make with regard to the PRC’s role or involvement with respect to TPP – Taiwan’s accession to TPP. Thanks.
MR. DONNAN: OK. And then we had two in the front here, if we can get them.
Q: Yeah. John Zang with CTI TV of Taiwan.
How big is the issue of the import of U.S. pork to Taiwan? If there is one thing or two things that Taiwan can do to impress the U.S. interlocutors – you know, how strong that Taiwan has the will to actually prepare itself for accession or for accession negotiations. What are they? Thank you.
MR. DONNAN: OK. And then next door, yeah.
Q: Thank you. Rob Colorina of AIAC Investment.
Competiveness came up a couple times in this panel. My question simple is: Do we have any metrics as to either new financial entrants to the markets or multinational expansions, even on a what I call apples to apples basis, before this – before the TPP goes through or doesn’t go through?
MR. DONNAN: OK. So competitiveness. So should we start with politics and the PRC, and then we’ll come back to it?
MR. WETHINGTON: I think the politics are obviously affected by whether TPP is approved or not. I mean, I think if it’s approved I’d reflect back on some indications out of Beijing that because they themselves are showing new interest, their ability certainly to stand in the way, I think, at that point, of Taiwan’s accession would be – would be quite constrained. So I think the political threshold would be low once TPP is ratified.
MR. DONNAN: Tami, do you want to have a go at the second question?
MS. OVERBY: The second question, on pork and one or two of that. I think that ractopamine issue has been on the plate for almost – maybe over a decade, forever, as long as I’ve been following things. And again, I think just cleaning up some of the long-standing things like that, and just doing a couple of sweeping things that, by the way, will be in Taiwan’s long-term interest anyway. Regardless of what happens, the neighborhood in Asia is changing.
On RCEP, the Regional Comprehensive Economic Partnership, the regional agreement that China is leading that includes the 10 ASEANs, Korea, Japan, Australia, New Zealand and India seems to have accelerated their pace after the completion of TPP. And Taiwan’s not part of that either. So if I were sitting in – next door to the president’s office, I would say: Everything we can do, as quickly as we can, to show – to help improve our economy and help to show that we can do politically difficult things, would be of value.
MR. DONNAN: Wendy, do you want to just have a go at that, that second part of the question which really hit at that list of seven, your magical list of seven, what you can do, what specifically should Taiwan be doing?
MS. CUTLER: All seven. (Laughter.) All seven.
Q: One or two.
MS. CUTLER: What?
MS. OVERBY: What are the two priorities.
MS. CUTLER: What are the two?
MR. DONNAN: What are the two priorities there?
MS. CUTLER: I think cleaning up the – you know, the bilateral trade agenda is something that’s just very important. And for the U.S. to build political support for any country or economy joining, USTR and the administration will need to show Congress that, you know, the political – or, excuse me, the bilateral irritants have been cleaned up. So I think that’s really important. But I also – I mean, you know, the notion – building support at home is really important. And particularly in a place like Taiwan, where there is a lot of concern about opening up the agriculture market or about increasing transparency. I mean, I know now there’s a lot of top-down interest in a lot of these areas, but, you know, that’s not enough. And so people will be looking to see what progress is being made on that agenda.
But I’ll continue, and then I’ll get to my list of seven. I think it’s really important, given that accession – let me back up a minute – the U.S., we do not decide. The United States doesn’t decide who accedes to TPP and who doesn’t. That’s a decision by all 12 member countries. And so any country or economy who’s interested in joining really needs to have those conversations with each member, and particularly in light of, you know, the issue of China. And China, you know, let’s recognize, it’s the largest trading partner for a lot of TPP countries. And China may have views here. And so I think it’s important that Taiwan in particular have conversations with the other 11 TPP members.
MR. DONNAN: And just walk us through a little bit more on how that accession process is going to work, because I’m thinking back to the TPP and actually there’s all this kind of pre-work then there’s a decision. And I’m thinking 2013, when Japan joins, and within two or three months you guys are at the table. You’ve been at the table beforehand. The reality is, a formal decision is not really the beginning of these things, right? I mean, there’s a lot of pre-work that goes into it. And then you’re right in the thick of things very quickly, aren’t you?
MS. CUTLER: Yeah, exactly. But once again, it’s different if you’re joining a negotiation that’s ongoing as a founding member, versus are you coming into – do you want to accede to agreement once it’s been concluded. So there are important differences there. But that said, those conversations, those informal initial conversations are very, very important. And they’re a way to kind of make progress, to build trust, and also to get a very clear understanding of expectations on both sides.
MR. DONNAN: Yeah. Olin, this question of competitiveness metrics – and I think I’ve got the question right here. You’re wondering sort of Taiwan, if you can build a little bit, and I think you talked about in your opening remarks about how Taiwan fits on the WEF and other scales, and Tami you did as well. So competitiveness of Taiwan and how it fits with the rest of the TPP, I think is the question, is it, or?
Q: Real investment, real multinational expansions.
MR. WETHINGTON: Yeah, to be honest with you, I’m not quite sure I understood the thrust of your question. But I think on competitiveness Taiwan’s got to look domestically, first of all, at its own internal economic and industrial policies, and I think provide some structural adjustment, and also some government-encouraged stimulus to investment in R&D. And it’s got to target that investment on sectors which are cutting edge. I mean, Taiwan has to go beyond its current emphasis on information technologies, conventional electronics. It’s already beginning to do that, in terms of robotics, for example. But it’s got to look at the next level of innovation, I think, particularly in information technologies.
MS. OVERBY: If I could add onto that. Again, I did mention I was an optimist. I believe once the issues that are preventing us from having enough votes to pass TPP right now – once they are addressed and TPP enters into force, investment in Asia, I think it’s going to be – TPP is going to be like a seal of approval, that you can expect a higher level of standard, more predictability, stronger rule of law. I think being on the outside of that high-standard, comprehensive agreement is going to have a negative and adverse impact on those countries that are not in it, which is why I think so many are raising their hands now.
MS. CUTLER: And I would just add, if you couple that with the whole supply chain issue and cumulative rules of origin, you know, TPP is building a supply chain. And so I think we’re going to see that trade then be attracted – the trade and investment to those – right – that group of countries.
MR. DONNAN: But how is that – go ahead.
MR. WETHINGTON: Another point of domestic competitive interest that perhaps should be considered is in the area of defense industrial technologies, particularly technologies that are asymmetrical in nature.
MR. DONNAN: Just back to the supply chain issue that you just raised there because, I mean, one of the interesting things is Taiwan’s supply chain is so linked in with the mainland right now, particularly on the electronic side. And that China’s not in the TPP, as we all know. So how is that going work when you get a kind of a TPP supply chain that’s being established and its sort of merging with an established China supply chain. And then we also have the dynamic, which I think a number of you pointed out, which is that some countries in the region – I’m going to take that to mean China – are kind of sucking up these supply chains and localizing these supply chains, which is something we hear about from the IMF and the World Bank when they talk about reasons why trade growth is slowing down structurally out there in Asia. So how is that going to work?
MS. CUTLER: I mean, part of it you need to think about prospective trade and investment versus the current supply chains. And so part of what we’re seeing already, if you have to make new investment and trade decisions and you can choose between a TPP country and a non-TPP member, I would agree with Tami, I think by definition a TPP member will look more attractive. Does TPP mean that existing supply chains are going to be obliterated and everyone’s going to just pull up their trade and investment and move elsewhere? I don’t think so. But I do think as people look forward and they’re figuring out the most efficient way to add value to their products and services and to eventually sell and market, they will look at TPP.
MR. DONNAN: Anyone else want to add?
MS. OVERBY: Ditto.
MR. DONNAN: Ditto? OK. Back to the floor.
MR. WETHINGTON: I would say, China’s role, I think, in global supply chains is also changing, whether ultimately in TPP or outside. It’s going to be some time before they’re inside. But the market – the market dynamics and the process within China of structural adjustment is altering the calculation of – in many industries – on the part of multilateral players in those chains, away from China.
MR. DONNAN: Yeah, and it was very –
MS. OVERBY: And Chinese companies are looking at moving into TPP countries. I spoke with a couple of Chinese CEOs recently who are setting up operations in Vietnam with the intent, idea of taking advantage of TPP.
MR. DONNAN: Yeah, I mean, on that note, my favorite current China supply chain story is that the world’s largest auto glass factory that is being built – as we speak – is being built by a Chinese company. But it’s not being built in China. It’s being built in Dayton, Ohio, which I think is really interesting.
Back out to the floor. Boy, so many questions. Why don’t we start in the front here, and then we’ll go ladies first and then we’ll work our way through it. So in the blue dress, here.
Q: Thank you. Tracy Huang with C&M International. Thank you for all comments.
Going back sort of beyond TPP, in the beginning, Dr. Olin, you mentioned that you think the United States really should work on or greater structure efforts to allow Taiwan to more easily be party to other agreements and other arrangements. I was wondering if you could comment more on that. I’d be really interested in Wendy and Tami’s comments on the trade side, how the U.S. could perhaps work with Taiwan for – allow that to happen? You know, God forbid, TPP doesn’t pass, other opportunities down the road, how would Taiwan leverage those for these greater opportunities?
MR. WETHINGTON: I wasn’t –
MR. DONNAN: Let me take a couple questions first, and then we’ll do that.
MR. WETHINGTON: I’m sorry. You’re right.
MR. DONNAN: So we’re going to go to the second row right here, on the left. Then we’ll go there next.
Q: Thank you. Rita Cheng from Central News Agency, Taiwan. Thank you, Wendy and Tami – all of you’s comment.
And I want to follow up to Tami’s specific comment about the ractopamine, because the meat product with ractopamine has been described as a not good enough product in Taiwan. Are you aware of that? Do you have any comment on it? And then there is also another argument that it’s because the U.S. and Taiwan has, like, a different eating habit, that people say in Taiwan they eat a lot of beef and pork hacele (ph). Therefore, the Taiwanese people not that interested about the – like the hacele (ph) product with the ractopamine. And how Wendy and Tami would like to persuade or communicate with the Taiwanese people and your Taiwanese counterpart? Thank you.
MR. DONNAN: And then on the aisle here.
Q: Hi. My name is Arthur Jai. I’m Taiwan visiting fellow now at CSIS.
I’m more curious about this – our new government has proposed a new policy, so-called new southbound policy that focus on mainly one purpose, for decreasing dependence on Chinese markets. And now we – the government also trying really hard to join the TPP. I’d like to know how – do you have any view or any suggestion that Taiwan – how Taiwan can align these two policy together, or how Taiwan should do its new southbound policy in order to increase the possibility joining the TPP?
MR. DONNAN: OK, why don’t we stop there. And we’ll go to another round of questions shortly. We’ll get some punchy answers to these. And I’m going to ask you – I’m going to put the one-minute rule in place here, to be quick. Olin, just on the first question.
MR. WETHINGTON: What I was I hope suggesting was not that other countries would almost certainly become party in this initial process to TPP, but that I think that the politics of trade in this country has profoundly changed. We have evolved to a new place. And I think regardless of who is elected president, there is going to be a major rethink. And we don’t know at this point, I think is it hard to predict, what the outcome of that is. But things may be scrambled in ways that we now cannot anticipate, depending on who the next president is. And so it may call for some new forms of creativity, some new structures. And I think if the – if the agreement is renegotiated, it’s hard at this point to project what that configuration might be.
Some of my discussions in Asia say to me, and I talk in a number of – with a number of officials in a number of countries, that they are beginning – they don’t want the scenario that Wendy described. But they are beginning to ask themselves what future scenarios might be likely depending on who the next president is – an unthinkable question six months ago. Completely thinkable and privately discussed today in Asian capitals.
MR. DONNAN: Yeah, I mean that is – yeah, it’s a fascinating dynamic. I mean, the whole idea that how the Republican Party, or at least the Republican voters, are more antitrade than Democratic voters, as polls are showing, is just – is odd to those of us who have –
MR. WETHINGTON: Well, we have enormous blocs in both parties which are no longer part of a global perspective.
MS. OVERBY: But we need to remind everybody that 95 percent of the world still lives outside the borders of the United States. And if America wants to economically grow, we must trade with them.
MR. DONNAN: And this is – I mean, this is one of the things we’re trying to get our head around – and what I’m trying to get my head around – is just how profound is this change, and then how much of a change is there? I mean, there’s a Bloomberg poll out this morning showing Hillary Clinton winning among middle income voters in rust belt states, which kind of goes against the Trump narrative that we’ve had for much of the primaries. There’s also polls out there that show widespread support among U.S. voters for trade in general, as – and especially if you look at it generationally. Among millennials, millennials seem to be incredibly pro-trade on both sides of the aisle. So I mean, we’re trying to figure out exactly, but as you say it’s all being scrambled. Hopefully we get some order at some point.
MR. WETHINGTON: Hopefully.
MR. DONNAN: Does anyone else want to weigh in on the politics, or?
MS. CUTLER: Yeah, I just have one. You know, just, you know, based on my experience serving for the U.S. government in a number of transitions, particularly when trade was kind of under the microscope and really being rethought, I would just like to share that I think in this rethink people are going to conclude that a lot of their concerns are really not linked to the trade agreements, but they’re really linked to concerns about U.S. kind of domestic issues, whether it be education or infrastructure or the need to have much more extensive worker retraining or educating our workforce for the jobs of the 21st century. I think those issues are going to come up very quickly.
I like to think – and I was a trade negotiator – so I like to think that these trade agreements are about us really helping to kind of shape the globalization in a way that advances our national interest, keeps us in the game, and allows us to kind of put our imprint on how we want to see the rules being devised. And so I think this rethinking – and I think there’ll be one – it’s just going to be a lot more extensive than in previous administrations.
MR. DONNAN: Yeah. I mean, one of the things I find fascinating is that globalization is treated as this new phenomenon of the last few decades. I like to think of it as a couple thousand years old, if not more. (Laughter.) So it’s a – Tami, now, every trade negotiation that I’ve seen always in the end comes down to heating habits in some ways, right? It’s a – so we’re seeing it with TTIP across Europe. As you go to Germany now, they complain about chlorine in the chicken here in the U.S. and think that that’s just a completely disgusting prospect. And here you have the question about Taiwan and pork, which is a very similar one.
MS. OVERBY: I have a very simple response. I look forward to going to Taipei, and inviting all my Taiwanese friends to join me in a safe and delicious meal of American pork. (Laughter.)
MR. DONNAN: A very good question, southbound policy. Who wants to take that on? Olin, I volunteered you. Go for it. I mean –
MR. WETHINGTON: Clearly I mean, now I think about 40 percent of Taiwan’s exports go to either Hong Kong or China. They’ve clearly got to diversify. Chinese demand is slowing. It’s slowing on a secular, downward trend, at least for some period of time. And the demand is simply not there. And they’ve got to seek out new growth markets. And there’s a lot of room to their south – to Taiwan’s south. And I think that’s an obvious place to look.
MR. DONNAN: Let’s go for another quick round of questions. Please keep it quick. We’ll go on the second row here, since you had your hand up. And then we’ll go behind and then –
Q: Thanks for the discussion. Mike Fonte. I work for the DPP here in Washington, in the mission.
I’ve known President Tsai for a long time. I walked into her office in 2000, when she was just appointed to the Mainland Affairs Council. And I said, how do you like your new job? She said, I’d rather be negotiating, because as you know she negotiated the WTO negotiations. I think if you asked her today – and if I see her in July I’ll ask her the same question. She’ll probably have the same answer. What I’m trying to say is, I think if you look at her inaugural speech, the long section on the economy, if you look at the appointment of Lin Chuan as the premier and the Cabinet, I think you see a very positive environment with this DPP administration for moving forward. How far and how fast is another question, but I wanted to put that out there, that I think there’s a very positive element in the Tsai administration ready to meet these challenges. Thanks.
MR. DONNAN: And we do know that there is a great international union of trade negotiations that is very powerful in the world. (Laughter.) We’ll just go across here and then we’ll come back to you guys. Yeah.
Q: Thank you. Alex Tsai with UDN, United Daily News of Taiwan.
I have a technical question with regard to the second round talk of TPP. I’m wondering, there are several countries express their willingness to join the second round TPP talk. Should they have to, you know, adopt or follow the agreement or the – you know, the text achieved by the 12 founding member, or can they negotiate with the existing member bilaterally? Thank you.
MR. DONNAN: Yeah, you get to build on that. And we’ll just go third row here. There were two questions there, and we’ll make those the final questions.
Q: Keegan Sweeney (sp) with the House Foreign Affairs Committee.
And then this isn’t my area of expertise, so I apologize. It’s a simplistic question. But I’ve heard a lot of concern and read a lot about the possibility that if TPP is rejected that it would open a window of opportunity for the Chinese to create a similar agreement that would be more favorable to their interest rather than American. Is that a legitimate concern, or is that primarily political rhetoric?
MR. DONNAN: OK, and then next door.
Q: Thank you. I’m Genie Nguyen with Voice of Vietnamese Americans.
I follow this question, and I need to ask Tami and Wendy and Dr. Wethington that have we reached out adequately to Congress to set our senators and congressmen to let them know the situation? And also with the Department of Commerce, do you think you can educate the public at large regarding the situation, because most of the concern came from the workers, the AFL-CIO people worried about losing jobs. But if you take the case of Vietnam, recently when Obama went there he – the U.S., we have been able to sell to Vietnam tremendous amount of our high technology equipments, including Boeings and many other things, in the billions, not talking about in $10 or $5. So there’s a lot of things I think the public at large need to be aware of. So if there a way? Wendy was hoping that we can pass that this year. Is there a time schedule that we need to work on with you? And are the Congress representative or reports here, do you think we can speed that up? Thank you.
MR. DONNAN: Sure, OK. So, Wendy, why don’t we start off the with the great union of trade negotiators, and –
MS. CUTLER: OK. I’m always pleased to see other trade negotiators, particularly female trade negotiators – (laughter) – get to the top of their system. (Laughs.) With respect to the specific question, accession negotiations to an agreement are very different than joining a negotiation when its ongoing. When the last TPP entrants entered the TPP, that was Japan, Canada and Mexico, they entered the negotiation three years into the negotiation, but there were still a number of outstanding issues that they were able to help kind of shape the final outcome, and indeed played a very useful role most of the time.
In an accession negotiation, the expectation is the interested candidate is going to sign up to what was already agreed upon. That said, in any trade agreement there are areas that, by definition, will need to be negotiated bilaterally or specifically with the candidate country or economy. And here, I would just raise issues like tariff staging – I mean, everyone knows you go to zero, but at least with the United States when we negotiated market access in TPP we negotiated that bilaterally. Second, there are a number of annexes. For example, in state-owned enterprises you have the rules and the text of the agreement, but then you have country-specific annexes with specific exceptions. So that’s another example of what would need to be negotiated bilaterally. And then you can look at nonconforming areas with services and, you know, other areas as well.
With respect to the question about how real is it, you know, that other countries will fill the vacuum, it’s really real. And I would say four letters why it’s real – R-C-E-P, RCEP. I think six months ago no one in the United States really knew any – a lot about that negotiation. But now it’s becoming more and more, in my view, a more serious exercise. Now, part of the reason is because the deadline for this negotiation is this year. And so they’ve intensified their meeting schedule. But also, if you note, a lot of different trade ministers now are pointing to RCEP as an agreement, a negotiation, they’ll have to look at seriously if it looks like TPP isn’t going to come together.
MR. DONNAN: And just to explain very quickly, RCEP stands for the Regional Comprehensive Economic Partnership. It’s essentially – it’s 16 countries. It’s essentially linked to ASEAN. And it is a kind of harmonization, a bringing together of all the free trade agreements that they have with the six countries outside –
MS. OVERBY: It’s ASEAN, Australia, New Zealand, Korea, Japan, and led by China, and India – 16 countries, not the United States.
MR. DONNAN: Yeah.
Q: (Off mic.)
MS. OVERBY: Right, absolutely.
MR. DONNAN: Yeah, then there’s – it’s a different type of agreement, very clearly. But is the forming of an economic bloc.
MS. OVERBY: And there is a lot of discussion at APEC that what would the model – FTAP, Free Trade Area of the Asia-Pacific, what would it look like? Obviously the 12 countries that negotiated TPP hope that framework will be TPP – high standard, comprehensive. Other countries not party to TPP maybe would consider RCEP as that model. That is not in America’s interests.
MR. DONNAN: Right. And again, just to back up, the FTAP is something that China has proposed within the context of APEC as an eventual – I guess an ambition at some point, that the whole Asia-Pacific would become a free trade area.
Olin, do you want to weigh in on –
MR. WETHINGTON: So the inclusion of India in RCEP causes me to temper my optimism that it would be concluded anytime soon. I think it’s a ways off, RCEP.
MR. DONNAN: Yeah. There is also another important point to make, is that there’s a number of TPP countries, as you mentioned, who are involved in RCEP as well.
MS. OVERBY: Seven.
MR. WETHINGTON: That’s right.
MR. DONNAN: Which is – it’s important to remember.
Well, listen, with that, I think we’ve run out of time. Thank you so much for some thoughtful questions from the audience. Thank you so much for some thoughtful interventions from the stage. If you in the audience could put your hands together for our folks on the stage, we’ll send you all home. Thank you. (Applause.)