Taiwan's Application to GATT/WTO: Significance of Multilateralism for an Unrecognized State

Citation

Todd, D. (2004), "Taiwan's Application to GATT/WTO: Significance of Multilateralism for an Unrecognized State", International Journal of Social Economics, Vol. 31 No. 3, pp. 318-320. https://doi.org/10.1108/03068290410518553

On 11 November 2001, just one day after accepting China's request to join, the plenipotentiaries present at the Qatar meeting of the WTO approved the membership application of Taiwan. The double event seemed an innocuous end to a long process thwart with difficulty, for the circumstances attending the applications were both complex and recondite, extending back several decades. The applications, while ostensibly separate, were inextricably connected. Indeed, they are downright incomprehensible when removed from the context wherein the People's Republic of China (PRC) and the Republic of China (RoC) each vies for recognition as the sole inheritor of the legacy of the celestial empire.

Cho provides us with nothing short of a packaged history of the rivalry, albeit from the perspective of one who attaches great importance to the form of international relations as expressed through the niceties of diplomacy. His bellwether is Taiwan's representation among intergovernmental‐ and non‐governmental organizations (IGOs and NGOs), with pride of place being given to GATT. In particular, he attempts to shed light on the 1980s, a time when Taiwan felt itself constrained to restructure its economy and pursue GATT membership at almost any cost. In this quest the RoC faced unremitting opposition from the PRC, itself undergoing the throes of restructuring, and had to placate its long‐standing friends, less sympathetic to Taiwan's plight for sound reasons of their own. As William Foreman remarks in the foreword, Cho wants to go beyond the “daily bluster of propaganda” that emanated from Beijing and Taipei. His object, rather, is to uncover the true rationale accounting for the latter's urge to seek membership of an IGO that was to be revamped as the WTO on 1 January 1995.

Cho is constantly at pains to underscore the importance of political prestige in the stances adopted by the PRC and RoC. All the same, economic development is at the heart of the matter, and much of the book is devoted to showing how it unfolded in Taiwan – the RoC's heartland after 1949. Chapter three covers the story succinctly, registering the salient features of a sequence that started with commodity exports (rice, sugar) deriving from comparative advantages established during the Japanese occupation. In short order, that gave way to the encouragement of manufacturing along import‐substitution lines; the beginnings of manufacturing exports after 1958 and their subsequent flourishing for an extended spell, aided and abetted by the then novel export processing zones; and the switch to more technology‐intensive products as signalled by the founding of the science park at Hsinchu in 1980. The transformation of the economy went hand in hand with policy shifts, the two affirming the legitimacy of the RoC through improved material well‐being for the inhabitants of Taiwan. The upshot was a dual trade regime. On the one hand – and governing the island's economy – were export activities that were favoured at every turn by the government, but compelled to prove their competitiveness in world markets. On the other hand – and equally cosseted by the government – were producers for the domestic market, prone to inefficiency as a result of their ability to shelter behind high tariff barriers and other protective measures. This state of affairs persevered for years, thriving on exports of manufactures to the USA and imports of intermediate and capital goods from Japan. Yet the accumulation of healthy trade surpluses by Taiwan rested on the USA's acquiescence in the system of trade imbalance, and that was about to change. Chapter four explains why. With the onset of the 1980s, America began to feel the bite of globalization: deindustrialization and discontented labour joined forces with concerns over persistent and growing trade deficits to fuel a grievance. That, in turn, became manifested through a harsher outlook from Washington, especially in the years of the Reagan presidency. Armed with “super 301” powers, the USA now set about chastising the RoC, accusing it of taking advantage of “most‐favoured nation” status to flood American markets while doing its level best to frustrate the entry of American goods into Taiwan.

At the same time as this external pressure was mounting, the government was assailed from all sides at home. At the grassroots level was a population newly liberated from martial law; a population that, while delighting in an improved living standard, was inclined to express dissatisfaction with its accompanying pollution, inadequate infrastructure and high land prices. The powerful business class, for its part, was lamenting rising wage costs and looking for redress offshore. Alarmingly, Taiwanese entrepreneurs were turning for relief to the mainland itself. A new vision was called for, one that required Taiwan to redirect its economy so as to reap comparative advantages in human capital. Central to this redirection was improved trade. It is at this juncture that the RoC's wish to re‐enter GATT (it had been a founding member, but retired in dudgeon in 1950) came to the fore, as Chapters five and six make clear. The former deals with the political conviction of the necessity of re‐entry; the latter covers the economic consequences, reviewing cost‐benefit analyses. There was common consent that net benefits would prevail, but agriculture would be severely mauled. The next three chapters present a blow‐by‐blow account of the political manoeuvring undertaken in pursuit of membership. Besides placating local interests, this required an international offensive that revolved round bargaining (at arm's length) with the PRC over acceptable terminology. At length, the winning formula was devised, and the RoC re‐invented itself as the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu. In a concluding chapter, Cho claims that the effort was worthwhile, for it was imperative that Taiwan maintained its trading ties. Moreover, the exercise established a precedent, permitting Taiwan to re‐enter other IGOs and take on the semblance of a “proper” country. Cho also suggests, in a final flourish, that the almost simultaneous entry of the two governments into the WTO promises some sort of rapprochement between the PRC and RoC.

The PRC and RoC have been roundly criticized for their predilection to play diplomatic games; a tendency that does nothing to clarify the real intentions of the two contenders, much less to expedite the restoration of normal trade channels. Cho's main purpose is to cut through the posturing and lay out plainly for all to see the path taken by Taiwan to secure GATT/WTO membership despite fierce opposition from China. In large measure he succeeds in this task, although by its nature, diplomacy does not lend itself to transparency. The diplomatic substance is so replete with convoluted prose as to defy full clarity, and Cho's analysis cannot escape some tainting. He is more successful in his lesser aim of conveying the logic of Taiwan's economic development, and, thankfully, this subject is spared the excesses of government‐speak. He manages to steer a careful course that embraces everything of consequence. To be sure, some aspects are glossed over – the trade in defence items overwhelmingly favourable to the USA is a case in point – but on the whole the book fulfils its purpose, leaving one with a much keener appreciation of Taiwan's dependence on international trade.