Opportunities are ephemeral, vanishing as quickly as they arise when not quickly seized. They are all the more delicate when a number of disparate actors are required to act in concert choreographing interlocking moves across the global stage. Yet there is an emerging opportunity that would improve political relations with China, boost trade with Taiwan and create tens of thousands of jobs across the EU.

The question is: will it be frittered away thus demonstrating the truth of Nietzsche’s dictum, ‘Madness is rare in individuals, but common in parties, groups and organisations’? Or will earnest and saner counsels prevail?
Currently the EU is having mixed success in its bilateral trade negotiations with Asia. The Free Trade Agreement (FTA) with the Republic of Korea came into force in July, while a raft of negotiations with other states continue. The present state of play suggests, on the positive side, that an agreement could be concluded this year with Singapore, and before next summer with Malaysia, while Brunei could piggy back on the Singapore Agreement.

However, progress with India is painfully slow and would require significant concessions by Delhi on the ‘sustainability’ chapter of the trade negotiations, which sets India sustainable development targets. If the Indians shift their ground, optimists in the Commission feel that an agreement with obviously huge economic gains attached could be pushed through the European Parliament despite political opposition – a necessary step since the ratification of the Lisbon Treaty, as all trade agreements must now be ratified by the EP. The same may not be true for the Vietnam agreement where Hanoi has lost its sense of urgency, and political opposition in Brussels is more closely marshalled and more ideological. Indonesia is now making all the right noises but will share many, if not all, of India’s difficulties and less of the advantages. Negotiations with Japan seem to be inevitable in the post-Fukushima World, although with Tokyo’s level of ambition they will not be quick.

What is strange is the dog that doesn’t bark – a prospective EU-Taiwan FTA. Of course, the barrier is fundamentally political. In the current state of the international system, as Beijing emerges as a global political power matching its economic eminence, China has an effective veto over any move by the EU in Taiwan’s direction. Yet this very ‘de facto’ ability to block progress constitutes the emerging opportunity. Were China to lift its veto, then Brussels could put Taiwan back on the trade agenda.

The potential benefits are high and should be available quickly to EU business. Taiwan’s economy is bigger than any other ASEAN country, and EU-Taiwan trade volume already amounts to €27.5 billion. The service sector remains massively underrepresented, so tourism, telecom and financial services stand to benefit, while in the manufacturing sector there would be significant gains for the automobile industry and the food and drink sector. A 2008 study by Copenhagen Economics calculated that should the Doha Round fail, gains from trade enhancement measures alone (such as a reduction of tariff barriers in combination with a significant reduction of non-tariff barriers in both goods and services) could boost EU GDP by over €2 billion a year.

But what’s in it for China? China faces two problems with the EU: first, the ongoing arms embargo imposed after Tiananmen Square, and second, a resistance to an early granting of Market Economy Status (MES) to the Chinese economy. The first embarrasses Beijing – lumping it with Zimbabwe and Myanmar – and Europe’s arms exports regulations would continue to prevent China’s military from buying EU equipment even if the embargo were lifted. The second problem is scheduled to go in any way in 2016 when China gains MES, as agreed upon its WTO accession in 2001. The current non-market economy status allows other countries to impose additional duties on China’s products, and senior Chinese politicians have repeatedly called on the EU to alter its position. Taipei could put the final piece of the trade puzzle in place by a “behind the scenes” removal of its objection to lifting the EU arms embargo and by openly encouraging Europe to proceed with an early granting of MES to China. Furthermore, if the precedent of ‘duty-drawback’ in the EU-Korea FTA was followed, liberalising trade between the mainland and Taiwan’s economy might provide a further boost to the mainland’s economy.

Overall it is clear that it will take political leadership from all sides to make progress to clinch a deal which creates a win-win-win for China, Taiwan and Europe.

by Glyn Ford (former South West MEP & member of the LME executive committee),  September 13, 2011