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Taiwan-India economic relations in the face of regionalism

The current fashion of regionalism has brought about changes in preferential treatments that lead to the enhancement of trade and investment.

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By Johnny Chi-Chen Chiang, PhD

Introduction

The current fashion of regionalism has brought about changes in preferential treatments that lead to the enhancement of trade and investment. These occurrences have promoted the international specialization of industrial production. For countries that are outside of preferential trade agreements (PTAs), their industries could face the rise of production costs and negatively affect their economies. Therefore, if they do not sign PTAs, they would risk diminishing their global competitiveness. Since EU, and the Americas have already reached a high level of regional integration, Asia has also begun to pursue regionalism.

In the face of the rise of regionalism, India has continued to shift its economic and trade policies, to focus on countries in the Asian bloc, such as increasing the linkage with China and strengthening ties with ASEAN through Look East Policy. The objective is to raise the level of India’s investment and exports to countries within the Asian bloc. In the case of Taiwan, the rise of recent regionalism has placed Taiwan outside of East Asian regionalism because of political reasons. To protect against the negative impact of being an outsider, Taiwan’s businesses have promoted FDI instead of directly exporting from Taiwan to maintain markets for their products.

Against the backdrop, this paper aims to explore Taiwan-India economic relations under regionalism. Specifically, what would India and Taiwan respectively respond to the rise of regionalism in Asia? More importantly, the ultimate objective of the paper is to find out the approaches that could be considered or employed to strengthen bilateral economic relations in the face of regionalism.

The Development and Effect of Regionalism

With the current wave of regionalism evolving, regional trade agreements (RTAs)[1] continue to mushroom across the globe despite the establishment of the official multilateral trading system, World Trade Organization (WTO), in 1995. As of June 2006, there are 197 notifications of RTAs in force to GATT/WTO.[2] If RTAs reportedly planned or already under negotiation are concluded, the total number of RTAs in force might well approach 300 in the near future. Pascal Lamy, the Director-General of the WTO, even points out that "[b]y 2010 around 400 of such agreements could be active."[3] In contrast to other regions like Europe, North or South America, Asia has been relatively lack of regionalism after the Second World War. Yet, the situation has begun to change owing to such major factors as the 1997 Asian financial crisis, the success of NAFTA, the expansion of the EU, the gridlock in WTO talks, deepening of economic interdependence, and the rise of China.[4] The Asian governments indeed have embarked on "institutional" cooperation or integration in a variety of forms to support market-driven economic integration or develop its own regionalism.

However, the questions of whether RTAs resulted in higher or lower welfare for their members as well as whether they serve as "building blocks" or "stumbling blocks" for worldwide freeing of trade have remained under debate.[5] In particular, as the coverage and depth of preferential treatment may vary from one RTA to another, the net effect of regionalism will certainly depend on its own architecture and participating partners. According to Viner, the earlier theorist on customs unions and free trade areas, usually a regional integration agreement which discriminates in favor of the members by reducing trade barriers or improving market access can lead to "trade creation" or to "trade diversion" on particular productions. More specifically, trade creation is the substitution of a lower cost source of supply form a partner country for a higher cost domestic source in one or more of the participating countries. Trade diversion is the substitution of a higher cost source of supply from a partner country for a lower cost source of supply from third countries as a result of the elimination of the tariff with respect to partner countries.[6]

Trade creation extends reliance on comparative advantage, whereas trade diversion does the opposite. Besides, the reduction in trade barriers, based on the subsequent studies, may also increase competition in the area and thereby lead to an overall reduction in costs of production.

But, unlike conventional regionalism, current wave of RTAs extend well traditional liberalization in goods and even services to include a wide range of trade facilitation measures in areas such as customs procedures, standards and conformance, quarantine measures, government procurement and harmonization of business law and tax practices, as well as provisions in areas such as competition policy, investment, intellectual property, digital commerce, labor and environmental measures. Effects caused by these non-trade provisions of RTAs in some senses are more dynamic and complex. For instance, RTAs provide preferences that may by and large alter the incentives facing firms, both those located within the preferential trade area and those located outside, so the formation of a FTA is likely to influence direct investment flows. Some also argue that "investment provisions can be used as discriminatory protective devices, so that a preferential agreement that balanced the interests of like-minded countries may not be in the interests of the rest of the world."[7] In other words, the new wave of regionalism would cause "investment" creation or diversion in addition to trade creation or diversion.

So, does regionalism create trade, bring investment, stimulate economic growth, shift comparative advantage towards high value-added activities, facilitate technology transfer, or induce political stability and cooperation? The answer is probably "all of these things depend on the particular circumstances of each FTA." However, theories do suggest that "trading partners who do not participate in a preferential arrangement will be hurt even when global welfare as whole is enhanced."[8] Based on the simulation conducted by Goto and Hamada, for example, it is clear that economic integration gives participating members more monopolistic power and better terms of trade or investment, and those that are left behind have to suffer from the reciprocal of these effects until the advent of the world free trade.[9] Certainly some exceptions could occur, but outsiders as whole will be harmed in various dimensions as theories and empirical case studies suggest.

As a result, participating in regionalism by forming RTAs or FTAs has become states’ strategic economic or trade policy. As Table 1 shows, more and more formal institutional trade agreements, in particular FTAs, are formed and proposed with Asian economies, which is also shaping the future of the region. Among others, ASEAN as the earliest regional grouping has all the more become the hub of forming FTAs in Asia. It has been making tremendous efforts to establish free trade agreements (FTAs) with its major economic partners, including China, Japan, Korea, Australia, New Zealand, and India. The East Asian FTA based on ASEAN+3 or ASEAN+6 countries is also initiated.

Table 1: FTAs/RTAs with Major Asian Economies

Country Completed (Year) In Progress (Beginning Year) Note
ASEAN China (2004) [10] Japan (2005)  
    India (2003)  
    Korea (2005)  
    Australia, New Zealand (2005)  
Singapore [11] New Zealand (2001) India (2005)  
  Japan (2002)    
  Australia (2003) Peru (2005)  
  USA (2004) Canada (2001)  
  Korea (2006) Mexico (2000)  
Thailand Australia (2005) USA (2004)  
  New Zealand (2005) Japan (2004)  
  Laos (1991)    
  India (2003)    
Indonesia   Japan (2005)  
Malaysia Japan (2006) Australia (2005)  
    New Zealand (2005)  
    Pakistan (2005)  
Japan Singapore (2002) ASEAN  
  Mexico (2005) Thailand (2004)  
  Philippines (2006) Indonesia (2005)  
  Malaysia (2006) Korea (2003)  
    Australia (2006)  
Korea Chile (2004) ASEAN(2005)  
  Singapore (2006) Japan (2003)  
    USA (2005)  
    Canada (2005)  
    EFTA [12] (2005)  
China [13] Hong Kong (2004/CEPA) Thailand (2003)  
  Macau (2004/CEPA) New Zealand (2005)  
  ASEAN (2004) Australia (2005)  
Hong Kong, China China 2004/CEPA New Zealand (2001)  
India Thailand (2003) MERCOSUR [14] (2005)  
  Mexico (2004) Chile (2004)  
  Nepal (1991)    
  Sri Lanka (1999)    
Source: ADB, Asian Development Outlook 2006: Routes for Asia’s Trade;Gary Clyde Hufbauer and Yee Wong, “Prospects for Regional Free Trade in Asia”, Working Paper Series, Institute for International Economics, Oct. 2005;WTO Database;Bilateral.org, http://www.bilateral.org.

India’s Response to Regionalism

Since its economic reform and openness in the early 1990s, India’s economy has been increasingly integrated and interdependent with the world economy. As the Indian economy rises, India with its large size of population, the market has not only actively taken part in multilateral trading system but also played a critical role in WTO trade talks, particularly as a leading role model for developing countries. More importantly, many economies all the more become interested in the Indian market. As Table 2 indicates, India was selected as the third and second idealist location for FDI in 2004 and 2005 respectively. In spite of this, India is still skeptical about what regionalism (especially RTAs/FTAs) would bring about for India while it is worrying that opening market access for non-agricultural goods would hurt its economy.

With the rapid growth of Asian economy as well as the enlargement of intra-industry trade in Asia, however, the significance of Asia or East Asia for India’s economy and trade has been greater than ever. In this context, the evolution of regionalism in Asia or East Asia would have significant impact on India. In particular, with the rise of East Asian regionalism in recent years, India’s economy may be affected negatively if India is excluded. To avoid the cost of being an outsider, India is shifting its foreign economic policy to deepen the existing "Look East" policy as well as to improve its economic relations with major Asian economies by forming RTAs/FTAs or other institutional arrangements.

Table2: 2005 Top 10 of FDI Confidence Index

Rank Country (2004 ranking) Index (on a 0 to 3 scale)
1 China (1) 2.197
2 India (3) 1.951
3 United States (2) 1.420
4 United Kingdom (4) 1.398
5 Poland (12) 1.363
6 Russia (11) 1.341
7 Brazil (17) 1.336
8 Australia (7) 1.276
9 Germany (5) 1.267
10 Hong Kong (8) 1.208

Source: The Global Business Policy Council, FDI Confidence Index, vol. 8, 2005, p. 2.

Under the current wave of regionalism, increasing integration with Asian economies has seemed to be a must for India’s economy. Yet, India has its own priority partners based on its economic interest. For instance, countries or areas with more complementariness to Indian economy, such as the ASEAN, are the priority. In addition, to establish and protect its domestic industries, South-South RTAs/FTAs thus far have been India’s main options in the face of competitive regionalism. Therefore, instead of advanced economies (except Singapore), India has signed or negotiated more RTAs/FTAs with developing economies such as Thailand, Sri Lanka, Mexico, SAFTA, ASEAN, and MERCOSUR as Table 3 shows.[15]



Table 3: India’s Engagements in RTAs

Region/Country Agreement Note
Sri Lanka INDIA-SRI Lanka Free Trade Agreement Signed in 1998
Afghanistan India-Afghanistan Preferential Trade Agreement (PTA) Signed in 2003
Thailand Framework Agreement for establishing Free Trade between India and Thailand Signed in 2003
ASEAN Framework Agreement on Comprehensive Economic Co-operation between the Association of South East Asian Nations (ASEAN) and India. Signed in 2003
Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) The Framework Agreement on the BIMST-EC FTA (among Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand) Signed in 2004
MERCOSUR India-MERCOSUR Preferential Trade Agreement Signed in 2004
SARRC Agreement ON SOUTH ASIA FREE TRADE AREA(SAFTA) Signed in 2004
China, Bangladesh, Korea and Sri-Lanka Asia Pacific Trade Agreement (Bangkok Agreement) Signed in 2005
Singapore India-Singapore Comprehensive Economic Cooperation Agreement (CECA) Signed in 2005

South Africa Customs Union (SACU)

Preferential Trade Agreement (PTA) between India and SACU In progress
Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates Free Trade Agreement (FTA) between India and Gulf Cooperation Council (GCC). In progress

Source: Ministry of Commerce and Industry, India, http://commerce.nic.in/india_rta_main.htm

In addition to pursuing RTAs/FTAs, India is making efforts to elevate its economic power and competitiveness by making use of the current wave of regionalism. For instance, by 2009 India seeks to double its share of world trade volume via expanding exports. This achievement certainly could be facilitated by increasing trade with major Asian economies like ASEAN, China and Japan. More importantly, India is actively attracting foreign direct investment (FDI) to strengthen its manufacturing industry and infrastructure. Particularly although India is regarded as the second most attractive FDI location after China, FDI received by India is still far behind that of China (as figure 1 shows). In this sense, India likes to bring in more FDI via RTAs/FTAs or other bilateral agreements. As a result, besides trade in goods, India would like to conclude talks on services and investment with ASEAN by 2007 in terms of ASEAN-India FTA. This may further bring FDI from Singapore and increase technology transfer from manufacturing in countries like Malaysia and Thailand.[16] In so doing, India decided to both expand and deepen its relations with ASEAN countries and at the same time deregulate or loose restrictions on FDI and taxation. In other words, besides increasing trade, acquiring more FDI is perhaps another crucial point for India in addressing the current wave of regionalism.

Source: The Global Business Policy Council, FDI Confidence Index, vol. 8, 2005, p. 4.

Taiwan’s Reaction to Regionalism

To address the current wave of regionalism, in October 2001, Taiwan indicated that it would pursue bilateral FTAs after formally joining the WTO. In the following month, the US, Japan, Singapore, and New Zealand were announced by Taiwan as its most preferred candidates for initial FTA partners.[17] However, In June 2002, China's Foreign Trade Minister Shi Guangsheng expressed Beijing’s serious concerns by saying that "The countries which have established diplomatic ties with China must observe the one-China principle while developing economic and trade relations with Taiwan." "If such countries sign free trade agreement with the Taiwan authorities, they are bound to bring political trouble to themselves."[18] Under the circumstances, Taiwan’s approach to bilateral FTAs is getting limited. Instead of forming FTAs with its major trade partners, Taiwan thus far could only sign FTAs with its diplomatic allies including Panama, Guatemala, and Nicaragua. Negotiations with El Salvador, Honduras, Paraguay, Dominican Republic, and Costa Rica are undergoing (see Table 4).

Table 4: Taiwan’s Engagements in RTAs

Country Agreement Progress
Panama FTA Signed in 2004
Guatemala FTA Signed in 2006
Nicaragua FTA Signed in 2006
Honduras FTA Negotiation finished
El Salvador FTA Negotiation finished
Paraguay FTA Under negotiation
Dominican Republic FTA Under negotiation
Costa Rica FTA Under negotiation

Source: Bureau of Foreign Trade, Taiwan, http://eweb.trade.gov.tw/

More importantly, with the establishment of the ASEAN+China FTA, Asian economic integration based on different kinds of ASEAN+X FTAs is emerging so rapidly that Taiwan as an outsider may suffer in the future. Viewed dynamically, the impacts of emerging Asian economic integration on Taiwan in the long run will be beyond trade to include issues like FDI shifting, trade facilitation, comparative or competitive advantages, foreign relations, and so on. To save its interest and enhance its prospects in the current wave of economic integration, Taiwan recently adopts a more clandestine and indirect approach to achieve its FTA objectives.[19] The approach involves pursuing FTAs with diplomatic allies, new "Go South" initiative, and the support for multilateral trading system.

First, forming FTAs with its allies in Central and South America indeed serves some strategic values for Taiwan’s FTA objectives. On the one hand, they are good "practice swing" FTA partners that enrich Taipei’s experience in negotiating such agreements and playing as a wanted FTA partner.[20] On the other hand, they provide Taiwan a beachhead or detour to access American regional integration like United States-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA)[21] and NAFTA.

At the same time, Taiwan tries very hard to diversify its outward investment to avoid likely tariff or non-tariff trade barriers (such as rule of origin)caused by emerging RTAs/FTAs in Asia. In so doing, Taipei launches a new "Go South"[22] policy to encourage Taiwanese firms to invest not only in Southeast Asia but also South Asia, particularly India. The result is still unclear, but the will of the government to diversify Taiwan’s outward investment and ease the harm of being excluded from FTAs in Asia is quite clear.

Furthermore, given the difficulty in forming FTAs with preferred partners as well as acceding to ASEAN+X FTAs, multilateral liberalization via the WTO, which Taiwan successfully joined in 2002, has become the most favored approach for Taiwan in promoting free trade. Essentially Taiwan hopes that the conclusion of the WTO Doha Round negotiation could to certain extent minimizes the negative impact of being excluded from Asian regionalism. Unfortunately, this idea may become farfetched as the WTO decided to suspend the Doha Round negotiation indefinitely in July 2006.

Nevertheless, given the limited economic effectiveness of FTAs with its diplomatic allies and the uncertainty of WTO Doha Round negotiations, diversifying or rearranging its outward investment thus seems to be a relatively effective approach for Taiwan to address the challenges that might be posed by emerging RTAs or regionalism in Asia.

Taiwan-India Economic Relations under Regionalism:
What could be done?

Taiwan-India Economic Relations: Room to Improve

In the past, economic relations between Taiwan and India were neither strong nor close for various reasons. But, with the rise of Indian economy as well as its potential huge middle-class population and access to South Asian market, in recent years both trade and investment between Taiwan and India have been growing. In terms of trade, according to Figure 2, bilateral trade between Taiwan and India began to increase greatly after 2004. Its share of Taiwan’s total trade is increasing as well but the proportion is still less than 1% (0.65% in 2005). As Figures 3 and 4 indicate, Taiwan’s major exports to India are machinery and equipment, petroleum, chemical, rubber, and plastic products. At the same time, Taiwan imports more raw materials from India. Overall, Taiwan still enjoys trade surplus against India.

Figure 2: Bilateral Trade and Investment between Taiwan and India, 1991-Oct. 2006

Source: Ministry of Finance, Taiwan and Ministry of Economic Affairs, Taiwan.

Figure 3: Import Structure from India to Taiwan, 2005

Resources : Ministry of Economic Affairs, R.O.C. http://cus93.trade.gov.tw/fsci/ accessed on 2006/11/1

Figure 4: Export Structure from Taiwan to India, 2005

As for investment, according to Taiwan government, Taiwan’s accumulated FDI in India is about US$23 million with 40 cases up to 2006. Most Taiwanese investment in India focuses on industries of ICT, food processing, textile, machinery, electronics, and auto parts. Taiwan’s total amount of investment in India from 1995 to 2005 on average is about 1% of India’s inward foreign direct investment and 0.07% of Taiwan’s outward investment. Although Taiwanese investment in India overall is still low, the interest of investing in India from Taiwan has been increasing in recent years. According to a survey (see Figure 5) conducted by Taiwan Institute of Economic Research in 2006, India is regarded as the second most potential market after China for Taiwanese business, consistent with the result of 2005 FDI Confidence Index. More importantly, the survey also shows (see Figure 6) that market concern and labor cost could be seen as two key factors influencing the FDI from Taiwan. In this sense, India with huge potential market and labor force would be an ideal location for FDI from Taiwan.

Source: Survey conducted by Taiwan Institute of Economic Research, 2006.

Source: Survey conducted by Taiwan Institute of Economic Research, 2006.

In other words, economic relations between Taiwan and India still have a lot of room to improve. In this case, the current wave of regionalism indeed provides another opportunity for Taiwan and India to further enhance their economic ties. As indicated above, in the face of regionalism, India nearly focuses on obtaining FDI in addition to increasing trade to improve its economic power and competitiveness. On the other hand, under Beijing’s political pressure, diversifying or rearranging the layout of its outward investment seems to be a more effective and appropriate way for Taiwan to minimize the negative impact of being excluded from RTAs or regionalism in Asia. "Investment" thus would be a very good point for Taiwan and India to improve economic relations against the backdrop of regionalism.

In particular, in terms of industrial and economic structure, Taiwan and India are highly complementary with each other in various dimensions. Taiwan is well-developed in ICT hardware manufacturing and designing, and India is good at ICT software as well as services. Taiwan is full-fledged in manufacturing sector, and India enjoys comparative advantages in services sector. Taiwan is in shortage of skilled and high-tech labor and India is full of skilled manpower and professional managers. The combination of these elements would contribute to a win-win situation for both parties. This is also why Taiwan government is actively carrying out the "Action Plan of Enhancing the economic relation between Taiwan and India" to especially facilitating Taiwanese investment in India.

Linking "Go South" strategy with "Look East" Policy

Thus far, an agreement on promotion and protection of Investment was signed in 2005 and a memorandum on cooperation of trade was signed in 2006 between Taiwan and India. However, to further improve trade and investment as well as build economic partnership between Taiwan and India, linking Taiwan’s "Go South" strategy with India’s "Look East" policy via such institutional arrangements as RTAs or other similar economic agreements could be a further approach. Enhancing institutional cooperation and arrangements to protect investment, avoid double taxation, or facilitate trade and investment would also meet the needs form business community as Figure 7 shows. However, this may take time to realize. Concerned about the negative effect on its manufacturing sector, indeed the Indian government is very cautious with any institutional arrangement about further openness or liberalization, especially FTAs with developed economies. Other factors like political pressure from Beijing may also affect further economic integration between Taiwan and India.

Source: Survey conducted by Taiwan Institute of Economic Research, 2006.

In this case, however, there are still at least the following policy measures or ideas that could be taken immediately by both governments to strengthen their economic ties.

First, with Taiwan’s rising interest in India regarding trade and investment, both sides could enhance technical cooperation, develop regional market, and strengthen intra-industry trade particularly in investment and trade, so as to fortify the industrial chain in the era of regionalism.

Second, as Indian government’s attitude towards investment from foreign business and trade has been on the side of liberalization, India’s response to Taiwan’s proposals for business Investment treaty (BIT), double taxation treaty (DTT), and special economic zone (SEZ) has been positive. In the future, both sides could boost investment and trade through such measures as BIT, ESZ, and even FTA or EPA in the face of regionalism.

Third, as the share of services sector in GDP grows rapidly and significantly in Taiwan, its outward FDI in services industries is getting great and critical. In other words, FDI from Taiwan to other countries have been increasing in the services industries. In India, the development of the services industries is seen as being significant. It has focused on financial services and IT services. In the case of Taiwan, food services, tourism, and retail services have been important. Therefore, both sides indeed could take the complementariness in this area to further improve bilateral trade as well as investment in the future.

Fourth, as to the issue of labor shortage in Taiwan, in addition to foreign labor from Southeast Asia, Taiwan could consider the utilization of Indian workers. The Indian population is relatively young. The Indian workers could feel the gap in Taiwan’s labor shortage. In addition, the human flow could also enhance the movement of capital and finance so as to strengthen economic relations.

Fifth, after China, India is considered to be a major emerging market and place for investment. Since Taiwan plays an important role in international industrial chain, the entry of international business to India would also affect Taiwan’s companies. More and more Taiwanese firms such as Winny Electronics, Acer, D-Link, Chinatrust Commercial Bank, Hotline Glass Limited and Lanner Electronics, etc. have followed or been suggested by other giant multinational companies to invest in India. In the future, both sides’ economic relations would be enhanced with the arrival of Taiwan’s business in India and the arrival of downstream industries. At this point, as a result, both Taiwanese and Indian governments should begin to initiate as well as strengthen institutional cooperation to respond to demands for closer economic ties between both countries.

 

The writer is the acting director, Division of International Affairs, Taiwan Institute of Economic Research, Associate Research Fellow, APEC Study Center. The paper was presented at the conference of Taiwan Today, organized by the Department of East Asian Studies, University of Delhi, Delhi, India from January 19-20, 2007.


[1] According to the WTO, "regional trade agreements (RTAs) have both a more general and a more specific meaning: more general, because RTAs may be agreements concluded between countries not necessarily belonging to the same geographical region; more specific, because the WTO provisions which relate specifically to conditions of preferential trade liberalization with RTAs." Also, the coverage and depth of preferential treatment varies from one RTA to another. They can take various forms: preferential trade area (PTA), free trade area (FTA), customs union, common market, or economic union. In general, in a PTA trade partners grant preferential tariff reductions to each other. An FTA is a PTA with tariffs eliminated entirely on goods produced in members. A customs union is an FTA with all members adopting a common external tariff on nonmembers. Please refer to Mario B. Lamberte, "An Overview of Economic Cooperation and Integration in Asia," in Asian Economic Cooperation and Integration: Progress, Prospects, and Challenges, ed. ADB (Manila: ADB, 2005): 5; and Arvind Panagariya, "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature 38 (June 2000): 288.

[2] http://www.wto.org/english/tratop_e/region_e/region_e.htm

[3] Pascal Lamy, "Multilateral or Bilateral Trade Agreements: Which Way to Go?" speech at Confederation of Indian Industries Partnership Summit 2007, January 17, 2007, Bangalore, India. http://www.wto.org/english/news_e/sppl_e/sppl53_e.htm

[4] Josef T. Yap, "Economic Integration and Regional Cooperation in East Asia: A Pragmatic View," PIDS Discussion Paper Series, no. 2005-32 (December 2005): 1-2; Lamberte, "An Overview of Economic Cooperation and Integration in Asia," 13-14.

[5] Arvind Panagariya, "Preferential Trade Liberalization: The Traditional Theory and New Developments," 287.

[6] World Trade Organization (WTO), Regionalism and the World Trading System (Geneva: WTO Secretariat, 1995), 43.

[7] Adams, Dee, Gali, and McGuire, The Trade and Investment Effects of Preferential Trading Arrangements, 23.

[8] Robert Z.Lawrence, Regionalism, Multilateralism, and Deeper Integration (Washington, DC: The Brookings Institution, 1996), 26.

[9] Junichi Goto and Koichi Hamada, "Regional Economic Integration and Article XXIV of the GATT," Review of International Economics 7, no. 4 (1999): 568.

[10] Preferential trade arrangement.

[11] Also signed FTAs with Sweden, Iceland, Lithuania, and Norway in 2003; with Pakistan in 2005; and with Qatar in 2004.

[12] A free trade area consists of Sweden, Iceland, Lithuania, and Norway.

[13] In addition, China is assessing FTAs with such partners as Brazil, India, New Zealand, Mexico, Singapore, Australia, Chile, and so on.

[14]Mercosur is a RTA (Regional Trade Agreement) between Brazil, Argentina, Uruguay, Venezuela (joined in 2006), and Paraguay, founded in 1991. Its purpose is to promote free trade and the fluid movement of goods, peoples, and currency.

[15] EU, India to seek free trade pact," Reuters, 27 September 2006

[16] Rahul Sen, Mukul G. Asher, Ramkishen S. Rajan, "Asean-India Economic Relations: Current Status and Future Prospects," April, 2004.

[17] "Gov't Sets up Task Force for Free Trade Agreements," The Taiwan Economic News, Nov. 14, 2001, http://news1.cens.com/cgi-bin/getnews?cat=1&file=/archive/c/200111/14/005-1.html&dir=/archive/daily/200111/14/fd1.html

[18] "FTA with Taiwan Means Political Trouble: Official," People’s Daily, June 21, 2002, http://english.people.com.cn/200206/21/eng20020621_98285.shtml

[19] Christopher M. Dent, "Taiwan and the New Regional Political Economy of East Asia," The China Quarterly 182, (June 2005): 398.

[20]Ibid., 403.

[21] DR-CAFTA is a comprehensive trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States.

[22] In order to avoid economic dependence on China, in 1994 Taipei launched its "Southward" (Go South or Sudpolitik) policy to channel Taiwanese investment to Southeast Asia. The policy mainly focused on encouraging and persuading Taiwan’s enterprises to invest in Southeast Asian countries by providing numerous preferential treatments. Please see Samuel C.Y. Ku, "The Political Economy of Taiwan’s Relations with Southeast Asia: The ‘Southward Policy’," Contemporary Southeast Asia 17, no. 3(1995): 282-97.

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