Shifting Paradigms in US, China and Taiwan Relations
Edited by Peter C.Y. Chow
8. Taiwan and East Asian integration Tain-Jy Chen and Ying-Hua Ku INTRODUCTION East Asian integration has picked up much momentum in recent years. In addition to many bilateral free trade agreements (FTAs), there is a series of plurilateral regional trade arrangements (RTAs) such as ASEANϩ1 (AP1 hereafter), ASEANϩ3 (AP3 hereafter), China–Japan–Korea FTA, and so on. This does not mean East Asia did not undergo earlier economic integration. In fact, East Asia has undergone very extensive economic integration since the late 1960s, driven by market forces. Unlike market-driven integration in the past, recent integration in East Asia has been driven by government policies and many FTAs and RTAs are politically manipulated. The watershed between market-driven and policy-driven integration is the Asian Financial Crisis that erupted in 1997. Taiwan was conspicuously missing in the recent policy-driven East Asian integration, although it has played an important role in the former phase of market-driven integration. The purpose of this chapter is to discuss why Taiwan was excluded from the recent integration process and to assess the possible consequences of its exclusion. In particular, we will estimate the eﬀects of AP1 and AP3 on Taiwan, along with other major trading partners of the intended members. Discussions will be made on Taiwan’s role as a trader and as a supplier to East Asia’s production network. In the next section, we review the recent movement in East Asian integration. We then estimate the eﬀects of AP1 and AP3 on the member...
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