A Preliminary Analysis on the Potential Benefits of a Taiwan-ASEAN FTA

A Preliminary Analysis on the Potential Benefits of a Taiwan-ASEAN FTA

Despite the birth of the WTO in 1995, free trade agreements (FTAs) continue to mushroom around the world as one kind of preferential trade agreement. Up with the vanguard of this trend, ASEAN, as a regional grouping, has been making tremendous efforts to establish FTAs with its major economic partners. Given its close and historical economic relationship with ASEAN and as a new member of the WTO, Taiwan could be considered as a potential candidate for a kind of“ASEAN+1”FTA. To analyze the potential of a Taiwan-ASEAN FTA, this paper first explains why countries join or form FTAs and addresses how they choose their FTA partners. Then, the paper introduces its preliminarily findings that an FTA between Taiwan and ASEAN could expand intra-regional or intra-industry trade flows, create more direct investment, increase the efficiency of FDI, reduce the risk of over dependence or concentration of trade and investment in specific countries, facilitate economic and technical cooperation, and enhance and consolidate the overall relationship between Taiwan and ASEAN. Taiwan and ASEAN can thus regard each other as prospective FTA partners. However, obstruction and opposition from China mean that the chances of forming a Taiwan-ASEAN FTA in the near future are significantly reduced.