Australian Parliamentary Committee Discusses Taiwan Joining the CPTPP

On September 2, the Trade Subcommittee of the Australian Parliament's Joint Standing Committee on Foreign Affairs, Defence and Trade met with three witnesses who supported Taiwan joining the CPTPP as part of its inquiry on "Expanding Membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership."

During the session, the witnesses discussed, inter alia, the "New Southbound Policy to diversify investments and trade to other regions of the globe"; Taiwan's use of state-owned enterprises; the alignment of Taiwan's legislation with the CPTPP rules; the relative merits of a Taiwan-Australia free trade agreement and the CPTPP; the implications for labor mobility of joining the CPTPP; concerns about China's response to Taiwan joining the CPTPP or a Taiwan-Australia trade agreement; and health and medical tourism.

The witnesses were: Professor Richard Herr of the University of Tasmania, and Jasmine Lin and Chan-Feng Lin-Wu of the Taiwanese Association of Canberra.

A partial transcript of the discussion is provided below.

Partial Transcript of Discussion

Ms Lin : ...

It is in Australia's national interest to extend the membership of the CPTPP to include Taiwan as it will not only open up more opportunities for new collaborations but further strengthen our existing trade relationship. In preparation to request accession to the CPTPP agreement, the Taiwan government has taken steps to demonstrate its commitment to join the trade treaty by undertaking extensive policy reviews and reforms in order to meet CPTPP's high trade standards, engaging with domestic business sectors and conducting informal consultations with all the participating members. Extending the CPTPP membership will help existing and potential new members to expand and diversify their trade and investment in the Pacific region, which is crucially important with the pandemic.

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CHAIR: I will start with some questions and then pass over to my colleagues. Thank you for both your statement and your submission. In your submission you refer to Taiwan's New Southbound Policy. For the sake of the committee, could you elaborate on that policy and its relevance to consideration of accession into the CPTPP.

Mr Lin-Wu : From memory, the Taiwanese government started the New Southbound Policy in 2016, when the current president was elected. This is the President that China doesn't like, so they basically use trade as a weapon to punish Taiwan. Hence, the current President developed the New Southbound Policy to diversify investments and trade to other regions of the globe. This is what we are sort of also seeing in Australia in the last few years, that China uses trade and economy as a weapon. By including Taiwan in the CPTPP, Australia and Taiwan can complement and learn from the experience that Taiwan has had since 2016.

CHAIR: I think you're saying six of the CPTPP members are part of the New Southbound Policy target country list. Is that right?

Ms Lin : Yes. They are Australia, New Zealand, Singapore, Malaysia, Japan and Vietnam.

CHAIR: Got it. There's an overlap there. One of the issues that the committee will concern itself with, as we look at various economies that might wish to accede, is state owned enterprises. Can you provide some explanation as to Taiwan's status: how many state owned enterprises there are and whether or not you see that as posing any hurdle or challenge for Taiwan wishing to accede into the CPTPP.

Ms Lin : Taiwan at the moment has about 17 state owned enterprises, and like most countries, Taiwan's state owned enterprises are for water, power and essential services for national security. Some of these SOEs actually have investors and collaborators with Australia in natural resources. The government entities and state owned enterprises are actually all covered and regulated by the WTO's Agreement on Government Procurement. SOEs compete directly with private companies, and the purchases of goods and services are open to private and foreign companies through public tender. Private companies in Taiwan actually have the same access to financing as SOEs, and SOEs are subject to the same tax obligations and are regulated by the Fair Trade Act, as are private enterprises, and these SOEs are actually not subject to government interference. So SOEs in Taiwan don't necessarily have more advantage than private owned enterprises and private business, including foreign companies. They enjoy a level playing field. So because Taiwanese state owned enterprises have the same obligations as other companies, we do not see how that will pose any hurt for Taiwan to join the CPTPP.

CHAIR: I was also interested in your evidence about some of the legislation that Taiwan has already passed, with a view to creating an easier pathway to align itself with the CPTPP. I won't ask you to go through each and every one; my question is more an open one. Are there any of those pieces of legislation that you would like to speak to by way of an example of how Taiwan is seeking to align to this CPTPP?

Mr Lin-Wu : Most of the legislation in Taiwan has already aligned with the CPTPP standards, but, as mentioned in our written submission, 12 laws were identified to have gaps. Since 2016, eight have already completed the amendment process, including those relating to environmental protection, intellectual property, patents, copyright and framework. I will give an example. Under the environmental chapter, CPTPP members recognise the importance of the conservation of marine life and the sustainable management of fisheries. Taiwan has passed amendments to three laws to prevent overfishing and illegal fishing activity. Under the intellectual property chapter, members should take necessary measures to prevent the abuse of intellectual property rights by right-holders and cooperate with other parties on patent protection. Taiwan has amended three pieces of legislation related to pharmaceutical affairs, plants and agricultural pesticides management. And there are three other amendment proposals on patent copyright and trademarks that are currently under review, and a new draft digital communication law is also under review.

Senator SHELDON: Again, welcome to both of you and thank you for joining us. I want to ask about the advantages that, from your point of view, Australia should be aware of with a Taiwan-Australia free trade agreement. Would there be an adequate meeting of those desires that we have for a Taiwan-Australia free trade agreement by joining the CPTPP?

Ms Lin : Senator, could you please repeat that question?

Senator SHELDON: What advantages of a Taiwan-Australia free trade agreement would there be? Is it adequately met by Taiwan joining the CPTPP?

Ms Lin : The advantage from Australia's point of view is that Taiwan is already among Australia's top 15 markets for service exports, including travel, education, professional services and financial services. Australia also has an advantage in fundamental research and supplies of raw materials which Taiwan relies on. Taiwan's niche lies in manufacturing, market development and the application and commercialisation of technologies—so the renewable energy technology and health sectors will also benefit from Taiwan's accession.

Australia is actually one of the most popular destinations for Taiwanese students to study overseas, and the demand for teachers from English-speaking countries will also increase in the next few years under Taiwan's 2030 Bilingual Nation policy. So the advantage for Taiwan to join the CPTPP from an educational perspective is that there will be multiple ways for Australian language experts in Taiwan to help pursue the new policy.

In July, the Australian government and the Taiwanese government discussed trade and investment opportunities to develop hydrogen energy and other emerging low-emissions technologies, including wind and solar power. I think with the inclusion of Taiwan in the CPTPP there will be more business for Australia where we will be able to collaborate with Taiwanese scientists and technology companies in the field of renewable energy.

Senator SHELDON: Thank you for that. Is it your view that it would be worth pursuing a Taiwan-Australia agreement unilaterally, regardless of other negotiations over the CPTPP?

Mr Lin-Wu : Currently, Taiwan has free trade agreements, or economic agreements, with New Zealand and Singapore, but certainly I think it would be beneficial for Taiwan and Australia to have unilateral as well as multilateral relationships. For example, with the free trade agreement with New Zealand, New Zealand has been able to export its agricultural business to Taiwan. Generally, Australian agriculture and services attract about 16 per cent tariffs. By having either a unilateral or a multilateral relationship with Taiwan, this will make Australian agriculture and services much more competitive in Taiwan, and this will be more beneficial for Australian exporters as well as agriculture and farmers.

Senator SHELDON: Turning to a slightly different issue, what implications for regional labour mobility in particular do you see if Taiwan joins the CPTPP or does not join the CPTPP? As a labour mobility question, do you see it as an advantage in the CPTPP?

Ms Lin : The CPTPP and the disadvantage of not joining the CPTPP?

Senator SHELDON: Yes, in the context of labour mobility between Australia and Taiwan.

Ms Lin : Regional trade like CPTPP will have effects on trade creation and trade diversion. The liberation of trade with Taiwan will create more trade flows among CPTPP members, and it will also enable expansion and the establishment of new supply chains among its members, including Australia. For example, currently Taiwan, Japan and Korea don't have any trade agreements, but we are actually close partners in manufacturing high-tech, ICT, products. Our relationships are already well established, and we have a robust supply chain there. If Taiwan joins and South Korea joins as well, our partnership will be complementary. We will not be able to produce more products all three cultures actually have something in common with Australia. All three countries rely heavily on Australia's energy products and critical minerals to sustain their manufacturing sectors. So this is the active role Australia can play in the region. Australia exports raw materials and agricultural products for these three economies to further process into media or finished goods and then export to the world. So from our point of view there are actually a lot of benefits for Taiwan's inclusion. The disadvantage would be that Taiwan plays a quite important role in the global supply chain, so without having Taiwan participating in the CPTPP, some members will miss out on opportunities to expand their technologies in their economies.

CHAIR: Sorry to interrupt. Senator Sam McMahon, one of our fellow committee members, has joined the session. If I'm not mistaken, Senator David Fawcett, who is the Chair of the Joint Standing Committee on Foreign Affairs, Defence and Trade is also online. Also, I believe we might now have Dr Richard Herr, who is joining this session as a witness. Dr Herr, do you have any comments to make on the capacity in which you appear?

Dr Herr : I work at the law school in the University of Tasmania, but I'm only representing myself and, to a certain extent, my joint submission colleague, Dr Anthony Bergin.

CHAIR: Thank you, Dr Herr. We received and appreciate your submission. What we might do is go back to you, Senator Sheldon, to finish your line of questioning, and then, once we finish with Senator Sheldon's questions, we might go to you, Dr Herr, to make some opening remarks you, and then we'll continue the dialogue.

Senator SHELDON: I'm just wondering if there are any particular concerns about China's response to Taiwan joining the CPTPP. Are there further concerns about Chinese resistance to a Taiwanese-Australian agreement? Can you outline whether there are particular concerns and what they might be?

Mr Lin-Wu : I will answer that. Taiwan is already a member of the WTO and APEC, and it also has, as I mentioned, existing FTA-like arrangements with Singapore and New Zealand. CPTPP has a high standard of trade rules and also transparency. In terms of China joining CPTPP, CPTPP has a high standard, which we've seen in some of our recent trade tensions. CPTPP would, I'm sure, welcome any countries who are committed to transparency and trade rules agreed by all participating parties. As we've seen before, the Chinese economic system is built on state owned enterprises and heavy subsidies, and this is, unfortunately, not compatible with the regulatory provisions of the CPTPP. China's lack of transparency in the handling of the pandemic and its ongoing political strife with Australia, Japan, Canada and Vietnam is unlikely to receive a warm welcome at the CPTPP.

Ms Lin : I will just add something on their reaction, before we compare Taiwan's commitment to join the CPTPP and China's current regulation. Taiwan would seem to be a more competitive candidate. China is already the biggest trading partner for most of the CPTPP members, and we know that these members may carefully consider Taiwan's inclusion due to China's pressure. But they probably will not be able to do much, because Taiwan's keen on and committed to CPTPP inclusion.

Senator SHELDON: Thanks very much. We appreciate your time this morning. I will have another question, if there's time, right at the end.

CHAIR: Thank you very much, Senator Sheldon. Dr Richard Herr, thank you for joining us. Why don't we pass to you to make some opening remarks? Then we'll continue our dialogue.

Dr Herr : Thank you very much, Chair. My opening comments concern your terms of reference. The question is: is it in Australia's national interest to support Taiwan's accession? As you'll see from our submission, we believe the answer is unequivocally yes. Certainly, if the decision were based solely on economic grounds, this would be a no-brainer. Taiwan is an important trading partner, as identified by DFAT. It's the sixth-largest of our trading partners, which puts it well in front of most of the current members of the CPTPP. We considered it only three years ago as a serious candidate for a free trade agreement, and I don't believe the economics of that have changed at all. As well, Taiwan occupies a level of economic significance and compatibility similar to the current membership of the CPTPP. Taiwan is obviously aware of what's involved. It took steps last year, as we understand it, to address its own internal arrangements to make it a contributing member. In that sense, it has demonstrated one of the terms of reference of the committee—an intent to reinforce the values, rules and norms of the CPTPP. So, on that score, we think there are no legitimate economic grounds for opposing or preventing Taiwan's accession.

Clearly, the elephant in the room is the one that you've raised a couple of times already, from what I've heard, and that is politics—the PRC's 'One China' policy and what that might be. The reason we don't believe this is the fundamental stumbling block is that the language of the agreement itself allows for non-state accession. It talks about separate customs, territories and the like. Taiwan is already a full member of the WTO, and that same sort of language, clearly, could be used to allow and promote the accession of Taiwan to the CPTPP. A similar point could be made of Taiwan's membership in APEC, which it actually joined alongside of the PRC and Hong Kong. All the current members of the CPTPP maintain economic ties with Taiwan through the trade offices. And one of the things that struck us, when preparing our submission, was the fact that there are almost as many Taiwanese trade offices in the PRC as there are in the CPTPP. So I think this makes the point that the CPTPP members, particularly Canada and New Zealand, in their support have noted that the multilateral nature of the agreement is in keeping with these other multilateral arrangements where Taiwan is already an active and effective member. Both by example and participation, Taiwan's accession to the agreement would serve to reinforce Australia's commitment and values and, indeed, the benefits to be achieved through the Free and Open Indo-Pacific project.

I think our final point might be a question to the committee, and that is that this political can of worms has already been opened. The fact that it's being discussed is clear: if Australia retreats from the proposal to permit Taiwan's accession solely—and I underscore 'solely' there—in the face of PRC objections, it really would damage our standing as an effective global middle power by making it fairly clear that another country's interest has bent our interest to their will, and I don't think it's a good look for us to be seen to be sacrificing our own national interest in deference to another nation's interest. That's not to ignore the political difficulties that could arise. But, as I said, and as we've said in our submission, we don't believe those difficulties are actually particularly pertinent at this time.

CHAIR: Thank you very much, Dr Herr. First, I have a question, and then we'll share the floor. In terms of the point you make about Taiwan having so many trade offices within the PRC, what point are you making there? Is it a reinforcement of the point that I think Ms Lin was making that Taiwan finds itself with a need to diversify its own international trade relationships or is it a point you're making that, in the event of Taiwan acceding to the CPTPP, they would be confident that their own trading relationship with the PRC would be somewhat uninterrupted?

Dr Herr : My main point in drawing attention to the number of trade offices there is that to a certain extent the PRC accepts that the PRC has an independent trading relationship, not only with the rest of the world but even within the PRC. While in Australia we sometimes have state tourism offices which help support tourism in other states within Australia, the Taiwanese economic and cultural offices do serve a quasi-diplomatic role. They do that in Australia and do that across the globe, even in those countries, like Australia, where they don't have formal recognition.

The fact is that the PRC accepts that Taiwan has this economic independence, and it's important to the PRC that that economic independence be accessed and developed within the PRC's own economy suggests that they shouldn't have any objection to Taiwan acceding to the agreement and being part of those richer, more engaged economic relationships.

CHAIR: Got it. You also made the point that you believe the economics speak for themselves, but that there are other geostrategic considerations—other layers that Australia should concern itself with on this matter. Of all of those do you want to elaborate on one?

Dr Herr : Our objective view is that those political ones are probably less significant here. There are enough examples which we've drawn on to show that the PRC itself has accepted Taiwan's engagement in other multilateral arrangements in a way which ought to be accepted both as a precedent and a path forward. Will the government so challenge their view of the One-China policy? It's in our interest to make sure that we don't cave in cravenly on the expectation of some new layer of problems. There is a good point in drawing a line in the sand and saying, 'Yes, those political problems could arise in a different way in a different context but they don't arise here.'

CHAIR: Right, thank you. As we continue this conversation, I don't want Ms Lin or Mr Lin-Wu to feel left out, so questions will go across the board. Senator McCarthy, I'll go to you.

Senator McCARTHY: Thank you, Chair, and good morning to all. Thank you, Dr Herr. I'm just going to go to Ms Lin and Mr Lin-Wu about your submission. First of all, thank you for your submission and thank you also for identifying the health aspects of Taiwan and, obviously, the incredible work that Taiwan has done to protect your constituency through COVID. I think that's really important for our country, to see the work of your country in respect of that, and I just wanted to point out that we certainly appreciate that.

I'd like to move to the health and biomedical industry. I think this is an important one, which is obviously a great strength of your country. What is it in that area of research and development around pharmaceutical health that you think would really benefit the relationship between yourselves and Australia through this CPTPP?

Mr Lin-Wu : In terms of the health aspects of the CPTPP, one of the issues both Australia and Taiwan are facing is an aging population. Because of this aging population, in the next few decades there is going to be an increase in public spending on health. Taiwan, like Australia, has a national health system, which is similar to Medicare. With increasing aging, there is going to be more and more expenditure in these areas. As we mentioned previously, Taiwan has developed itself into a country where there are lots of technological advancements. There has been quite a big development in ICT in terms of health, with a number of high-tech medical devices which are mainly used in hospital settings, for example in monitoring sick patients. There's also development in terms of use of mobile robotics in health care. Other than the high-tech side of health, there are also a number of medical devices that Taiwan is well known for, such as wheelchairs, walking frames and things like that.

Senator McCARTHY: You made reference to medical tourism in your submission. Do you want to expand on that and tell the committee what you mean by medical tourism?

Mr Lin-Wu : We all know that in Australia the most popular medical tourism country is Thailand. Taiwan is probably a bit silent in terms of medical tourism. It's something the government is trying to expand over the next few years. In terms of medical advances, Taiwan is probably one of the top countries in East Asia, and the cost for overseas visitors to visit Taiwan and receive medical treatment is comparable to places like Thailand and Vietnam. If Taiwan is able to join the CPTPP, this is something that can benefit both Australia and Taiwan as well as other member countries. In terms of what's available in medical tourism, from my research it's things like medical cosmetics, cancer treatment and transplants. Those are the main areas that the government is focusing on for medical tourism.

Senator McCARTHY: In your submission you say that the CPTPP will eliminate the barrier for Australian consumers to access more affordable and higher-quality medical care, and you do mention personal protective equipment, or PPE, in particular. Could you expand on that as well and tell us specifically what you're referring to there?

Mr Lin-Wu : Before the pandemic, China was the biggest producer and manufacturer of PPE. At the beginning of the pandemic last year, there was a severe shortage of PPE in Taiwan, including surgical masks, so the government stopped exporting locally manufactured PPE to other countries and ramped up the production of PPE so that Taiwan is self-sufficient. This has led to an increase in production of PPE so that currently Taiwan is self-sufficient and it has been able to assist other countries who are suffering from the pandemic. Taiwan was able to donate quite a large amount of PPE to countries in need. You've probably heard of the Taiwan Can Help campaign, where Taiwan has donated PPE to other countries.

Senator McCARTHY: How many other countries did you donate to, just out of curiosity?

Mr Lin-Wu : From what I understand, just off the top of my head, I think the places were less well-developed countries like India. I think Taiwan donated quite a large amount of PPE to Europe last year and also some specific island countries where Taiwan has formal diplomatic relationships. From what I understand there is also a material exchange with Australia. From memory, it was alcohol and also material to make surgical masks. I think there is an exchange program with Australia.

Senator McCARTHY: Fantastic. By all means, take that question on notice if you feel that you'd like to expand on it in response. But that's wonderful work. Thank you very much for your evidence.

Senator FAWCETT: I have one very quick comment. I note and appreciate the work that Taiwan has done in terms of PPE. Just for committee members, in case they weren't aware, Australia has now developed both surgical mask and N-95 respirator manufacturing capability. We thank Taiwan and other nations in part for some of the initial input materials, but it has been good that, over the course of the last year, we've now actually got supply chains manufacturing the input materials here as well. So, yes, it has been a good collective effort, but it's good to see nations now independently developing their own sovereign capabilities in that regard. It reduces dependence on sole sources that sometimes can be coercive.

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CHAIR: I have a question for all of you. As you probably know, we Australians love our sport. We like to get competitive. If we apply a competitive lens to this, we look at Taiwan and we know that some of those countries with whom we compete on trade—in particular New Zealand, on agriculture—have the benefit of a free trade agreement with Taiwan. As this inquiry is looking at different economies that could accede to CPTPP in Australia's interest, how could Taiwan's inclusion in the CPTPP help Australian businesses compete against other markets, other countries, such as New Zealand, that are already enjoying some benefits, at least with tariffs, when it comes to Taiwan? Can you give us any examples?

Dr Herr : I'm not sure I can give you examples, because that's not my particular area, but I would say that, if our economic competitors are already engaged with Taiwan in various supply chains, trading relationships and all the rest of it, in your analogy it's like benching one of our star players so that we can't compete effectively. If we're not willing to engage in a level playing field with our friendly competitors, if you like, in the economic marketplace, we lose relative to the advantage they gain by having a more effective relationship with Taiwan, whether it's through multilateral arrangements, like the CPTPP or WTO, or through free trade arrangements. We simply don't put our best team on the field.

CHAIR: Thank you.

Mr Lin-Wu : The example I can give is that Australia is Taiwan's top 3 import source of wheat, barley, beef and milk powder, and Australia is also Taiwan's fourth-largest source of red wine imports. Currently, these attract, as I mentioned earlier, about a 16.4 per cent tariff in Taiwan, which is quite considerable considering that New Zealand products enjoy tariff-free status. If Taiwan can join the CPTPP, that would really help with our agriculture and wine industries in Australia, which were affected by China's trade sanctions.

CHAIR: Thank you very much. Is there anything you would like to add to that, Ms Lin?

Ms Lin : Taiwan has a lot of middle-class, and people have a strong preference for premium and quality food and wine. Australia has a great reputation for elite products. If Australia has few barriers to enter the Taiwanese markets, it will be a more competitive [inaudible]. So it will present fewer barriers for Australia to enter the Taiwanese market. It will then be more competitive than New Zealand for agricultural businesses.

CHAIR: Thank you very much, Ms Lin. Unless colleagues have any further questions, I'll ask if any of the witnesses wish to take up a final minute to summarise any point they would like to emphasise or to raise anything that they wish we had asked a question about. We'll go to Dr Herr first.

Dr Herr : I would like to note that the points that have been made about China's misuse of its economic power are part of the reason why it's very much in Australia's national interest to have a wider range of supportive country arrangements, multilateral agreements and the like that reinforce a rules-based and rules-compliant international economic order. Both Dr Bergen and I believe that the CPTPP will significantly add to the pressure for broader compliance with economic good citizenship across the globe. To that extent, it is very much in our national interest to reinforce progress in that direction.

A free and open Indo-Pacific isn't necessarily an anti-Chinese initiative; it's not a project designed necessarily to contain China. But it does reinforce the notion that we want a world where economic coercion and misuse of economic power is limited by agreements, rules, transparency and compliance mechanisms. The CPTPP will be stronger with Taiwan's participation in it.

CHAIR: Thank you very much, Dr Herr. I'll go to Ms Lin. Are there any final comments you would like to make?

Ms Lin : Expansion of the CPTPP will increase the influence of the agreement globally, and the more nations in the region joining, the more nations will follow the high standard of trade [inaudible} and it will inspire [inaudible] to coordinate collective agenda and awareness to include Taiwan's inclusion in the CPTPP without saying to the economics led that what we want to consider doing, the message that we are giving people is that we owe everyone who can meet the high standard requirement and who shares the same value to contribute to the global economics.

CHAIR: Thank you very much, Ms Lin. Mr Lin-Wu?

Mr Lin-Wu : My final remark is that we have all seen that China has used its economy as a political weapon, and both Taiwan and Australia have suffered from this. The expansion of the CPTPP will set a high standard of trade rules and increase the influence of the agreement globally. This will provide platforms to coordinate collective agendas and awareness, which comes to transparency, oversight of human rights and good governance and standards in the supply chain. It is also important that we re-establish the supply chain and diversify our investments. As Dr Herr said, it is in Australia's national interest to expand the CPTPP, and especially to include Taiwan. Thank you.