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Sign an investment
treaty with the US, economist says
By William Lowther / Staff Reporter in Washington
Economist Derek Scissors is urging Taiwan to diversify its international
investment portfolio and seek a bilateral investment treaty with the US.
Scissors, a research fellow with the Asian Studies Center at the
Washington-based Heritage Foundation, says that the US and Taiwan have an
extraordinarily intense trading relationship.
With a population of 23 million, Taiwan is the US¡¦ ninth-largest trading
partner. However, excluding the microstates, it is actually the US¡¦
third-largest trading nation on a ¡§per person¡¨ basis.
Addressing a panel discussion at the Center for National Policy, Scissors said
that using the ¡§per person¡¨ formula, the only countries ahead of Taiwan in US
trade were Canada and Mexico, and the US has free-trade agreements (FTAs) with
both of them.
The US-Taiwan trade relationship, he said, was ¡§absolutely classic,¡¨ ¡§mutually
beneficial¡¨ and ¡§very positive and healthy.¡¨
However, Scissors said the stalled Trade and Investment Framework Agreement (TIFA)
was a ¡§waste of time¡¨ and unneeded.
He supported an FTA with Taiwan, but said the real barriers to such an agreement
were US¡¦ lack of interest and Taiwanese protectionism. Scissors said a major
problem was that while Taiwan held about US$250 billion in US securities, Taiwan
holds only US$4.5 billion in direct US investments, and this at a time when the
return on bonds is very low.
¡§They may as well stick their money under the mattress,¡¨ Scissors said.
¡§Taiwan is much smaller as an investment partner than it is as a trade partner,¡¨
he added. ¡§This is a real flaw in the economic relationship. If an FTA is
unrealistic at this point, we should think about a bilateral investment treaty.
Taiwanese direct investment in the US is far, far, too low. More investment in
the US would bring the two economies closer together, would improve political
ties and would diversify Taiwan away from the mainland. You want a diversified
portfolio. This has nothing to do with politics.¡¨
Taiwan could be making a big mistake by putting most of its investment capital
into the Chinese basket, because the Chinese economy could stall.
Scissors said that the labor surplus upon which China relies could end, the
environmental devastation of land could take a toll, return on capital could
decline and China could continue suppressing innovation.
¡§Hooking Taiwan to China is going to look like a very bad thing by 2020,¡¨ he
said.
On top of that, Scissors said, all of the ingredients are in play for ¡§a big
America-China economic blowup.¡¨
US President Barack Obama¡¦s administration, he said, was not committed to open
trade and markets, Republican presidential candidates will be trying next year
to make names for themselves any way they can, a Chinese political transition is
coming soon and the US economy is stagnant.
Taiwan needs to plan for contingencies, he said.
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