Lack of formal diplomatic ties will not be an impediment for a stronger economic engagement between Taiwan and the Philippines through a free trade agreement (FTA), which is the preferred path during the pandemic and when the scourge ends.
It has been proven globally that trade walls only result to unnecessary slowdown in the transport of goods that are needed urgently in the war against the virus. Bottlenecks caused by Customs and health restrictions greatly contributed to an ongoing global supply chain problem.
While the county struggles to join the Regional Comprehensive Economic Partnership (RCEP) as a result of senators’ political whims and preferences, the pursuit of trade deals should not stop.
Think tank Taiwan Institute of Economic Research (TIER) noted that since both Taiwan and the Philippines are both members of the World Trade Organization (WTO), diplomatic ties are not needed for an FTA.
Despite geopolitical realities, Taiwan’s first FTA, for instance, was with Panama in 2003, which boosted bilateral trade between the island and the Central American nation by as much as 112 percent.
Such a deal was signed with Guatemala in July 2005; Nicaragua in June 2006 and El Salvador and Honduras in 2007.
As trade and investments with the Philippines boom, Taiwanese companies will have more incentive to flock to the country under an FTA regime considering proximity that will make the Philippines the closest free trade partner of Taipei.
An FTA between both countries will be complementary. For example, the Philippines has developed a comparative advantage in the production of electronics, given its lower production and labor costs.
Free trade could result to exports of electronic parts and components surge since Taiwan is now the world’s third largest producer of information technology products.
Economist Bernardo Villegas listed food, telecom, electronics, logistics, health, metals, infrastructure and entertainment industries as ideal for joint ventures.
He noted the entertainment and health industries have big potentials when the economies open. Filipinos are among the best entertainers in the world. Disneyland Hong Kong had heavily relied on Filipino staff members to entertain the great number of tourists at the theme park.
A joint venture between Taiwan movie production companies and Filipino talents would be a force to be reckoned with, Villegas noted.
Taiwan, considering its strength in the medical field, can help the Philippines develop a medical tourism industry, like that of Thailand, in which tourists from wealthy countries may check in to a local hospital and get an executive check-up at a cost about a tenth of what they have to pay back home.
The necessity of free trade has been highlighted during the pandemic and expanded relations between the Philippines and Taiwan make the lowering of trade barriers an urgent matter.