Now that Taiwan is a WTO member, why are ECAs still necessary?
The WTO, which saw the accession of Taiwan in 2002, is the most important international organization for the promotion of global trade liberalization. As a WTO member, Taiwan hopes to ensure fair treatment for exports thereof on the basis of the MFN treatment of the WTO.
However, the MFN treatment of the WTO has been seriously eroded by ECAs being signed actively between different countries. According to WTO figures, a total of roughly 276 ECAs are in effect and being implemented, a total of 178 ECAs were launched and entered into force over the last decade (2000 to 2009), while transnational trade conducted with preferential ECA tariffs applied thereto have exceeded 50% of the total trade worldwide.
For instance, in South Korea, 13% of its total trade is conducted under ECAs in effect, while 27% of that is conducted under pending ECAs. In other words, a share of 40% of the total trade of South Korea enjoys tariff concessions compared to competitor countries, while that for Japan is 15.4%. Conversely, trade conducted under ECAs signed accounts for less than 0.2% of the total trade of Taiwan.
Taiwan lacks in natural resources and has a limited domestic market, thus expansion of external markets is necessary for sustained economic development. Export growth of Taiwan lags behind primary competitor countries thereof, resulting in a significant drop in the ranking of Taiwan in global trade, a sign of substantial weakening in the economic strength of Taiwan. Hence, the launching of ECAs is listed as a primary target for the economic and trade policy of Taiwan.