A path to a chile - Taiwan FTA: Balancing political risk and economic gains

Abstract

With over US$ 2.300 million in bilateral trade in the year 2011, Chile and Taiwan have developed strong economic linkages according to market interests and economic complementarity. In the current regional process of trade liberalization in the Asia Pacific, Taiwan is struggling to strike Free Trade Agreements with its trading partners. On the other hand, Chile has been the most active trade liberalization agent in Latin America, being especially active in the Asia Pacific region. The path towards an FTA between them would seem to be an obvious next step if trade liberalization leads to a strengthening of competitiveness for both sides. Why hasn `t the step been taken yet? That is because this move towards and FTA would involve as many economic gains through first mover advantages, avoiding the damages of New Zealand being the first mover, and enhancing complementarity as politico-economic risks -since Chile`s main trading partner is Mainland China. A game of tightrope walking and careful gradual progress will be necessary for Chile to be able to reach economic cooperation agreements with Taiwan, without hurting its situation of vulnerability dependence with Mainland China.