Legal Basis of China-Taiwan FTA: Article 24 of the GATT or Enabling Clause

 

Wen-Cheng Huang

One of the key issues involved in China-Taiwan FTA is the selection of legal basis: Article 24 of the GATT 1994 or the Enabling Clause.

Substantial Differences: Degree of Liberalization

The main difference between the two legal provisions is the level of liberalization on trade in Goods between both sides. If both parties choose Article 24 of the GATT, all of the ‘substantially’ goods between both sides shall be liberalized. In practice, some FTAs even zeroed the tariff rates on certain agricultural products. While, if the China-Taiwan FTA is based on the Enabling Clause, the requirement of liberalization is quite loose. It is possible for President Ma, the highest political leader in Taiwan, to keep his political commitments to block the agricultural exports from China, on the basis of the Enabling Clause. Therefore, this lower threshold seems attractive for both sides, since both parties can keep their own sensitive sectors without facing severe competition, in particular for Taiwan.

Eligibility and the Potential Reactions from Other Members

However, the precondition of invoking the Enabling clause to form a FTA is that both parties shall be developing Members of the WTO. Although, Taiwan is free to claim itself as a developing economy, in terms of the self-selection principle. It seems that, at least the EU and the US would strongly oppose Taiwan’s assertion. The US, in particular, has been keen to push the idea that all FTAs shall be based on Article 24 of the GATT for a long time. Despite the fact that all Members are reluctant to bring the inconsistency of the other Member’s FTA before the dispute settlement system of the WTO, considering China has become the target of trade remedies imposed by the other Members since its accession, it seems pretty hard for the China-Taiwan FTA to easily pass through the oncoming supervisions of the other Members.