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As Asia builds economic ties, Taiwan sidelined by China

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Taiwan was able to join the World Trade Organization in 2001, a day after China. But it joined as a "separate customs territory" – not a nation.

Since then, Taiwan has watched fretfully from the wings as Asian neighbors lower tariffs, ink trade pacts, and schmooze at regional conferences.

It was left out of China's trade pact with the Association of Southeast Asian Nations (ASEAN), which will create the world's largest free trade area (encompassing some 2 billion people) and eliminate tariffs on most goods by next year.

This weekend, China announced a $10 billion ASEAN-China infrastructure investment cooperation fund, plus another $15 billion in credit to ASEAN nations, designed to help them out of the global economic doldrums – with Taiwan again shut out.

Meanwhile, South Korea has signed its own trade pact with ASEAN, and is in talks with the United States and the European Union. Taiwan has tried but failed to interest those parties in trade talks.

Trade pact with China?

This has left many Taiwanese deeply uneasy about their economic future. Taiwan has seen its per capita GDP ($18,300) stagnate as peers like South Korea ($19,600) out-race it.

Most Taiwanese expect that their island's economic fortunes will be increasingly tied to China's. For them, the debate isn't about whether to integrate with the giant next door, it's about what the terms will be.

"Everyone wants to make sure Taiwan isn't marginalized," says Kung Ming-hsin, vice president of the Taiwan Institute of Economic Research. "But we disagree on how to do that."

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