Free Trade Agreement (FTA) between Guatemala and the Republic of China - Taiwan: An Analysis of a Mutually Beneficial Economic and Political Relationship

Posted: May 05, 2016



Free Trade Agreement (FTA) between Guatemala and the Republic of China - Taiwan: An Analysis of a Mutually Beneficial Economic and Political Relationship

Political relationship existing between china and Central America

In 1997, the Central America countries signed an Economic Complementation Agreement with Taiwan whose objective was to enhance cooperation in trade areas, investment, and technology transfer, and continue to cooperate in the financial sector.  With the exception of Costa Rica, countries in Central America constitute a group of nations that lack any political and other official sensitive relations with China.  Through the ambassador of the Chinese government in Costa Rica, there was an assurance that opening an office would enable the beginning of diplomatic relations between governments of Central America and the government of China.  The government of China revealed that the country was planning to start political relations with Central American countries within a maximum two-year period following 2007.  Despite the fact that no approach was made officially by the governments of Central America and that of China, Beijing had maintained both commercial and extra official associations with the general political parties in Central America (Agence France-Presse 2009).

Otto Perez, the president of Guatemala, said in 2013 that the country hoped to begin deeper relations in a trade with the Republic of China and make sure that a diplomatic relation was maintained with Taiwan. He continued to announce that Guatemala was planning to establish a trade office in China in 2014 (La Prensa, 2013). However, so far, there is no approach that has been officially made to start political relations between the Central American governments and China. The diplomatic relations between the general Central Americans’ governments and Taiwan are viewed as mutually exclusive as they make it possible for the countries in Central America to get benefits related to developmental aids. These countries can get economic support used for development, associations with the business community, aid for military and help the young people in these countries get scholarships. The kind of help that the Taiwanese government offer is used by the regional institutions (Rodas-Martini, 2004).

FTA Negotiations with Taiwan and Guatemala

According to SICE (2005), the last round of negotiations for a Free Trade Agreement was concluded successfully between Taiwan and Guatemala, where a memorandum of understanding was signed to go ahead and sign the agreement after the review of the fine points of the lawyers and making of any form of technical adjustments. The agreement allowed Guatemala to extend free tariff treatment to a total of 447 products from agriculture from Taiwan. On the other hand, Taiwan was expected to grant tariff exemptions to 41% of listed agricultural products from Guatemala, continue maintaining the present levels for 12.5% and go on reducing tariffs on the remaining products gradually. In the agreement, the business men in Taiwan are permitted to do businesses in Guatemala and also expand to the United States as well as other Central American countries other than Guatemala under the strict terms of the Central American Free Trade Agreement where Guatemala is one of the signatories. This approach is beneficial as Taiwan would explore regions different from China capable of serving as bases and markets for manufacturing thereby decreasing the foreign investment risk of the country. The determination of the Guatemala government and that of Taiwan is therefore, to reinforce the traditional connection of closeness and the force of togetherness between the two nations, recognize  the strategic capability of each nation in its respective market regionally, strike a balance in their trade relationships, expand a secure market for goods they produce recognize their individual levels of development to create economic development opportunities, avoid any form of distortion within their reciprocal trade, establish rules that govern trade in their produce and services that are clear for mutual advantages, reinforce their enterprises’ competitiveness in international markets and establish opportunities for employment with an aim of improving the living standards (SICE, 2005).


Agence France-Presse. (2009). China Espera Que Toda Centroamérica Restablezca Relaciones Políticas. La Nación, Retrieved online on 3rd January, 2016 from

La Prensa. (2013). Guatemala Con Planes de Canal Seco. La Prensa, Retrieved online on 3rd January, 2016 from

Rodas-Martini, P. (2004). China, Taiwán y Centroamérica. El Diario de Hoy, Retrieved online on 3rd January, 2016 from

SICE. (2005). Taiwan, Guatemala reps conclude FTA negotiations. Retrieved online on 3rd January, 2016 from

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