Growing Optimism Regarding U.S.-Taiwan Economic Ties – Taiwan Business TOPICS – Taiwan Business TOPICS
AmCham Taiwan’s Washington contacts see expanded opportunities for raising bilateral commercial cooperation to a new level.
Taiwan and the U.S. are in the process of forging a much closer level of economic collaboration than ever before. That was the main takeaway from a series of 13 online conversations that AmCham Taiwan conducted with key contacts in Washington, D.C., during June and July.
The program, called the “Virtual Doorknock,” reflects the Chamber’s desire to stay in touch with valued sources of information and advice in the U.S. capital, as well as to deliver our advocacy messages despite cancellation for the past two years of AmCham’s usual annual Doorknock visit to Washington due to the COVID pandemic. The online meetings enabled AmCham members, led by Chairman Vincent Shih, to exchange views with representatives of both the executive and legislative branches of the U.S. government, prominent think tanks, and NGOs such as the U.S. Chamber of Commerce and U.S.-Taiwan Business Council. The final session was with Taiwan’s ambassador-level representative to the U.S., Bi-Khim Hsiao.
“Because of the lengthy suspension of the longstanding Trade and Investment Framework Agreement (TIFA talks), as recently as two years ago, there was no active platform for advancing the economic agenda between the U.S. and Taiwan,” notes Chamber President Andrew Wylegala. “Now, not only has TIFA been resumed, but three other highly promising platforms have been added.”
He was referring to the Economic Prosperity Partnership Dialogue (EPPD) established in November 2020 by the U.S. State Department with Taiwan’s Ministry of Economic Affairs (MOEA) and Ministry of Science and Technology (MOST); the Technology with Trade and Investment Collaboration (TTIC) framework set up by the U.S. Commerce Department and MOEA in December 2021; and the U.S.-Taiwan Initiative on 21st Century Trade, which was launched this summer and will be led by trade officials from the two sides.
“Our Virtual Doorknock discussions were extremely encouraging in giving us a sense of how seriously those various channels are being taken in Washington,” says Wylegala. “We heard repeatedly that the U.S. government is determined to find ways to increase the integration between the two economies, both because of the direct economic benefit and for the sake of bolstering peace and stability in the Asia Pacific.”
Although the Virtual Doorknock ended before U.S. House Speaker Nancy Pelosi’s trip to Taiwan sparked an overreaction from China, defense concerns were a part of many of the discussions. Alluding to China’s rapid military buildup and increased belligerence in recent years, speakers called for increased communication and cooperation between the U.S. and Taiwan armed forces. They stressed that at a time of numerous severe geopolitical and economic challenges, the U.S. is more than ever in need of partners in the world arena that share its commitment to international cooperation, human rights, and democratic freedoms. Taiwan stands out as just such a partner.
“Taiwan is ‘trending’ in Washington right now,” said one of the Doorknock interlocutors, alluding to a combination of factors that has prompted the foreign policy community in DC to pay more attention to the island, including:
• Taiwan’s deft management of the COVID pandemic that enabled it to protect its public without resorting to draconian lockdowns and even to donate protective equipment to other countries.
• Heightened awareness of Taiwan’s crucial role in the global semiconductor and other technology supply chains.
• The impressive growth in two-way trade in recent years that brought Taiwan to eighth place among U.S. trading partners in 2021, up from number 11 in 2018. The total trade in goods last year came to a record US$114 billion.
• The increased interest among Taiwanese companies in investing to set up manufacturing facilities in the U.S. Although the US$12 billion project by Taiwan Semiconductor Manufacturing Co. (TSMC) in Arizona is the prime example, each year, the Taiwanese delegation is the largest contingent attending the SelectUSA investment-promotion conference in DC., and Global Wafers announced a US$5 billion facility in Sherman, Texas on this year’s delegation.
• The deterioration in the U.S.-China relationship. American officials are now more inclined to consider policies toward Taiwan on their own merits rather than as a subset of relations with Beijing.
Multitude of channels
In the words of one of the Doorknock contacts, the resumption of TIFA talks and creation of the other three platforms means that “now there are more horses to pull the cart.” But at the same time, several observers pointed out, the proliferation of programs could create drift in Washington unless a coordinating authority – perhaps the National Security Council or even the Office of the Vice President – is tasked with providing interagency coordination and prioritization for Taiwan policy.
Of the current four platforms, the TIFA channel focuses on resolving traditional trade concerns such as market access issues. Lack of progress in resolving one of those issues – Taiwanese restrictions on the import of certain U.S. beef and particularly pork products – kept the TIFA talks from being held for over five years. The consultations resumed in June last year after the Tsai Ing-wen administration took some domestic political heat to accept international standards governing trace amounts of the leanness-inducing feed additive ractopamine in imported pork.
Although the issue is not completely resolved – the U.S. side remains dissatisfied with what it views as excessive labeling requirements that discourage Taiwanese consumption of American pork – the U.S. side appears optimistic that resolution is achievable. The Doorknock participants took it as a positive sign to learn that USTR expects to conduct the next TIFA Council meeting with Taiwan’s Office of Trade Negotiations within the coming several months.
USTR will also take the lead on the U.S. side for the 21st Century Trade Initiative. That program was announced after the U.S. government disclosed that Taiwan would not be included in the new Indo-Pacific Economic Framework (IPEF), a decision prompted by concern that some other countries in the region would regard Taiwan’s participation as an anti-China gesture. But if creation of the 21st Century Trade Initiative was intended as a consolation prize for Taiwan, most commentators that AmCham spoke to suggested that it would turn out to be a far more effective platform for Taiwan than IPEF. As a bilateral undertaking, they said, the Initiative can be more ambitious and move at a faster pace than the multilateral IPEF. It is likely to cover a broader array of issues, including digital trade enhancement, trade facilitation, standards, and sound regulatory practices. As a result, “USTR is more engaged with Taiwan than ever before,” a knowledgeable source told the Doorknock team.
The other platforms are designed to be more targeted, though no less significant. The second annual EPPD, held last November, focused on supply chain resiliency, countering economic coercion, promoting the digital economy, strengthening 5G network security, and advancing science and technology collaboration. No date has yet been announced for the third dialogue, but it is expected to take place in the third quarter this year.
The stated goal of TTIC (pronounced “Tee-tick”) is to “expand U.S.-Taiwan cooperation on critical supply chains by promoting two-way investment,” with an initial focus on such areas as semiconductors, electric vehicles, sustainable energy, and 5g/cybersecurity.”
As meaningful as these various opportunities are likely to be, the big prize in boosting U.S.-Taiwan relations would, of course, be the negotiation of a full-fledged free trade agreement, now more commonly referred to as a bilateral trade agreement or BTA. Unfortunately, the current political atmosphere in the U.S. would seem to make that option untenable for the foreseeable future. In recent years, large numbers of both Democrats and Republicans have been critical of trade agreements as spurring the movement of American jobs overseas. U.S. labor unions and environmental groups have been vocal in their opposition to entering into more trade agreements, whether bilateral or multilateral, while the traditional pro-trade base within the Republican party has cratered.
In that atmosphere, the Biden administration has paid little attention to developing a robust trade policy. And Congress has seen no incentive to provide the executive branch with the Trade Promotion Authority (also known as fast-track authority) that in the past has generally been needed to move ahead with trade negotiations. The BTA skepticism is not targeted at a pact with Taiwan – in fact, observers believe there would be more support for a BTA with Taiwan than with any other partner. But it does narrow the options for Americans looking to bolster U.S.-Taiwan ties.
Given the political hurdles for a BTA, some alternatives have been suggested as more realistic ways to tighten the bilateral economic relationship in the short term. One of the most frequently mentioned ideas is the of concluding a Digital Economy Agreement potentially covering e-commerce, cybersecurity, and the regulation of cross-border data flows, among other topics. Advocates of this approach say it could have a “building-block” function, building mutual confidence and ideally leading to eventual inclusion of the agreement as a chapter in a BTA or serve as the model for IPEF or within the World Trade Organization.
A similar proposal calls for considering an agreement to prevent double taxation. Proponents include U.S. Senators Chris Van Hollen (D-MD) and Ben Sasse (R-NE), who this July sponsored a resolution urging the Biden administration to begin negotiations on such an agreement with Taiwan. When the idea of a tax agreement was first broached more than a decade ago, the lack of formal diplomatic relations between the U.S. and Taiwan was cited as an obstacle since such pacts are normally structured as “treaties.” Whether that constitutional interpretation continues to be a potential hindrance remains to be seen.
Whatever channel proves to be most effective, many U.S. experts approached on the Virtual Doorknock stressed Taiwanese companies’ well-established competitive advantage: a firm track record of dependability and integrity, including respect for intellectual property rights. As one Doorknock presenter put it: “China may have scale, but Taiwan has trust.”
Following up on the Virtual Doorknock, AmCham Taiwan will be conducting a new series of remote discussions with key figures in Washington, the “DC Dialogue,” over the coming months.
Published monthly by the American Chamber of Commerce in Taiwan, Taiwan Business TOPICS is a source of balanced, reliable, and insightful news and analysis on issues of concern to Taiwan’s business community.