Key takeaways:
TIFA not enough to generate momentum for a trade agreement
U.S.-Taiwan trade gaining momentum amidst a rising China
Both the United States and Taiwan willing to speed up trade process
The United States and Taiwan concluded four days of trade negotiations in Taipei
reached consensus on several areas related to trade facilitation, anti-corruption, small and medium-sized enterprises and regulatory practices
Taiwan has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
TIFA to U.S.-China Tech Decoupling
In 1994, Taiwan and the United States signed a Trade and Investment Framework Agreement (TIFA), which allowed mechanisms for resolving bilateral trade and investments between officials from the United States Trade Representative Office (USTR) and Taiwan's Office of Trade Negotiations. In 2006, the United States and Taiwan held the fifth meeting of the TIFA Joint Council in Taipei, covering topics such as agricultural trade, intellectual property rights, and other areas. Since 2007, however, the trade talks have halted due to Taiwan’s barriers to U.S. agricultural and ractopamine pork export. As a result, USTR suspended TIFA talks but resumed them from 2013 to 2016 after Taiwan allowed some beef imports containing ractopamine before the Trump administration suspended trade talks again in 2017.
The United States trades more with Taiwan than it does with India, France, or Italy. Furthermore, Taiwan is the United States’ ninth-largest trading partner and its seventh-largest destination for agricultural exports, with total trade in goods valued at $90 billion in 2020. However, no bilateral trade agreement (BTA) or free trade agreement (FTA) has been established by the two parties. Moreover, Taiwan was excluded from the much anticipated U.S-led Indo-Pacific Economic Framework which featured countries such as Australia, Japan, and the Republic of Korea.
However, ongoing trends such as intensifying tech competition and decoupling between the U.S. and China, has rendered Taiwan's role in the global semiconductor supply chain to become more pivotal and influential. During the fall of 2020, fifty senators called on the then-U.S. Trade Representative to initiate a trade agreement with Taiwan. Subsequently, another bipartisan letter signed by 161 members of the House in 2019 and the passage in 2020 of the Taiwan International Protection and Enhancement Initiative Act called on USTR to strengthen bilateral trade and economic relations with Taiwan.
Against the backdrop of the U.S. slowing China's technological advancement and Taiwan fighting China's economic coercion and political intimidation, U.S.-Taiwan trade has increased substantially in the last two years. John Deng, Taiwan's top trade negotiator went as far as to claim that a proposed trade agreement with the United States would enhance Taiwan’s economy and democracy vis-à-vis China’s attempts to isolate the country. Deng said, “If our economy cannot be strong enough, then there’s only one place that we can go — China." Furthermore, “More reliance on their market, more dependence,” he added. In 2020, nearly 45% of Taiwan’s exports went to China and Hong Kong, a sharp contrast to just 14.5% to the United States, 6.8% to Japan, and 6.6% to the EU, according to World Trade Organization statistics.
Trade Negotiations Gaining Momentum
In other words, to reduce reliance and block China from accessing ultra-advanced semiconductors, the status quo may be subjected to unprecedented changes. On December 2021, the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO), the U.S. Department of Commerce (DOC) and the Taiwan Ministry of Economic Affairs (MOEA) jointly launched the U.S.-Taiwan Technology Trade and Investment Collaboration to expand bilateral cooperation on critical supply chains.
In September 2022, Taiwan expressed confidence in signing a 'high standard' U.S. trade deal, which may help improve the prospect of its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Tsai Ing-wen said, "We have already announced that negotiations under the U.S.-Taiwan Initiative on 21st Century Trade will begin soon. We are confident that through this initiative, we can sign a high-standard trade agreement and advance bilateral trade development." Fastforward two months, Taiwan's deputy trade representative Yang Jen-ni remarked that a Taiwan-U.S. non-tariff trade deal would be possible in 2023. The first round of physical talks was held in New York from Nov. 8-9, 2022. As of writing, Taiwan and the U.S. just concluded four-day trade negotiations in Taipei and have reached consensus on issues such as trade facilitation, small and medium-sized enterprises and regulatory practices, etc. With the U.S.-Taiwan Initiative on 21st-Century Trade steamrolling in progress, officials have pledged to maintain an ambitious negotiating schedule in the months ahead to continue this momentum. Taiwan's top trade negotiator, John Deng, also said he is "quite satisfied" with the outcome of the meetings.
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