US-Taiwan Economic Relations After the SelectUSA Investment Summit

US-Taiwan Economic Relations After the SelectUSA Investment Summit

US-Taiwan Economic Relations After the SelectUSA Investment Summit

On June 20, the US government concluded its fourth SelectUSA Investment Summit. Organized by the Department of Commerce since 2014, this year’s confab broke the record for total registrations and participating international business representatives. Indeed, “more than 3,000 people registered for the Investment Summit, including 1,200 business representatives from 64 foreign markets.” Of this total, Taiwan’s delegation was its largest ever, with 140 delegates from 84 companies; it was second only to the Chinese delegation with 155 members and ahead of Japan’s 121 delegates.

Underscoring the high-profiled representation of Asian economies at the Investment Summit, Commerce Secretary Wilbur Ross explicitly acknowledged the record number of delegates in his opening remarks. “This is a year of many SelectUSA records … a report [sic] number of Chinese and Japanese attendees with 155 from China and 121 from Japan respectively. The Department of Commerce is proud to host such a large and diverse group of executives, investors, foreign and domestic delegations, ambassadors and economic development professionals,” said Secretary Ross. Indeed, China and Japan sent the first and third largest delegation to ever participate in the summit, respectively. Despite sending the second largest delegation, Taiwan was not mentioned in the secretary’s remarks—an omission that some observers saw as a snub emblematic of Taiwan’s unfair treatment, even by its primary security partner and second largest trading partner.

Taiwan’s delegation this year was headed by National Policy Advisor to the president, Ho Mei-Yueh (何美玥). Ho’s delegation was twice as large as the previous year’s, led by former Taiwan External Trade Development Council Chairman Francis Liang (梁國新)—now the country’s representative to Singapore. Ho, who previously served as minister for economics (2004-06), was President Tsai Ing-wen’s initial pick to serve as head of the Ministry of Economic Affairs and a close confidante of the president. On the sidelines of the summit, Ho reportedly held meetings with senior US officials, including participating in a business summit attended by the Special Assistant to the President and Senior Director for Asia at the National Security Council, Matthew Pottinger, and AIT Chairman James Moriarty. Acting Commerce Undersecretary Israel Hernandez also attended another function for the Taiwanese delegation.

A key function held in conjunction with the Investment Summit was organized by the US-Taiwan Business Council, which helps to develop trade and business relations between the United States and Taiwan. On June 19, the Council co-hosted the US-Taiwan Business Forum with the Taipei Economic & Cultural Representative Office (TECRO). In a press release, Council President Rupert Hammond-Chambers noted that:

This annual Forum examines the important role that Taiwan plays in the global economy, as well as the close relationship between the US and Taiwan business communities. The significant business and commercial relationship between the US and Taiwan is a crucial piece of the overall bilateral relationship, and the Forum allows us to explore ways to deepen cooperation, establish new relationships between businesses, and encourage action on bilateral, multilateral, and global trade issues.

Taiwan is currently the United States’ 10th largest goods trading partner, with $65.4 billion in total goods traded during 2016. While the US trade deficit in goods with Taiwan was valued at $13.27 billion in 2016, the United States enjoyed a surplus in trade in services of $4.2 billion over the same year. Although the apparent imbalance in volume is not insignificant, according to US Census Bureau data compiled by the US-Taiwan Business Council, Taiwan’s percentage share of the total US trade deficit only accounted for 1.81 percent—by comparison, China commands the lion’s share of the US trade deficit at 47.24 percent. Moreover, Taiwan and US customs statistics differ as to the extent of the Taiwan’s trade surplus with the United States. According to Taiwan Custom Statistics, its trade surplus with the United States was only $4.93 billion in 2016.[1] This is close to an $8 billion difference. Given the huge discrepancy between the two figures, there is an important role for think tanks and industry to play in harmonizing the metrics used to calculate trade surplus and establishing standards to minimize political misunderstanding about the fairness of the economic relationship.

Perhaps as a sign of the Tsai administration’s effort to narrow the trade gaps and improve economic relations with the United States, Ho announced at a press conference that new investments from Taiwan into the United States could possibly top $34 billion. In a similar tone of optimism about the future of US-Taiwan trade relations, American Institute in Taiwan (AIT) Chairman James Moriarty proclaimed that there has “‘never been a better time than now to resolve outstanding bilateral issues’ if economic reform is to make major advances toward economic liberalization.” Indeed, the political stars seem more aligned than ever before in Taiwan domestically and internationally as both the executive branch and legislature are now controlled by the same party, and the Trump administration has signaled its interest to look at ways to upgrade the trade relationship. Yet, as former AIT Deputy Director Robert Wang noted: “The question then is where Taiwan will rank in terms of US trade policy priorities.”

Indeed, there are many challenges ahead. President Trump’s decision to withdraw from the Trans Pacific Partnership (TPP) notwithstanding, the United States and the People’s Republic of China (PRC) recently announced the initial results of the 100-day action plan on trade that the two leaders agreed to back in April at Mar-a-Lago. Among other things, this plan included China allowing imports of US beef by no later than than July 16, 2017.

Beijing’s decision to allow the import of US beef shines the spotlight on a longstanding sticking point in the US-Taiwan trade relationship. Taiwan has barred the imports of US beef and pork that contain ractopamine—because of perceived potential health risks. Taipei, however, permitted the import of US beef in 2012 after a United Nations food standards-setting body adopted, by a narrow margin, maximum limits for ractopamine in beef and pork. Taipei still maintains a ban on US pork.

On May 18, the Department of Commerce held a public hearing, pursuant to Executive Order 13786, in which Taiwan was the subject of investigation because it was identified by the Trump administration as among 14 other trading partners with which the United States had a significant trade deficit in 2016. The public hearing and comments will go towards preparing an Omnibus Report on Significant Trade Deficits (Report). According to public comments submitted by the US-Taiwan Business Council in response: “[US trade with Taiwan] is not a ‘zero sum’ endeavor where US exports should be counted as wins and imports from Taiwan should be counted as losses—particularly as the official trade deficit data does not cover the entirety of the complex trade relationship between the two partners.”

The AIT Chairman further noted that if the two sides were able to use bilateral mechanisms like the Taiwan Investment and Framework Agreement (TIFA) to resolve trade issues, it would help to “foster stronger and closer trade relationships.” TIFA—established in 1994—is the primary bilateral mechanism for trade dialogue between Taiwan and the United States. The last Taiwan Investment and Framework Agree (TIFA) meeting was held in October 2016. At the last meeting, the two sides reportedly made progress in areas such as intellectual property rights protection, market access for pharmaceuticals, improvement in the investment regime, and agricultural trade. The 11th meeting may be held as soon as this summer in Taiwan. While progress on negotiations between the USTR and Taiwan’s Ministry of Economic Affairs to upgrade the trade relationship have reportedly stalled over the pork issue, they now face the looming 100-day action plan. Just as Beijing has done with US arms sales to Taiwan, Beijing’s apparent strategy appear to be to crowd out the agenda of the United States so that it may never be a good time to work with Taiwan.

The main point: Despite sending the second largest delegation, Taiwan was not mentioned in the secretary’s opening remarks at this year’s SelectUSA Investment Summit—an omission that some observers saw as a snub emblematic of Taiwan’s unfair treatment. Just as it has tried to do with arms sales to Taiwan, Beijing’s strategy appear to be to crowd out the agenda of the United States so that it may never be a good time to do something on Taiwan.

[1] The Prospects of U.S.-Taiwan Economic Relations under the Trump Administration Taiwan’s Viewpoint, June 20th, 2017, Washington, D.C. (printed handout provided to attendees of the US-Taiwan Business Forum).

Update: On Day 2 of the Investment Summit, Secretary Ross acknowledged the top ten delegations to the 2017 SelectUSA Investment Summit and included Taiwan: “And huge contributors to this success have been our top ten delegations from China, Taiwan, Japan, India, Canada, Brazil, Korea, Italy, Turkey, and Germany.”