President Joseph Biden just wrapped up the first 30 days of his presidency and the new administration is rapidly setting out its foreign policy agenda. While the Biden administration has expressed that it will not negotiate any new trade deals before focusing on other domestic priorities like addressing the COVID-19 pandemic, there are compelling reasons why President Biden should make an exception and begin negotiating one with Taiwan. Support in Washington for a bilateral trade agreement (BTA) has significantly grown since August 2020 after Taiwan President Tsai Ing-wen (蔡英文) announced an end to restrictions on importing certain US beef and pork. Global conditions should pull the United States closer to negotiating a BTA with Taiwan as national security concerns and a post-COVID economic recovery take precedence. A US-Taiwan BTA would contribute to national security priorities while increasing investment, export opportunities, and meaningful employment for the United States. For the aforementioned reasons, the post-COVID economic recovery is the best time for Washington to begin trade negotiations with Taipei.
US National Security
Tensions in the South China Sea—and more broadly with China—underscore the security imperative for a US-Taiwan bilateral trade agreement. A top US national security goal is to maintain a Free and Open Indo-Pacific. A key part of this strategy is to counter China’s use of unfair trading practices and economic leverage to coerce nations and to prevent China from wielding outsized economic and political influence around the world. A bilateral trade agreement with Taiwan would help to build a network of like-minded governments and signal to the world that Taiwan is a viable trading partner without rejecting the United States’ “One-China Policy.”
A formal economic relationship with Taiwan would advance US national security interests as Washington competes with Beijing in the region. The US-China trade war and the COVID-19 pandemic revealed the dangers of overreliance on one economic partner and the ease by which China can influence global supply chains. During the pandemic, Taiwan has remained a stable hub for manufacturing and provided critical products for the United States. Along with personal protective equipment (PPE), Taiwan is a producer of intermediate goods such as semiconductors, which are critical for US defense products, telecommunications equipment, and consumer goods. Unlike many of those in China, Taiwan’s telecom companies are all designated as clean providers of 5G technology. This designation is significant, as unverified suppliers can put digital backdoors into their software and hardware to violate the privacy and integrity of the product.
A BTA would facilitate the sale of safe 5G technology to the US and allies. Establishing a BTA with Taiwan would also be the most economical and stable way of securing the supply chain of intermediate goods coming to the United States, reducing regional economic dependence on China and maintaining a free and open Indo-Pacific. Furthermore, signing a bilateral trade agreement with Taiwan would create a formal cooperation framework between Washington and Taipei. Codifying a BTA into United States law would upgrade Taiwan’s status as a high priority security and economic partner.
US Economy
A bilateral trade agreement with Taiwan would help the US economy’s post-COVID recovery. A US-Taiwan BTA could lower tariffs on US agricultural products, raw materials, and manufactured goods, as well as expand market access for the US energy, finance, and telecommunications industries. Taiwan was the United States’ 10th largest trading partner in 2018, with USD $103.9 billion in goods and services exchanged. The US Department of Commerce estimates that US exports to Taiwan supported 208,000 US jobs in 2015. Taiwan’s foreign direct investment (FDI) in the US accounted for USD $11.1 billion in 2019 primarily in the manufacturing, depository institutions, and wholesale trade sectors. One such investment project—TSMC’s plan to build a 5-nanometer semiconductor wafer fabrication in Arizona—will represent an investment of approximately USD $12 billion between 2021-2029, and will directly create 1,600 high-tech professional jobs and thousands of indirect jobs. In addition to attracting inward FDI, Taiwan’s Taipei Economic and Cultural Representative Offices (TECRO) help Taiwanese vendors become part of the US domestic supply chain.
Indo-Pacific and East Asian nations are encouraging companies to reshore their operations amid the US-China trade war and COVID-19 pandemic. The pandemic has only exacerbated supply chain diversification and further encouraged Taiwan’s companies to relocate out of China. Taiwan was the United States’ 15th largest foreign investor in 2019, with high-tech leaders Foxconn and Pegatron pledging to invest in US manufacturing in late 2019. A US-Taiwan BTA would further improve and stimulate the bilateral investment environment while creating high-skilled jobs for both signatories. Making it easier for Taiwanese production to relocate to the US will put unemployed Americans back to work and create lasting employment opportunities in the manufacturing sector. Taiwan has proven itself to be a willing and stable trading partner. If a BTA is signed, the United States would gain a trading partner with a sound legal system, strong intellectual property rights, social stability, an educated talent pool, high-tech manufacturing experience, and shared democratic values, according to the American Chamber of Commerce in Taipei (AmCham). AmCham also reported in its 2020 White Paper that Taiwan’s government agencies have been diligent in seeking solutions to issues outlined in previous White Papers. This close collaboration has already led to a record 11 issues resolved from AmCham’s 2020 White Paper to 2021. President Tsai’s announcement lifting the ban on US beef and pork imports displayed Taiwan’s commitment to reducing trade barriers in anticipation of negotiating a BTA with the United States.
These factors led 50 US Senators to co-author their October 1 letter to US Trade Representative Lighthizer, urging him to prioritize a comprehensive trade agreement with Taiwan. In their letter, the Senators recognized Taiwan’s status as a valued trading partner dedicated to fair competition and open markets free from government manipulation. While the United States has yet to reach an agreement with Taiwan on agricultural standards, the Senators expressed their confidence that progress can be made on removing remaining trade barriers.
The benefits of a US-Taiwan BTA are also recognizable on the state level. For instance, Georgia—one of the US’s top 30 beef and pork producers—will now be able to increase meat exports to a more open Taiwanese market. Taiwan is currently Georgia’s 19th largest export market. A BTA would lead to meaningful information and technology collaboration, with strong economic gains expected for Georgia’s energy, advanced manufacturing, and tourism industries. Georgia Senator David Perdue’s endorsement of the Senate’s letter to Lighthizer shows that he has clearly recognizes the benefits of a US-Taiwan BTA for the State of Georgia.
Conclusion
A bilateral trade agreement between the US and Taiwan would expand an already extensive trade, business, and commercial relationship. In addition to a bolstered economic relationship, a BTA would deepen US-Taiwan security cooperation in the Indo-Pacific. Taiwan has proven its commitment to a stable economic partnership with the United States, and recently demonstrated the importance of further economic collaboration with the United States by lifting a major hurdle to a bilateral trade agreement—import restrictions on US beef and pork—in September. Support for a US-Taiwan BTA in the US is at a high point, with the US House of Representatives, the Senate, think tanks, and US business associations calling on the US Trade Representative to begin negotiations. Despite silence on the issue from the USTR, Congress now has the TAIPEI Act of 2019 to serve as precedent to initiate a comprehensive economic dialogue with Taiwan. A timely negotiation would deepen US-Taiwan economic prosperity and security during the global post-COVID recovery.
The main point: 2021 is the best time for the US to negotiate a bilateral trade agreement with Taiwan. It is widely recognized in Washington that a US-Taiwan BTA will support economic development on the state level and support US national security interests. The Office of the United States Trade Representative should negotiate a bilateral trade agreement as part of the US’s post-COVID economic recovery.
