A Backgrounder on the History of US-Taiwan Trade and Investment Talks

A Backgrounder on the History of US-Taiwan Trade and Investment Talks

A Backgrounder on the History of US-Taiwan Trade and Investment Talks

While the United States and Taiwan have no comprehensive trade agreement, they do have a Trade and Investment Framework Agreement (TIFA). TIFAs “provide strategic frameworks and principles for dialogue on trade and investment issues between the United States and the other parties to the TIFA.” It’s essentially a platform for formal economic dialogue between the United States and Taiwan, without involving the sometimes long and politically-fraught legislative process.

On June 10, the US Trade Representative, Ambassador Katherine Tai (戴琪), spoke with her counterpart in Taipei, Minister Without Portfolio John Deng (鄧振中). The two plan on convening the 11th US-Taiwan TIFA meeting on June 30. While it would be great for the United States and Taiwan to take the trade relationship to the next level with a formal trade agreement, resuming the TIFA meetings is also important. It’s been nearly five years since the United States and Taiwan last held a round of TIFA talks.

In preparation for this long-overdue meeting, a brief history of the ten TIFA talks the United States and Taiwan have held to date follows below.

The US-Taiwan TIFA agreement was signed in 1994 and the first meeting was held in 1995. Those years were a particularly important period for US trade policy. In addition to the TIFA, the United States, Canada, and Mexico had just signed the North American Free Trade Agreement (NAFTA). This period saw also the creation of the World Trade Organization (WTO), which Taiwan would join several years later.

Back then, Taiwan was the United States’ 8th largest trading partner. One of the biggest and most persistent issues for US-Taiwan trade relations at that time was the protection of intellectual property rights (IPR) in Taiwan. Taiwan had made its way onto the US Trade Representative (USTR) “watch list” on IPR protection due to its lack of copyright and trade secret protection. Therefore, IPR was the main topic for the inaugural TIFA talks, along with customs cooperation and tariffs. In addition to these talks, and in its efforts to join the WTO, Taiwan cut nearly 800 tariff lines by more than 20 percent and enacted legislation to strengthen IPR for integrated circuit layout design.

The second TIFA took place in 1997. IPR laws in Taiwan were strengthening, but there were questions about enforcement. Taiwan had enacted new patent and trademark laws and even made its way off of the USTR’s watch list. By then, the WTO had been in force for two years and Taiwan’s interest in joining had grown. Much of the TIFA talks were now centered around Taiwan’s accession to the WTO, although there was “limited progress” in this regard. There were still apparently issues regarding “full access to Taiwan’s agricultural market (pork, chicken, rice, and offal), privatization of the government’s tobacco and wine monopoly, tariffs and quotas on automobiles, and Taiwan’s government procurement practices.” But Taiwan would phase out most tariffs, particularly for industrial goods, by 2002 in order to join the WTO.

The third round of TIFA talks were held in 1998. By this time, Taiwan’s economy was estimated to be the 18th largest in the world with a GDP of USD $280 billion. In addition to Taiwan’s joining of the WTO, the TIFA talks included support for Taiwan’s participation in various Organization for Economic Co-operation and Development (OECD) activities. However, Taiwan had also found itself back on the USTR watch list for a lack of enforcement over pirated videos. It would stay on this watch list, even after officially becoming a member of the WTO in 2001, until 2009.

In 2002, there was an increased interest in the United States in signing a bilateral free trade agreement with Taiwan. Since it had recently joined the WTO, and because other members of the WTO were signing preferential trade agreements as well, Congress took interest in expanding the US-Taiwan trade relationship. Members of the Senate Finance Committee and the House Ways and Means Committee sent letters to the US International Trade Commission asking them to examine the economic impact of a US-Taiwan trade agreement. The study found that US imports from Taiwan would increase by 18 percent while exports to Taiwan would grow by 16 percent. Meanwhile, although the agreement would have little impact on US GDP, it would increase Taiwan’s GDP by 0.3 percent. Regretfully, that’s the closest the United States and Taiwan would come to a bilateral trade agreement to this day.

Perhaps because officials were now more focused on working through the WTO, the fourth TIFA wouldn’t take place until 2004. The TIFA talks were now to be held at the level of the deputy minister instead of the director general or assistant. IPR was still a main topic for discussion with the focus now being on pharmaceuticals. And Taiwan had just implemented a ban on US beef products at the end of 2003—due to widespread fears over the spread of mad cow disease—which would become an enduring complication in US-Taiwan trade relations.

The fifth TIFA round was held in 2006. There was apparently another push by Taiwanese officials to get negotiations started for a US-Taiwan trade agreement, but the USTR decided instead to focus its resources on WTO negotiations, commonly referred to as the Doha round (the Doha round negotiations would eventually fail). At this point, it was obvious that the USTR was also beginning to have greater issue with Taiwan’s ban on US beef. Included in these TIFA talks were ways to increase Taiwan’s participation in Asia-Pacific Economic Cooperation (APEC) activities.

The sixth TIFA negotiations were held in 2007. Though Taiwan had lifted its ban on some beef products in 2006, the remaining beef products still banned were an area of contention in US-Taiwan trade relations. In addition to the beef issue, counterfeit goods in Taiwan, as well as American companies’ inability to win bids for Taiwan’s rice imports, continued to be a grave concern for the United States. On the plus side, negotiators did manage to sign a memorandum of understanding and establish a Consultative Committee on Agriculture. This would allow both sides to increase their level of communication over agricultural issues.

That being said, the seventh TIFA talks wouldn’t take place until 2013. Even though the United States and Taiwan would come to an agreement over the beef issue in 2009, a ban remained on certain beef products, and certain pork products had been banned as well. Officials eventually felt that progress was being made, however, after Taiwan established a “maximum residue limit” for growth products used in American beef and pork production. The resumed TIFA talks would also go on to create two working groups: one on investment and one on information and communication technology services.   

The eighth TIFA negotiations were held in 2014. Both IPR enforcement and agriculture were main issues at these talks. These talks also included efforts to expand Taiwan’s role in APEC activities, and to expand the WTO negotiations. The ninth TIFA round was held in 2015. Along with continuing efforts—such as WTO negotiations and cooperation through APEC—these talks included ways to improve market access for medical devices and removing barriers for pharmaceuticals in Taiwan.

Last but not least, the tenth TIFA negotiations were held in 2016. Beef and pork restrictions were still a topic for discussion, along with various IPR laws and enforcement issues. There are several possible reasons why US officials gave up on the TIFA after that. One reason could be that they were frustrated by the fact that the United States has never had a trade surplus (exports exceeding imports) with Taiwan. Another could be that the Trump Administration did not want to upset the trade deal it was negotiating with Beijing (even though the Trump Administration continued to engage in other activities with Taiwan that upset Beijing, such as arms sales, diplomatic dialogues, and launching a new economic partnership). Another reason could be a lack of resources. Perhaps US trade negotiators were just too busy with the trade war with China, or any of the other trade disputes it was creating, to invest in the TIFA. But more likely than not, the beef and pork issue is the main reason why there has been no TIFA since 2016.  

Nearly a year ago, however, President Tsai Ing-wen made an announcement on unilaterally dropping the restrictions on certain beef and pork products in an effort to mend the long-standing issue between the United States and Taiwan. It’s clear now that these efforts seemed to have paid off with the Biden Administration’s trade negotiators.

The upcoming TIFA is an important one as the world is increasingly concerned about the safety of Taiwan, as highlighted in the recent G7 communiqué. While not all of them are especially exciting geopolitical issues, some topics likely to be covered in the upcoming TIFA are: beef and pork; supply chains and how to build resiliency (especially for semiconductors); ways to cooperate and invest in climate technology and finance; how to coordinate these climate efforts in support of Southeast Asia’s climate efforts; furthering WTO negotiations such as around fisheries; and other trade and investment areas mirrored in the US-Taiwan Economic Prosperity Partnership Dialogue.

The main point: The Trade and Investment Framework Agreement (TIFA) is one of the most important platforms for bilateral negotiations between the United States and Taiwan. The upcoming TIFA talks should be warmly welcomed as the first such talks in five years. These talks will help trade officials work out their issues, and also find new areas for US-Taiwan cooperation.