On June 1, the United States and Taiwan launched a new initiative called the “US-Taiwan Initiative on 21st-Century Trade.” The initiative is meant to “deepen the economic and trade relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth.” It will be held under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO), with its first meeting tentatively scheduled for the end of June.
The US-Taiwan partnership is much more than just defense commitments and weapon sales. Accordingly, it is good to see the Biden Administration’s continued efforts to expand this relationship to include economic and trade issues. While this new initiative will hopefully serve as a building block, or “stepping-stone,” to new meaningful US-Taiwan economic commitments, it is hard not to compare this recent trade initiative with the recently announced US-led Indo-Pacific Economic Framework (IPEF)–in which Taiwan is not included.
The US-Taiwan trade initiative will likely move faster and have more meaningful outcomes than the IPEF. While the trade initiative includes many of the same areas covered by IPEF, it also focuses on some additional areas, such as state-owned enterprises and non-market activities. Meanwhile, the current IPEF statement is merely an agreement to start negotiations, and it could take years before any meaningful outcomes are achieved through the framework. While IPEF might not be ideal, it is nevertheless unfortunate that Taiwan could not be included at this time. Taiwan continues to be isolated from international organizations and trade agreements—and it is a shame that the United States could not help Taiwan into the IPEF, even at the risk of losing some initial participants.
How is the Trade Initiative Different than IPEF?
Much of the reporting about the Biden Administration’s two recent economic initiatives (the IPEF and US-Taiwan trade initiative) has been focused on their participants. IPEF has 13 initial participants: Australia, Brunei, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. By contrast, the US-Taiwan trade initiative is a purely bilateral effort. Besides the difference in participants, however, there is quite a bit of overlap between the two initiatives.
Trade is a major feature of both the US-Taiwan initiative and IPEF. Yet, neither of these agreements is a trade agreement like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Taiwan applied to become a member of in September of last year. IPEF membership is also ad hoc, meaning that not every participant will sign on to all four pillars of the framework.
The focus on trade for both of these initiatives makes sense, given that the office of the US Trade Representative (USTR) is a principal lead on both. Yet, US Trade Representative Ambassador Katherine Tai has made explicit her thoughts on past US trade policy, like the signing of trade agreements, and has stated that these new initiatives will not be the same. This means that neither of these initiatives will include tariff removal or new laws, which would require Congress to get involved. Both initiatives will also be worker-centric and will look to support small and medium enterprises, while also taking into consideration energy and environmental challenges. Both initiatives will also have an element of fighting corruption. And finally, digital economy standards, such as those relating to online privacy and artificial intelligence, will be included in both initiatives as well.
The differences between the two initiatives are fewer. The IPEF will include pillars that focus on building infrastructure and supply chain resiliency across the Indo-Pacific. This includes mapping critical mineral supply chains, as well as establishing an early warning system for supply chain disruptions. The US-Taiwan initiative will include areas such as agriculture, regulatory practices, state-owned enterprises, and other non-market policies and practices. US concerns about Taiwan’s import restrictions have long been a point of contention for another US-Taiwan trade dialogue, the US-Taiwan Trade and Investment Framework Agreement (TIFA) dialogue. The focus on state-owned enterprises and non-market activities has probably less to do with conflict between the United States and Taiwan and is more of an opportunity to work together to identify the non-market activities that take place in countries like China.
Hopeful Outcomes
Since its launch, the new US-Taiwan trade initiative has already been moving quickly. Its first meeting is tentatively scheduled for later in June. Meanwhile, the Technology Trade and Investment Collaboration (TTIC) set up between the United States and Taiwan in December has yet to have its first meeting. Taiwan’s chief trade negotiator, Minister without Portfolio John Deng (鄧振中), is hopeful that the US-Taiwan trade initiative will lead to more trade and economic cooperation between the two countries, and even lead to a long-awaited bilateral trade agreement. US-Taiwan Business Council President Rupert Hammond-Chambers is also hopeful, saying “We hope that this could lead toward the start of negotiations on a US-Taiwan Bilateral Trade Agreement.”
Certainly, the initiative could set a path that makes it easier for the United States and Taiwan to present a bilateral trade agreement to Congress after the US midterm elections later this year. Taiwan officials are even hopeful that the trade initiative could lead to Taiwan’s eventual participation in the IPEF–even though it is uncertain when the IPEF will have meetings or how they will be conducted going forward. (The first IPEF meeting may happen sometime this summer.)
Still, a few questions remain about the structure of the new US-Taiwan initiative. For example, how does the new trade initiative work in relation to the three other major dialogues the US has with Taiwan (TIFA, the Economic Prosperity Partnership Dialogue [EPPD], and TTIC)? As previously mentioned, the trade initiative will already include many areas—like agriculture and regulatory practices—covered under the TIFA dialogue. Meanwhile, the EPPD and TTIC were meant to enhance technology standards and seek economic inclusiveness as well. Notably, all of these dialogues were once seen as possible pathways to a US-Taiwan bilateral trade agreement.
The US-Taiwan trade initiative will likely cover both areas of contention and opportunities for collaboration. But if it does become a replacement for the TIFA or other dialogues, there are other issues which could eventually be added to these talks. USTR publishes a list of trade barriers it compiles every year, which includes areas such as copyright legislation, digital piracy, financial services, and investment and regulatory transparency. Again, it is unclear as to what direction the new initiative will take. The one thing that is obvious for now is that it has the interest of both Washington and Taipei. Hopefully, that momentum can be carried on towards a more fruitful relationship.
US-Taiwan Trade
Taiwan continues to be one of America’s most important trading partners. In 2021, Taiwan was the eighth largest goods trading partner of the United States, accounting for USD $114 billion worth of goods traded. Taiwan is an important destination for American industrial parts, semiconductors, airplane parts, and crude oil. Conversely, Taiwan is an important source for semiconductors, computer parts, and telecommunications equipment. Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) and South Korea’s Samsung are the only companies in the world to have developed the most advanced semiconductors (also referred to as chips). It has been suggested that the United States, Taiwan, South Korea, and maybe even the Netherlands, could form some sort of semiconductor alliance.
The new US-Taiwan trade initiative will hopefully lead to more opportunities to expand economic and trade ties between the United States and Taiwan. Taiwan has only a few trade agreements in the world, as China continues to pressure countries and isolate Taiwan. Ideally, the United States and Taiwan will eventually pursue their own bilateral trade agreement. A recent study found that a free trade agreement would not only benefit both the American and Taiwanese economies, it would also provide an alternative to China, which is still a major trading partner for so many in Asia. It would also encourage others in the region, including some of America’s trading partners, to pursue their own trade agreements with Taiwan.
Conclusion
The recently announced US-Taiwan initiative on trade is more likely to manifest meaningful outcomes than the other new, US-led economic grouping, the Indo-Pacific Economic Framework. IPEF could take years to negotiate, while the US-Taiwan trade initiative has momentum, with its first meeting already scheduled. There is a great deal of overlap between the content covered by these two initiatives, including trade, climate change, digital economy, and anti-corruption. It remains unclear how the new initiative will overlap with other major trade and technology dialogues between the US and Taiwan. Yet, there is hope that the new trade initiative will lead to more economic and trade opportunities between the United States and Taiwan, and potentially even lead towards a long-awaited bilateral trade agreement.
The main point: The new US-Taiwan Initiative on 21st-Century Trade will hopefully lead to a more meaningful US-Taiwan economic and trade partnership. There are questions about how the new initiative will interact with ongoing US-Taiwan dialogues, but it appears that there is growing momentum behind the new initiative.
