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US and Taiwan begin formal negotiations on trade initiative

US and Taiwan begin formal negotiations on trade initiative
Shipping containers stacked at the Port of Keelung in Keelung, Taiwan, on Wednesday, 24 November 2021. (Photo: I-Hwa Cheng/Bloomberg)

The US and Taiwan have started formal negotiations on a bilateral trade initiative to deepen economic ties, in a move likely to inflame already high tensions with China.

The first round of trade talks is set to take place early this autumn, the Office of the US Trade Representative said on Wednesday, unveiling a negotiating mandate for the US-Taiwan Initiative on 21st Century Trade announced in June. Discussions will cover trade facilitation, regulatory practices, anti-corruption standards, deepening agriculture trade and other issues, the office said.

The trade negotiations “will deepen our trade and investment relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for our workers and businesses”, the office said in the statement.

Excited that we are taking a big step forward in opening a new chapter in our trade partnership. We welcome this announcement, and Taiwan’s ready to start!

— Bi-khim Hsiao 蕭美琴 (@bikhim) August 18, 2022

Separately, Taiwan’s Office of Trade Negotiations said in a statement that it aimed to bolster the island’s economy by promoting trade of its agricultural products and helping small and medium-sized enterprises expand to US markets. Taipei also wants to increase international investor confidence in Taiwan and allow the island to “attract funds and technologies from the US and the world”.

An agreement on bolstering trade may end up being more symbolic than substantive, given reticence in both major US political parties to embrace free trade agreements. 

The US-Taiwan trade initiative was announced weeks after President Joe Biden launched the Indo-Pacific Economic Framework in May, a deal designed to counter China’s influence in the region that didn’t feature Taipei despite more than 50 senators urging Biden to include the island.

That initiative has been criticised by trade advocates as offering little in terms of specifics on issues such as market access or lower tariffs, though it’s been welcomed as a sign of American engagement in Indo-Pacific.

Read More: US, Taiwan to deepen trade ties, plan June Washington talks

The United States and Taiwan, under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO), will commence formal negotiation on the U.S.-Taiwan Initiative on 21st-Century Trade.

— United States Trade Representative (@USTradeRep) August 18, 2022

Since then, Washington’s relationship with Beijing has become even more strained over Taiwan, a self-governed democracy China deems its own territory. After US House Speaker Nancy Pelosi’s landmark visit to Taipei earlier this month, China launched unprecedented military drills around the island, sparking concern in the region. 

The US expects Chinese “military intimidation and coercive economic tactics” around Taiwan to continue, State Department spokesman Ned Price said at a Wednesday briefing. 

“We will continue to take steps that are resolute but also calm to uphold peace and stability in the face of Beijing’s ongoing efforts to undermine the status quo,” he said. The drills held by China shrank a vaguely defined buffer zone that has long helped kept the peace around Taiwan.

China has called on the US to refrain from sailing naval vessels through the Taiwan Strait, saying Beijing would take further action in the wake of Pelosi’s trip. The US has long held that visits such as ones by members of congress are consistent with its “one China” policy to not formally recognize the democratically elected government in Taipei. 

Read More: China warns US against sailing warships through Taiwan Strait

The initiative is “designed not only to grow trade volumes and cooperation between the United States and Taiwan but also an opportunity to assist Taiwan in building its resilience and ensuring that we have resilient and secure supply chains between us”, said Daniel Kritenbrink, US assistant secretary of state for East Asian and Pacific affairs, at a briefing after the announcement. 

Taiwan’s position as the world’s leading supplier of semiconductors is a linchpin of its economic relationship with the US, China and other nations, making the island a strategic asset for countries seeking cutting-edge chips technology. Other electronics and machinery are also major exports, along with information and communications tech.

The US was Taiwan’s third largest trading partner last year, according to the island’s trade negotiations office. Shipments to the US surged nearly 30% in 2021 to a record value of $65.7-billion, the fifth straight year of growth, data from Taiwan’s Ministry of Finance showed.

China and Hong Kong, meanwhile, account for around 40% of the island’s total exports, with bilateral trade between the two economies reaching $328.3 billion last year. 

Taipei has been trying to reduce its economic dependence on Beijing in recent years, with President Tsai Ing-wen exploring ways to bolster trade and investment with Southeast Asia, India, Australia and New Zealand. Taipei last year asked to join Asia Pacific’s biggest working trade deal, though its application is still pending. 

The island’s Office of Trade Negotiations said signing trade deals with the US would “not only help” Taiwan join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, but would also afford it more opportunities to “deepen institutionalised links with other countries”.

“Both sides have shown a high degree of ambition and look forward to achieving concrete results as soon as possible and signing a trade agreement,” Taiwan’s trade negotiations office added.


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