US, Taiwan push to deepen trade ties amid China tensions

Washington has been keen to bolster support for Taiwan, especially as it faces stepped up political pressure from China. PHOTO: AFP

WASHINGTON (BLOOMBERG, NYTIMES, REUTERS) - The United States 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 in a statement on Wednesday (Aug 17), unveiling a negotiating mandate for the US-Taiwan Initiative on 21st Century Trade announced in June.

Deputy US Trade Representative Sarah Bianchi said: "We plan to pursue an ambitious schedule for achieving high-standard commitments and meaningful outcomes covering the eleven trade areas in the negotiating mandate that will help build a fairer, more prosperous and resilient 21st-century economy."

Talks for the pact will focus on 11 trade areas, the Office said, including expanding trade in agriculture and digital industries, raising labour and environmental standards, and enhancing trade between small and medium-size businesses.

The governments also said they would combat market distortions caused by state-owned enterprises, as well as non-market policies and practices – an apparent nod at China, where such practices are common.

The US-Taiwan trade initiative will be negotiated by the American Institute in Taiwan, which is the unofficial US embassy in Taipei, and the Taipei Economic and Cultural Representative Office in the US, which represents Taiwan in Washington in the absence of diplomatic recognition.

“The United States and Taiwan will seek to 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 of the US Trade Representative said.

Separately, Taiwan’s Office of Trade Negotiations said 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. Designed to counter China’s influence in the region, that deal did not feature Taipei despite more than 50 senators urging Mr 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 has been welcomed as a sign of American engagement in Indo-Pacific.

Since then, Washington’s relationship with Beijing has become even more strained over Taiwan, a self-governed democracy that 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 Mrs 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 recognise the democratically elected government in Taipei. 

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 Mr Daniel Kritenbrink, 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 China and other nations, including the US, 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 technology.

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 per cent last year to a record value of US$65.7 billion (S$90.8 billion), the fifth straight year of growth, data from Taiwan’s Ministry of Finance showed.

China and Hong Kong, meanwhile, account for around 40 per cent of the island’s total exports, with bilateral trade between the two economies reaching US$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 South-east 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".

Taiwan's trade negotiations office added: “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."

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