Messages to Washington

Taiwan has proven itself to be a trustworthy partner of the U.S. It has been a dependable supplier of cutting-edge technologies for American companies, provided public health assistance during the recent pandemic, strived to remove trade irritants, and cultivated an inspiring model of vibrant democracy. As the U.S. has come to recognize Taiwan’s contribution to safeguarding global supply chains and maintaining peace and security in the Indo-Pacific, the two sides have drawn even closer over the past several years.

At a time when the international trading order is in flux and American leadership is under serious challenge, the U.S. needs reliable friends around the world as never before. The huge US$12 billion chip-making project in Arizona being carried out by the Taiwan Semiconductor Manufacturing Co. is a concrete sign of what such mutual cooperation can bring.

Now is the time for Washington to move decisively to achieve closer economic integration and free trade with Taiwan. AmCham Taiwan calls on leaders in Washington to begin now to champion a Taiwan Commercial Initiative (TCI) – a coordinated approach comprising six parallel tracks, with the goal of concluding a Bilateral Trade Agreement (BTA).

Collaboration with Taiwan has advanced under the Economic Prosperity Partnership Dialogue (EPPD) and the Global Cooperation and Training Framework (GCTF), while loosened ground rules governing interaction between U.S. government officials and their Taiwan counterparts will facilitate such cooperation. Strong gestures of support for Taiwan during the Trump Administration have been further built upon under the Biden presidency.

Leading members of both houses of Congress from both political parties have been speaking out in favor of progress toward a BTA between Taiwan and the U.S., as well as a place for Taiwan in the World Health Assembly and other key international organizations. Legislation to date has included the Taiwan Travel Act and the Taiwan Allies International Protection and Enhancement (TAIPEI) Act, while the Taiwan International Solidarity Act and the Taiwan Fellowship Act are currently under consideration.

An American business coalition of which AmCham is a founding member has called for early action toward a BTA. For the benefit of American businesses and workers, we urge the Biden administration to bring together the various nascent initiatives and proposals into a coordinated TCI drive for strengthened cooperation with Taiwan along the lines set out below.

Track 1: TIFA – Give an Immediate Signal of Intent to Restart Soon.

There have recently been promising indications that the bilateral Trade & Investment Framework Agreement, or “TIFA talks,” which provide a practical and symbolic foundation for commercial ties, may soon be restarted after a five-year hiatus. The negotiations are conducted by teams led by the Office of the U.S. Trade Representative (USTR) and Taiwan’s Ministry of Economic Affairs (MOEA), and typically cover areas such as IPR protection, pharmaceuticals, medical devices, and agriculture, which are critical U.S. interests.

These talks not only serve to remove impediments to two-way trade and investment, but also help set strategic direction for further cooperation. Their absence has held back progress on other economic initiatives. Among the principal trade irritants in recent years has been Taiwan’s restrictions on the import of U.S. pork products containing traces of a certain feed additive. The issue has been controversial in Taiwan because opponents of relaxing the regulation have portrayed the matter as one of food safety. When the Tsai Administration took the politically courageous step last year of opening the market by accepting international standards for the additive, it stressed the importance of resolving the issue in order to put the trade relationship with the U.S. back on track.

Yet the topic remains a political hot potato in Taiwan, with a public referendum on the question scheduled to be held August 28. A negative result in that poll would likely represent a major setback in the bilateral trade relationship. As a signal that it recognizes Taiwan’s efforts to ease trade irritants like the pork restrictions, we urge USTR to announce plans by mid-August to resume the TIFA talks, even if for a to-be-determined date and with a virtual format.

Track 2:  EPPD – Looking toward a Second Round with Private Sector Engagement in 2021.

The initial round of the EPPD last November showed that it is an effective way to supplement traditional trade and investment talks with science, technology, and economic security concerns, opening new avenues for the U.S. to collaborate with its technologically advanced, strategically placed partner, Taiwan. Expanding the dialogue to one through which businesses and civil society can make common cause with governments to tackle 21st century challenges would make the process even more relevant. In fact, leveraging the EPPD to encompass public-private approaches would empower all the TCI tracks and better tap Taiwan’s capacities. Excluded from most international forums, Taiwan is particularly reliant on public-private participation.

We understand that the American Institute in Taiwan (AIT) is planning a 2021 round of the EPPD. AmCham hopes that the scope will be expanded to include the private sector and that the agenda will include topics such as strengthening supply chain structures and building cutting-edge technologies from 5G to medical supplies – all areas in which AmCham members can make a significant contribution. The Chamber looks forward to making available the expertise of some of our more than 520 member firms, whether in a business advisory function, engaging in parallel B2B activities, or by fostering ventures to commercialize the fruits of EPPD agreements.

Track 3:  U.S.-Taiwan Trade & Investment Platform – Convoked by USDOC and MOEA.

Transaction-oriented platforms organized by governments but driven by the private sector can help translate market-access or strategic cooperative agreements into job-and-wealth-creating business. Such an approach for the U.S. and Taiwan has been suggested by thoughtful Washington trade insiders such as Evan Feigenbaum and Barbara Weisel. It holds promise as a promotional complement to the access- and policy-heavy first and second tracks. Taiwan has consistently been among the world’s largest participants in the SelectUSA Investment Summit and recent announcements by TSMC and Hon Hai (Foxconn) suggest a wave of U.S.-bound direct investment that this track should aim to facilitate with sustained interaction.

As part of such a platform, the U.S. Department of Commerce (USDOC) and Taiwan’s MOEA could invite companies and associations to explore business development issues in areas of mutual promise. These are likely to include semiconductor and e-mobility investment in the U.S., defense industry collaboration, joint development of pandemic mitigation/response solutions, and expanded cooperation to promote third-country infrastructure investment, including green energy projects.

The Infrastructure Finance Framework set up at AIT in late 2020 may offer technical support for the latter work-streams, which also dovetail with Taiwan’s New Southbound Policy. Taiwan should also be engaged within the State Department’s Blue Dot Network to support the global development of quality infrastructure. Other U.S. Trade Promotion Coordinating Council (TPCC) agencies – notably the Small Business Administration and the Development Finance Corporation – might lend technical assistance and help identify business opportunities.

Track 4:  DTA – With a Legal Template for Economic Agreements with Taiwan.

The U.S. has several tax treaties in the Indo-Pacific but lacks one with top-10 trading partner Taiwan. Double Taxation Agreements (DTAs) prevent redundant taxation of the income of American individuals and businesses working in signatory countries, and vice versa. They help to minimize tax evasion, make it easier for talent to circulate between co-signers, and improve bilateral relations and investment. By enhancing efficiency, they lead to more job creation, which stands to offset revenue lost to the Treasury.

Tracks 1-3 address a swath of sectoral opportunities without requiring Congressional action. Narrow functional agreements such as a DTA may be equally important and are often less complex to negotiate than broad trade agreements. However, they may also require approval by one or more houses of Congress, as would a BTA. In the absence of a formal government-to-government relationship with Taiwan, the State Department’s legal office and other agencies need to engage Congressional leadership to design the legal structure for economic agreements with Taiwan.

As the legal issues are resolved, AmCham looks forward to sharpening the business case for a DTA – and in so doing to help pave the way for a BTA.

Track 5: Plurilateral Economic Talks – Bring Taiwan into Existing and New Conversations

To reinforce the four bilateral tracks, Washington should continue to bring Taiwan into discussions with Japan and other similarly minded governments involving digital trade, export controls, cybersecurity, and other issues where Taiwan stands to contribute more as it breaks through its enforced international isolation. As the expansion of the GCTF platform and increased support for Taiwan’s participation in international bodies have shown, Asian and European partners are keen to work with Taiwan given its strong rule of law, transparent governance, and protection of intellectual property rights. Additionally, Washington could play an invaluable role in convening a timely discussion primarily among the private sector actors driving semiconductor technology and supply chain matters. Such interaction may include Japanese, Korean, and Dutch firms, as well as Taiwanese and U.S. companies.

Track 6: BTA – TCI Homestretch Requiring Patience…and Opportunity to “Fast Track.”

The preceding tracks, while important and timely, do not preclude the need for a BTA, as the Chamber and its BTA Coalition partners, including the U.S.-Taiwan Business Council, have advocated. Indeed, a BTA with Taiwan is an American priority interest that should be taken up as soon as feasible as the keystone of the TCI. The U.S. national economic interest case for a BTA – already a strong one when first broached two decades ago – is now compelling, whether considered in macroeconomic, strategic sector/technology terms or from a political, defense-security, and geopolitical viewpoint.

The Biden Administration’s re-emphasis on U.S. alliance architecture and soft power utilization further underscores the value of a BTA with Taiwan. The idea is highly popular on Capitol Hill, standing alone for the high degree of bipartisan support it enjoys in both the House and Senate in an era of general skepticism about trade. Just six months ago, 161 members of Congress wrote to the previous USTR urging him to open negotiations with Taiwan. The letter argued that “As the trade and investment relationship with Taiwan already supports an estimated 373,000 U.S. jobs, working toward [a BTA] would further enhance…the global competitiveness of U.S. industries while spurring American job creation.” The authors noted that “Taiwan already affords its workers a high standard of labor protection, consistent with ILO conventions, and is a leader in environmental protection in the region.”

A patient, multi-track approach to laying the groundwork for the BTA is needed. AmCham looks forward to expanding the Coalition and making a strong case in the coming year for how a BTA would benefit American business and employment. In parallel, the Biden administration should create an interagency task force to conduct a “gap analysis” aimed at identifying areas where Taiwan’s domestic laws and regulations are inconsistent with recent high-standard trade agreements. At the same time, the BTA is so important and timely that legislative action to expedite it should be considered as well. Language instructing the administration to embark on BTA negotiations with Taiwan may represent the swiftest such approach and we urge members of Congress to consider providing this impetus and direction in the U.S. Ensuring American Global Leadership and Engagement Act (EAGLE) Act of 2021 or other relevant vehicles.

Conclusion

While ambitious in scope, the TCI we have proposed above is feasible given the broad support for its objectives on the U.S. and Taiwan sides and among the private and public sectors. While the tracks reinforce one another, they are neither interdependent nor rigidly sequenced. Indeed, given the potential of a U.S.-initiated BTA to set in motion further economic liberalization both within Taiwan and beyond, its conclusion might constitute more of a starting block than a finish line. AmCham enjoins readers in Washington to help us get started on this proposal today. As one of the most impactful, influential, and diverse business organizations in Taiwan, the Chamber is eager to join a collective effort to push forward this initiative and share its vision with stakeholders in America, Taiwan, and globally.

Addendum

While the six TCI tracks listed above constitute the core items on AmCham’s advocacy agenda for 2021-2022, we provide two additional recommendations that we view as equally important to enhancing the U.S.-Taiwan relationship and ensuring that Taiwan is able to maintain its status as one of the U.S.’ most critical economic partners.

Pass, fund, and expedite initiation of the Taiwan Fellowship Act. AmCham welcomes the reintroduction in this Congress of the Taiwan Fellowship Act. The bipartisan proposal would provide a great opportunity for a rising generation of U.S. government Asia specialists to experience Taiwan’s political and economic strengths and make meaningful, long-lasting connections with their Taiwan counterparts while building core career expertise, including Chinese language skills. It would also encourage knowledge sharing and help to address inefficiencies in both partners’ governing systems. We call on Congress and the Biden administration to make a clear commitment to this program by swiftly enacting and implementing the Taiwan Fellowship Act and preparing to announce and launch the program this year. Doing so would set the stage for the first cohort of fellows to be welcomed to Taiwan in 2022.

Ensure Taiwan’s access to a sufficient supply of vaccines. As AmCham Chairperson CW Chin noted recently in a letter to the COVID-19 coordinators at the U.S. Department of State and the White House, the current outbreak of COVID-19 in Taiwan has threatened to cause serious disruptions to some of its most vital manufacturing operations, including those of its semiconductor producers. Of particular concern is the fact that Taiwan is among the world’s most densely populated locations, increasing the potential for the situation to badly deteriorate. Were the virus to spread out of control, it would likely have a negative impact on U.S. industry and interests. For a number of reasons, Taiwan has had limited success in securing a sufficient and timely supply of vaccines. We urge our friends in Washington to push for Taiwan’s inclusion at the appropriate level in all efforts to direct the U.S.’ surplus supply of vaccines to areas of critical need overseas.