Reviewing the U.S.-Taiwan Trade Agenda

The latest annual USTR report provides an item-by-item update on the status of trade issues.

Each year at the end of March, the Office of the U.S. Trade Representative (USTR) issues a National Trade Estimate Report on Foreign Trade Barriers, assessing the state of market access for American goods and services in countries around the world. The nine-page Taiwan section in the just-released 2015 report identifies areas in which meaningful progress has been made, as well as providing insight into continuing irritants in the bilateral economic relationship – issues likely to be raised in the annual high-level TIFA (Trade and Investment Framework Agreement) negotiations.

Among the topics cited as examples of positive developments:

Banking. After previously insisting that foreign banks holding both branch and subsidiary licenses would have to relinquish the branch license, the Financial Supervisory Commission in 2013 indicated that banks would be allowed to keep both operations as long as the primary business scope of the branches is limited to areas, such as corporate finance and derivate services for large companies, that do not overlap with those of the subsidiaries. In May 2014, the FSC also lifted previous requirements that both local and foreign banks maintain stand-alone onshore data centers.

Foreign Direct Investment. An amendment proposed by the government to the Statute for Investment by Foreign Nationals would eliminate the need for pre-investment approval for cases worth less than US$1 million, while an amendment to the Business Mergers and Acquisitions Act would clarify criteria and review procedures affecting foreign investment in domestic companies. Both measures are currently pending approval by the Legislative Yuan.

Intellectual Property Rights. Following revisions to the Trade Secrets Law in 2013 to increase penalties to help deter misappropriation of trade secrets, the Legislative Yuan last year passed additional legislation to provide law-enforcement agencies with enhanced enforcement tools to deal with trade secret theft and to oblige defendants in trade-secrets lawsuits to submit a substantive defense. Another bill, still awaiting legislative action, would extend coverage under the Witness Protection Act to witnesses in trade secrets cases.

USTR also noted positive steps in 2014 to enhance patent and test-data protection for pharmaceutical products. The Taiwan government has committed to establish a patent linkage system for pharmaceuticals and to study expansion of the scope of regulatory data protection for innovative drugs, including biologics.

At the same time, the report cited areas of continued IPR concern, including infringement of copyrighted material on the Internet, end-user software piracy, cable TV signal theft, and illegal textbook copying. It noted that Taiwan has yet to effectively implement 2009 amendments to the Copyright Act to require Internet service providers (ISPs) to undertake notice-and-takedown action against online infringers as a condition for avoiding liability for such infringement.

A number of other problems were listed in the report under the heading “Technical Barriers to Trade.” Among them:

Agricultural issues. USTR reminds Taiwan that largely because of controls legislated in 2010 without regard to scientific evidence and risk analysis, Taiwan has not met its commitment under a 2009 protocol with the United States to provide fuller market access to U.S. beef products. Pork is also an issue, because of Taiwan’s failure to adopt a Maximum Residue Level for the feed additive ractopamine in pork despite having notified the World Trade Organization in 2007 of its intent to do so.

Mandatory biotechnology labeling. This category refers to the regulation of genetically modified (GM) food products. According to USTR, “Taiwan’s current practices and contemplated stricter policies on biotech labeling do not appear to be based on science, impose significant burdens on U.S. stakeholders, and may serve to increase costs and cause concern among consumers.”

Toys. The United States has raised concerns that new inspection requirements in Taiwan for formamide in foam toys and phthalates in children’s products do not correspond to international practice The USTR report notes that requiring testing “for formamide in toys where it is likely not present is an onerous and costly task for manufacturers.”

In several other categories, USTR appeared to be adopting a stance of continued monitoring and observation of the situation:

Cosmetics. Proposed amendments to the Cosmetic Hygiene Control Act have prompted industry concerns about requirements governing the product approval process, product claims and advertising, and the treatment of medicated cosmetic products, including toothpaste, breath fresheners, and sunscreen.

Chemicals. Both the Environmental Protection Administration and the Ministry of Labor have recently adopted new registration systems for chemical substances. The report said the U.S. government has raised questions about the scope of coverage of the regulations and the protection afforded confidential business information, and in addition will continue to engage with the Taiwan agencies to urge harmonization of the two regulatory systems “to the extent possible.”

Medical devices. According to the report, “U.S. stakeholders and trade officials have encouraged Taiwan to adopt a flexible mechanism that would 1) reduce the stringency regarding which products may enter the market as self-pay or balance-billing devices, 2) provide Taiwan consumers a greater choice of advanced medical devices, and 3) provide clear self-payment guidelines to allow earlier access to new devices prior to the establishment of a reimbursement price.”

Dates have not yet been set for the 2015 TIFA Council meeting, which is slated to take place in Taipei.