Taiwan is urged to take early action in resolving outstanding trade issues.
Despite continuing uncertainty about the ultimate fate of the Trans-Pacific Partnership (TPP) trade pact within the U.S. political process, AmCham Taipei’s 2016 “Doorknock” delegation to Washington D.C. heard from many observers inside and outside the U.S. government that Taiwan should take urgent steps to show its readiness to abide by high-standard provisions governing international trade and investment.
The Doorknock delegation, led by Chamber Chairman Dan Silver and President Andrea Wu, held nearly 50 meetings from June 20 to 24 with U.S. executive-branch agencies, members of Congress and their staff, think tanks, industry associations, and others concerned with U.S.-Taiwan economic relations. AmCham began each meeting by presenting a two-page handout outlining why Taiwan matters to the United States, including its rank as America’s ninth-largest trading partner, crucial place in the supply chain of many U.S. technology companies, and open political system sharing American values of democracy, freedom, and human rights.
Although there has been a proliferation of criticism in the United States in recent months about the value of free-trade agreements, many of the experts the group met in Washington suggest that U.S. ratification of TPP should be viewed as a question of “when, not if.” These analysts cautioned against taking “election-campaign rhetoric” at face value, and noted that Congress has never failed to approve a trade agreement negotiated by the executive branch, although the process is often lengthy and turbulent. Aside from the United States and Canada, the delegation learned, the other 10 TPP negotiating parties are already well along in obtaining ratification from their legislatures.
For Taiwan, however, a particular challenge is that China can be expected to try to block its entry into a future TPP second round by exerting pressure on the original 12 members, who must agree unanimously on any additional economies to be invited to join the pact. As a result, Taiwan would be put in the position of having to show that its credentials for inclusion are exemplary, leaving no room for other countries to question its qualifications.
A theme in numerous Doorknock meetings was the need for Taiwan to engage in regular in-depth communications with all 12 TPP countries, not just the United States, to cultivate support and ward off any potential opposition to its candidacy.
It was also pointed out that even if TPP fails to come into being (or if Taiwan fails to gain admission), Taiwan will still need strong support from the United States and other major trading partners. In the place of multilateral agreements such as TPP, the focus would then shift to bilateral initiatives, but the aims would be the same: ensuring competitiveness, forestalling marginalization from the international trading community, and diversifying trade to avoid over-concentration on any single market.
For that reason, a widespread view heard in Washington is that it would be a strategic mistake for Taiwan to delay the completion of reforms needed to become TPP-ready – whether from belief that TPP will be slow to materialize or from a desire to hold onto bargaining chips. The prospective reforms would benefit Taiwan regardless of TPP’s progress and would build valuable good will among trading partners, it was noted.
In addition, for second-round entrants there will be less that is subject to negotiation. The newcomers will have to accept the package of rules already agreed upon by the original 12 countries, although they may have some room for maneuver regarding the pace of phasing in tariff cuts for particular items.
The advice for Taiwan, therefore, was that the new administration take early action to resolve – or at least achieve concrete progress on – outstanding agricultural and other trade issues, basing its decisions firmly on scientific evidence as is expected of a country as technologically advanced as Taiwan. The next “TIFA Council” meeting – the annual U.S.-Taiwan talks under the Trade and Investment Framework Agreement – is scheduled to take place in Washington within the next few months, and the U.S. side has made known its desire for the meeting to bring some clear-cut positive results.
American Chamber of Commerce in Taipei
2016 Doorknock, Washington, D.C.
June 20-24, 2016
National Security Council
Office of the U.S. Trade Representative
Department of State
Department of Commerce (International Trade Administration)
Department of Health & Human Services
Congressional Research Service
Offices of Senators Charles Grassley, James Inhofe, John McCain, Patty Murray, Bill Nelson, David Perdue, Robert Portman, Pat Roberts, Marco Rubio, and John Thune.
Offices of Representatives Ami Bera, Gerald Connolly, Scott DesJarlais, Mario Diaz-Balart, Randy Forbes, Tom Marino, Grace Meng, Devin Nunes, Bill Pascrell, Erik Paulsen, David Reichert, Paul Ryan, Matt Salmon, Brad Sherman, and Adrian Smith.
Staff from Senate Foreign Relations Committee and House Ways and Means Committee
American Institute in Taiwan/Washington
Asia Society Policy Institute
Council for Strategic and International Studies
DPP Liaison in Washington
Emergency Committee for American Trade
National Foreign Trade Council
Peterson Institute for International Economics
Samuels International Associates
Taipei Economic & Cultural Representative Office
U.S. Chamber of Commerce
U.S.-Taiwan Business Council
In many meetings the AmCham team introduced its proposal – set out in the 2016 Taiwan White Paper – that Taiwan enhance the transparency and effectiveness of its rules-making process by revising its Administrative Procedures Act (APA) to create a common platform for all executive agencies to notify the public of any proposed new or revised regulations, provide ample time (60 days) for stakeholders to submit comments, and require the agencies to post their general response to the feedback.
The comment period in the Taiwan system is being expanded from seven to 14 days, but that level is still widely considered to be woefully inadequate. Sources in Washington noted that China is already providing at least a 30-day period.
The Doorknock delegation found broad agreement that Taiwan’s adoption of a rigorous “second-generation APA” could head off many industry issues and prospective trade disputes before they ever occur, and would help to burnish Taiwan’s qualifications as a dedicated and progressive member of the global trading community.
During the delegation’s week in Washington, much of the conversation centered on the likely timetable for Congressional ratification of TPP, which was signed by representatives of the 12 governments this past February at a meeting in New Zealand. There has been considerable speculation that the issue of TPP approval might be brought to a vote at a “lame-duck” session of Congress late this year after the November 8 elections.
Prospects for such a vote would be greatly enhanced if an understanding is reached to satisfy the pharmaceutical industry about the strength of data protection to be provided to biologic drugs under TPP. Orrin Hatch (R-UT), chairman of the powerful Senate Finance Committee, has been championing the pharmaceutical industry’s position, and broad Republican support for TPP could be in doubt without his backing. The AmCham group was told that intensive talks have been under way between Hatch and President Obama’s trade advisers toward finding a solution.
If the lame-duck window is missed, the next opportunity for a ratification vote would be early in the administration of the next U.S. president, who will be inaugurated January 20, 2017. Otherwise, consideration would probably have to wait until after the mid-term elections in 2018.
If TPP does enter into force, Korea is regarded as the leading candidate for inclusion in a second tranche. As Seoul has already negotiated a KORUS free-trade agreement with Washington that resembles the content of TPP in many respects, it is considered the furthest along in TPP preparedness. Besides Taiwan, other countries that have expressed strong interest in joining TPP include the Philippines, Indonesia, Thailand, and Colombia. But since Korea is Taiwan’s chief trade rival, it would be particularly detrimental if Seoul is able to participate in TPP, but not Taipei.
“Overall, we felt that the atmosphere in Washington this year was especially supportive toward Taiwan, which was very encouraging,” says Andrea Wu. “There was less talk about problems or irritants in the bilateral relationship, and much more about opportunities for the two sides to expand cooperation.” The United States and Taiwan, for example, recently established a Global Cooperation Training Framework (GCTF) through which Taiwanese experts in various fields – environmental protection and the digital economy are examples – will participate in U.S. programs to offer training in third countries. GCTF provides a new channel for Taiwan, despite political obstacles, to increase its engagement in the international arena.