An Opportunity for Progress in U.S.-Taiwan Trade

Among the flurry of executive orders signed by U.S. President Donald Trump since taking office was one issued March 31 aimed at reducing the American trade deficit with countries with which the United States runs a significant trade imbalance. The order assigns the Secretary of Commerce and Office of the U.S. Trade Representative (USTR) – in consultation with other U.S. government departments including Treasury and Agriculture – to examine, country by country, the degree to which bilateral trade deficits are caused by “tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States.”

The Secretary of Commerce and USTR are then instructed to submit a report on their findings before June 29, providing the administration with what Commerce Secretary Wilbur Ross refers to as the “hard facts, not theories” on which to base trade-policy decision-making. Although the appointment of USTR-designate Robert Lighthizer is still awaiting Senate confirmation, Ross is reported to be energetically taking up his assignment under the executive order as a way to improve American trade competitiveness. Ross is also described as showing greater interest in agricultural trade issues than is typical for Secretaries of Commerce.

The five trading partners with the largest surpluses with the United States in the trade in goods are certain to get the most attention: China with a 2016 imbalance of US$347 billion, Japan with US$69 billion, Germany with US$65 billion, and Mexico with US$63 billion. South Korea’s imbalance was US$27.7 billion. But others with more than a US$10 billion trade gap with the United States are also expected to be subject to scrutiny, and that includes Taiwan, whose surplus last year as calculated by the U.S. government came to US$13.3 billion.

At first glance, inclusion anywhere on the list might be viewed as a less-than-welcome source of U.S. pressure to make concessions on trade issues. But for Taiwan the spotlight could turn out to be an opportunity. Unlike the other major trading partners, Taiwan lacks formal diplomatic relations with the United States, which keeps Taiwan from receiving as much attention by U.S. officials as it deserves. High-level government-to-government contacts are severely restricted.

At the same time, Taiwan badly needs U.S. support to avoid marginalization in the international economic arena as rival economies enter into more and more bilateral and multilateral trade agreements. The dim outlook for the Trans-Pacific Partnership trade pact following the Trump administration’s withdrawal has dashed Taiwan’s hopes of joining the TPP in a second round, leading Taiwan to turn its attention to the possibility of a bilateral trade or investment agreement with the United States.

The trade imbalance review over the coming months will at least ensure that Taiwan is on U.S. trade officials’ radar, and overall Taiwan should have a positive story to tell about its efforts to protect intellectual property, promote workers’ rights, eliminate technical barriers to trade, increase regulatory transparency, and cooperate with the United States in other areas of potential concern.

President Tsai Ing-wen hinted as much when she spoke in March at AmCham Taipei’s Hsieh Nien Fan banquet. “Faced with the new U.S. administration’s ‘America First’ policy, Taiwan is prepared to make adjustments,” she said, adding that Taiwan supports not only “free trade” but also “fair trade.” That is a message Secretary Ross should be glad to hear.