The U.S. Congress showered attention on Taiwan in mid-September. Headlining was the Senate Committee’s vote to jack-up military assistance under the Taiwan Policy Act. A week later, AmCham loyalists followed Senior Advisor Don Shapiro’s speech at a Taiwan Congressional Caucus-supported launch in Washington of the Taiwan Matters for America / America Matters for Taiwan booklet, which your Chamber co-authored with the East-West Center.
Less reported but more revealing was a lengthy House Ways & Means Committee hearing, which delved into current and future trade negotiations with Taiwan. The near unanimous support for a comprehensive free trade deal among the representatives – Democrat and Republican – and four expert witnesses representing agricultural, labor, and political economy interests was astonishing.
A comprehensive Free Trade Agreement (FTA) with Taiwan is closer than at any time since Taiwan joined the WTO in 2002. Can Taiwan seize the day and secure its future in the process? My thumbnail on how to get there follows:
• Taiwan must match its commitment to military strengthening (such as arms purchases and reserve reforms), with comparable resolve to secure an FTA with the U.S. and break through decades of economic marginalization and China dependence. Moreover, trade agreements with fellow WTO members are legally uncontestable and thus hard for Beijing to use to justify “exercises” and other expressions of “outrage.”
• Negotiator-in-Chief Tsai Ing-wen should personally mobilize the campaign for free trade in 2023. Taiwan has not signed even a minor FTA in a decade, and no substantial trade deal has been made since 2002’s WTO accession, which Tsai was instrumental in shaping. With presidential elections in Taiwan and the United States pushing policy aside a year from now, Tsai’s immediate imprimatur is critical. She needs to pull along the private sector to support a lobbying campaign, an element common to every FTA The U.S. Congress has ratified.
• Make bold concessions, even via the current bilateral framework talks, to cajole Washington into comprehensive, binding negotiations that include market access. Agriculture is the place to begin – Taiwan has high 15% tariffs on many items, and American farmers carry outsized political punch in red, blue, and purple mega-states. Finally, irritants and incomplete measures abound here, most notably where a partial opening on pork led to cratering U.S. sales in 2021-22, in part due to implementing regulations.
• Win over die-hard skeptics by preempting Americans’ “enforcement anxiety” – the sense that from NAFTA to the Korea-U.S. Free Trade Agreement, and even in agreements on IP, MedTech, or beef with Taiwan, U.S. trade partners regularly fail to honor trade deals, weakening support for new accords. The potential for the PRC to free-ride on market access concessions is a particular worry for a U.S.-Taiwan FTA. “Rapid response mechanisms” such as those built into the United States-Mexico-Canada Agreement will be critical. So, too, will be President Tsai’s immense personal credibility in the United States.
• Make first moves on such “crunch topics,” as the environment, labor, and small business support. Taiwan can enter the green agenda with strength, advancing common standards and regulations on EV solutions or showing the way to trade in recycled products. Challenges to Taiwan’s labor practices, the major discordant note at the otherwise harmonious September hearing, will prove tougher challenges for Team Taiwan. But progress on migrant and fishing fleet crew abuses and curbs on union formation, participation, and bargaining can be proactively addressed to convert U.S. Labor from skeptic to backer of an FTA as a tool for Taiwanese and U.S. worker rights. Might not calls by American Labor for wage and other improvements match objectives that Taiwan has sought domestically as part of worker support, industry transformation, and escape of the “middle-income trap?”
• Swing for the fences on true 21st Century challenges. Once the above steps have generated trust and captured imaginations about Taiwan-America synergies, the United States won’t be able to resist this FTA. Key elements will include digital trade rules (with trade facilitation for micro-small-and-medium enterprises and cyber protections) and a China-proof approach to supply chain reform and technology management. Complex and sweeping disciplines such as two-way investment screening, export control, IP espionage cooperation, and tax and currency policy coordination all require a comprehensive and congressionally approved platform.
In sum, we’ve made headway on trade. From zero platforms in June 2021, we now have four. But none constitute a binding “market access-plus” structure. Nor, critically, will the Biden Administration chart a path from frameworks and dialogues to comprehensive, binding free trade.
Astute observers have pointed out that the U.S. Congress has every authority it needs to act on its expressed support for Taiwan and a Taiwan FTA by passing a tailored Trade Promotion Authority and directing the Administration to initiate negotiations. Political timetables and ample distractions discourage Congressional action – necessitating action by Taiwan and its disciplined and highly credible leader.
An FTA will not be easy to initiate, let alone complete. Yet the alternative might be an unfortunate march to confrontation and kinetic responses. President Tsai’s push on trade is urgently needed.