The President’s View appropriate to our annual Wine & Dine feature would be tasting notes on Taiwanese fruit beers. But I cannot resist a sobering look back at the last year for AmCham, paired with mention of two developments that I hope for during the coming Rabbit Year.
The China House: As we approached the passing of what would become a barely missed 2022, the U.S.-China relationship seemingly “found bottom” ahead of a Xi-Biden Bali meeting, and the rhythm and promise of interactions picked up. Today there is even a brand-new PRC policy coordinating group at the State Department nicknamed “the China House” – something that would at least sound hospitable, even if observers suspect that it signals an extension of the Trump-Biden hardline toward Beijing.
Tech curbs led by the U.S. government so far remain targeted on specific military end-uses and have not yet spread into what would surely be a pyrrhic quest to cap Chinese tech broadly.
Bilaterally speaking: The four (four!) economic frameworks set up or reactivated by Taipei and Washington in mid-2021 chugged forward. A preparatory round for the top-priority 21st-Century Initiative negotiations was held in November, while talks under a second framework broke the freeze on senior Biden Administration State officials’ travel to Taipei.
Through summer and fall a third series under the commerce ministries seeded tech business matchmaking and supply chain FDI. In-person visits to AmCham Taiwan also resumed in July with U.S. governors, Congressional delegations, think tankers, and company bosses racing to catch up on 33 months of postponed travel.
AmCham Advocacy: Our 2022 policy messaging deserves a few kudos. Under our annual “report cards” of government responsiveness to our recommendations and requests, the 2020 White Paper cycle generated top marks for Taipei (12 issues resolved), while 2021’s score declined by half. To its credit, the 2021 cycle included gains such as Taiwan’s streamlining of medical device approvals, the re-start of TIFA trade talks, and Washington’s consideration of supply chains when allocating vaccines to Taiwan.
The interim report card for the current White Paper cycle looks lackluster, overall. However, I am proud of our successful push to open Taiwan’s borders ahead of its elections and using a timely “flash survey” to temper Western observers’ overreactions to the PLA’s overreaction to Speaker Pelosi’s August visit. We also called for both capitals – but particularly Taipei – to accelerate healthcare and finance regulatory reform and to pursue trade breakthroughs more proactively. Both sets of steps could offset economic headwinds and risk premiums.
Fit for the fight: Our members enter the new year supported by the fittest Chamber in a decade. AmCham emerged from two years of Covid-disrupted programming with 71-year peaks in membership, revenue, surplus, and staffing. Jessica Chen. Lily Kuan. Jay Lin. Angelo Alvarez. Julia Bergstrom. Don Shapiro. They would be six top reasons for this strength since they doggedly led the sub-teams of your Chamber through tough sledding. Another important reason would be our 1,165 members: good numbers, rising engagement. The author of this piece? I had the sense to be in no one’s way.
Bold Moves for 2023
Against a glum panorama for global growth, it seems Taiwan will clock 2-2.5% growth in 2023 – a third of the growth level two years back but still respectable. Taiwan faces stark challenges, particularly in its shrinking labor force and razor-thin energy margins. Despite this, it is in many ways primed to leap ahead as much of the world struggles – if-if-if capitals Taipei and Washington can find the focus and boldness to, well, capitalize. For AmCham in 2023, I urge two actions:
#1 Get done what President Biden might term ‘a BF deal’:
The United States aims to safeguard Taiwan through “integrated deterrence,” and the defense element is making strides. But why are we still moving so timidly and piecemeal on the less provocative yet equally crucial economic element? First, we must double down on U.S.-Taiwan trade and investment integration. Our focus no longer needs to be the four established frameworks. These require little more than encouragement, occasional counsel, and, when requested, private-public partnerships to put theory into practice.
Rather, AmCham must lobby hard for a comprehensive and binding free trade agreement (an FTA, also known as a BTA, for bilateral trade agreement), a gold standard Digital Economy Agreement, or a means to avoid double taxation. Any one of these or another combination of narrow, functional agreements, ideally expanding market access – reducing tariffs or other limitations at the border – would benefit workers, businesses, and the environment in both economies.
These agreements could be initiated under fresh “Trade Promotion Authority” granted by Congress to the President or as enhancements to the executive agreements that the Administration is already pursuing under the 21st-Century Initiative.
Confidence game: A broad, binding accord would bolster Taiwan’s economy and confidence from outside and bind Taiwan to the international, non-authoritarian order. A bold accord with Washington would drive to fruition trade agreements with which some of Taiwan’s other partners have flirted, as well as propel its candidacy for membership in the CPTPP and other bodies.
“A trade alliance without limits”: The signing of a BTA has been a lodestar for AmCham since Taiwan’s 2002 admission to the WTO. In late 2020 we were co-founders of the BTA Coalition, a group that in 2022 doubled in size (but still lacks a single corporate member). Think tank Heritage Foundation researched the economic case for a BTA this year, and support
for Taiwan in the U.S. Congress was never higher nor more bipartisan. Last month Senators Coons (D-DE) and Portman (R-OH) introduced legislation on worker trade adjustment and directed the Administration to negotiate an FTA with Taiwan.
#2 Join “Taiwan outbound” … and unbound
Taiwan’s direct investment in China has remained relatively flat over the last five years. To the New Southbound countries, it is up 150%. To the United States, it is up 300%! When the recently announced US$45 billion in investments by the likes of TSMC, GlobalWafers, and Hon Hai are executed in the coming few years, the uptick becomes a surge. We can expect to find ourselves amid an industrial upgrade that simultaneously spurs growth abroad, yields massive soft power, and transforms Taiwan’s economy at home.
Semiconductors are the first mover, but similar waves should follow in 6G, EVs, clean tech, and smart manufacturing. There are at least three reasons why AmCham must take a seemingly counter-intuitive step for a Chamber that has been based in Greater Taipei for 71 years and get on board with the outbound trend. Call it Taiwan Unbound, or what investment strategist C.Y. Huang has termed Taiwan’s “re-globalization,” after a few decades of investment focused on this island and China.
It’s the economy: Taiwan faces the same pressures as all manufacturing and trading powers. Supply chains post-Covid are all about security, inventory, and diversification away from single sources. To stay relevant, Taiwan, too, must diversify production on-island and off. Kaohsiung, Phoenix, Kumamoto, Dresden, Hanoi, Bengaluru, Melbourne – these will soon become complements as familiar as Taichung is to Hsinchu today.
Contrary to occasional commentary, the restructuring of semiconductor and other tech supply chains is not leading to the “hollowing out” of Taiwan’s economy. We have enough evidence of investment in Taiwan from our members Entegris, Merck, Qualcomm, Micron, and TSMC (and potential members NVIDIA and ASML) to debunk this fear.
It’s the ally: Our Chamber should, out of self-interest, support Taiwan’s targeted support to the U.S. as a vital partner and defense guarantor. The anchoring investments begin with semiconductors – a sector critical to American, Taiwanese, and global stability.
Taiwan’s chip tech support helps guarantee peace, stability, and freedom of movement for Taiwan and the trade system upon which it depends. AmCham has long served as a bridge between the U.S. and Taiwan. In fact, alongside improving Taiwan’s business environment and competitiveness, bridging is our mission.
AmCham can help new investors – especially SMEs – acclimate and thrive in the United States by equipping their staffs with the kind of linguistic, cross-cultural, U.S.-business, and personal transition skills that European and Asian investors have benefited from in the past.
AmCham has been exploring with partners a sister offering to our in-Chamber leadership program, NextGen, as an internationalization course for future members. I have tagged it NextLeap. Our unique contribution will be to include senior managers and engineers in our English-language networking and educational events to practice online learning. AmCham may thereby attract Taiwanese capital members who are building stakes in the United States.
It’s the next big thing: President Tsai Ing-wen identified the recipe for Taiwan’s next phase of economic growth. The ingredients include geographic and sectoral diversification, customer proximity, talent attraction, bilingualism, and internationalization of the workforce, as well as overcoming “the five shortages,” escaping the value-add ceiling of contract manufacturing, and maximizing Taiwan’s “trust currency.” Her vision was good – and now the timing is, too.
The serendipity of 2023 is four-fold: a rebound from Covid, the shakeup of regional trade and investment patterns and the reset of global supply chains, and, finally, the opportunity to bet big abroad with partner support, such as from the CHIPS Act have put all the ingredients together. Any interest in a new Investment Committee and its Outbound Subcommittee? Go bold, Taiwan! Go bold, AmCham!