Domestic & International Brief – October 2023

Representatives from Virginia, led by Secretary of Commerce and Trade Caren Merrick (center), celebrate the opening of the Virginia-Taiwan Trade Office in Taipei on September 19.


A selection of these news stories are also covered in AmCham Taiwan’s Executive Sweet podcast, available on Apple PodcastsSpotify and online, here.

Senate Committee Passes Taiwan Tax Bill

The U.S. Senate Finance Committee unanimously passed the United States-Taiwan Expedited Double-Tax Relief Act on September 12. If passed by the Senate, the bill would add a new section to the U.S. Internal Revenue Code extending tax benefits to the cross-border operations of U.S. and Taiwan enterprises and workers, aiming to remove a significant obstacle to increased U.S.-Taiwan bilateral investment. 

Taiwan’s representative to the United States, Hsiao Bi-khim, stated that Taiwanese enterprises investing in the United States currently face triple the tax burden compared to competitors from countries that have tax agreements with the United States. Currently, Taiwanese companies operating in the United States face withholding tax in both the U.S. and Taiwan when repatriating profits.  

The bill includes the reduction of withholding taxes, application of permanent establishment rules, treatment of income from employment, and the determination of qualified residents of Taiwan. To come into effect, it would require reciprocal tax arrangements for American businesses and workers in Taiwan, which Taiwan’s Ministry of Finance would prepare once the bill passes through the full legislative process in the U.S. Congress. 

U.S. and Taiwan Announce Cybersecurity Collaboration  

During a three-day visit to Taipei, National Institute of Standards and Technology (NIST) Director Laurie E. Locascio said that the United States and Taiwan will expand cooperation on cybersecurity issues. According to the Ministry of Economic Affairs (MOEA), the two sides will build a joint cybersecurity supply chain under the U.S.-Taiwan Technology Trade and Investment Collaboration (TTIC) framework, which was established in 2021 to strengthen bilateral supply chains and develop joint commercial projects.  

During her visit, Locascio also attended U.S. Business Day, which aims to foster relationships between U.S. and Taiwanese companies. Governor of Arizona Katie Hobbs and Governor of New Mexico Michelle Grisham also attended the event. Hobbs said she expects more Taiwanese companies to invest in her state after the Taiwan Semiconductor Manufacturing Co. (TSMC) chose Arizona for its first U.S. facility.  

Grisham announced that Hota Industrial Manufacturing Co., a Taiwanese company that supplies auto components to electric vehicle manufacturers, including Tesla, will invest US$99 million to set up a production facility in her state.  

Virginia Opens Taiwan Trade Office  

The state of Virginia opened its Taiwan Trade Office on September 19, aiming to encourage greater commercial and investment relations between Taiwan and the Commonwealth. The opening was attended by Virginia’s Secretary of Commerce and Trade Caren Merrick, representatives from the American Institute in Taiwan (AIT), and Taiwan’s Ministry of Foreign Affairs.  

In 2022, Virginia exported US$730 million of goods and services to Taiwan and imported US$1 billion from Taiwan, making Taiwan the state’s ninth-largest overseas trading partner. Taiwan now becomes the site of Virginia’s fourth offices around the world, following Germany, Japan, and South Korea. During the opening ceremony, Merrick said that the office would help Taiwanese companies looking to expand their business opportunities in Virginia, particularly in agriculture, electric vehicles, aerospace, and other sectors. The office is the 15th U.S. state trade office currently operating in Taiwan. 

Taiwan to Receive U.S. Military Aid

The U.S. government has, for the first time, granted approval for Taiwan to receive military aid through the Foreign Military Financing (FMF) program, which is usually reserved for sovereign nations. The purpose of the aid, worth US$80 million, was described as enhancing Taiwan’s self-defense capabilities within the framework of the United States’ one-China policy. The decision had bipartisan support and is widely viewed as a concrete implementation of the Taiwan Enhanced Resilience Act.  

On September 1, Vice Chairman of the U.S. House Armed Services Committee Rob Wittman met with Taiwanese President Tsai Ing-Wen. During the meeting, Wittman emphasized that the United States would respond forcefully to any unprovoked armed attack against Taiwan by any country or power. In a statement, Taiwan’s Ministry of Foreign Affairs thanked the U.S. government for “continuing to implement its security commitments to Taiwan in accordance with the Taiwan Relations Act and the Six Assurances.” 

Taoyuan Transits Streamlined

Passengers flying from the United States will no longer have to go through security checks when transiting at Taiwan Taoyuan International Airport, Taiwan’s main gateway. The Civil Aeronautics Administration (CAA) said that the new policy would speed up the process of transferring passengers, saving them almost an hour of waiting time. It would also improve the overall user experience and help make Taoyuan transits more competitive than other regional transfer hubs. According to the CAA, approximately 30% of all transfers at Taoyuan currently involve passengers from the United States, up from 25% before the pandemic. 

It is estimated that up to 3,000 travelers per day on three Taiwanese airlines – China Airlines, EVA Airways, and Starlux Airlines – would be able to avoid additional security checks on arrival at the airport. Before implementing the new procedures, CAA personnel in July visited San Francisco International Airport to ensure that U.S. security checks meet Taiwan’s aviation security standards.  

KMT’s Hou Yu-ih Visits United States

Presidential candidate for the opposition Kuomintang (KMT) Hou Yu-ih recently concluded an eight-day visit to the United States, where he met with officials from the Washington office of the American Institute in Taiwan (AIT), members of the U.S. Congress, leading think tanks, and representatives of the Taiwanese diaspora. During his tour, which included stops in New York, Washington, D.C., and San Francisco, Hou said that the U.S. was Taiwan’s “sincerest ally and friend” and that he looked forward to deepening ties if elected next January.  

While in Washington, Hou met with Senator Dan Sullivan (R-AK) and Congressmen Mike Garcia (R-CA), Pete Sessions (R-TX), and Keith Self (R-TX) and visited such think tanks as the Brookings Institute, the Council on Foreign Relations, and the National Committee on American Foreign Policy. Hou, a former police officer and currently mayor of New Taipei City, also briefly met with the mayor of New York City, Eric Adams, who had been a captain in the New York City Police Department.  

KMT presidential candidate Hou Yu-ih met with Mayor of New York City Eric Adams during his visit to the United States.

Taiwan to Introduce Subsidies For IC Chips

Taiwan’s government is planning to allocate NT$800 million in subsidies for smaller domestic IC design companies. The budget is part of an NT$2.5 billion fund for the wider semiconductor industry proposed by the National Science and Technology Council. The Ministry of Economic Affairs (MOEA) is expected to start distributing subsidies early next year once the proposal receives approval from the cabinet. 

In a statement, the Industrial Development Administration under the MOEA said that the funding aims to help small domestic designers develop advanced IC processes in the face of expected competition from China following the United States’ announcement of semiconductor export controls in October 2022.  

Terry Gou Announces Tammy Lai as Running Mate

Terry Gou, founder of manufacturing giant Foxconn and independent presidential candidate, has picked actress-singer Tammy Lai as his vice-presidential running mate, making him the first of the four leading presidential aspirants to announce a vice-presidential candidate. Lai, who recently portrayed a Taiwanese presidential candidate in the popular Netflix political drama Wave Makers, does not have prior political experience. 

Gou said that he selected Lai due to her ability to provide a “female perspective to help foster a more equitable and gender-balanced culture in Taiwan.” Gou and Lai will need to collect around 290,000 signatures before a November deadline in order to be included in the ballot for the January 13 election.  

More challenging than reaching that figure will be Lai’s renunciation of her U.S. citizenship before November 24, as required by Taiwan’s election laws. In a statement, the American Institute in Taiwan (AIT) said that the process usually takes between four and six months and that there may not be enough time to complete the process before the November deadline.   

Chinese Incursions at Record High

Taiwan’s Ministry of National Defense (MND) on September 18 detected 103 Chinese military aircraft and nine ships in the Taiwan Strait and waters to Taiwan’s south and southeast, surpassing the previous high of 91 aircraft set in April.  

Of the 103 aircraft detected, 40 crossed the median line of the Taiwan Strait and entered the southwestern and southeastern parts of Taiwan’s Air Defense Identification Zone (ADIZ). In a statement, MND called on China to stop its “unilateral military harassment,” saying such actions disrupt regional peace and stability.