The Return of U.S. State Offices

More American states view Taiwan as both a market for their products and a source of incoming investment.

As recently as three years ago, only six U.S. state governments were operating offices in Taiwan to promote business with the island. Today the number is 17, including Guam (an American territory that in this context is treated as a state). At least two more states – Ohio and New Jersey – have announced plans to establish offices, and there are rumors of more in the pipeline.  

The increased interest in the Taiwanese market at the state level is also seen in the steady stream as governors who have been visiting as the head of trade delegations. Over the past 18 months, Taiwan has welcomed the leaders of Arizona (twice, by two different governors), Indiana, Idaho, Michigan, Montana, New Jersey, New Mexico, and Virginia. “It’s like a tsunami of attention,” says Liran Golan, who directs the Pennsylvania office in Taipei. 

A number of factors, both economic and political, have been responsible for states’ decisions to open an office in Taipei – or in some cases to return to Taiwan after having previously entered and then departed the market. In the early years of this century, the number of American states with representation in Taiwan reached a peak of 22 before seeing an extended decline as Washington-Beijing relations steadily improved and the prospect of booming business with China captured the imagination of many U.S. companies.  

Meetings with President Tsai Ing-wen, pictured here with Arizona Governor Katie Hobbs, have become a prominent feature of gubernatorial visits to Taiwan.

Eddie Yen, who has run the Idaho office in Taiwan for more than 30 years, has observed the ebbs and flows. “In the early 2000s, many states maintained offices in both China and Taiwan,” he recalls. “At that time, the U.S. treated China as a kind of friendly competitor and hoped that China’s admission to the WTO would lead to it becoming a more open and democratic country.” 

A turning point came with the global financial crisis of 2007-2009. Faced with big drops in tax revenue, many state governments were forced to retrench. “Instead of having offices in both China and Taiwan, they tended to keep their China office and close the one in Taiwan, which was understandable when looking at the difference in market size,” says Yen.  

During the past few years, however, the situation began to reverse. As a result of the steep tariffs the Trump administration imposed on Chinese products and the general souring in U.S.-China relations that continued under President Biden, “many U.S. companies simply no longer want Chinese products, causing importers to make changes in supply chains,” Yen notes. Buyers have started looking more intently at other potential markets in the region, including Taiwan, Korea, and Japan. 

The recent strengthening of the U.S.-Taiwan relationship has also had an impact. The attitude of the state governments is often influenced by the direction of national foreign policy, and state-level officials have been keenly aware of the increasingly supportive American posture toward Taiwan. That support has been evident not only in statements by administration officials from President Biden on down and by members of Congress, but in practical terms through increased military assistance, progress toward the conclusion of a double-taxation avoidance agreement, and the ongoing negotiation of the U.S.-Taiwan Initiative on 21st-Centry Trade, the highest-level trade agreement ever entered into by the two parties.  

In response to requests for guidance from state officials, the U.S. government has sought to assuage any potential concerns about active engagement with Taiwan. For example, a “Dear Governor” letter dated February 28, 2023, and signed jointly by Assistant Secretary of State Daniel J. Kritenbrink, Assistant Secretary of Commerce Arun Venkataraman, and Daniel Whitley, head of the Department of Agriculture’s Foreign Agricultural Service, states that expanding states’ “relationship with Taiwan in areas such as trade, education, investment, and tourism is fully compatible with and supports U.S. policy and can be beneficial to your state.”  

The letter adds that the “U.S. one-China policy encourages commercial, cultural, and other engagement with Taiwan.” It refers to “our shared values and robust relationship with Taiwan,” which it describes as a “vital U.S. partner and democratic success story.” A similar letter was sent to mayors of major American cities.  

During his October visit to Taiwan, New Jersey governor Phil Murphy announced that his state’s first Asia-Pacific trade office would be located in Taipei.

For their part, Taiwan’s diplomats in the United States have been active in contacting state governments to encourage them to send trade delegations and open trade offices in Taipei if they have not already done so. Besides the Taipei Economic and Cultural Office in the United States (TECRO), the quasi-embassy in Washington, Taiwan is represented in 12 other locations around the country with offices that would be considered consulates if there were formal diplomatic relations. Each of those offices keeps in close touch with state governments throughout its region. 

Eye on investment 

Yet another critical element in the increased attention Taiwan is receiving from American states is the growing awareness of Taiwan as a source of potential foreign direct investment (FDI). State officials have noticed that each year, Taiwanese companies constitute one of the largest foreign delegations – recently the largest – to the U.S. Commerce Department’s SelectUSA Investment Summit in Washington, D.C. And it made an even bigger impression when Taiwan Semiconductor Manufacturing Co. (TSMC) committed to building a huge production complex in Arizona, a project now valued at US$40 billion. 

“That opened a lot of people’s eyes about Taiwan,” says Mei Mei Wang, the head of the Montana trade office in Taipei. “When they saw such a big investment coming from TSMC and so many of its suppliers setting up operations in the U.S., it made them aware of what an important investor Taiwan can be.” 

Whereas the American state offices in Taiwan once concentrated on promoting export products from their state, today most of the offices are also seeking to attract Taiwanese corporate investment to boost job creation – and some of the newer offices are focused exclusively on investment promotion. The geopolitical pressures that might give multinational companies pause about further investments in Taiwan are not an issue for investments in the other direction. As one state’s representative put it, “if there is more tension in this part of the world, more Taiwanese companies might think about hedging their bets” by establishing an operation in the United States. 

Many states seem to be looking at the same industry sectors for potential investors, including electric vehicle (EV) and other automotive components, batteries, aviation and aerospace components, semiconductors, and other technology-oriented fields. 

A group of National Taiwan University students on a dig for dinosaur bones in Montana, arranged through the state office.

They are under no illusions about snaring another mammoth project like TSMC’s. In fact, some states, like South Carolina, are specifically targeting small and medium-sized enterprises (SMEs). “This is our niche,” says Sam Leng, director of the South Carolina office. “In some states, smaller companies worry that they won’t get a lot of attention. We assure them that we not only welcome them – we’ll go the extra mile to make sure they are satisfied.” 

Concluding an investment deal is inevitably a long-term proposition. “It’s not a decision that companies can make quickly,” says Ricky Lee of the West Virginia office. “So even after you identify a company that wants to go abroad, it takes a long time to convince them of the advantages of West Virginia and how we can give them support.”  

Still, several states have already registered some recent investment-project successes. This July, New Mexico announced that Taiwan’s Hota Industrial Manufacturing Co. will build a plant there for production of automotive gears in a project valued at US$72 million. North Carolina last month reported on a potential deal in which 16 Taiwanese EV component makers would invest in the state. In Guam, Taiwan’s Honhui Group will reportedly invest over US$300 million to construct a 913-room luxury resort hotel plus condominiums that will become the tallest building in Guam. Groundbreaking is scheduled for the first quarter of 2024.     

Scope of activity 

In terms of trade promotion, the offices assist companies in their state in finding importers or distributors, exhibiting at selected trade shows, and holding events to gain media publicity. For some states, the nature of their operation has changed substantially over the years. When Wang headed the Montana office from 1988 to 2012, for example, the main responsibility was promoting exports of wheat and wooden products like plywood and log houses, as well as tourism to Yellowstone and Glacier National Parks. Then the office closed due to a decision to focus on China, and Wang then spent nine years working in the Commercial Section at the American Institute in Taiwan (AIT).  

Rehired when the Montana office reopened in 2021, Wang found that the state’s priority had shifted to developing its high-tech business. Because Montana State University is a leading center for photonics research, the state in recent years has spawned a number of companies in that field, specializing in such applications as semiconductor manufacturing, 3D mapping for defense, food testing, and drones.  

Similarly, the University of Montana’s work on bioscience has opened new commercial opportunities. Among the companies in a recent trade mission were specialists in acute pain management and immunotherapies. 

Some state offices have particular areas of specialization. For Hawaii and Guam, for example, the main mission is to promote tourism. In the case of Guam, the closest territory of the United States to Taiwan, the attractions are the island’s natural beauty, water sports, and duty-free shopping, and the number of Taiwanese visitors is gradually inching back toward the pre-Covid level of 30,000 a year. Taiwanese tourists can enjoy the convenience of using their Taiwan ID card to rent a car, without the need for an international license. Since the Chamorro people of Guam are of the same Austronesian origin as Taiwan’s Indigenous tribes, the Guam office also helps arrange related cultural interchanges. 

Just as most funding for the Guam Taiwan office comes from Guam’s Tourism Bureau, the Minnesota and Missouri offices come under those states’ Department of Agriculture and concentrate on such products as soybeans, corn, and wheat. To that list, Minnesota adds dairy products and Missouri exports pet food. 

The Missouri and Idaho offices have a regional role, using exhibitions and trade delegations to promote their states’ products beyond Taiwan, especially to Vietnam and other Southeast Asian countries. The reopened Montana office also includes “Asia” in its title but first devotes all its efforts to Taiwan before taking on a wider responsibility.  

For many offices, raising the profile of their states’ universities and other educational institutions in Taiwan is a lesser but still important part of their portfolio. 

Challenges and opportunities  

The effectiveness of a Taiwan-based state office depends heavily on the degree of support from its headquarters back in the United States. The amount of budget available may vary with changes in economic – and political – conditions back home. New governors or legislative majorities may have different priorities than their predecessors, sometimes favorable for international promotion, sometimes not. In several cases over the years, the Taipei office had to rely on its own resources for several months while state legislators wrangled over budget approvals. Realizing the financial burden even when budgets are in place, Taiwan’s Ministry of Foreign Affairs helps out with subsidies for office rental expenses, especially for newcomers to the market. 

One state office director also cautioned against the “long-term fatigue” that can develop among colleagues back in the state government. “Providing the necessary support is a lot of work,” the director notes. “People get tired, people change jobs. It’s hard to stay consistent.” Offices with sustained achievements credit the dedication of the staff in their parent agency in the U.S. state as fundamental to their success. 

Also crucial is establishing close working relationships with key partners, including AIT, the various sector-specific industry associations, organizations like the Taiwan External Trade Development Council (TAITRA) and Importers and Exporters Association of Taipei, and such government agencies as the Taiwan-USA Industrial Cooperation Promotion Office (TUSA) of the Ministry of Economic Affairs.  

Many of those relations are cemented through the American State Offices Association (ASOA), currently headed by Felix Yen of the Guam office. “When state delegations come to Taiwan, ASOA is usually their first or second stop,” says Yen. “We let them know how ASOA can help in disseminating information, arranging representation at key trade shows, and maintaining good connections with the local industry associations.” As a member of AmCham Taiwan, ASOA also provides an umbrella for the state offices to interact with the Chamber. 

Pennsylvania’s Golan marvels at the sense of camaraderie he has found among the state office representatives. “You might expect it to be fierce competition, but it’s a rare collaboration that I doubt exists in many other markets.”  

With the current growth in membership, ASOA is looking forward to becoming even more active. “Despite budget constraints and other challenges, there is a lot we can do – not just for our states but also for Taiwan and the U.S.-Taiwan relationship,” says Irene Tsai, who heads the Minnesota office. “There is no shortage of opportunities.”