China Push To U.S. And Taiwan Trade Deals

China To U.S-Taiwan Relations

As U.S.-China relations continue to deteriorate and the situation in the Taiwan Strait is becoming increasingly tense, the U.S. and Taiwan recently conducted an economic negotiation with great practical significance for deepening bilateral relations. China threatens to push U.S. and Taiwan to seek new trade deals, deepen the substantive relationship. It is expected that this negotiation will bring new impetus to the development of U.S.-Taiwan relations.



The security and defense relations between the United States and Taiwan have been deepening in recent years, but they have stagnated in many aspects of the economic and trade field for many years, which is considered to be a major flaw and hidden danger in the development of bilateral relations and the security situation in the Taiwan Strait. In order to break this situation, the United States and Taiwan launched the "US-Taiwan 21st Century Trade Initiative" in June this year, and held the first negotiation last Tuesday (November 8).


Economic and Trade 

After two days of negotiating meetings, the USTR called the talks "very productive" and more meetings will be held "in the near future". The Taiwan side also stated that the participants showed "extremely high" willingness at this meeting, and the results of the meeting were very positive and constructive. A press release from the Economic and Trade Negotiation Office of the Executive Yuan of Taiwan also stated that the topics of this discussion were quite extensive, mainly focusing on the exchange of views between the two sides on the similarities and differences in their respective overall legal systems, as well as policies and practices for maintaining a favorable business environment for companies on both sides.


President Tsai Ing-wen also said in a meeting with the Center for American Progress (CAP), a think tank in Washington, DC on Monday (November 14) that in the future, Taiwan and the United States will hold more meetings to promote cooperation in the field of trade.

Deng Zhenzhong (second from right), political councilor and chief economic and trade negotiator of Taiwan's Executive Yuan, meets with Deputy U.S. Trade Representative Sarah Biarch (second from left) in Washington on June 30, 2022. (Provided by the Taipei Economic and Cultural Representative Office in the United States)

Unprecedented Power

The United States and Taiwan signed the "Trade and Investment Framework Agreement" (TIFA) as early as 1994. Up to last year, there have been more than ten rounds of talks, but overall progress has been very limited. The U.S. pork imports of ractopamine and clenbuterol led to the suspension of this communication platform between the two parties for many years.


After Taiwan lifted its import restrictions on U.S. pork at the beginning of last year, this obstacle is considered to have been basically eliminated. However, analysts pointed out that another important reason for the two sides to actively engage in a new round of negotiations is the security situation in the Taiwan Strait and the deterioration of U.S.-China relations. economic factors.


Tensions in the Taiwan Strait have been tense for decades and have taken a turn for the worse in recent years. From the US military to strategic observers, people from the US military to strategic observers are increasingly talking about the possibility of China's military attack on Taiwan in the next few years. Although Taiwan is small in size, as the world's leading semiconductor supplier, it occupies an extremely important position in the world economic structure. Its economic connection with the United States and China is directly related to regional security and stability.


David Sacks, a fellow at the Council on Foreign Relations, said there was certainly economic value in trade talks with Taiwan, one of the top 10 U.S. trading partners and a key part of global supply chains. But the negotiations are also highly geostrategic.


"I think from the U.S. perspective, it sends a strong signal to Taiwan and China that we're going to invest in our partnership with Taiwan and that's an important thing for us," he told VOA. Relationships. So I do think there is some geopolitical dynamic or motivation to it that we haven’t had since we started negotiating the Trade and Investment Framework Agreement (TIFA) in 1994.


Whether it is the United States or Taiwan, their respective economic ties with China are far greater than their trade with each other. Exports to mainland China will be $188.91 billion in 2021, compared with $65.7 billion to the U.S., according to Taiwan's Ministry of Finance. A CNBC report said that over the past five years, Taiwan's imports from mainland China have surged by about 87%, while imports from the United States have increased by 44%. A World Trade Organization study said nearly 45 percent of Taiwan's exports were destined for China and Hong Kong in 2020, compared with just 14.5 percent for the United States. Against the background of deteriorating geopolitics in the region, both sides are working hard to strengthen their economic ties and ensure that they will not be overly dependent on China.


U.S. Assistant Secretary of State for Asia-Pacific Affairs Daniel Kritenbrink said the initiative is not only aimed at increasing trade volumes and cooperation between the U.S. what's more, Taiwan but on the other hand "is a valuable chance to help Taiwan in building its flexibility and guaranteeing that we can have a solid relationship." A versatile and secure store network."


Christine McDaniel, a senior fellow at George Mason University's Mercatus Center and a former deputy assistant secretary of the Treasury, said both sides appeared comfortable with the in-person first round of talks.


In an interview with Voice of America, she said that in terms of the economic and potential economic impact of the free trade agreement, it is expected that the United States will not benefit much, and some of the driving forces behind the agreement are non-economic factors. She said: "This is not the first time that the United States and Taiwan have discussed a formal trade agreement, but now it seems that there is a lot of political interest on the US side. In fact, the US-Taiwan free trade agreement is the current Republican and Democratic parties on trade and trade policy. One of the only consensuses that the two sides have reached, so that's one impetus to push it (the U.S.-Taiwan trade deal) through, or at least push it forward."


In addition to the Treasury Department, McDaniel, who has served in the White House, the Office of the Trade Representative, and the US International Trade Commission, said that the expansion of economic and trade relations between the United States and other countries is often not based on economic considerations. She said that if you look at the countries that have signed free trade agreements with the United States, you will find that there are many small countries like Morocco, Jordan, Bahrain, etc., which really shows that there are non-economic considerations.


McDaniel recalled that in late 2000 and 2001, she worked for the independent government agency, the US International Trade Commission. At that time, they were asked to study the potential economic impact of the US-Taiwan Free Trade Agreement. They did the economic analysis, modeling, etc., and found that the US would benefit slightly.


But, as we know, those talks didn't come to fruition, partly because of friction in the agricultural sector, but also non-economic factors at play, largely probably not wanting to annoy China at the time, but times have changed. "But now, because non-economic geopolitical factors may be more inclined to do so (negotiations), maybe the U.S. is willing to ignore some of the frictions in terms of market access in Taiwan that they were not willing to ignore before," she said.


The "Initiative" May Be The First To Open Up

To isolate Taiwan internationally, China has for years sought to marginalize Taiwan in international trade. Although Taiwan is a member of the World Trade Organization and the Asia-Pacific Economic Cooperation (APEC) forum, it is not the two largest regional trade organizations - the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership Agreement (RCEP) member.


Clark Packard, a senior fellow at the Cato Institute, pointed out in a recent article that the United States is not paying enough attention to its economic influence while emphasizing its security role in Asia. For economic and geopolitical reasons, it has become increasingly clear that the United States needs to demonstrate its international economic leadership in the Asia-Pacific region, he said. For now, the U.S. has only two free trade agreements with Asian countries — South Korea and Singapore.


In May of this year, President Biden launched the Indo-Pacific Economic Framework (IPEF) with the participation of more than 10 countries during his visit to Tokyo. The framework is considered to be aimed at making up for the economic shortcomings of the US "Indo-Pacific strategy" and countering China's influence in the Asia-Pacific region. In order to ensure that Taiwan can also join in, more than 200 members of the House of Representatives and 52 senators signed a letter to the White House and cabinet officials at that time, urging the Biden administration to accept Taiwan. The lawmakers noted in their letter that Taiwan is increasingly dependent on China and that it is also critical to diversifying U.S. supply chains.


However, the Biden administration ultimately chose to use the "US-Taiwan 21st Century Trade Initiative" to strengthen economic and trade exchanges between the two sides, and at the same time avoid other Asia-Pacific countries from worrying that they would be retaliated by China for inviting Taiwan.


China recently once again expressed its firm opposition to the "US-Taiwan 21st Century Trade Initiative". The Taiwan Office of the State Council in charge of Taiwan affairs in China stated that Taiwan's speculation that the recent two-party meeting has achieved fruitful results is that the Democratic Progressive Party has "betrayed" for "independence" political self-interest. interests of the people on the island in exchange for external support.”


Sachs, a fellow at the Council on Foreign Relations, said being excluded from such international trade organizations would ultimately damage Taiwan's economy and increase China's influence over Taiwan. He noted that a U.S.-Taiwan trade deal could provide a layer of political cover for other countries to start their own negotiations with Taipei.


In an interview with Voice of America, he said that Taiwan has realized that Asia is moving towards trade liberalization, of which Taiwan is not a part, and that if the United States negotiates a trade agreement with Taiwan, it will give other countries the confidence to start trading with Taiwan Negotiations, whether it is Australia, South Korea, Japan, or Southeast Asian nations, "assuming the US is ahead, they will follow."


FTA May Still Be Out Of Reach

Although the recent economic and trade negotiations between Washington and Taipei are progressing smoothly, Taiwan’s economic and trade chief negotiator Deng Zhenzhong even expressed the hope that the negotiations will be completed next year, and Taiwan’s ultimate goal is to sign a free trade agreement with the United States. But observers pointed out that it may be too optimistic to think that the United States and Taiwan can reach a free trade agreement in the near future because it is difficult for the United States to make concessions on issues such as market access and tariffs.


George Mason University's McDaniel said security concerns are enough to motivate the U.S. to aggressively pursue agreements with Taiwan such as the U.S.-Taiwan 21st Century Trade Initiative, which it has failed to reach for years, but not enough to allow the U.S. to open the door to market access.


Sachs of the Council on Foreign Relations also believes that although the first round of negotiations on the "Initiative" is progressing smoothly, the chances of reaching a free trade agreement now seem quite limited. Taipei's goal is clearly a free trade agreement, but the Office of the U.S. Trade Representative and others in the administration have so far not publicly said they have the same goal, a key component of which is market access for Taiwanese products to the U.S., he said. “Without market access, you can’t have a comprehensive trade agreement. I honestly don’t know if USTR wants to go down that path with Taiwan or with any country,” Sachs said.


He said that although there is bipartisan support for a trade agreement with Taiwan, the United States still has some domestic political obstacles and is resistant to free trade and trade agreements.


However, in Taipei, the Tsai Ing-wen government seems to be making greater concessions. Sachs said President Tsai Ing-wen would not have to run for re-election after her second term, and she could use her political capital to seal a trade deal with the United States. Regardless of party, her successor is unlikely to make concessions to the United States in his first term, he said. Tsai Ing-wen has been committed to keeping Taiwan's economy away from China. She will regard the free trade agreement with the United States as her important political legacy, and she is expected to negotiate with the United States in good faith.


On the other hand, observers also pointed out that it is not entirely hopeless to resolve issues such as market access to Taiwan. George Mason University's McDaniel said that now it seems that the political interest on the US side is strong, and in fact, the US-Taiwan free trade agreement is one of the rare consensuses between Republicans and Democrats on trade and trade policy. Sachs, an expert on China, also said: "I think Taiwan is a very interesting case, because it may be a potential area that may have the momentum to reach an agreement, or we should seek to reach an agreement." He said that the question depends on Biden Is the government willing to spend political capital on this issue and really invest the time and energy required to negotiate a free trade agreement with Taiwan?


Edward Cunningham, director of the China Program at the Ash Center at Harvard's Kennedy School of Government, said deteriorating U.S.-China relations, among other things, could still drive progress on the thorny issue of market access, for both parties.


In an email to VOA, he said: "Vital market access, taxation, and other issues constrain the economic relationship between the United States and Taiwan, however, the tension between the United States and China in the field of technology has put foreign policy And security issues directly into discussions on trade, supply chains, and economic issues, which may provide a more bipartisan path to progress in 2023."

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