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Trade talks good news for Taiwan

Taipei Times - 20 June 2021

Trade talks good news for Taiwan
By Thomas Shattuck

The administration of US President Joe Biden has continued its ongoing efforts to increase bilateral ties with Taiwan with the announcement about the return of US-Taiwan Trade and Investment Framework Agreement (TIFA) talks.

TIFA was signed in 1994 and had been a consistent forum for trade discussions between the two countries. Talks had previously encountered obstacles to progress due to barriers on Taiwan’s side, the most enduring of which had been related to a ban on US meat products containing ractopamine.

TIFA talks were once suspended in 2007 due to such barriers and did not resume until 2013. They stopped again in 2016 and did not occur at all during the administration of former US president Donald Trump. Interestingly, as of June 11, the US-Taiwan TIFA text is absent from the Office of the US Trade Representative’s (USTR) online list of agreements. The “China, Mongolia, and Taiwan” section only has the text for the US-Mongolia TIFA.

Better trade relations with Taiwan have received support from both sides of the US political spectrum. Despite bipartisan calls in Congress for the Trump administration to enter into trade agreement talks with Taiwan, then-USTR Robert Lighthizer did not move forward; instead, he focused on China.

Most recently, on June 7, US Secretary of State Antony Blinken announced the possibility of a return to the defunct TIFA discussions. Testifying before the House Foreign Affairs Committee, Blinken said: “I know we are engaged in conversations with Taiwan, or soon will be, on some kind of framework agreement, and those conversations should be starting.”

Then, on June 10, USTR Katherine Tai (戴琪) spoke with Minister Without Portfolio John Deng (鄧振中), who heads the Office of Trade Negotiations. During their call, they “committed to the convening of the 11th Trade and Investment Framework Agreement Council meeting ... in the coming weeks.”

After four years of no progress through TIFA, the sudden announcement of the resumption of talks might be viewed as a relative surprise.

However, both Republicans and Democrats agree on pushing for trade agreement talks with Taiwan. During a time in which the two parties have difficulty agreeing on anything, especially on trade issues, the general bipartisan push for closer trade relations with Taiwan might be a motivating factor in resuming TIFA talks so early in Biden’s administration.

Another reason for the announcement could be the result of the Biden administration’s 100-day supply chain review, “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-based Growth.” The report lays out just how vulnerable and reliant the US is on foreign countries in the critical areas of semiconductor manufacturing and advanced packaging, large-capacity batteries, critical minerals and rare earth elements, and active pharmaceutical ingredients.

The semiconductor section, authored by the US Department of Commerce, outlines the US’ reliance on Taiwan for semiconductors. The report does not mince words: “The United States lacks sufficient capacity to produce semiconductors. The United States relies primarily on Taiwan for leading edge logic chips.” It highlights Taiwan’s struggles with water shortages and power, as well as the enormous effect that a “geopolitical event” could have on global economies, especially the US economy.

While agriculture and intellectual property have generally been the focus of TIFA talks, new talks could likely focus on the US’ desire to secure semiconductors, their supply chains and potential greater investment in the US homeland — beyond Taiwan Semiconductor Manufacturing Co’s commitments in Arizona. The supply chain issue for critical industries will likely be a continuing feature of importance for the Biden administration.

The Trump administration had created a different trade discussion mechanism, the US-Taiwan Economic Prosperity Partnership (EPP) Dialogue, under the auspices of the State Department. The EPP, which “covered a broad range of economic issues, focusing on 5G networks and telecommunications security, supply chains, investment screening, infrastructure cooperation, renewable energy, global health, science and technology, and women’s economic empowerment as a cross-cutting issue,” was launched in late November last year after Trump lost his re-election bid.

It is unclear if the EPP will continue beyond its inaugural dialogue, especially since any potential discussions for a bilateral trade agreement (BTA) would occur under the authority of the USTR, not the State Department.

It is safe to assume that the Biden administration is focused on re-invigorating TIFA talks instead of a late Trump-era dialogue that only convened once.

The announcement of the resumption of TIFA is generally good news; however, given the historical absence of TIFA’s success in resulting in BTA talks, the US and Taiwan should approach the talks with caution so as to not overestimate their chance for “success,” however it can be defined.

President Tsai Ing-wen’s (蔡英文) administration is likely looking for a breakthrough given her decision to lower import restrictions on US meat containing ractopamine. That was a consistent sticking point in past TIFA talks. Tsai put herself out there by making the decision and used some of her political capital — but received little to no support from the Trump administration in advancing trade talks.

Now, the ractopamine issue is on the ballot in the August referenda, so the clock is ticking for progress on trade talks before Taiwanese make a decision.

It is possible that TIFA talks could resume, and Taiwanese citizens could vote against allowing ractopamine imports — which would again create one of the main obstacles in US-Taiwan trade talks. In this scenario, a BTA would likely not materialize, and dialogues such as the EPP would convene.

Taiwan also has its own needs that it should consider during the TIFA talks. While the US has placed an emphasis on semiconductors and securing supply chains, Taiwan needs help in its water and energy needs. The water shortage and blackouts throughout Taiwan this year demonstrate critical needs, and they relate directly to US priorities; without water or power, it is hard to make semiconductors. Negotiating US investment in Taiwan’s energy infrastructure would serve both countries’ economies well.

During TIFA negotiations, the US needs to receive assurances from the Tsai administration about its effort to reform labor issues, particularly the forced labor occurring in Taiwan’s fishing industry and the despicable treatment of migrant workers.

The US Department of Labor included the forced labor occurring in Taiwan’s fishing industry in its report last year, “List of Goods Produced by Child Labor or Forced Labor.” The issue of the treatment of migrant workers has particularly come into light with a COVID-19 outbreak in Taiwan.

Given that the Biden administration has placed human rights at the center of its foreign policy agenda, the US should not overlook these abuses. It is necessary for Washington to call out human rights issues in both friendly and adversarial nations. Focusing just on the latter makes the human rights agenda hollow if the administration does not place pressure on the former.

While the resumption of TIFA would be good news for the US-Taiwan relationship, there is no guarantee that it will result in concrete actions or a BTA. Getting back together after five years will require work, and ensuring continued dialogue is a more likely outcome than an agreement that has vexed both sides for decades.

Thomas Shattuck is a research fellow in the Asia Program at the Foreign Policy Research Institute. He is also a member of Foreign Policy for America’s NextGen Foreign Policy Initiative and the Pacific Forum’s Young Leaders Program.

 source: Taipei Times