US, Taiwan Hold Formal Bilateral Trade Negotiations

Taiwan's Chief trade negotiator John Deng looks on as he speaks to the media in Taipei, Taiwan, on January 22, 2021. Ann Wang/Reuters

A U.S. delegation is in Taiwan for the first formal negotiations over the text of a trade agreement, following an initial round of talks in November 2022.

The effort is aimed at pushing back against China’s bid to create a regional sphere of influence and become the world’s most influential power, according to a previous White House statement. The meetings, which began on Jan. 14, are set to run through Jan. 17.

The discussions have focused on multiple areas including anti-corruption standards, trade by small- and medium-sized businesses, regulatory practices, and trade facilitation. They are parts of the 11 areas highlighted for continuing discussion, according to the U.S. Trade Representative’s Office (USTR).

As momentum for a larger trade agreement grows, the United States and Taiwan may announce stand-alone accords on some of these topics as the two sides reach agreement in certain areas. Taiwanese authorities referred to this as an “early harvest.” Agriculture and digital trade, two topics that have been more difficult to discuss between the United States and Taiwan, are probably going to need more time.

The potential trade deal would act as a bilateral addition to the Indo-Pacific Economic Framework for Prosperity (IPEF), which the Biden administration initiated last summer with 13 countries in the region, but excluded Taiwan.

The talks are taking place under the auspices of the Taipei Economic and Cultural Representative Office in the United States and the American Institute in Taiwan.

The U.S. delegation is led by Assistant U.S. Trade Representative for China Affairs Terry McCartin, who is in charge of developing U.S. trade policy toward China, Taiwan, Mongolia, Hong Kong, and Macau. Officials from other U.S. agencies also joined the trip.

The USTR also noted that the negotiations will be conducted according to the Taiwan Relations Act, which governs the United States’ unofficial diplomatic relationship with Taiwan.

There is hope that an agreement will be reached by the end of this year.

Taiwan’s Expectations

The new trade initiative came after the island was excluded from the new Indo-Pacific Economic Framework that President Joe Biden launched in May 2022.

The IPEF is widely seen as a U.S. strategy to counter China’s influence in the Asia-Pacific region. It’s also supposed to fill the regional void created when the United States pulled out of the Trans-Pacific Partnership (TPP), which later morphed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in 2017.

The new agreement, formally called the U.S.-Taiwan Initiative on 21st-Century Trade, was announced following a June 2022 virtual meeting between Deputy U.S. Trade Representative Sarah Bianchi and Taiwan’s top trade negotiator, John Deng, according to a press conference held in Taipei at the time.

Calling the initiative “a historic breakthrough in Taiwan–U.S. economic and trade development,” Deng said it will pave the way for trade negotiations with the United States, potentially leading to a bilateral free trade agreement. He noted that the initiative will help Taiwan build economic ties with other governments in the world.

Joseph Wu, Taiwan’s foreign minister, also said the initiative was of “high strategic” importance, saying that it will assist the island in joining the CPTPP, an 11-nation free trade agreement.

Boosting Cooperation in Chip Production

Taiwan is notable for producing the majority of the world’s most cutting-edge chips, a critical dimension of the escalating tech competition between the United States and China.

The island has boosted its cooperation with the United States in terms of chip production, with Taiwan Semiconductor Manufacturing Co. (TSMC) announcing the opening of a second fabrication plant in Arizona to produce advanced semiconductor technology.

The chipmaker said that the second fabrication plant (or “fab”) will bring the company’s total investment in its manufacturing site north of Phoenix to $40 billion. The fab has started construction and is slated to begin production of cutting-edge 3-nanometer process technology in 2026.

According to TSMC, its $40 billion investment in the manufacturing site will represent the largest foreign direct investment in the history of Arizona.

With a market cap of more than $415 billion. TSMC is the world’s largest contract chipmaker. It provides for major customers including AMD, Apple, Broadcom, and Nvidia.

Greg Isaacson and Frank Fang contributed to this report.