There’s no better time for Taiwan to seal a trade deal with the US and bolster its economy
- The winds of geopolitics seem to be blowing in Taiwan’s favour. The US-China trade war, Covid-19 and Hong Kong’s national security law are helping the island’s reshoring initiative. Next, it should negotiate a free-trade agreement with the US
An unprecedented sea change is blowing in Taiwan’s direction. The island, having suffered decades of political ostracism, is reaching a new crossroads that has been formed by the confluence of exceptional global events.
In showing Taiwan’s willingness to roll back meat product restrictions that date back to at least 2003 (and were supposedly related to mad cow disease fears), Tsai has opened the door to much stronger economic, political and even military relations with the US. The door opening resonates through the halls of the American Institute in Taiwan’s relatively new office located in Neihu, Taipei.
National security is a pre-eminent focus. Taiwan is a direct beneficiary of his protection policy against China. But his nationalism requires a quid pro quo from Taiwan, in the form of a beneficial trade agreement as well as major investments by Taiwan companies in the US.
Thus, Pompeo and Ross have encouraged the reshoring of manufacturing to Taiwan, with Taiwan as a springboard for a variety of investments in the US. This investment strategy is a key element of their “SelectUSA” initiative, wherein Taiwan has been a major participant.
More notably, the Trump administration has not only placed significant pressure on US companies to stop relying on the Chinese supply chain, but similar efforts with its allies, such as Japan and South Korea, have also yielded major results. In the mind of the Trump administration, Taiwan needs to become an even more active participant.
Over a third of American businesses are thinking about leaving Hong Kong, AmCham survey finds
Moreover, as evidenced by TSMC, Foxconn, MediaTek, Acer and many other famous Taiwan technology brands, Taiwan’s predominance in technology innovation is unsurpassed. With the earlier announced NT$10 billion (US$340 million) in subsidies over the next seven years to attract R&D investments, Taiwan is hoping to bring research and development back to the island. However, the US is also hoping that Taiwan will encourage more of its businesses to invest similarly in the US.
These issues will continue to be significant factors in the amount of money to be reinvested into Taiwan and the US. In the case of the US, Taiwan would need to focus increasingly on accessing STEM (science, technology, engineering and maths) talent pools in the US to continue its innovation leadership.
With the China market increasingly “off-limits”, there is no better time than now for Taiwan to negotiate a trade agreement with the US that will provide mutually beneficial rules and regulations addressing issues pertaining to: tariffs, intellectual property, free flow of goods and services, tax dispute resolution and elimination of non-tariff barriers, to name a few. Most importantly, a bilateral trade agreement can result in greater economic integration and supply-chain diversity for both the US and Taiwan.
Richard L. Thurston, PhD, JD, is of counsel at Duane Morris LLP, former general counsel at Taiwan Semiconductor Manufacturing Company and former assistant general counsel at Texas Instruments