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https://scmp.com/news/china/article/3194973/2024-presidential-elections-us-taiwan-could-help-spur-trade-deal-says
China

2024 presidential elections in US, Taiwan could help spur trade deal, says former State Department official

  • But other experts point out the many obstacles that will make it difficult for a pact to be reached, despite the US-Taiwan Initiative on 21st-Century Trade
  • The US has a trade-in-goods deficit with Taiwan that stood at US$40.27 billion last year, an annual increase of more than 30 per cent
The US and Taiwan have established a framework for a trade deal. Pictured, the Taiwanese port of Keelung. Photo: Getty Images/TNS

Washington and Taipei should produce “building blocks” through the US-Taiwan Initiative on 21st-Century Trade for a bilateral trade deal before the countries’ next presidential elections, a former US State Department official said on Wednesday.

Christian Castro, who was head of Taiwan affairs at the State Department during Barack Obama’s presidency, said the administrations of US President Joe Biden and Taiwanese President Tsai Ing-wen should produce “deliverables” from the latest trade framework to pave way for a bilateral agreement. Both the US and Taiwan have presidential elections in 2024.

“That’s a very good window of opportunity in part because that government will only be in place for the next couple of years,” Castro said, adding that both Tsai and Biden had strong trade negotiating teams.

The Biden administration introduced the US-Taiwan Initiative on 21-Century Trade in June to strengthen ties with the self-ruled island, a major US trading partner, as it comes under increasing Chinese political, economic and military pressure.

The US-Taiwan Trade Initiative mirrors the Indo-Pacific Economic Framework, a US-led agreement with 12 Asia-Pacific countries which left Taiwan out partly to secure buy-in from other members.

Castro, who now runs a consulting firm, said he hoped the Taiwan initiative would “produce deliverables and momentum” that give contours of what a potential trade deal might look like.

“You sort of want to imagine, if you get that progress and have those deliverables, then this long-time concept of building blocks, leading towards a larger goal, might actually work,” he said at a symposium sponsored by the Global Taiwan Institute, a think tank in Washington.

The new bilateral framework will cover areas including digital trade, regulatory practices, the removal of discriminatory trade barriers, robust labour and environmental standards, and will address distortive practices of state-owned enterprises, according to official statements.

However, the path forward to a trade agreement is far from straight. According to Rupert Hammond-Chambers of the US-Taiwan Business Council, “It would be hard for this to evolve” into a trade deal.

He pointed out that the framework “is a forward-looking mechanism designed to streamline future policy areas such as data security and management. It has no ability to address trade barriers or areas of needed liberalisation in tax, investment or agriculture”.

According to Anna Ashton at the Eurasia Group, the primary obstacle is that “the Biden administration doesn’t have trade promotion authority from Congress and hasn’t asked for it”.

“I don’t think that Washington is really well positioned for negotiating trade deals right now,” she said. “We’re in a climate where both parties are expressing greater reservations about trade agreements in general and what the benefits of globalisation have been for the United States.”

US President Joe Biden signs the Chips and Science Act of 2022 during a ceremony on the South Lawn of the White House on August 9. Photo: Bloomberg
US President Joe Biden signs the Chips and Science Act of 2022 during a ceremony on the South Lawn of the White House on August 9. Photo: Bloomberg

In a pre-recorded address to the symposium’s participants, Tsai said the trade initiative “is a major step forward for our bilateral economic ties and paves the way for greater economic resilience amid a changing global landscape”.

She alluded to the demand for skilled workers in the US semiconductor industry, who will be needed to support the new factories that will receive subsidies under the Chips and Science Act, which became US law in August.

“Taiwan semiconductor firms are investing billions of US dollars to build plants in the US,” she said. “These projects are expected to create thousands of jobs and enhance the resilience of our supply chains for key strategic resources.”

Beijing, which views Taiwan as a renegade province, has emphasised its opposition to the new trade framework, as it condemns any form of official exchange between the island and other countries. The US, like most countries, does not recognise Taiwan as an independent state but opposes any military moves against it.

Kurt Tong, an East Asia expert and former diplomat in the Obama and Donald Trump administrations, said that having a bilateral trade agreement – one that is ratified by the US Congress – is “the most important pathway” for Taiwan to participate like any other global economic entity.

“Many of the conditions for that exist in the form of fairly strong congressional support, for both economic and geopolitical reasons,” said Tong, a former consul general to Hong Kong and Macau who is now with The Asia Group consultancy.

But, he added: “There is still a lot to do, and Taiwan and people thinking about this shouldn’t be too lighthearted and dismissive about the difficulty to the substance and the conversation that will take place in the US-Taiwan initiative.”

The US has a trade deficit with Taiwan, a major exporter of manufactured goods such as machinery and consumer electronics. The trade-in-goods deficit stood at US$40.27 billion last year, an increase of more than 30 per cent from 2020.

After being caught in the global shortage of chips, memory hardware and circuit boards, the US is making a push to secure its supply chain for semiconductors as its tech competition with China widens. Taiwan Semiconductor Manufacturing produces 56 per cent of the world’s chip supply, according to Taipei-based market research firm TrendForce.

Additional reporting by Robert Delaney in Washington