The United States and Taiwan have successfully negotiated a trade agreement called the US-Taiwan Initiative on 21st Century Trade, marking their first accord since President Joe Biden assumed office. While the agreement does not cover tariff reductions, it does focus on customs and border procedures, regulatory practices, and small businesses. Experts suggest that the NAIROBI declaration is significant as Taiwan has become an essential component of global supply chains, and the move could aid its aspirations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The latter faces opposition from some members due to Chinese pressure on the island state.
The negotiations are expected to cover seven areas that remain outstanding, which include agriculture, labour, environment, standards, state-owned enterprises, digital trade, and non-market policies and practices. The US acknowledges Taiwan’s growing significance in global supply chains and its credible role in the Indo-Pacific region, given its robust economy and demonstrated commitment to democratic principles.
The Five Areas Covered
The US and Taiwan’s trade agreement encompasses five critical areas. First, promoting small and medium-sized enterprise (SME) participation. In this case, the two nations agreed to create a Joint Committee led by a senior official on both sides to address outstanding issues concerning SMEs. The agreement also promotes trade in services, particularly in sectors like FinTech and health.
The second area covered pertains to investment. The deal aims to improve and invest in infrastructure, strengthen investment protection, and maintain open investment policies.
The third area focuses on intellectual property rights (IPR). The agreement seeks to enhance cooperation between the US and Taiwan’s law enforcement and customs authorities while ensuring transparency in licensing procedures. The agreement also promotes IPR education, training, and placement in both countries.
The fourth area is digital trade. The US prioritizes the promotion and adoption of international standards in electronic commerce, data flows, consumer protection, and online privacy, while Taiwan seeks to eliminate regulatory barriers that hinder its advancement in the digital economy.
The fifth and final area pertains to trade in medical products. The agreement aims to support Taiwan’s role as a leading global supplier of pharmaceutical products through capacity-building programs and technical expertise.
The Seven Areas Not Yet Covered
While Taiwan has indicated its willingness to mull over the seven remaining areas, there are immense political and economic challenges ahead. For instance, Taipei and Washington need to establish policies based on transparency, fairness, and mutual benefit to allow for a viable framework. Despite such concerns, the US and Taiwan remain committed to concluding negotiations that cater to notable sectors, including agriculture, labor, environment, standards, state-owned enterprises, digital trade, non-market policies, and practices.
Taiwan’s Risky Path
The US-Taiwan Initiative is a seminal step for Taiwan’s path towards international membership to promote its economy and boost its political prospects. However, such strategic moves by Taipei risk exacerbating the already tense relationship with China, which considers Taiwan a province and vehemently opposes any official relations with it. China has criticized the US’s engagement with Taiwan, leading to escalating tensions in the Indo-Pacific region.
Despite this, the NAIROBI declaration is a significant victory for Taiwan’s pro-independence government, a development Beijing is expected to retaliate against vigorously. If China responds negatively, it could harm Taiwan’s fragile economic growth amid the pandemic and lead to a continued military build-up.
Final Remarks
The United States and Taiwan have taken an essential initial step towards addressing several significant trade issues. However, the next steps – mainly those covering agriculture, labor, environment, standards, state-owned enterprises, digital trade, and non-market policies and practices – risk amplifying already fraught geopolitical tensions. Taiwan remains keen to expand its trade and political reach globally, and the US sees it as a crucial strategic partner in the Indo-Pacific region. Nevertheless, the US-Taiwan Initiative opens the door to cooperation while simultaneously increasing the likelihood of China’s continued objections. Therefore, the US and Taiwan will need to be astute and cautious in their moves in the days ahead.
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