U.S. and Taiwan Sign Partial Trade Deal

Taipei, Taiwan, city skyline. (Heeheemalu)

The Lede: The U.S. and Taiwan have signed the first accord under a new bilateral trade initiative framework in the midst of tensions with China

What We Know:

After two rounds of negotiations, representatives of the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States have signed the first accord under the broader US-Taiwan Initiative on 21st-Century Trade.
This first accord does not constitute a traditional trade deal but looks to boost trade by streamlining customs checks, improving regulatory procedures, and establishing anti-corruption measures between the US and Taiwan. It contains no measures on tariff reductions, exemptions, or Taiwanese complaints about double taxation in the U.S., which are to be covered in separate negotiations with the U.S. Treasury Department.
Other issues scheduled for later negotiations under the initiative include labor, environment, and digital trade rules.

The Background: The U.S. announced plans for trade negotiations with Taiwan in August 2022 as a show of support after Taipei was excluded from the Indo-Pacific Economic Framework. It was also at a time when the Chinese military ran drills in response to the visit by then-U.S. House Speaker Nancy Pelosi’s visit to Taipei. China also conducted military exercises to simulate a blockade of Taiwan in response to a meeting between current U.S. House Speaker Kevin McCarthy and Taiwanese President Tsai Ing-wen on her visit to the U.S. in April. This agreement precedes the Shangri-La Dialogue security summit in Singapore where China has declined a meeting with U.S. Defense Minister Lloyd Austin.

Likely Outcomes:

Despite the talk of increasing communication and dialogue between the two superpowers, both sides are continuing to make moves in the opposite direction. Until the steps forward overcome the strides of the steps backward, the two sides are still on the path toward worse bilateral relations.
Although this accord is seen as a big step in U.S.-Taiwan relations, it represents an incremental change in the substance of their bilateral trade. Still, as the U.S. continues to erode its strategic ambiguity with Taiwan, this red line with China will flash increasingly bright as Beijing responds with stronger expressions of disapproval.

Quotables:

“We thank our Taiwan partners for helping us reach this important milestone and look forward to upcoming negotiations on additional trade areas set forth in the initiative’s negotiating mandate” – Sam Michel, spokesperson at the U.S. Trade Representative press office

“Relevant tasks are yet to be completed … Taiwan will continue to move towards a comprehensive FTA [free trade agreement] with the United States to ensure Taiwan’s economic security.” – Alan Lin, Taiwan cabinet spokesperson

“The U.S. should stop any form of official exchanges between the U.S. and Taiwan, refrain from negotiating agreements with Taiwan that have sovereign connotations and are official in nature, and refrain from sending any false signals to the ‘Taiwan independence’ separatist forces in the name of economic trade.” – Mao Ning, spokeswoman for the Chinese Foreign Ministry

“This is only phase one of the agreement, and it is mostly the low-hanging fruit — the easiest things to agree on. Phase two will be more significant but also more difficult, though I do think they’ll finish by the end of this year.” – William Reinsch, trade specialist at the Center for Strategic and International Studies

Good Reads:

Taiwan hails ‘comprehensive’ trade deal with US as China issues warning (The Guardian)

Partial U.S.-Taiwan trade deal is a first step, but China still hates it (Washington Post)

Taiwan, US sign initial trade agreement (Taipei Times)

US-Taiwan relations: New trade deal signed as China tensions rise (BBC)