Panelists Say Taiwan Needs Closer Trade Ties With US

A major talking point of the Biden administration, according to Hudson's Riley Walters, is that the government should help expand semiconductor chip manufacturing in the U.S. in part because it is so dangerous to be overdependent on Taiwan for chips. But Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council, said he feels that kind of talk is playing into China's hands. He said China wants corporations to believe the risk of doing business in Taiwan is rising. He said for Chinese leaders, the more they convince investors of this view, "the more they can curb the upward economic trajectory of Taiwan" -- and make economic entanglement with China Taiwan's only option.

Hammond-Chambers said it's in America's national interest to ensure that Taiwan's economy is as vital as possible. He was critical of the 21st Century Trade initiative the U.S. has launched with Taiwan, saying, "Let’s not call breadcrumbs a feast."

Wendy Cutler, a primary negotiator of the Trans-Pacific Partnership and vice president of the Asia Society Policy Institute, disagreed with Hammond-Chambers during the Oct. 17 virtual event. "I’m a big proponent of this 21st Century Trade initiative," she said. "I disagree with Rupert. I don’t consider it breadcrumbs. I consider it to be a hearty breakfast. I think it’s a really good start, and much further than we’ve gone with Taiwan in the past."

She said that she hopes Taiwan and the U.S. can reach agreement on many of its planks in the next year or two, and since many of this initiative's planks are the same as those in the Indo-Pacific Economic Framework for Prosperity, she said those agreements could "almost show the way forward" for IPEF countries.

She also noted that Taiwan and the U.S. are seeking to get on the same page on how to deal with state-owned enterprises and non-market economies, which are not on the IPEF agenda.

Cutler said she recognized that Hammond-Chambers and Walters are critical of IPEF and the Taiwan initiative because neither is designed to lower tariffs. She said they are useful even so, and do not preclude decisions to liberalize tariffs.

She said it's easy to say that Taiwan needs a free trade agreement to lessen its economic dependence on China. But, she cautioned, "as the only one in the panel who has negotiated free trade agreements: They are not easy negotiations, even with your closest partner." She noted that the U.S. often wants its counterparty to lower agricultural tariffs, and that's politically sensitive -- including in Taiwan.

If the U.S. does go down that road, she said, "let’s make sure we do the proper preparatory work with Taiwan so there are no surprises." Otherwise, she said, FTA negotiations could create tension between Taiwan and the U.S. rather than bringing them closer.

The IPEF and the Taiwan initiative seek to address supply chains, and Culter said there's "kind of a conflict" in that, given the recent legislation that subsidizes domestic manufacturing, directly or indirectly. "You can’t just have your allies and partners when you want them to help you with the supply chains that are of interest to you, while at the same time you're discriminating against them in your own market," she said.

Hammond-Chambers talked about how the U.S. needs to help Taiwan deal with economic coercion from China, and Culter agreed. She noted that after House Speaker Nancy Pelosi visited Taiwan in August, China blocked several food exports from Taiwan as well as sand exports.

"And I think we’re going to see more and more steps that smack of economic coercion," she said. "For me, when I look at what’s on the economic agenda going forward, this is an area -- if left unchecked -- that can really endanger the rules-based trading system."