Taiwan's unequal status in US-Taiwan trade talks

Taiwan and the US held the 11th Trade and Investment Framework Agreement (TIFA) Council meeting on 30 June, under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office in the United States (TECRO). This discussion happened five years after the last session, and it is worth noting that Taiwan and the US are reviving the dialogue amid China-US tensions as well as cross-strait tensions.

The first TIFA Council session was held in 1995, and since then, Taiwan has used this mechanism to conduct trade talks with the US, to pave its way for entry into groupings such as the World Trade Organization (which it joined in 2002 as the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)), Trans-Pacific Partnership (TPP), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as well as negotiating a Bilateral Trade Agreement (BTA) with the US.

The TIFA is the only high-level channel for trade talks between Taiwan and the US, and plays a role in improving mutual trust. However, under the US-led trade talks mechanism, the Taiwan-US TIFA dialogue has shown signs of digression and has instead become a mechanism for Taiwan to indulge in political flattery of the US in exchange for limited trade interests. The benefits to Taiwan are paltry, and have in fact, worsened Taiwan's trade environment to a certain degree.

First, the political nature of the TIFA talks. During the George Bush Jr administration, US trade representative Robert B. Zoellick had said that international trade agreements are crucial in strengthening members' political, diplomatic, and security interests. And in this case, the political makeup of the Taiwan-US TIFA dialogue has become its main driver.

During the Ma Ying-jeou administration, the US put pressure on Taiwan, "forcing" Ma to open up to US imports of beef containing feed additives in exchange for political "gifts" such as diplomatic immunity for representatives, which helped Ma to keep his political promises.

Second, the inequality in status between Taiwan and the US. The agreement says: "The Council will meet at such times as agreed by the two Parties." This is different from other TIFAs between the US and other countries and regions, which meet at least once a year. There is no question that the so-called mutually agreed time for the Taiwan-US TIFA can be taken to mean when the US agrees. The subtext is that this framework will only go on if Taiwan gives the US what it wants.

In the four previous TIFA talks, Taiwan was forced to give in and import more US rice and implement patent term extensions for medications; at the seventh session in 2013, Taiwan had to open up to importing US beef containing feed additives, to satisfy the US's core trade demands. On the other hand, there has been no response on the Taiwan-US BTA and scrapping of double levies, which are what Taiwan is interested in.

It is apparent that the Taiwan-US TIFA is an unequal negotiation framework that is not mutually beneficial, which was designed by the US in leveraging Taiwan's pro-US, anti-China sentiments, with US interests as the only consideration.

However, putting aside the uniquely skewed nature of the Taiwan-US TIFA, Taiwan essentially would not be able to ride on the US for any real economic benefit.

First point: the US has no intention or ability to "protect" Taiwan. Taiwan is not a key trading partner for the US - it is only the US's tenth largest trading partner, accounting for less than 2% of US total trade. Compared to mainland China, which is the US's largest trading partner apart from the EU, what would the US care about the chump change provided by Taiwan?

Besides, Taiwan is not the US's only focus in the West Pacific region. Mainland China sees the "Taiwan issue" as its core interest and would object to the signing of any official agreement between Taiwan and the US that would hurt its sovereignty. The US - which only sees Taiwan as a bargaining chip to contain China or to carry out strategic exchanges with China - would weigh the pros and cons and avoid any impulsive moves that would cause it to lose out in the larger scheme of things. It is very likely to keep Taiwan-US trade relations at a non-essential level and focus on Taiwan's political usefulness, rather than building up trade ties.

Second point: Taiwan's pro-US, anti-China stance does not take into account the closeness of cross-strait trade relations. Statistics show that Taiwan's trade dependence on mainland China is growing. In 2020, Taiwan's exports to mainland China and Hong Kong were worth US$151.4 billion, accounting for 43.8% of its total exports.

Taiwan's exports to mainland China and Hong Kong for May 2021 grew by 30% year-on-year to US$15.6 billion, accounting for 42% of Taiwan's total exports for the month, and three times the value of Taiwan's exports to the US at US$5.4 billion.

Furthermore, the so-called New Southbound Policy aimed at reducing dependence on mainland China has seen little results. Amid a weak economy and rising unemployment, Taiwan is still bowing to the US, and its pro-US, anti-China trade stance is definitely a case of getting its priorities wrong, which will hurt it rather than help it.

An ancient Chinese saying chides ignorant people who mock those of substance, noting that the former would vanish over time while the latter would leave a lasting legacy (尔曹身与名俱灭，不废江河万古流). The Taiwanese authorities' closed-off pro-US, anti-China stance in politics and trade, as well as lopsided negotiation frameworks like the Taiwan-US TIFA run contrary to the development of an open and accepting global economy. If Taiwan continues in its ways and fails to knuckle down and find the right focus for its own development, it would risk losing its economic position as the wheels of multilateralism continue to turn.

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