US-Taiwan Trade Talks Will Further Strain China-US Relations

TAIPEI AND WASHINGTON have agreed to start the formal trade talks anticipated by the US-Taiwan Initiative on 21st Century Trade announced in June.

Unsurprisingly, given the fractious state of China-US relations over the island in the wake of the Pelosi visit, Beijing is opposed to the talks, seeing them as part of an effort by the United States to deepen its ties with Taiwan and further distance itself from the ‘One China’ policy. The Ministry of Foreign Affairs warned Washington not to conclude any arrangements that could imply Taiwanese sovereignty.

The discussions will start in early autumn and include agricultural trade and expanded access for small and medium-sized Taiwanese enterprises to US markets, according to a statement from Taipei’s Office of Trade Negotiations. The Office of the US Trade Representative says the talks will also cover trade facilitation, digital trade and anti-corruption standards, all touchpoints of US President Joe Biden’s approach to trade.

A Washington-Taipei trade agreement will partially plug one of the most prominent gaps in the Indo-Pacific Economic Framework that the Biden administration announced in May as part of its strategy to counter China’s growing regional influence. Pressure from the US Congress, which has become increasingly forceful in its support for the island, preceded the June announcement of the separate trade initiative with Taipei.

Both the framework and the initiative are more symbols of US economic engagement in the region than committed pushes for free trade through traditional means such as lowering tariffs and opening market access; expanding free trade is not the tenor of the times in Washington.

Nonetheless, Taipei will be hoping to increase the share of its exports sold to the United States, around 30%, to bring it into better balance with the 40% that go to the mainland and Hong Kong. It has for some years been trying to diversify its markets and has signed free trade agreements with Singapore and New Zealand.

Taipei also hopes that a trade deal with Washington will bolster its application to join the region’s largest operational trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, or TPP11), the successor to the Trans-Pacific Partnership from which former President Donald Trump withdrew the United States in 2017. However, this Bystander sees little immediate prospect of Taipei’s application advancing, especially with Beijing also wanting in.

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