The Launch of the U.S.-Taiwan Initiative On 21st Century Trade

On June 1, 2022, the United States and Taiwan announced the launch of the “U.S.-Taiwan Initiative on 21st Century Trade” (“Initiative”) designed to strengthen bilateral economic and trade relationships between the two parties.  Representatives from the United States and Taiwan intend to meet later in June to “develop an ambitious roadmap for negotiations for reaching agreements with high standard commitments and economically meaningful outcomes” in 11 specific areas affecting bilateral trade and economic cooperation. Concurrent with the launch of the Initiative, the U.S. Trade Representative (“USTR”) published a request for public comments in order to help the agency develop negotiating objectives and positions for these upcoming meetings. Comments must be filed with USTR by July 8, 2022.

This Initiative is widely viewed as a response to the decision to exclude Taiwan from the launch of the Indo-Pacific Economic Framework for Prosperity (“IPEF”) last month. There was widespread support in the U.S. Congress for the inclusion of Taiwan in the IPEF, but the consensus was that the inclusion of Taiwan could have led other inaugural members of the IPEF to decline participation because of concerns about China’s negative reaction. Nevertheless, many of the 11 topics to be covered by the Initiative are similar to those that are expected to be covered under the IPEF:

• Trade facilitation. Both parties aim to establish “best practices with respect to facilitating trade, including accelerated implementation of the WTO’s Trade Facilitation Agreement, adopting provisions on digitalization of trade facilitation measures, and ensuring inclusivity in accessing customs procedures.” The parties will specifically focus on “electronic payments, risk management, protection of trader information, and support for small and medium enterprises’ (SME) access to technology used for the clearance of goods.”
• Regulatory practices. Both parties aim to adopt provisions with respect to sound and transparent regulatory processes and regulations.
• Agriculture. Both parties intend to “explore provisions to facilitate agricultural trade through science and risk-based decision making and through the adoption of sound, transparent regulatory practices.”
• Anti-corruption. Both parties “seek to develop strong anti-corruption standards to prevent and combat bribery and corruption,” and “explore negotiating provisions that preclude the tax deductibility of bribes and establish measures regarding the recovery of proceeds of corruption and the denial of a safe haven for foreign public officials who engage in corruption.”
• Supporting small and medium sized enterprises (SMEs) in trade. Both parties seek to “support and enhance U.S.-Taiwan SME trade, by collaborating to identify and overcome barriers to trade for SMEs, focusing on trade facilitation for SMEs, sharing and promoting best practices, and working together on activities to promote and support SMEs, including those owned by under-represented groups and women entrepreneurs, and those in disadvantaged communities.”
• Harnessing the benefits of digital trade. Both parties “seek to advance outcomes in digital trade that benefit workers, consumers, and businesses, including SMEs,” including exploring ways to “build consumer trust in the digital economy, promoting access to information, facilitating use of digital technologies, promoting resilient and secure digital infrastructure, and addressing discriminatory and trade distortive practices in the digital economy.”
• Promoting worker-centric trade. Both parties will “work to develop more durable and inclusive trade policies,” including “to support the protection of labor rights, including the elimination of forced labor in global supply chains.”
• Supporting the environment and climate action. Both parties “seek to deepen their cooperation and joint approaches on trade and the environment, including promoting decarbonizing our economies consistent with COP26 outcomes, exchanging information, and supporting businesses, green jobs, and the growth of low-carbon economies.”
• Standards. Both parties intend to explore provisions where “the preparation, adoption, and application of standards, technical regulations, and conformity assessment procedures should be non-discriminatory, should not create unnecessary barriers to trade, and should serve legitimate policy objectives.”
• State-owned enterprises. Both parties “seek to develop provisions to create a level playing field for workers and businesses when competing against these entities in the international marketplace, including by ensuring that these entities act in a commercial manner, are regulated impartially, and do not provide or receive trade-distorting non-commercial assistance.”
• Non-market policies and practices. Both parties “intend to collaborate on ways to address . . . harmful non-market policies and practices.”

The Initiative and the IPEF share one other characteristic as well, namely, that any agreements reached through the Initiative will not address issues of market access or tariff reduction. Such an agreement would require Congressional approval, and since the President’s authority to negotiate agreements under Trade Promotion Authority has lapsed (with no apparent interest by the Administration in seeking its renewal), the Administration has clearly stated that any agreements would not address such issues in order to avoid the need for Congressional approval.

Reaction to the announcement of the launch has been mixed.  While certain organizations supported the Initiative’s announcement, others expressed concerns that the Initiative does not go far enough.  In the United States, Senator Pat Toomey (R-Pa.) raised concerns that the Biden Administration was pursuing “an ‘executive agreement’ that would not require approval by Congress and could be amended or revoked by executive fiat.” A senior official in Taiwan welcomed the Initiative, but expressed disappointment that “it falls short of both IPEF and bilateral FTA.”

However, officials in the United States and Taiwan have acknowledged that they are “not ruling anything out for the future,” and have noted the possibility of utilizing any agreements reached under the Initiative as “future chapters of a bilateral trade deal.”  In this regard, the U.S. and Taiwan are expected to restart negotiations for the Trade and Investment Framework Agreement and the Technology, Trade and Investment Collaboration, with the U.S. Department of Commerce spearheading the dialogue on trade issues related to high-technology products (e.g., semiconductors), export controls on sensitive technologies, and the supply chain. Thus, even if a free trade agreement with Taiwan is not on the immediate horizon, this Initiative, in tandem with other trade negotiations taking place, could lay the groundwork for a possible future trade agreement.