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The start of trade talks and investment agreements between the US and Taiwan has been officially announced, opening up new economic opportunities for both nations. Washington and Taipei also released statements endorsing the agreement.
After the island nation was cut out of the Indo-Pacific Economic Framework, the US-Taiwan Initiative of the 21st Century Trade was published in June. To establish a presence and connections with the nations in the Indo-Pacific region that are vulnerable to Chinese influence, the Biden administration launched the IPEF. “We’re here today for one simple purpose: the future of the 21st Century economy is going to be largely written in the Indo-Pacific,” President Biden said when the framework was announced.
The Taiwan-US economic negotiations would include many areas like “trade facilitation, good regulatory practices, anti-corruption, SMEs, agriculture, standards, digital trade, labor, environment, state-owned enterprises, and non-market policies and practices.”
According to the Office of Trade Negotiations of Taiwan, the US House Speaker Nancy Pelosi’s visit to Taiwan and subsequent visits by other US lawmakers have increased China’s pressure and sanctions on the island nation. The trade relations with the US will help alleviate the sanctions imposed upon them by their neighbors.
“Everyone can see that China is engaging in economic coercion [towards] not only Taiwan, the US but also many other countries, [which is] harmful to the world economic order,” stated John Deng, Taiwan’s trade representative.
China’s take on Taiwan’s sovereignty
Despite the Chinese Communist Party’s lack of authority in Taiwan, Beijing has long asserted Taiwan as a portion of its territory. Taiwan and China held distinct governmental systems for more than 70 years. Beijing officials responded by saying that Taiwan should first impose the one-China principle before engaging in any international economic negotiations in response to the repeated visits by high-ranking US officials to Taiwan. The United States should support and uphold the policy, according to China.
“[Beijing has] always opposed the negotiation of any economic and trade agreements with Taiwan that have sovereign connotations and are official in nature,” said Wang Wenbin, the Ministry of Foreign Affairs spokesperson.
China quickly retaliated after US Speaker of the House Pelosi visited Taiwan by stepping up military exercises and increasing its military presence in the areas closest to Taiwan’s territorial waters. Since then, Beijing has issued a warning to the US, saying it should not attempt to contact Taiwan. However, the reality was quite different.
As a result, China put trade restrictions in place and prohibited a number of imports and exports to and from Taiwan. According to a US diplomat, China would use the US officials’ recent visit to the nation as justification for the pressure it applies to Taiwan and its attempts to alter the status quo.
“[China] overreacted, and its actions continue to be provocative, destabilizing and unprecedented. [China’s actions could] jeopardized peace and stability across the strait and in the broader region,” stated Daniel Kritenbrink, the East Asian and Pacific Affairs Assistant Secretary of State.
The trade barriers put up by China, according to many experts, may also have a negative effect on international trade.
“Taiwan matters far more to the world economy than its 1% share of global GDP would indicate. A further escalation in cross-strait tensions that cut Taiwan’s export off from the rest of the world would lead to renewed shortages in the automotive and electronics sectors and put further upward pressure on inflation,” said Capital Economics senior economist Gareth Leather.
Taiwan-US relations will improve trade
Taiwan’s Trade Representative is still positive that despite objections from China, the collaboration will “deepen trade relations with the US, enhance Taiwan’s economic competitiveness, bolster foreign investment, and improve Taiwanese businesses’ image.”
In addition, the partnership could also “increase the chance for Taiwan to join international trade organizations, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).”
Both countries will “seek to adopt provisions that promote collaboration on ways to address these harmful non-market policies and practices,” stated the US Trade Representative (USTR).
Opinions expressed by CEO Weekly contributors are their own.