On Friday, Taiwanese President Tsai Ing-Wen made an overture for trade negotiations by unilaterally easing import restrictions on American beef and pork. This was overdue and can’t by itself erase Taiwan’s record in trade talks. But it is a welcome chance to move toward a free trade agreement (FTA) or its equivalent, which would help the US economically and strategically. Failing to move forward would be a bad mistake.
In fact, the first step toward a quasi-FTA with Taiwan has already been taken — the United States-Mexico-Canada (USMCA) deal. President Trump is loudly skeptical of open trade, yet USMCA was not only successfully negotiated, it passed Congress on a bipartisan basis. This important political accomplishment offers the template for a deal with Taiwan (and others).
An FTA with Taiwan can
even be superior to the USMCA, with labor and environmental standards the
obvious example. Compared to Mexico, Taiwan faces almost no criticism of its
practices in these areas. Negotiation and implementation of the relevant
chapters will be much easier than in the USMCA.
Two internal American issues should also be easier to resolve. The debate over how much protection intellectual property (IP) should receive here spills into our trade negotiations. Taiwan’s protection of IP in general and American IP in particular has greatly improved. Moreover, as a rich economy, there is little prospect of IP rights in Taiwan leading to prices that deny access to vital products.
The USMCA has sunset clauses, calling for review and possible termination. This could become economically disruptive. The North American Free Trade Agreement’s political legacy is irrelevant for Taiwan, and its smaller size — our 2019 imports from Canada and Mexico were 14 times larger than from Taiwan — should make an indefinite agreement less controversial.
A deal with Taiwan could ease the bane of all FTA’s, non-conforming measures. Non-conforming measures are inserted by the parties as exceptions from the high-sounding principles they supposedly endorse. In USMCA, the list of non-conforming measures goes 260 pages.
For instance, the US continues to cling to the Jones Act, and exempts maritime services from competition. This justifies Canada’s multiple restrictions in water transportation and Mexico invoking barriers “when the principles of free competition are not observed.” There’s much more. The US should do better in Taiwan talks and, if we refuse to, the agreement is at least unlikely to require USMCA’s painful 15 side letters.
Still, a deal can’t be done quickly. For one thing, USMCA provision 32.10 allows withdrawal if a party signs an FTA with a non-market economy. Taiwan arguably has an FTA with mainland China, the Economic Cooperation Framework Agreement, though its viability is uncertain. Airtight transshipment rules preventing China-to-Taiwan-to-US exports are mandatory and will require a chunk of 2021 to finalize.
But talks should start immediately. Taiwan punches well above its weight as an American trade partner: At less than half the population, it imports more from the US than Italy does. Strategically, an FTA would bolster the island in the face of Chinese intimidation. It would show the US will support friends, which the Trump administration has been criticized as failing to do.
This is why Secretary Pompeo and the bipartisan Taiwan caucus immediately responded to Tsai’s statement by calling for more trade cooperation. They aren’t in charge, United States Trade Representative Lighthizer is. And it’s possible he opposes moving forward with Taiwan because it would threaten cooperation with China.
The current centerpiece of American trade relations with China is the “phase one” deal. China is well behind its promised purchases, the main IP action is adding rules when enforcement has long been the problem, and the administration no longer even wants the financial market access it negotiated. Phase one should collapse under its weight.
Allowing it to undermine relations with Taiwan would be ugly. Beijing’s breaking of its “one-country, two-systems” pledge to Hong Kong leaves the pledge useless with regard to Taiwan unification, making coercion far more likely. Chinese repression in Hong Kong is intensifying with little American response as yet. If we won’t support Hong Kong, we must support Taiwan.
The Obama administration held itself hostage on a range of policies out of fear Beijing would stop cooperating on climate change, even while Chinese emissions soared. Ambassador Lighthizer (at least) once correctly warned President Trump that China was trying to play him. It would be sad if he fell victim to the same ploy.