Ways and Means Members Want FTA Negotiations With Taiwan

At the hearing convened Sept. 14 by Chairman Richard Neal, D-Mass., witnesses and members said the U.S.-Taiwan Initiative on 21st-Century Trade announced in June (see 2206010053) is not enough to support Taiwan's government.

The initiative covers trade facilitation, sanitary and photosanitary regulations for agricultural imports, digital trade, and coordinating to confront non-market practices, but is not aimed at lowering tariffs on either side. It is similar to the Indo-Pacific Economic Framework in its scope.

Committee ranking member Kevin Brady, R-Texas, in a phone call with reporters later in the day, said he's skeptical the White House would pursue a true free trade agreement with Taiwan, "given the president’s absolute insistence that we not pursue free trade agreements," and the fact that the administration has had no interest in getting trade promotion authority through Congress.

Bonnie Glaser, Asia program director at the German Marshall Fund, said that reaching a free trade agreement with Taiwan would help Taiwan diversify its trade away from China, would encourage other countries to negotiate FTAs with Taiwan, and would show solidarity with the Taiwanese as China menaces what it sees a renegade province through military exercises and economic boycotts. She said China's goal is "to subvert the island’s democracy and compel reunification."

Mark Wu, director of the Fairbank Center for Chinese Studies at Harvard University, agreed. "We need to send a signal to the world it is OK to do trade agreements with Taiwan," he said.

But Wu, who was a senior adviser to the new U.S. trade representative through July 2021, said that tight rules of origin are needed to prevent "back-door access for Chinese firms that we do not wish to see." In his written testimony, he said the U.S. and Taiwan should "consider delineating a list of inputs that, if sourced from non-market economies, would bar a product from eligibility."

The Republican witness at the hearing, Texas Farm Bureau President Russell Boening, emphasized that the initiative the administration is pursuing would do nothing to lower Taiwanese tariffs of about 15% on agricultural imports. He noted that Taiwan is the sixth-largest ag export market for the U.S., which sells hundreds of millions of dollars' worth of soybeans, beef, wheat, poultry and fresh fruit to Taiwan.

Wu said that while the ag tariffs are high, only one-fifth of U.S. exports to Taiwan face an applied tariff of more than 5%. "Tariff-related market access concessions obtained through further negotiations are likely to benefit only a select number of industries, rather than generate across-the-board benefits for U.S. exporters broadly," he wrote.

Wu said negotiations should focus on realigning supply chains in Asia for electronics and semiconductors, to ensure it flows through friendly countries.

Both sides need to ensure that stronger deterrence exists to prevent a repeat of the theft of U.S. trade secrets by employees of Taiwanese companies to further the development of high-tech sectors, such as semiconductors, in mainland China. One immediate step that could be taken by Taiwan is to further amend its National Security Act to enhance criminal penalties for economic espionage.

Rep. Adrian Smith, R-Neb., asked Glaser if it would have been better to include Taiwan in the Indo-Pacific Economic Framework rather than putting it on a separate track.

Glaser said, "If we had included Taiwan as an initial member we would have lost participation of some countries" in IPEF, and she said she thinks the initiative could arrive at concrete advances more quickly than IPEF.

In a hallway interview outside the hearing, Smith said it's possible the administration could go for a free trade agreement with Taiwan. He said House Speaker Nancy Pelosi's visit to Taiwan "showed some boldness." He said a market opening for services could be particularly fruitful, given the push for more chip manufacturing in the U.S.

Trade Subcommittee Chairman Earl Blumenauer, D-Ore., expressed hope that Republicans and Democrats in Congress could come together on Taiwan negotiating priorities. "I’m encouraged we’re not sweeping things under the rug," he said, referring to a witness from the Solidarity Center who talked about problems with forced labor among migrant workers in Taiwan. "Taiwan has an egregious record when it comes to fishing," Blumenauer said. "If we’re not consistent with our friends and allies -- with Taiwan -- how are we going to support the efforts that have been made at the WTO" to fight forced labor in fisheries?

Both Glaser and Wu said the time is now to open negotiations. Wu noted that international companies are moving services jobs from Hong Kong to Taiwan because of the Chinese crackdown in Hong Kong, and that if the U.S. negotiated liberalization of services exports in Taiwan, it would "create win-win situations for both Taiwanese and American service workers."

Glaser noted that the president of Taiwan used to be a trade negotiator, and she noted that Tsai Ing-wen spent quite a bit of political capital lifting restrictions on the importation of pork and beef that were fed ractopamine. She noted the Taiwanese president only has a year and half left in her term.

Neal, and many other members, said that using trade to show solidarity is the right thing to do. "The people of Taiwan have built a robust and thriving democracy. In fact, Taiwan is a beacon of democracy in Asia. Recently, they’ve faced incredible pressure from their authoritarian neighbor, China," he said. "In the face of this aggression, along with Russia’s unprovoked war in Ukraine, this committee stands with the people of Taiwan."