I have been Director of the Asian Studies Center at The Heritage Foundation for almost 12 years. One of the first big ideas I had was to propose a US-Taiwan Free Trade Agreement (FTA). My then-boss and mentor, Ed Feulner, responded with humor, “Great idea, Walter. We’ve suggested that for 30 years!” It was humbling, but a good lesson that even the best of ideas can be stymied.
When George W. Bush was President, the US negotiated FTAs with 18 countries. President Obama brought three of those over the Congressional finish line and successfully concluded negotiations on the 12-nation Transpacific Partnership (TPP) — what would have been the largest free trade area in the world.
A US-Taiwan FTA was nowhere on the radar.
The Trump Administration is now looking to make new trade deals. It has notified Congress of intentions to move negotiations forward with Japan, the UK, and the EU. The Philippines is another candidate under active consideration, and the administration has floated the idea of bi-lateral agreements with Vietnam and other members of the TPP.
Still, no Taiwan.
What’s the problem? The Trump administration is confronting China on issues from the South China Sea to intellectual property rights. It has officially characterized China as a “strategic competitor” and gone directly after its economic interests.
Could it be that on some matters of substance, the administration is sticking to the tradition of preemptively capitulating to Beijing? Is it listening too closely to the advice of nervous professionals at the State Department content to challenge China in already well-established channels, like arms sales, but wary of the impact new ideas might have on US-China relations?
One of the less noted remarks in the now famous speech Vice President Mike Pence gave to the Hudson Institute a few weeks ago was the standard US commitment to its one-China policy. From my perspective, this was a good thing. When appropriately interpreted, it is a policy that has served US interests and the cause of peace well for a long time.
In no way, however, should America’s one-China policy preclude reaching an FTA with Taiwan.
Maybe it’s bureaucratic inertia in the office of the United States Trade Representative (USTR) that is holding the administration back. USTR has long held Taiwan trade consultations hostage to narrow issues around the export of beef and pork. President Trump’s partisans praise him as a great “disrupter.” Hard to imagine him allowing parochial bureaucratic interests to block negotiations with America’s 11th-largest trading partner in goods. (And don’t forget services. Taiwan imports more American services than all ASEAN combined — minus Singapore.)
It is a little farfetched, but it could also be that the central-planning faction of the Trump administration — those seeking to restructure supply chains in ways that support either their geopolitical dreams or romantic conceptions of the ideal American worker — see Taiwan as already part of the PRC economically. It could be these advisers see an FTA with Taiwan inadvertently helping China. Of course, an FTA would have the exact opposite effect, as it would present an opportunity to set and enforce rules of origin that do not currently govern the US-Taiwan trade relationship.
Finally, it could simply be a matter of disinterest. The difficulty Taiwan has had in getting White House attention on an exemption for steel tariffs would point to this. The logic of an exemption for a country so fundamentally dependent on the US for its security is so compelling that if the relevant decision makers gave it just a moment of thought, an exemption would be a done deal. Yet, on this issue, Taiwan can barely get a phone call returned.
Whatever the reason, it is possible it can be overcome and the Trump administration will move forward with a US-Taiwan FTA. That would be great. Chances are, however, that answering objections will be no more effective today than it has been for the last 30 years. What is needed is a new, more encompassing approach to advance the US-Taiwan economic relationship — an initiative that will give context to FTA talks and ultimately go beyond them.
In a paper published by Heritage two weeks ago, my colleague, Riley Walters, proposes just such a mechanism. He suggests a high-level economic dialogue between the US and Taiwan on the model of the current US-Japan economic dialogue. Instead of meeting at the Vice President and Deputy Prime Minister level, however, the representatives would be the US Trade Representative and the Secretary of Commerce on the US side and appropriate counterparts on the Taiwanese side.
A high-level dialogue would accomplish a number of things. First, the political commitment implicit in regular high-level exchange would help break through the bureaucratic barriers to an FTA on the US side. Second, raising the odds on the conclusion of an FTA would give Taiwan the comfort it needs to compromise on sensitive issues, like beef and pork. Third, the dialogue would look beyond removal of tariff and non-tariff barriers to cooperation in areas like the digital economy, investment, energy, cyber security, and global promotion of intellectual property rights. Fourth, a dialogue would command consistent US attention.
So yes, Heritage analysts — and its Presidents — have espoused the value of a US-Taiwan FTA for more than 30 years. But really, there has been no better time than the present to make it happen. We have a White House willing to take a hard look at precedents in the US-China relationship and challenge bureaucracy across the board. The US and Taiwan should create a process that can channel that instinct into real, market-based deliverables.
Walter Lohman is director of the Heritage Foundation’s Asian Studies Center.
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