The second round of negotiations of the US-Taiwan Initiative on 21^st Century Trade have come to a smooth conclusion. This round has not only brought economic prosperity and consumer support to the table, but also could substantially increase Taiwanese salaries following the American example. Dr. Hank Huang, President of TABF, led the team on this article to interview the Trade Negotiation Office’s Chief Negotiator and Member without Portfolio John Deng.

The US will in no way steal Taiwanese jobs

While most people may imagine US-Taiwan relations deepening and becoming more equal after the Initiative is signed, some may still hold reservations.

Minister Deng said that according to the Initiative, certifications will be provided in an open and transparent manner. Businesses have the right to check the progress and timelines of their applications. “In the past, the Taiwanese government was powerless when discussing SMEs with the US government. Based on this agreement, however, we don’t have to worry about being stonewalled when following up on applications, which will help Taiwanese SMEs expand into the US.”

Social media has speculated that the Initiative will allow US firms to invade Taiwan’s market en masse or cause Taiwanese firms to run off to the US, hollowing out the Taiwanese economy. Deng made it clear that many US firms were already expanding into Taiwan prior to the Initiative, including financial institutions and tech giants like Google and Amazon. However, they have not hollowed out Taiwan’s economy, but have rather helped to establish Taiwan’s industry and create jobs. “Americans will in no way steal Taiwanese jobs,” Deng said.

Prior to this, TSMC had already built a factory in the US, spurring many other manufacturers to build their own plants in the vicinity of their US operations. According to Deng, Taiwanese business investment in other nations “is the spread of strength rooted in Taiwan,” and he has not heard of Taiwanese businesses shifting abroad.

Moreover, if two nations’ international trade and R&D interactions become more frequent, they will also become more transparent. Might this not cause Taiwanese wages to match those of the US? When US firms recruit Taiwanese talent, their wages and benefits could also emulate US labor. Capable applicants might also see more opportunities.

Taiwan’s increase trade surplus with the US, which has reached US $40 billion a year, has helped strengthen the international competitiveness of Taiwanese businesses. Minister Deng encouraged Taiwanese SMEs, especially those in the service sector, to assess the possibility of expanding into the US after the Initiative is implemented. “After it takes effect, more competitive firms can expand, while less competitive ones will have their work to do.”

The negotiations have also been viewed as a challenge to Taiwan’s application to join the CPTPP. The CPTPP includes customs and trade facilitation, sound regulatory practices, domestic service regulation, anticorruption, and SMEs; the Initiative not only in touches on all these topics, but also goes into even greater detail.

Taiwan also hopes that the Initiative will serve as publicity for Taiwan’s application to the CPTPP. “But the CPTPP has strict investigations. Even the UK’s application took more than two years; all it could do was wait patiently.”

“Previously, trade agreements signed by Taiwan and the US were all proposed by the US and carried out by Taiwan,” Minister Deng recalled. “The current negotiations, however, are being conducted on a bilateral and equal basis.”

Taiwan breaks out of its international isolation

Deng points out that the Initiative is significant in four respects. Taiwan will be able to break out of its international isolation. Additionally, this will be the first trade agreement between the US and Taiwan on an equal basis, and will allow Taiwan’s government to improve its governance capacity. Other nations may also look to it and promote their own trade with Taiwan.

“Compared to neighboring countries like Japan and Korea, Taiwan’s coverage by international trade agreements is extremely low,” Deng said. Taiwan often encounters enormous resistance when engaging in international negotiations or inter-country trade.

As US-Taiwan trade deepens, the two nations will sign even more trade agreements. Deng highlighted that the Initiative is the first instance of a US-Taiwan trade agreement that is systemic and predicated upon principle of equality. The interests and duties of the two governments are equal, which will someday allow US-Taiwan trade to reach a new level.

“The agreement can be expected to also promote US investment in Taiwan, as well as new technology and jobs,” Deng indicated. The US government also expects more Taiwanese firms to invest in the US. Moreover, it will set the two nations’ minds further at ease. “The direction of government policy is not going to suddenly shift. This will guarantee that when firms encounter difficulties, whether Taiwanese or American, they will receive government assistance.”

The Initiative stipulates that both the US and Taiwan governments should take the views of firms, including SMEs, into account prior to formulating or announcing trade policy. Apart from requiring transparency in both nations’ trade policy, it also requires the governments to strengthen their policy governance.

“Many nations want to increase their trade with Taiwan, but they are still worried about retaliation from China, resulting in a wait-and-see attitude. We are working hard to find a balance between these two methods,” said Deng. The US is the leader of the international community, and it signing the Initiative with Taiwan may trigger other nations to follow suit, which would be a great benefit to Taiwan’s international status.

Helping SMEs

The Initiative includes several sections: customs and trade facilitation, sound regulatory practices, service domestic regulations, anticorruption, and SMEs. Its principal goals are to help SMEs, expand opportunities for public input during the legislative process, and strengthen Taiwan’s integration with international partners on these topics, while also developing Taiwan’s capacity to adhere to the high standards of the CPTPP.

“Customs and trade facilitation” refers to simplified, transparent, automated, and faster customs via digital technology. This would lower the costs of imports and exports for SMEs and promote opportunities for participation in international trade. Apart from deepening their cooperation in customs enforcement, Taiwan and the US will also establish a trade facilitation committee and communicate regularly.

The “sound regulatory practices” refers to improvement of regulatory workflow of governance structures and abidance by fair, open, and democratic procedures. These practices would provide the public, stakeholders, and the government with smooth communication channels and guarantee the rights and interests of SMEs, workers, and vulnerable communities. The US and Taiwan will establish a sound regulatory practices committee, institute bilateral information exchanges, and push for mutually beneficial regulatory cooperation.

“Services domestic regulation” means bilaterally deepening the contents of the WTO’s “Services Domestic Regulation Reference Document.” Regulators on both sides will fairly, independently, logically, and transparently optimize approval and issuance of certifications. Additionally, they will provide more diverse trade opportunities to SMEs by improving the business environment and lowering trade barriers.

This section applies to any open service industry. It also distinguishes typical services from financial services, since the latter is subject to a higher degree of regulation. Therefore, this industry has its own regulations, and regulatory institutions are endowed with greater flexibility to approve and issue financial certifications.

Although Taiwan is not a member of the UN, it has already drawn up a law implementing the UN anticorruption convention. According to the Initiative’s “anti-corruption” section, Taiwan and the US will take on corruption together and deny safe haven to those involved in corruption in accordance with regulations, while also promoting the participation of the private sector and labor organizations.

The “SME” section also calls for the two nations to establish mechanisms for bilateral trade dialogue and arrange for a dedicated website to act as a cooperative platform for direct interaction. This would help SMEs immediately grasp trade-related information and familiarize themselves with customs and technology regulations, as well as business registration, taxation, and SME financing legislation.

All SMEs are beneficiaries

The beneficiaries of the US-Taiwan Initiative on 21st Century Trade are extensive. The section on “trade and customs facilitation” benefits freight, express delivery, air and sea freight companies, in addition to customs brokers and agricultural product exporters. “Sound regulatory practices” will benefit communication, medical, and other industries subject to a high degree of regulation. Service firms that intend to expand into the US will benefit from “services domestic regulation,” while “anti-corruption” will help exporters and those engaged in engineering and construction projects abroad, as well as firms interacting with the government. Finally, the “SMEs” section will benefit all SMEs.

“Initially concentrated in China, Taiwan’s overseas investment has continuously shifted to Southeast Asia, while there is still too little deployment in Europe and the US,” Minister Deng exhorted. Diversification is a great strategy for self-preservation, and it should prioritize investment in nations friendly to Taiwan. The Initiative will eliminate many of the obstacles facing Taiwanese firms investing in the US. “While the short-term benefits are hard to quantify,” he concluded, “the long-term benefits will be immense!”