Strengthening Economic Ties with Taiwan Means More Trade Deals

Strengthening Economic Ties with Taiwan Means More Trade Deals

Taiwan is a key partner of the United States, and strengthening our bilateral relationship is vital to secure our economic interests in the Indo-Pacific region and throughout the world.

The United States' steadfast commitment to enhancing Taiwan’s defense capabilities is vital to deter unprovoked Chinese aggression. Growing economic investment in and military assistance with Taiwan raises the cost and calculations of hostilities from the People’s Republic of China. However, more can be done on the economic front of U.S.-Taiwan cooperation.

Recently, Taiwan’s vice president stopped in the United States on his way to attend the inauguration of the new president of Paraguay. This visit drew criticism from China, which conducted military drills around Taiwan—even though merely traveling through the United States is not unprecedented and in line with longstanding policy.

China increased its gray zone tactics, violating Taiwan’s air defense identification zone, by 79 percent from 2021 to 2022. However, Taiwan is determined not to provoke China. Moreover, Taiwan will hold presidential elections in January 2024. Its two main political parties—the Democratic Progressive Party (DPP) and the Kuomintang (KMT)—are committed to maintaining the current status quo with China, which most of the population supports.

According to the Election Study Center at National Chengchi University, 32 percent of the people of Taiwan prefer to maintain the status quo indefinitely, while nearly 29 percent favor maintaining the status quo for now but are open to changes later. By comparison, only 4.5 percent wanted independence immediately, while 21 percent preferred to move toward independence gradually.

Nevertheless, the U.S.-Taiwan relationship should be examined through a bilateral and regional context instead of solely through a China lens. Some American policymakers believe war is imminent between China and Taiwan. While on a recent trip to Taipei led by Wilson Center President and CEO Amb. Mark A. Green, I spoke with Taiwanese leaders. They made it clear that while it is vital to strengthen Taiwan’s ability to defend itself, war remains avoidable.

Taiwan is the ninth-largest trading partner for the United States and produces more than 90 percent of the world’s most advanced semiconductors. Almost half of the world’s container fleet and between 20 to 30 percent of global trade transits through the Taiwan Straits and the South China Sea. This underscores the importance of peace and stability and underlines the vulnerabilities facing global economies should there be any threat to accessing these waterways.

Supporting Taiwan also helps Americans at home. Taiwanese businesses want to divest from China and move elsewhere to the United States or its Indo-Pacific allies. As Taiwan’s exports to China continue to decrease slowly, Taiwan’s foreign direct investment in the United States has grown to nearly $14 billion in 2020—an increase of 13.6 percent compared to 2019.

Washington can do more to increase its economic ties to Taipei. The double taxation agreement under consideration in Congress will help stimulate economic growth. In addition, the Biden administration signed an agreement this year between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. Even though this agreement did not initially go to Congress for approval, Congress proactively and quickly passed it into law.

Several other measures should be prioritized.

Although Taiwan has applied to enter the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the United States is not part of it. Nonetheless, it could lead the effort for a smaller regional trade initiative, including Taiwan and other allies like Australia, Japan, and South Korea. With the recent “trilateral partnership” signed by President Joe Biden, Prime Minister Fumio Kishida, and President Yoon Suk Yeol, a new era of cooperation looks possible.

It is also essential to allow technology transfers so Taiwan can produce weapons to bolster its defenses. That would include cybersecurity capabilities as much as conventional land, sea, and air-based defense power.

Finally, Taiwan should be admitted to the Inter-American Development Bank (IDB) as a non-borrowing member. Of the 12 countries, plus the Holy See, that recognize Taiwan, seven are in the Western Hemisphere: Guatemala, Haiti, Paraguay, Belize, St. Lucia, St. Vincent and the Grenadines, and St. Kitts and Nevis. Sadly, in the last six years, El Salvador, Honduras, Panama, the Dominican Republic, and, most recently, the Central American Parliament have shifted recognition away from Taiwan and toward China. With concerns rising over China’s malign influence in Latin America and within the IDB itself, Taiwan being elevated from observer status to a non-borrowing member would be a significant step forward in recovering its limited international recognition.

Half measures are not enough to send strong signals to our allies or our adversaries abroad. The United States should continue its policies of supporting Taiwan, especially with a comprehensive free trade agreement, especially after Congress has demonstrated strong bipartisan support.

Taiwan is a key partner of the United States, and strengthening our bilateral relationship is vital to secure our economic interests in the Indo-Pacific region and throughout the world. Even though Taiwan seeks not to provoke China, it will also not surrender to it.

Eddy Acevedo is the chief of staff and senior adviser to former Ambassador Mark Green, the president and CEO of the Woodrow Wilson International Center for Scholars. He was formerly national security adviser at the U.S. Agency for International Development and senior foreign policy adviser for former Rep. Ileana Ros-Lehtinen.

This opinion is solely of the author and does not represent the views of the Wilson Center.

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