Why a U.S.-Taiwan Free Trade Agreement Is Needed Now More Than Ever

June 10, 2020 Topic: Economics Region: Asia Blog Brand: The Buzz Tags: AmericaTaiwanTaiwan FTAFree Trade AgreementChina

Why a U.S.-Taiwan Free Trade Agreement Is Needed Now More Than Ever

Good for both countries' economies and a firm message to China.

Unsurprisingly, the novel coronavirus has wreaked havoc on globalization and free trade. Driven by diminished demand and “socially distant” logistical difficulties, international imports and exports have slumped to their lowest level in at least four years. Existing trade relationships with China are becoming increasingly frayed amid revelations that the communist regime covered up early coronavirus cases. Despite this bad news, lawmakers and Trump administration officials are overlooking a stable, reliable trading partner with significant technological accomplishments: Taiwan. Inking a free trade deal with Taiwan would let the world know that the two countries are open for business and innovation in a new, post-Coronavirus world. It would also send a powerful message to Beijing that rejecting Taiwan is no longer an option. It’s time to forge a new era of cooperation and shared prosperity with the island-state juggernaut.

Even before the coronavirus crisis, the U.S. and Taiwan had already established a strong, mutually beneficial trading partnership. American Enterprise Institute scholars Dan Blumenthal and Michael Mazza note, “It [Taiwan] occupies a key node in the global supply chain, including for important American tech

companies like Apple and Micron…Without Taiwan’s semiconductor and information and communication technology (ICT) industries, many of the world’s most ubiquitous consumer electronics would not exist or, perhaps, would rely on China’s (People’s Republic of China, PRC) industry to the detriment of the United States.”

This technological transfer and cooperation will prove increasingly critical as the U.S. rolls out the new 5G wireless standard this year. This “latest, greatest” generation of wireless connectivity can help bridge the digital divide and power a host of new applications, if America focuses on the right relationships with countries such as Taiwan to scale up deployment. Even in these exceptionally difficult times, Taiwanese companies are setting up shop in the U.S. to massively ramp up chip production. On May 15, Taiwan Semiconductor Manufacturing Co. committed to building a $12 billion plant in Arizona slated for completion in 2024. With these partnerships, America can expand internet access to underserved communities with 5G and TV White Spaces via chip-powered devices that won’t break the bank. Shifting more of this technological supply chain to Taiwan and Taiwanese companies would also help the U.S. disentangle itself from a thorny trade relationship with China.

While trade will inevitably continue with mainland China, trust and credibility issues with the “People’s Republic” make it unwise for the U.S. to put all its eggs in one basket. Chinese officials have been known to drastically understate Coronavirus cases, and continued flare-ups can continue to shut down entire provinces. In contrast, Taiwan appears to have largely gotten a grip on its COVID-19 issues by mounting an immediate, aggressive response to the deadly disease. As early as January, the island-nation was carefully restricting travel and subjecting incoming passengers to health inspections. As the World Health Organization (WHO) shut Taiwan out of Coronavirus meetings in late January, the government was conducting hospital infection control drills and ramping up the availability of surgical masks. The results speak for themselves; there have been less than ten COVID-19 related deaths in the densely populated nation of 23 million.

Strong leadership and the prompt response allowed for the country’s citizenry to proceed with their day-to-day activities including work and business activities. Taiwan’s attention to health and continued economic strength make it a top-notch trading partner. Yet, the U.S. has repeatedly overlooked the island-nation in shopping around for free-trade agreements. This is unfortunate because a comprehensive trade deal with Taiwan would result in new, better technology for the U.S. with minimal Coronavirus-related logistical risks. It would also send a powerful message to the WHO and China that the powers-that-be simply cannot continue to ignore the powerhouse.

Taiwan has much to offer the world and should be integrated into the global economic order without delay. To fully recover from the Coronavirus, America needs as many reliable, forward-thinking trading partners as it can find. Taiwan fits the bill.

Ross Marchand is the director of policy for the Taxpayers Protection Alliance.

Image: Reuters