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The United States and Taiwan have officially announced that they will enter into trade negotiations and investment treaties, ushering in new economic opportunities for both countries. Furthermore, both Washington and Taipei issued statements expressing their delight at the agreement.
Following Taiwan’s exclusion from the Indo-Pacific Economic Framework, the US-Taiwan Initiative of the 21st Century Trade was unveiled in June. The Biden administration created the IPEF to forge ties and a presence in the Indo-Pacific nations that were highly susceptible to Chinese influence. “We’re here today for one simple purpose: the future of the 21st Century economy is going to be largely written in the Indo-Pacific,” Biden told the public after the announcement of the framework was made.
According to both countries, the negotiations would include “trade facilitation, good regulatory practices, anti-corruption, SMEs, agriculture, standards, digital trade, labor, environment, state-owned enterprises, and non-market policies and practices.”
According to the Office of Trade Negotiations of Taiwan, the US House Speaker Nancy Pelosi’s visit to Taiwan, followed by the arrival of another delegation of lawmakers, increased China’s pressure and sanctions against the island. And this is what the countries are also aiming for – to ease the sanction put by Chinese authorities on Taiwan.
“Everyone can see that China is engaging in economic coercion [towards] not only Taiwan, the US but also many other countries, [which is] harmful to the world economic order,” said John Deng, Taiwan’s trade representative.
What is the relationship between Taiwan and China
Despite the Chinese Communist Party’s lack of influence in Taiwan, Beijing has always claimed Taiwan as part of its territory. Taiwan and China had separate governments for more than 70 years. Beijing officials responded to the repeated visits of high-ranking US officials to Taiwan by saying that Taiwan should first impose the one-China principle before engaging in any international economic negotiations. China added that the United States should support and preserve the policy.
Wang Wenbin, the spokesperson of the Ministry of Foreign Affairs, stated, “[Beijing has] always opposed the negotiation of any economic and trade agreements with Taiwan that have sovereign connotations and are official in nature.”
When US Speaker Pelosi visited Taiwan, China retaliated right away by stepping up military exercises and increasing its military presence in the areas closest to Taiwan’s territorial waters. Beijing has since advised the US not to try to connect with Taiwan, but that’s not what actually happened.
Because of this, China imposed trade limitations and effectively banned some imports and exports to and from Taiwan. Furthermore, the recent visit of US dignitaries to China, according to a US diplomat, would be used as a pretext by China to increase pressure on Taiwan and alter the status quo in the country.
“[China] overreacted, and its actions continue to be provocative, destabilizing and unprecedented. [China’s actions could] jeopardized peace and stability across the strait and in the broader region,” stated the East Asian and Pacific Affairs Assistant Secretary of State Daniel Kritenbrink.
Many experts also predicted that the trade barriers put up by China might have a negative effect on international trade.
Capital Economics senior economist, Gareth Leather, said, “Taiwan matters far more to the world economy than its 1% share of global GDP would indicate. A further escalation in cross-strait tensions that cut Taiwan’s export off from the rest of the world would lead to renewed shortages in the automotive and electronics sectors and put further upward pressure on inflation.”
New agreement will enhance trade between Taiwan and US
Despite the pressure from China, the Taiwan Trade Representative is still optimistic that the collaboration will “deepen trade relations with the US, enhance Taiwan’s economic competitiveness, bolster foreign investment, and improve Taiwanese businesses’ image.”
The agreement could also “increase the chance for Taiwan to join international trade organizations, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).”
Meanwhile, both countries will “seek to adopt provisions that promote collaboration on ways to address these harmful non-market policies and practices,” said the US Trade Representative (USTR).