US and Taiwan agree to start talks on a trade and investment pact

The United States and Taiwan have officially agreed to launch negotiations on a new trade and investment pact, according to statements released by Washington and Taipei.

The two unveiled the US-Taiwan Initiative of 21st Century Trade in June, soon after Taiwan was excluded by US President Joe Biden from the Indo-Pacific Economic Framework (IPEF).

The negotiations would cover 11 topics, including “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 a statement by Taiwan’s Office of Trade Negotiations on Thursday.

Both sides would also discuss ways of addressing China’s “economic coercion,” Taiwan’s trade representative John Deng said in a press conference on Thursday.

He added that “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.”

Authorities in Beijing claim full sovereignty of Taiwan, even though Taiwan has never been controlled by China’s ruling Communist Party. The two sides have been governed separately for more than seven decades.

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China on Thursday said “the one-China principle” was a prerequisite for Taiwan’s participation in international economic cooperation and it urged the United States to abide by it.

Beijing has “always opposed the negotiation of any economic and trade agreements with Taiwan that have sovereign connotations and are official in nature,” Ministry of Foreign Affairs spokesperson Wang Wenbin said in a press briefing.

Tensions between Beijing and Washington have escalated significantly since US House Speaker Nancy Pelosi’s visit to Taiwan early this month, the first by a sitting speaker in 25 years.

China kicked off drills involving the navy, air force and other military forces in the seas and airspace surrounding Taiwan. They were a direct show of force in response to Pelosi’s visit to the self-governed island, which Beijing repeatedly warned against.

China, Taiwan’s largest trading partner, also suspended some trade with Taiwan in apparent retribution for the visit. The curbs include the suspension of some fruits and fish imports from Taiwan, and exports of natural sand to the island, a key component in the production of semiconductor chips.

In a phone press conference on Wednesday, a top diplomat from the United States said that China would use Pelosi’s recent visit to Taipei as a “pretext to launch an intensified pressure campaign against Taiwan and to try to change the status quo.”

China “overreacted, and its actions continue to be provocative, destabilizing and unprecedented,” Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink said on the call, adding that its actions could “jeopardized peace and stability across the strait and in the broader region.”

Analysts have warned that an escalation of China’s military actions around Taiwan could disrupt global trade. The self-governed democratic island of 24 million people is a global leader in the supply of semiconductor chips, which are a vital component for virtually all modern electronics.

“Taiwan matters far more to the world economy than its 1% share of global GDP would indicate,” said Gareth Leather, a senior economist at Capital Economics, in a note earlier this month.

“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,” he added.

Taiwan’s trade representative Deng said that the negotiations would “deepen trade relations with the US, enhance Taiwan’s economic competitiveness, bolster foreign investment, improve Taiwanese businesses’ image.”

He added that the talks could “increase the chance for Taiwan to join international trade organizations, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).”

According to a separate statement by the Office of the US Trade Representative (USTR), Taipei and Washington DC will “seek to adopt provisions that promote collaboration on ways to address these harmful non-market policies and practices.”

Deng said Taipei would suggest to begin negotiations in September, though that is subject to the availability of US officials. The USTR said the first round of negotiations is expected to take place this fall.


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