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

In June, they unveiled the US-Taiwan 21st Century Trade Initiative, shortly after US President Joe Biden expelled Taiwan from Indo-Pacific economic structure (IPEF).

The talks will cover 11 topics, including “trade facilitation, regulatory best practices, anti-corruption, small and medium-sized enterprises, agriculture, standards, digital trade, labor, environment, state-owned enterprises, and non-market policies and practices” . Statement by the Taiwan Trade Negotiation Authority on Thursday.

The two sides will also discuss ways to deal with China’s “economic coercion,” Taiwan Trade Representative John Deng said at a press conference Thursday.

He added that “everyone sees that China is engaged in economic coercion” against “not only Taiwan, the United States, but many other countries”, which is “harmful to the world economic order.”

Authorities in Beijing claim full Taiwan sovereignty even though Taiwan has never been controlled by the ruling Communist Party of China. The two sides were ruled separately for more than seven decades.

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

Beijing has “always opposed any economic and trade agreements with Taiwan that have sovereign overtones and are official,” Foreign Ministry spokesman Wang Wenbin said at a press briefing.

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

China started exercises involving the navy, aviation and other armed forces in the seas and airspace around Taiwan. They were a direct show of force in response to Pelosi’s visit to the self-ruled island, against which Beijing has repeatedly warned.

China, Taiwan’s largest trading partner, has also suspended some trade with Taiwan, apparently in retaliation for the visit. The restrictions include the suspension of imports of certain fruits and fish from Taiwan, as well as the export to the island of natural sand, a key component in the production of semiconductor chips.

In a telephone press conference on Wednesday, a senior US diplomat said China was using Pelosi’s recent visit to Taipei as “an excuse to launch an intensified pressure campaign against Taiwan and try to change the status quo.”

China “overreacted and its actions continue to be provocative, destabilizing and unprecedented,” Assistant Secretary of State for East Asia and Pacific Affairs Daniel Kritenbrink said by phone, adding that his actions could “endanger peace and stability across the strait and into a wide area.

Analysts warn that an escalation of Chinese military action around Taiwan could disrupt global trade. The self-governing Democratic island of 24 million is the world’s leading supplier of semiconductor chips, a vital component in virtually all modern electronics.

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

“Further escalating cross-strait tensions that cut off Taiwanese exports from the rest of the world will lead to renewed shortages in the automotive and electronics sectors and increase upward pressure on inflation,” he added.

Deepen trade relations

Taiwan Trade Representative Deng said the talks would “deepen trade relations with the US, enhance Taiwan’s economic competitiveness, support foreign investment, and improve Taiwan’s business image.”

He added that the talks could “improve Taiwan’s chances of joining international trade organizations such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP)”.

According to a separate statement from the Office of the United States Trade Representative (USTR), Taipei and Washington, DC, “will seek to adopt provisions that promote cooperation in combating these harmful non-market policies and practices.”

Deng said Taipei would offer to start talks in September, although that is subject to the availability of US officials. The USTR said the first round of negotiations is expected this fall.

— Johnny Hallam contributed to this report.

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