Peterson Institute publications
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search


Taiwan Is Next Stop in US Reengagement in Asia

by Daniel H. Rosen, Peterson Institute for International Economics

Posted in the China Real Time Report, Wall Street Journal
August 8, 2010

© Wall Street Journal

The Obama administration is showing a renewed vigor in deepening America's roots in Asia. This year, it has made a commitment to get the Korea-US Free Trade Agreement through Congress, raised the priority for a Transpacific Partnership trade agreement, and decided to seek participation in the Association of Southeast Asian Nation (ASEAN)'s East Asia Summit. These are important steps.

But the United States has not yet taken advantage of a significant opportunity to add to this momentum by boosting economic engagement with Taiwan. Doing so can further US commercial goals with an important trading partner, and also contribute to the US foreign policy goal of keeping pace with the economic integration happening within Asia.

The US-Taiwan talks on the Trade and Investment Framework Agreement, or TIFA, have lapsed for three years. In Washington policymakers have been preoccupied with critical domestic issues including healthcare and financial sector reform. In Taipei, authorities were unable to implement an agreement on US beef trade, leaving American exporters unhappy and US officials worried about setting a bad precedent. As a result, US-Taiwan TIFA talks have fallen by the wayside.

US firms also have nearly $20 billion invested in Taiwan, and Taiwanese businesses have $4.2 billion in the United States.

This is unfortunate. Through the TIFA talks, the United States can pursue new opportunities to export to Taiwan, and smooth the road to further two-way investment flows. And restarting TIFA talks will also advance broader US interests in Asia.

Taiwan is the 10th largest trading partner of the United States, despite a population of just 23 million. US firms also have nearly $20 billion invested in Taiwan, and Taiwanese businesses have $4.2 billion in the United States. There is great potential for more: So far this year US exports to Taiwan are up 68 percent through May compared to the same period last year, and the United States exported $18.5 billion even in the depths of the crisis last year.

But Taiwan is now at a turning point, with much of its focus on Asia. On June 29 it signed an Economic Cooperation Framework Agreement, or ECFA, with China, which will be followed by a free-trade deal. Once implemented, that agreement will increase the share of China-bound Taiwanese exports to 60 percent, and lift Taiwan's overall economic growth significantly.

This agreement with China also opens the door for other countries to sign formal trade deals with Taiwan. Many expected the United States to be the next in line, but instead Singapore is jumping to the head of the line and pursuing a trade and investment agreement with Taipei.

While the United States has recently stepped up its game in Asia, countries in the region are moving even faster. The TIFA talks can show that the United States is not lagging behind these Asian countries, as well as help us better understand Taiwan's regional engagements.

The disappointment in Washington over Taiwan's poor implementation of existing agreements is justified and must be addressed. But rather than a reason not to talk, those concerns are a compelling reason to schedule TIFA talks. Addressing those concerns should be a priority for Taiwan as well, since smoothing out problems with existing agreements will comfort potential partners down the road.

This year China has, in addition to signing the framework agreement with Taiwan, implemented a free-trade agreement with ASEAN, and committed to launch free-trade negotiations with Korea. President Obama has taken steps to keep pace on the ASEAN and Korea trade fronts, which are essential for meeting his goal of doubling US exports in five years.

Restarting our TIFA dialogue with Taiwan would be a natural next step to demonstrate the continued economic relevance of the United States in Asia.

Daniel H. Rosen is coauthor of the book The Implications of China-Taiwan Economic Liberalization.


Working Paper 16-2: The Economic Effects of the Trans-Pacific Partnership: New Estimates January 2016

Book: Bridging the Pacific: Toward Free Trade and Investment between China and the United States October 2014

Book: Economic Normalization with Cuba: A Roadmap for US Policymakers April 2014

Book: Understanding the Trans-Pacific Partnership January 2013

Book: The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment November 2012

Policy Brief 12-21: How Can Trade Policy Help America Compete? October 2012

Book: The Long-Term International Economic Position of the United States April 2009

Op-ed: New Imbalances Will Threaten Global Recovery June 10, 2010

Op-ed: How Best to Boost US Exports February 3, 2010

Paper: Submission to the USTR in Support of a Trans-Pacific Partnership Agreement January 25, 2010

Working Paper 09-2: Policy Liberalization and US Merchandise Trade Growth, 1980–2006 May 2009

Policy Brief 09-2: Buy American: Bad for Jobs, Worse for Reputation February 2009

Paper: Report to the President-Elect and the 111th Congress on A New Trade Policy for the United States December 17, 2008

Op-ed: The Payoff from Globalization June 7, 2005

Book: American Trade Politics, 4th edition June 2005

Op-ed: Trade: An Opportunity About to Be Lost? May 20, 2011