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The United States and Taiwan sign a historic trade agreement intended to promote more exports by small and medium-sized companies. Predictably, the agreement angered China.

The Deal Aims to Promote Exports by Small and Medium-Sized Businesses

The United States and Taiwan have signed and Congress has approved a formal trade agreement. It’s the first significant legislation affecting bilateral relations since authorization of the American Institute in Taiwan in 1979, following full diplomatic relations between the U.S. and China, which strongly opposed the new agreement.

Oregon Senator Ron Wyden, who chairs the Senate Finance Committee that oversees trade relations, praised the agreement: “This bill demonstrates our strong bipartisan, bicameral support for Taiwan, gives the agreement Congress’s stamp of approval, and lays out robust requirements on public transparency and congressional consultation for future trade agreements with Taiwan. It’s a win-win that will shore up our economic and strategic partnership with Taiwan and make sure Congress and the American people have a voice and vote when it comes to international trade.”

Taiwan represents a significant export market for Oregon, though China remains Oregon’s largest export market, followed by Japan, South Korea and Malaysia. Taiwan is the fourth largest export market for Oregon wheat. The Portland Tribune reported a Taiwan trade delegation visited Oregon last year. An Oregon Food and Beverage trade delegation will visit Singapore and Taiwan later this year.

“Taiwan is an affluent market that sources a high percentage of their food and agricultural products from the United States,” according to the Oregon Department of Agriculture. “In 2021, Taiwan was Oregon’s fifth largest international market for agriculture products. Taiwanese consumers and food processors appreciate high quality products and will pay for premium, healthy and trendy products.”

Taiwan exports to the United States include semiconductors, electrical machinery, vehicles, plastics and iron and steel products. Taiwan-owned factories also produce computer chips in China that are exported to the United States. Taiwan produces more than 60 percent of global output of semiconductors, most of it by Taiwan Semiconductor Manufacturing Corporation (TSMC).

What the Agreement Covers
The agreement covers Customs administration and trade facilitation, regulatory practices, service supplier regulation, anticorruption measures and promotion of trade with small and medium-sized businesses. It is the first agreement reached under the U.S.-Taiwan Initiative on 21st Century Trade, which was launched in June 2022.

According to the U.S. Trade Representative’s office, the agreement will encourage trade and investment opportunities involving small and medium-sized enterprises (SMEs) through training programs, trade education, trade finance, trade missions and improved access to capital and credit. The text of the agreement also encourages dialogues that include SMEs owned by diverse, underserved and underrepresented groups.

Customs Administration and Trade Facilitation
The agreement aims to streamline border procedures and reduce red tape, “making it easier, faster and cheaper for American businesses to bring their products to Taiwan and Taiwanese customers.“ Custom forms can be submitted electronically and allow border agents to accept electronic payment of duties, taxes and fees. An objective will be to reduce idling times to lower greenhouse gas emissions and prevent spoilage of perishable products.

Good Regulatory Practices
The agreement creates improved transparency tools and mechanisms to help SMEs understand regulatory procedures in both the United States and Taiwan markets. Public consultations on draft regulatory measures are intended to promulgate better and more informed regulations.  A Good Regulatory Practices Committee will be formed to monitor implementation, improve information sharing and enhance cooperation.

“Taiwan is an affluent market that sources a high percentage of their food and agricultural products from the United States.”

Services Domestic Regulation
This provision is intended to treat service suppliers fairly when they apply for permission to operate and ensure a smooth flow of information between applicants and regulators. Regulators must be independent of the industry they oversee. They must inform applicants of  requirements to obtain a license, provide applicants a fair opportunity to demonstrate they meet the requirements and make a decision on whether to issue a license in a reasonable period of time. The agreement prohibits licensing rules that discriminate based on gender.

Both sides commit to establish comprehensive anticorruption measures that will prevent and combat bribery and other forms of corruption. Building on the anticorruption framework established in the United States-Mexico-Canada Agreement, this chapter addresses money laundering, denial of entry for foreign public officials, the recovery of proceeds of corruption and enhanced protections for corruption whistleblowers. The agreement mandates procedures for removal of public officials who are charged or convicted of corruption.

Chinese Opposition
China, which views Taiwan as part of its territory, opposes formal contact between the United States and Taiwan, whether for trade or military support. As China has grown more openly assertive about its territorial rights to Taiwan, the Taiwanese people have shown more interest in self-rule and independence, which has contributed to escalating tensions between China and the United States.

When the Republic of China under Chiang Kai-shek lost control of the Chinese mainland to Chinese communists under Mao Zedong, Chiang and his government took refuge in the nearby island of Taiwan and set up a dictatorship to suppress an unwelcoming native population. Chiang and the United States signed an agreement in 1955 guaranteeing Taiwan’s defense. Following Chiang’s death in 1975, the United States moved to normalize relations with China in 1979, which led to a scaled-back relationship between the United States and Taiwan that included formation of the American Institute in Taiwan.

About TSMC
Taiwan Semiconductor Manufacturing Company launched in 1987 and fueled its growth by investing heavily in research development (18 percent of revenues in 2021), investing in fabrication facilities and developing and maintaining its own supply chain. It formed strong ties with Apple and Qualcomm, which gave it an inside perspective on new electronic product demands.

Morris Chang, who was born in China, founded TSMC in 1987. Veering from his original dream to become a writer, Chang followed his father’s advice and attended Harvard University before transferring to the Massachusetts Institute of Technology where he earned degrees in mechanical engineering. He became an engineering manager at Texas Instruments before taking his doctorate in electrical engineering from Stanford University in 1964.

Change remained with Texas Instruments for 25 years, rising to become senior vice president for the company’s global semiconductor business. Taiwan recruited Chang to take over its Industrial Technology Research Institute and develop a semiconductor industry. With help from Taiwan’s government, Chang started TSMC and propelled it to become one of the world’s most profitable chipmakers. Along the way, Chang promoted e-commerce and led TSMC’s expansion into solar cells and LEDs. He found time to indulge in his first passion, writing his autobiography that was published in 1998. He retired in 2018.