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Trade

US and Taiwan revive trade talks after 5-year freeze to counter China

Taipei pushes Washington for pact, but both sides likely face heavy pushback at home

Cargo cranes and cargo are seen at Keelung Port during sunset hours .   © Reuters

TAIPEI/WASHINGTON -- For the first time in five years, the U.S. and Taiwan on Wednesday held their first talks under a dormant trade and investment framework as they pursue stronger trade ties to ramp up pressure on China. But the path to an agreement will likely be rocky.

Assistant U.S. Trade Representative Terry McCartin and Yang Jen-ni, deputy trade representative from Taiwan's Office of Trade Negotiations, took part in Wednesday's virtual meeting, where the two sides discussed intellectual property, e-commerce and supply chains. They also touched on how to streamline imports and exports of coronavirus vaccines.

"Taiwan and the U.S. can expect close economic cooperation over the next year," said Taiwan chief trade negotiator Deng Chen-chung, adding that the Taiwanese delegation communicated its interest in signing a trade deal with the U.S.

Taiwanese President Tsai Ing-wen described Wednesday's meeting as an "important step" on bilateral trade. But little concrete progress toward a free-trade deal appears to have been made.

Washington and Taipei in 1994 signed the Trade and Investment Framework Agreement, or TIFA, as a mechanism for discussing bilateral trade issues and as a precursor for a free trade deal. Despite the latest overtures, the next step is expected to be an uphill battle with both sides likely facing heavy pushback at home.

The U.S. had signed a TIFA under then President Bill Clinton as it sought to bolster bilateral economic ties with an eye on China. But discussions have stalled in the 27 years since, largely over Taiwan's refusal to allow imports of U.S. pork containing a growth stimulant called ractopamine. Though only a trace amount of the drug is present in U.S.-grown pork, the Taiwanese public has remained staunchly opposed to it.

Following years of deadlock with the U.S., former Taiwanese President Ma Ying-jeou in 2010 instead signed a preferential trade deal with China called the Economic Cooperation Framework Agreement. Trade between mainland China and Taiwan boomed in the ensuing years, while the U.S. broke off TIFA-based dialogue with Taiwan in 2016 after their 10th meeting.

Now the two sides have returned to the negotiating table as the Biden administration seeks closer cooperation with Taipei to exert pressure on Beijing. In a major compromise, Taiwan lifted most of its restrictions against ractopamine-laced pork in January.

Taiwan has been eager to restart the trade talks with the U.S., both to secure a free-trade agreement with the world's largest economy and to encourage other countries that have steered clear of trade deals with the island over fears of pushback from Beijing.

Curbing economic dependence on the mainland is a top priority for Taiwan. The island's total trade with the mainland came to $216.2 billion in 2020, about 2.4 times more than its $91 billion of trade with the U.S. More than 40% of shipments from Taiwan, worth a record $151.4 billion, went to mainland China, while just over 10% was bound for the U.S.

Yet obstacles loom for a new trade deal with the U.S. In general, Washington has been reluctant to sign free trade agreements, and the idea would likely trigger strong opposition from workers who form the support base of the Democratic Party.

Taiwan faces significant roadblocks as well. In August, the island will hold a referendum on whether to continue allowing U.S. pork imports, which remain highly unpopular. Depending on the vote's outcome, Taiwan could be forced to reimpose the ban, potentially derailing future talks with the U.S.

"Even if the two sides start FTA negotiations, which is what lies ahead of TIFA, the topic of liberalizing trade on agricultural goods will inevitably emerge," said Darson Chiu, a research fellow at the Taiwan Institute of Economic Research.

"Taiwan's small farmers would surely suffer a major impact," Chiu added. "The Tsai administration won't be able to accept U.S. conditions, and the talks will likely stall."

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