U.S. and Taiwan restart TIFA meeting, China benefits Taiwan, sanctions are no way

The U.S. and Taiwan restarted the five-year suspension of the Taiwan-U.S. Trade and Investment Framework Agreement (TIFA) meeting on June 30, and the two sides reached a preliminary consensus on 10 major issues. Experts believe that the TIFA meeting has more political effects than substantive effects on economic and trade, highlighting Taiwan’s strategic position under U.S. multilateralism, while China, which strongly opposed official interaction between the U.S. and Taiwan before the meeting, has no bargaining chips to respond.

The Taiwan-U.S. Trade and Investment Framework Agreement (TIFA) meeting, which has been absent for five years, was successfully held on June 30, and Taiwan and the United States reached preliminary consensus on 10 major issues. Experts have different views on the political implications of the reopened meeting, the cooperation projects discussed at the meeting such as vaccine OEM, whether the two sides can further negotiate bilateral trade agreements (BTA) in the future, whether to catalyze cooperation between other countries and Taiwan, and the possible reaction of China.

Restart has indicative significance

During former U.S. President Donald Trump’s presidency, the U.S.-Taiwan TIFA meeting was suspended because of the preference for U.S.-China trade negotiations. But after President Biden took office, he restarted this trade structure, and it is widely believed that the key lies in the fact that the Tsai Ing-wen administration this year further relaxed import restrictions on U.S. pork containing ractopamine (lean meat extract) and U.S. beef over 30 months of age, clearing the trade barriers in the eyes of the U.S. side and restoring opportunities for deeper cooperation between the U.S. and Taiwan.

But experts interviewed by the Voice of America believe that the meeting is much more significant than that.

Liu Mengjun, director of the Continental Institute of the Chinese Academy of Economic Research, analyzed that Trump’s presidency focused on bilateral negotiations and relatively little effort on international organizations such as economic and trade, and this one-on-one one-man model has increased the workload of the U.S. Trade Representative Office. The U.S.-Taiwan bilateral negotiations, which are of low importance, were obviously put on hold under the manpower crunch caused by the lack of administrative staff capacity and even many vacancies at the end of his administration.

Therefore, he said, the resumption of the TIFA meeting is indicative of the importance that President Biden attaches to “alliances and alliances” to address common issues. In the Asia-Pacific region, the U.S. has reorganized its relations with Japan and Taiwan in order to respond to the challenge of China’s rise.

In addition, Liu believes that the U.S. and Taiwan chose July 1, the day before the Communist Party’s centennial celebration, to restart the TIFA meeting, also has the connotation of no longer worrying about China. This is a very interesting timing,” he said. It is clear that the TIFA negotiations between the United States and Taiwan do not put a lot of weight on the China factor and are less concerned about China’s reaction. Then it is clear that Taiwan has become more prominent than before in the minds of the United States to restart the supply chain and promote the return of manufacturing industries, as well as the importance of Taiwan in the strategic layout of the global section of the United States.”

Wu Jianhui, a researcher at the Institute of European and American Studies at Academia Sinica, told Voice of America that the geopolitical significance of resuming the U.S.-Taiwan TIFA meeting is greater than the subsequent economic and trade impact. He said that the common statements of the summits held by the U.S.-led democracies recently show that the Taiwan Strait issue is no longer just an item under U.S. foreign policy, but has been upgraded to an important international issue.

Wu Jianhui said, “TIFA is certainly a trade body, but the resumption of TIFA talks should be placed in the context of the internationalization of the entire Taiwan issue. Biden turned the Taiwan Strait issue into an international issue under the vein of multilateralism; the bilateral trade policy between Taiwan and the United States became conventional, meaning that it returned to the existing TIFA vein between Taiwan and the United States before. Therefore, we can observe that the first is to return to the established mode of negotiation, with the established civilian customary way; the second is that in addition to Taiwan-US economic and trade relations, there are multilateral issues, whether between the G7, Taiwan, Japan and South Korea, the Taiwan Strait issue has become a very important issue.”

Catalyzing European-Taiwan cooperation, the effect is yet to be fermented

Compared to the restart of the TIFA meeting between the U.S. and Taiwan, the European Parliament voted overwhelmingly in late May to freeze the Comprehensive Agreement on Investment (CAI). This development has led to questions: Will European countries follow the footsteps of the United States and start more trade dialogues with Taiwan?

The Biden administration’s Indo-Pacific strategy needs to unite democratic allies to confront China, and Europe has always been an open question, with Germany, for example, often appearing to be a huge gap.

This means that trade relations between the EU and China probably won’t go any further, so since the breach has been filled, it’s a good time for the U.S. and Taiwan to talk about an investment and trade agreement,” said Gao Renshan. This is a ‘beacon effect’ for other countries. Once it is lit, many countries will come to talk to us (Taiwan) about agreements, not only investment agreements, but also other bilateral trade agreements. Because Taiwan plays a very important role in the industrial chain restructuring, such as Japan and Germany hope that Taiwan’s semiconductors can be invested in the past. Taiwan’s golden decade should start with the U.S.-China trade war and the epidemic, and there are quite a few opportunities for Taiwan to negotiate trade agreements in the next decade.”

Liu Mengjun of the WIEGO, on the other hand, said that Europe is a large regional economy that has always emphasized its policy autonomy. Therefore, although the EU-China Comprehensive Investment Agreement (CIA) is suspended, it will not give up cooperation with China just because the U.S. and Taiwan restarted TIFA. However, the Biden administration is actively restarting the U.S.-EU partnership in the hope that the EU will cooperate with the U.S. global strategy, which should lead Europe to consider further cooperation with Taiwan in certain technology-related fields.

Liu Mengjun said: “Europe is quite concerned about China in the technology industry, so it is possible that cooperation in science and technology, the restart of the U.S.-Taiwan TIFA will be quite a big help. Germany, for example, also hopes that TSMC to set up factories in Europe to help stabilize its semiconductor supply chain, and even Japan is looking forward to. Because in the global semiconductor and automotive battery all kinds of shortages, Taiwan’s manufacturing energy in the semiconductor is more prominent.”

The United States agreed to expand the supply of vaccines OEM is still to be discussed

In this meeting, the U.S. and Taiwan agreed to more actively promote the accelerated circulation and customs clearance procedures for vaccine supplies under the World Trade Organization (WTO) structure. Taiwan, on the other hand, raised its desire to OEM the Modena vaccine, and the U.S. side expressed its willingness to continue discussions in the future.

Liu Mengjun pointed out that putting the vaccine issue on the economic and trade meeting has special significance. In addition to the government’s international procurement of vaccines, Taiwan now has private industry, especially TSMC and Hon Hai, two of Taiwan’s leading technology companies, forming a combination of public and private collaboration. Therefore, he said, the U.S.-Taiwan TIFA priority discussion on vaccines means that if Taiwan’s local manufacturing industry is affected by a vaccine shortage or a worsening epidemic, it could also lead to a global disaster, especially since Taiwan’s semiconductor industry plays an indispensable role in the global supply chain. Therefore, vaccines have not only become a powerful tool for the U.S. to win international allies, but also a realistic interest for the U.S. and the international community.

Wu believes that the political effect of vaccines jumping to the TIFA meeting is high. He said: “In fact, the import and export procedures of vaccines are to see how to make it fast customs clearance, it is a trade issue, Taiwan itself can simplify the procedure. If the U.S. wants to export vaccines to Taiwan, Taiwan should not spend so much on procedures when it comes to importing, and the U.S. should not spend so much on procedures when it comes to exporting, and the matter will be solved quickly, so it is not a very important issue. But it is a very important political message to convince the opposition party or the public in Taiwan that the vaccine is safe. So it’s not an economic issue, it’s just a political issue.”

Wu pointed out that if the U.S. and Taiwan follow up discussions on the OEM of vaccines, leading to the authorization of U.S. manufacturers to OEM production in Taiwan, the vaccine will then become a real economic issue. However, once Taiwan really becomes a foundry for U.S. vaccines, the production capacity of local vaccines will be affected and its competition with imported vaccines in the Taiwan market will intensify, which will then turn back to being a political issue, so he expects that the discussion on Taiwan’s foundry for U.S. vaccines will not come to fruition soon.

BTA is difficult to achieve results with framework agreements

Taiwan’s negotiator and Executive Yuan Councilor Deng Zhenzhong said that Taiwan has expressed its ultimate hope to the U.S. side to sign the U.S.-Taiwan Bilateral Trade Agreement (BTA), which was not immediately approved by the U.S., but an agreement was reached during the meeting that both sides will set up working groups on different projects and start substantive discussions on related issues in the coming year.

Liu Mengjun believes that the U.S. and Taiwan directly negotiate and sign the BTA with the connotation of sovereignty does have the difficulty of international politics, but if you turn to the TIFA structure agreement to start, you can gradually achieve a substantive effect similar to the BTA. He said: “TIFA has a characteristic that its issues are stacked. It is to discuss those problems in the year or period, and then gradually solve the problem, and finally will achieve the effect of BTA. For example, this year has been finalized 10 major issues, and then will be divided into 10 working groups to continue to talk and continue, the ultimate goal is to talk about these issues this year to come to fruition. Although it is not the name of FTA (Free Trade Agreement) or BTA, it is obvious that we hope to achieve the same effect through the TIFA model. Taiwan and the United States is in this way, Taiwan and Japan also have a similar situation, are using the framework agreement (framework) to achieve (similar) effect.”

Gao Renshan called for the Taiwan-US BTA should be negotiated and signed as soon as possible, even if there are difficulties. He said: “After the trade war between the U.S. and China, the industrial chain in China has shifted, and Taiwanese businessmen or foreign investors who have withdrawn from China hope to move to places where there are free trade agreements with the U.S., such as Vietnam or South Korea. However, Taiwan is more important, so whether from the perspective of economic and trade or human rights, the BTA should be reached as soon as possible.”

Gao Renshan believes that if Taiwan and the U.S. successfully sign the BTA, Taiwan will be able to further join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a high-standard, highly liberal trade body initiated by former U.S. President Barack Obama, with tariff reductions of up to 95 percent or more among member countries, and although President Trump signed an executive order to withdraw in 2017, the Biden administration is now likely to consider returning to .

China lacks sanctioning leverage, and the Taiwan-friendly effect is diminishing

In the face of the resumption of U.S.-Taiwan TIFA, the Chinese Foreign Ministry reaffirmed the “one-China principle” as early as mid-June and stressed its opposition to any form of official U.S.-Taiwan relations. At that time, Ma Xiaoguang, spokesperson for the Taiwan Affairs Office, also criticized the DPP government for “relying on the United States for independence” and expressed China’s firm opposition to any agreement with sovereignty implications signed by the United States and Taiwan. Therefore, after the successful conclusion of the U.S.-Taiwan TIFA meeting, there has been much discussion about what practical actions China will take against Taiwan.

Liu Mengjun believes that China will have a corresponding reflexive action to oppose any exchange between Taiwan and the international community, but it will not have much leverage to impose substantive sanctions on Taiwan, at most to reduce cross-strait contacts, similar to the recent denial of visas to Taiwanese personnel stationed in Hong Kong offices, or the successive evacuation of Hong Kong and Macau offices in Taiwan. As for the rest of the sanctions, Liu Mengjun believes that China’s leverage is limited, not to mention that Xi Jinping recently proposed to shape China’s international image as “relatable, lovable and respectable”, and it is expected that there will not be too many practical actions. As for Taiwan, Xi Jinping’s speech at the Communist Party’s 71st anniversary, besides repeating the same old tune, emphasizing “realizing the reunification of the motherland and crushing Taiwan independence attempts,” no specific goals are in sight, which shows that China’s attitude may also be in the process of adjustment.

As for whether China will adopt a two-pronged strategy to release a more friendly policy for Taiwanese businessmen or strengthen trade cooperation with Taiwan? Gao Renshan said that even if it does, the effect will be small. He said, “These preferential measures for Taiwanese businessmen, these benefits will not end up in the pockets of Taiwanese businessmen, but in the hands of the Chinese Communist Party. So, this two-handed strategy has been seen by many people to break their hands, because like in China’s internal means, including the aggravated tightening of the virtual currency, including more restrictions on trade, especially for Taiwan business, so the future of business in China, Taiwan businessmen, the world will be more and more difficult to do business, and Taiwan businessmen in China’s domestic market is not competitive, is also more and more difficult to do. ”