Comments Regarding U.S.-Taiwan Initiative on 21st Century Trade

U.S.-Taiwan Initiative on 21st Century Trade

Prof. Steve Charnovitz

I support the Biden Administration's efforts to improve cooperation with Taiwan. Strengthening Taiwan's economic and political sovereignty is important both for the people of Taiwan and for stability in East Asia.  Taiwan improved its international legal standing and legitimacy by joining the WTO in 2002.  In so doing, Taiwan's WTO Accession Agreement contains many Applicant WTO-Plus legal commitments, some of which are arguably more stringent than US obligations.  Today, Taiwan enjoys a highly competitive economy boosted by a Freedom House rating of 94.  The US rating is only 83, but much higher than China which is only 9. 

Here are specific comments on the issues in the Docket:

1. General negotiating objectives.The Federal Register Notice states that the Biden Administration is "not seeking to address tariff barriers."  Neglecting tariff barriers is a strategic USTR mistake because foreign tariff barriers continue to handicap US exporters.  The most recent WTO Trade Policy Review of Taiwan (WT/TPR/S/377) points out that "the tariff remains one of the main trade policy instruments and a significant source of tax revenue" for Taiwan.  The WTO Report also notes that Taiwan's agriculture tariff protection averages 17.8% with peaks as high as 1059.6%. The US should be seeking a Free Trade and Investment Agreement with Taiwan. 
2. Customs and Trade Facilitation.US-Taiwan trade would provide a good laboratory for testing more transparent and efficient government regulation of and operational interaction with digitized trading solutions including blockchain.
   
   
3. Transparency and Good Regulatory Practice Issues. The USTR Notice states that "The United States and Taiwan hold shared values of good governance and respect for the rule of law...." Of the two governments, Taiwan seems far more respectful of the rule of economic law than does the US. For example, there have been zero complaints filed against Taiwan at the WTO in contrast to the US which has far more complaints against it (156) than any other government.  So I would hope that Taiwan can export some of its lawabidingness values to the US. 
   
   
4. Agriculture.The objectives stated in the Notice are reasonable.  Probably most of the problems with lack of science are on the US side. 
   
   
5. Anti-corruption related matters.The relatively high rankings of Taiwan (68) and the US (67) in the Global Corruption Perceptions Index (2021) are similar.  I am not aware that either Taiwan or the US provide a "safe haven" for foreign officials who engage in corruption, but I see no harm in a bilateral US-Taiwan treaty prohibiting both parties from doing so.
   
   
6. SMEs.SMEs are very important to future US economic growth, but the US problems with its business environment are home-grown and are not affected much by what occurs in Taiwan.  US productivity in 1Q/2022 was a shocking MINUS 7.3% which points to the need for much better US competitiveness policies.
   
   
7. Digital economy-related matters. I agree with the points in the Docket.
8. Labor-related matters.I agree with the Docket Notice that the world needs "more durable and inclusive trade policies that demonstrate that trade can be a force for good by creating more opportunities for people...."  Going back to my earliest involvement in US trade policy in 1975, I've lamented how USTR has failed over many decades to provide effective leadership in improving US policies to address worker dislocations (e.g., trade adjustment assistance).  These pathologies persist into the Biden Administration which, even after 16 months, has failed to publicly convene the Adjustment Assistance Coordinating Committee (19 USC §2392).  The Notice further states that the US and Taiwan "also seek to support the protection of labor rights, including the elimination of forced labor in global supply chains."  If the US were truly serious about boosting the international protection of labor rights, the US would join the 157 other countries that have ratified the San Francisco Convention on Freedom of Association and the Protection of the Right to Organise (ILO No. 87). I support the goal of removing goods produced with forced labor from global supply chains, but this challenge is best managed internationally, rather than through bilateral Initiatives.

9. Environment and climate-related matters.The stated objectives (e.g., "exchanging information") are fine as far as they go, but they do not go very far to solving the planet's worsening climate problems. The COP26 outcomes were desultory, but Taiwan is not to blame for those missed opportunities because the US and other countries excluded Taiwan from those meetings, an outcome that Taiwan rightly criticized at the time as "unfair."  Even 20 years after Taiwan's WTO accession,[1] the WTO remains the only multilateral organization willing to admit Taiwan as a member. 
10. Standards.I have long supported the development and use of higher international standards.  I would like to see greater US-Taiwan cooperation to shape international standards.  In doing so, the negotiators should engage full participation of transnational enterprises, labor unions, SMES, and civic society from both countries.  The Docket does not describe any mechanisms that the US-Taiwan Initiative would use to provide assure that the participants in these talks are not just bureaucrats, but also include economic and social actors.
    
    
11. State-owned enterprises. The WTO has robust rules to address state-owned enterprises, but these rules are underenforced. Unfortunately, the Biden Administration has done nothing to step up WTO enforcement regarding the practices of state-owned enterprises. On the contrary, the Biden Administration has hobbled the WTO dispute system by refusing to appoint new WTO appellate judges.  Taiwan should raise this issue in the bilateral talks and point out to the US why its continued verbal attacks on international judges undermines democracy and rule of law around the world.
    
    
12. Non-market policies and practices.Good governance requires both markets and governmental regulation.  Best practices are to pursue needed government regulation with market-based instruments, such as a carbon tax.  I agree with the Docket Statement that countries that use harmful nonmarket policies can "threaten the livelihoods of their people and harm their workers and businesses." This sometimes happens in Taiwan, but lately more  domestic problems have arisen in the United States.  During the Biden Administration, the US has doubled down on its nonmarket schemes through, for example, the Defense Production Act.   
    
    
13. Other Measures.One issue not covered well in the Docket are investment restrictions.  In forthcoming talks, there can be opportunities to address how US investment restrictions "undermine fair market opportunities for U.S. workers, farmers, ranchers, and businesses."

Taiwan has been a model WTO Member and I wish the United States acted as courageously. 

[1]Steve Charnovitz, "Taiwan and the WTO," International Conference on the United Nations and Taiwan, New Century Institute, New York, September 5, 2003, https://charnovitz.org/publications/Taiwan_1.pdf.