U.S.-China relations are stuck in choppy waters following the U.S. and Taiwan’s formal declaration of trade negotiations. The first round of talks begins this fall.
The move comes after U.S. House Speaker Nancy Pelosi and a U.S. congressional delegation visited the island, which China opposed and responded with escalated military drills.
David Sacks, Council on Foreign Relations research fellow, discussed trade talks with the U.S. and Taiwan, and what could unfold as a result of negotiations.
“Taiwan is a top ten trading partner of the United States. We know how important it is for global semiconductor manufacturing as well,” Sacks told Yahoo Finance Live. “The mainland is Taiwan’s largest export market and I think that’s a real vulnerability for Taiwan and one that we should work on helping alleviate.”
Despite heightened tensions, China and Taiwan are important trade partners. The value of trade along the Taiwan Strait was $166 billion in 2020, and Taiwan has a trade surplus with the mainland.
Taiwan is also the world leader in exporting semiconductors, which are used in automobiles, cellular devices, and more. Taiwan’s Ministry of Finance reported that chips accounted for 40% of Taiwan’s $446.45 billion in 2021 exports, a 27.1% increase from 2020.
Sacks also stated that successful trade talks were a top priority for Taiwan President Tsai Ing-wen.
“She is a trade negotiator by training, helps lead the negotiations for Taiwan to enter the World Trade Organization (WTO), and took a politically unpopular step over a year ago when she lifted export restrictions of U.S. pork and beef with an additive,” Sacks explained.
After the U.S. officials affirmed their support for Taiwan, President Tsai’s office thanked Speaker Pelosi and others for their support and indicated that Taiwan is a reliable partner for the U.S.
In terms of what an actual agreement could look like, Sacks listed out potential options for the U.S. and Taiwan considering the Biden administration does not have trade promotion authority.
“It’s unclear to me whether the end product here will be a formal trade agreement that’s submitted to Congress for approval, or whether it’s something just short of that, but addresses trade facilitation, labor standards, environment standards,” Sacks explained.
If the U.S. takes action first, Sacks believes other countries will follow suit.
“I think if the United States takes the first step, negotiates a meaningful trade agreement with Taiwan, that could incentivize Japan, Australia, South Korea, and other major economies in the region to open up similar negotiations with Taiwan because they’ll see that this is something that is feasible, something that is possible,” Sacks said.
Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22
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