Taiwan Trade Relations - Essay Example

The U.S. – Taiwan Trade relations Taiwan (The Republic of China) and the United s have a history of long and strong friendship. During the WorldWar II the nations were allies and ROC government moved to Taiwan because of civil war in Chinese mainland. The US government recognized the ROC as the legal government of China. To improve the bilateral relationship and security, the ROC and the U.S. signed the Sino-American Mutual Defense Treaty in 1954. The economic aids from U.S. helped Taiwan to improve its economy and remained as a member of United Nation and also other major international organizations. However, the U.S. policy towards the ROC had a major change in 1979 and shifted its diplomatic recognition from ROC to the People’s Republic of China (PRC). But the friendship between the peoples of the United States and ROC continued unofficially and maintained its commercial, cultural, and other major relations. Taiwan Relations Act (TRA) was enacted on March 1979 by U.S. Congress that further strengthened association between the ROC and the United States. The TRA specifies that the United States has to provide Taiwan with necessary defense materials and defense services to protect the country (Taiwan-U.S. Relations 2006). The recognition of People’s Republic of China (PRC) as the legal Chinese government has become the key issue towards the status of Taiwan and U.S. foreign policy. The U.S. policy towards the PRC changed and expanded the economic and political relations with them. Taiwan has become democratic country in the year 2000. In the mean times Taiwan-U.S. relations have suffered set back mainly because of the mistrust between the Bush and Chen administrations; a decline of Taiwan’s willingness to satisfy U.S. prospect about its own self-defense; the breakup of the once-powerful status of Taiwan in the United States; the declining position for Congress; and the utter instability in Taiwan’s domestic political setting. All these transformations are posing challenge to U.S. policy. Since both Taiwan and PRC are involved, the present U.S. policy needs to be reexamined or discarded. But others observe that the very reliability of the U.S. policy structure is vital in running U.S. dealings with both countries and it is to be maintained. Under these circumstances it is suggested that a clear U.S. policy and open relations with Taiwan leaders; maximum U.S. support for Taiwan’s involvement in global institutions; put more pressure on the PRC for discussion to the elected Taiwan government, and give up the use of force; and more open support for Taiwan democratic government (Dumbaugh 2006). The United States have a vital role to play in Taiwan’s foreign policy since Taiwan is the third-largest business partner and a main ally of peace and strength in the Asia-Pacific region. They also contribute to a broad array of political and cultural values. The dealings between Taiwan and the United States are maintained as per the 1979 Taiwan Relations Act, 1982 Six Assurances, and 1994 Taiwan Policy Review. Recently, Taiwan-US relations have improved in various aspects such as, joint visits by officials and military personnel, US arms sales to Taiwan, and US help for Taiwans efforts to join global institutions such as the World Health Organization and so on. Mutual trade between the two countries aggregated to US$49.5 billion in 2005, with US$28.5 billion in exports to the United States and US$21 billion worth of imports from the United States. To further improve and strengthen the mutual trade relations, Taiwan called U.S. for talks on Taiwan-U.S. Free Trade Agreement (FTA). The US Congress also is interested in setting up the Taiwan-US FTA. This idea was supported by a resolution in 2003 and stressed to enter negotiations with Taiwan on US-Taiwan FTA. In December, 2005, 23 state legislatures had passed resolutions advising the United States to start talks for such an agreement. Further, the Council of State Governments and the National Association of Secretaries of State (NASS) passed such resolutions in 2005 in consent of a Taiwan-US FTA (GIO 2006). The reason for the rapid economic growth for Taiwan was due to the foreign trade since last 50 years. Taiwans economy relies on an open world trade system and stays susceptible to variations in the world economy. The growth of trade was phenomenal by an increase more than five-fold in the 1960s, almost ten times in the 1970s, and twice over again in the 1980s. There was modest growth in 1990s and early 2000’s export growth was 60% due to the major change of export composition from agricultural products to industrial goods. Taiwans electronics sector is the vital industrial export sector and U.S. makes a huge investment in this sector. In January 2002, Taiwan became a member of the World Trade Organization (WTO). Taiwan firms are the largest suppliers of electronic products such as personal computers and monitors. Textile production is another major industrial export sector. Taiwan imports coal, oil and gas to make up most of its power requirements. China (including Hong Kong) maintained 27% of Taiwans total trade and approximately 40% of Taiwans exports in 2006. Japan was placed Taiwans second-largest trading partner with 15% of total trade, including 23% of Taiwans imports. The U.S. became third-largest trading partner, accounting for 14% of Taiwans exports and 11% of its imports. Taiwan’s imports from the United States consist mainly of agricultural and industrial raw materials in addition to machines and equipment. United States import mainly electronics and consumer goods from Taiwan. Since Taiwans per capita income level has risen, its demand for imported, high-quality consumer products also has increased. The lack of proper political relations with its trading partners seems not to have badly hindered Taiwans fast expanding trade, but has made free trade agreements awfully difficult to pursue. Taiwan is an associate of the Asian Development Bank, the WTO, and the Asia-Pacific Economic Cooperation (APEC) forum. All these developments shows, Taiwans economic significance and its position into the global economy (USA.GOV. 2007). Taiwan keeps the most vibrant position of the international economy. The global economy couldn’t progress without it. Because of this reason the peace with China is very important. Income of Taiwan’s 25 main tech industries was 122 billion in 2005. Even as the semiconductor and information technology sectors are very important for Taiwan, Taiwan’s future potential depends on research and growth activities. Taiwan’s successful economic evolution in the past made Taiwan a model for international innovation through the progress of new products and technologies. The U.S. government is concerned about the defense of Taiwan and supply required arms and weapons in accordance with the TRA. When China conducted missiles tests across the Taiwan Strait, in March 1996, U.S. President Clinton sent aircraft carriers battle groups to protect the waters of Taiwan and reduce the tension. Further, during the Bush government, Taiwan-U.S. relations have grown still closer. President Bush approved arms sales package for Taiwan in April, 2001. The United States-Taiwan Free Trade Agreement (FTA) will enhance benefit for both nations and further develop the strong relationship between the two democratic countries by increasing business, offering opportunities for investment and the developing of new technologies, enhancing security, and improving the economic ties. This will make a Win-Win condition where farmers and ranchers can take advantage appreciably from a Taiwan-U.S. FTA. Taiwan is one of important market for agricultural products, regularly importing over $2 billion worth of U.S. farm products yearly. Taking into consideration of all U.S. trading partners, Taiwan is the 3rd major market for U.S. corn and beef, the 5th major market for soybeans, and the 8th main market for wheat. The FTA between the United States and Taiwan, allow U.S. firms to influence Taiwan’s role as an opening to Asia, and services into the greater China and Southeast Asia. FTA talks will also give a foundation for improvement in many areas important to American business. The United States is one of the major foreign investor in Taiwan and in 2005, the U.S. venture in Taiwan estimated to $14.1 billion (Taiwan-U.S. Relations 2007). Recently, one of the Taiwan’s economic official said that he is confident of winning the United States private sector in support of signing Free Trade Agreement between the two countries in spite of few problems remains to be solved in business and trade among these two countries. There are some changes required to be made in the field of pharmaceutical products and agriculture and these issues can be solved in the near future and the resolution of such issues can help to improve the talks on Taiwan-US FTA. The development of many free trade agreements (FTAs) around the globe among countries, has created a fear of exclusion and trying to establish their own regional FTAs. It is observed that Taiwan’s technology based economy and role as an opening to China’s market provides a great potential trading relationship to Taiwan than any other country presently negotiating for FTA with United States. Taiwan is the16th-largest trading power in the world and the United States’ ninth-largest trading partner. The government of Taiwan has already changed many of its policies concerning the few trade problems pointed out by the United States, including those in the pharmaceuticals sector. As a result of Taiwan’s entry to the WTO in 2002 many tariff problems have been braught down. Further Taiwan will not raise objection to U.S. providing China preferential trade treatment like Permanent Normal Trade Relations (PNTR). Many Taiwanese companies have invested in China and developed business networks and improved mutual economic relations over the past decades and Taiwan hope that a benign economic relations between the United States and China is advantageous for Taiwan because it brings out a win-win situation for all. Similarly a U.S.-Taiwan FTA, is certainly good for China in terms of its instant business interests and its long-term economic progress. It is further expected that FTAs can lead to business progress and trade diversification, thereby tranforming the competitive conditions favorably (Taipei Times 2007). Taiwan have an extensive network of investment and business ties in Southeast Asia and China and these companies play a significant position in the international supply chain. From this situations U.S. companies can take advantage on Taiwan’s relations and skill in increasing their trade in Asia, particularly in China. Additionally, Taiwan’s unique culture, economy and geological position make it suitable to serve as a launch pad for U.S. for its business growth in the Asia-Pacific region. Work Cited Dumbaugh, K. Taiwan-U.S. Political Relations: New Strains and Changes October 10, 2006 Congressional Research Service ˜ The Library of Congress 24 April, 2007 Government Information Office. Foreign Relations 2006 by the Government Information Office 24 April, 2007 Taipei Times taiwan Confident Of Winning U.S. Private Sectors Support For FTA March 30 2007, 24 April, 2007 Taiwan-U.S. Relations Taiwan-U.S. Relations 13 August,2006. 24 April, 2007 Taiwan-U.S. Relations, Taiwan-U.S. Relations and the Prospects for a Bilateral Free Trade Agreement March 30, 2007. Presented at Plimsoll Club, World Trade Center, New Orleans. 24 April, 2007 USA.GOV. Background Note: Taiwan Profile April, 2007. Bureau of East Asian and Pacific Affairs 24 April, 2007 Read More