U.S.-Taiwan Economic Relations Remarks by AIT Director Stephen M. Young at the Economist Intelligence Unit's Business Roundtable November 18, 2008
OT0817E | Date: 2008-11-18
First, let me say it is a pleasure to be able to participate in this important forum. I'd like to thank Mr. Goddard and his colleagues at the Economist Intelligence Unit for arranging this opportunity for leaders from the private and public sectors to exchange ideas about Taiwan's present situation and future opportunities.
This has been a truly eventful year for the people of Taiwan, one that has seen historic milestones. Certainly one of the most important of these milestones was the election of a new President and Vice President and a new Legislative Yuan. As one who has seen first-hand so many changes in Taiwan over the years, I have to say that I feel fortunate to have been present when Taiwan reaffirmed its strong commitment to government by and for the people. The impressive electoral turnout and successful transition to the new administration this spring reinforced my faith in this vibrant young democracy.
Early on I made clear that we were prepared to work with whomever emerged as the winner in last March's hard-fought presidential election. It was also clear that there was going to have to be focus on restoring trust after some stress in the relationship over the past couple of years. President Ma Ying-jeou welcomed this challenge, and we are developing a good working relationship with him and his administration.
Another historic event this year was the resumption of direct talks between Taiwan and the PRC. The United States has long championed closer economic and trade relations between the two sides of the Taiwan Strait, and we have encouraged the PRC to talk with Taiwan's democratically elected leaders. We will continue to support efforts here and in the PRC to foster a climate of stability and progress and expand economic and trade cooperation. The U.S. viewed the visit of Mr. Chen Yunlin as a positive step, and we believe the four agreements signed during his visit will help further regional peace, stability, and prosperity. We welcome agreements that improve cross-Strait relations. I think the majority of people here and around the world want the PRC and Taiwan to work out their differences peacefully through mutual dialogue in a manner that is acceptable to people on both sides of the Strait.
In the context of such dynamic developments here, what should we focus on regarding Taiwan's relationship with the United States? I believe it is important to note that our relationship is both strong and multi-dimensional. Many of you may be familiar with my emphasis on the three pillars of the relationship: democracy, security and economic cooperation. We continue to work closely with our Taiwan friends on a broad agenda. This includes active discussion of the government procurement agreement under the WTO; e-commerce between our two economies; exploring ways to strengthen the investment climate; improving intellectual property rights; fully opening Taiwan's market to U.S. beef and other agricultural products; and setting science-based standards for food imports. Our trade and investment flows are a significant reason why the overall relationship is solid, but there is more to the economic nexus than that.
I will explore various aspects of the economic relationship in a moment, but first I believe that, in order to understand fully the nature of those ties, we have to consider the larger economic picture.
It is important to assess realistically the present global economic situation. With markets in turmoil and demand decelerating in numerous sectors, we have to acknowledge that it is unclear how deep the present downturn will be and how long it will last.
I believe that what is emerging in recent weeks is a recognition that this is a global problem that requires cooperation of all the major economies of the world. The meeting of world leaders that President Bush hosted this past weekend is an encouraging step in a process of communication and coordination that will be on-going.
As I understand it, discussions at the APEC summit in Lima, Peru, will very much focus on plans to address the global economic and financial crisis. This will provide Taiwan's representative, Lien Chan, an opportunity to consult with leaders from around the Asia-Pacific region, to make Taiwan's views known, and to contribute to the global response to the unfolding situation. This is why we support Taiwan's being able to participate in international organizations like APEC, the WTO and the Asian Development Bank, and have its voice heard.
In regard to Taiwan's economy, it is in good condition to weather the ongoing turmoil in capital markets, thanks in part to considerable foreign exchange reserves and high levels of liquidity. However, it would be unrealistic to expect that shrinking consumer spending world-wide, particularly in the United States and the PRC, will not have an impact on Taiwan's economy since so many of its businesses are export-oriented.
Economic interdependence entails both positive and negative consequences. Uncertain times, in fact, often provide new opportunities for those with creativity and drive. These are the very qualities that propelled Taiwan's economic miracle and made this island's technology firms world-class. Indeed, many leading Taiwan business figures are emphasizing the opportunities offered by the present situation to improve competitiveness.
While Taiwan, like the rest of Asia, has been hit hard by the global financial crisis, its continuing commitment to openness and globalization makes me confident the economy here will prosper. At the same time, I believe that Taiwan's future economic growth will depend on deregulation and liberalization. By inviting competition, Taiwan can create the kind of business environment where continual improvement in performance is the key to companies' success. Numerous multinational corporations that are already here appreciate Taiwan's unique combination of talent, rule of law and democracy. Enhancing the ease of doing business here will surely attract more of them.
We welcome moves by President Ma's administration to reduce regulation and improve the business environment. AIT played a role in enabling progress on that front this June by co-sponsoring a forum on Taiwan competitiveness, which brought together economic policy-makers and business leaders and produced numerous recommendations for how to make this place more business-friendly. I would not be surprised if today's forum produced similar insights on policy measures to enhance Taiwan's attractiveness to investors and businesses from around the world. With the global economy in disarray, a fairly new administration in Taipei, and a new one to take office in Washington in two months, what can we say about the U.S.-Taiwan economic relationship?
First, I think it's important to note the continuity of our strong trade and investment ties. Taiwan remains our ninth-largest trading partner, with nearly US$65 billion in two-way trade in 2007. Taiwan is also our sixth-largest market for agricultural exports. U.S. business has invested over US$16 billion in Taiwan, making the United States the largest foreign investor in the Taiwan economy. While the actual volume of trade and investment may vary over time, the relative importance of Taiwan to the U.S. economy will continue to be significant.
Second, both sides have mutual interest in continuing to strengthen our trade and investment relationship. Americans are well aware of Taiwan's interest in a free trade agreement. I also understand that at the APEC Summit in Lima there will be discussion of the Asia-Pacific Free Trade Area, as a long-term prospect. However, until the fundamental question of how the new U.S. President and Congress will deal with FTA's is clarified, initiating dialogue with potential partners around the world, including with Taiwan, is a bit premature.
The United States and Taiwan have used the Trade and Investment Framework Agreement (TIFA) process in past years to knit closer ties and build our economic relationship. In the TIFA process we have a positive, important, even vital tool to resolve issues in the best interests of both our peoples. The last TIFA round was held in Washington in July 2007, and although the next TIFA meeting has not yet been scheduled, the U.S. Trade Representative's office in Washington, D.C., is well aware of the necessity of continuing these important talks. We remain committed to using the TIFA process as a way to find common ground on increasing trade and investment opportunities.
In the meantime, we pursue many activities consistent with our TIFA framework. For example, Assistant U.S. Trade Representative Tim Stratford visited Taiwan in late July to discuss the entire TIFA agenda. We regularly have visits here by representatives of the Treasury Department and other U.S. economic agencies. There have been multiple digital video conferences between our respective economic experts. So we have a variety of ways to continue to move our trade and investment relationship forward.
In addition, it's important to remember that our economic relationship extends beyond trade and investment. We work with the authorities here on a wide range of issues for the benefit of both our peoples. Cooperation on protection of intellectual property rights has been one of the bright aspects of our economic dialogue over the last several years. We recognize the significant progress that Taiwan has made in this area, and we know that Washington is evaluating whether to remove Taiwan from the Special 301 Watchlist. There is a lot that countries like the PRC can learn from Taiwan's experience strengthening protection for IPR.
Through a variety of capacity-building initiatives, we are also working together to reduce transaction costs and facilitate the movement of goods and people. Taiwan is a partner with us in a major global initiative to enhance the safety of sea cargo transiting Asia. Our combined efforts have helped thwart the smuggling of drugs and counterfeit currency and reduce violations of intellectual property rights, which have undeniably benefitted the Asia-Pacific region.
Further, we have extensive cooperation in scientific research. For example, Taiwan's National Science Council is working with its U.S. counterpart to explore outer space using a revolutionary telescope array, and our leading scientific institutions are collaborating to integrate Taiwan into the worldwide network of scientific databases. Although some of these initiatives don't receive the publicity they deserve, they are nonetheless crucial to the technological innovation that will drive future economic growth.
There is also important cooperation in the field of energy. Taiwan officials are exploring application of U.S. clean coal technologies here to improve the efficiency of the island's coal-fired power plants, and the U.S. is assisting Taiwan to re-license its nuclear power plants. In the area of renewable energy, particularly wind and solar technology, American companies are very interested in the future potential here.
In other words, the U.S.-Taiwan economic dynamic is more than what is reflected in the trade figures. The incredible number of Taiwan officials, academics, and business people who studied in America is both a cause and an effect of our good relationship. There are some 29,000 Taiwan students in the U.S. right now and we've probably educated hundreds of thousands of Taiwan's best and brightest over the decades. These strong personal ties enhance commercial and other interactions and add depth to our special relationship.
Furthermore, we share a commitment to open economic systems in which transparency and respect for the rule of law ensure fair conditions for business competition.
Finally, I want to point out that my country's policy toward Taiwan has been consistent over the past thirty years, through five transitions to new administrations. History has shown that the fundamentals of our robust if unofficial relationship have flourished through all of these shifts in American politics. The solid foundation of our relationship includes three points. First, there is the traditional relationship of friendship between us. Second, there is the continuity of the Taiwan Relations Act. Finally, there are the values we share, such as democracy, respect for human rights, an open society and freedom of expression.
As we work our way through uncharted waters, we can be confident in the strength of our friendship and mutual trust. We have weathered periods of economic disruption before, and we will come through the global financial crisis in the same way.
Thank you ladies and gentlemen.