Prospects for U.S.-Taiwan FTA Following $3 Billion Agricultural Deal

By Maria Krol Sinclair —

Corn harvest in Iowa, United States. In 2016, one quarter of Taiwan’s imported agricultural products came from the United States. Source: Brian.Abeling’s flickr photostrea, used under a creative commons license.

At a joint signing ceremony on September 13, the United States and Taiwan announced that Taiwan will purchase $3 billion worth of agricultural products from the United States, the largest single new trade transaction to date under either the Trump or Tsai administrations. Under the pledge, the United States will ship between 359 million and 379 million bushels of corn, wheat, and soybeans to Taiwanese agricultural groups in 2018 – 2019. During the signing ceremony, which was attended by Senate Agricultural Committee Chairman Pat Roberts (R-KS), House Foreign Affairs Subcommittee on Asia and the Pacific Chairman Ted Yoho (R-FL), American Institute of Taiwan’s Managing Director John Norris Jr., Taipei Economic and Cultural Representative Office’s (TECRO) Representative Stanley Kao gave remarks which focused on the high share of Taiwanese agricultural imports that now come from U.S. exporters. In 2016, one quarter of Taiwan’s agricultural imports originated in the U.S., making Taiwan the United States’ seventh largest agricultural export market.

Despite the close trade relationship, Taiwan has not been immune from the Trump administration’s highly public goal to reduce the U.S.’s global trade deficit. Under Executive Order 13786, signed by President Donald Trump on March 31, 2017, Taiwan was listed as one of 16 nations that accounts for the “lion’s share of the deficit problem,” according to National Trade Council Director Peter Navarro. Should imports from Taiwan remain around $40 billion in 2018 as they have in the past three years, this bean and grain deal would significantly reduce the U.S. trade deficit with Taiwan.

A key question is whether this grain deal is the harbinger of a broader trade agreement. Taiwanese delegation head and Deputy Minister of Agriculture Dr. Huang Chin-Cheng, expressed hope that the Trump administration would consider signing a bilateral free trade agreement (FTA) with Taiwan, a prospect which Senator Pat Roberts said had been discussed with the delegation privately.

After representatives signed the agreement, delegates traveled to Iowa, Indiana, and Missouri to meet with local farmers’ associations. Mark Heckman, a corn farmer from Atalissa, Iowa and member of the Iowa Corn Promotion Board, felt that the deal helped solidify Taiwanese buyers and American producers’ mutual commitment to the longstanding relationship and helped to mollify the Taiwanese delegation members’ “concerns about the trade relation and all the other talk and rhetoric that’s going on.”

Despite the overall positive portrayal of the deal in U.S. and Taiwanese media reports, Liberty Times, Taiwan News and Taipei Times all included an update on ractopamine-treated pork in their readouts of the trip, an issue that was highlighted by only one U.S. news source.

The U.S. – Taiwan longstanding debate on the topic remains strained, despite that according to multiple sources, resolving it is seen as a necessary, although not sufficient, progression toward a bilateral FTA. Taiwan has long cited high public sensitivity toward food safety as the main reason for blocking U.S. pork. Recent protests against ractopamine-treated pork during a routine delegation visit of U.S. Department of Commerce officials and steady, salient disapproval of the chemical on the island corroborate political leaders’ concerns. Regardless, in the 2016 National Trade Estimate report, the Office of the United States Trade Representative criticized the block, arguing that U.S. pork was in line with international CODEX standards and that Taiwan’s position was not backed by scientific fact.

For now, it seems that Taiwan has taken a step forward in improving the likelihood of an FTA under the Trump administration by reducing their trade surplus with the United States. President Tsai Ing-wen’s willingness to re-visit the ractopamine issue and the historically close relationship between Taiwan and the United States might mean that ractopamine-treated pork is the next issue on the docket for serious discussion.

In addition to establishing maximum residue limits (MRLs) for ractopamine and other beta-antagonists, though, significant barriers remain. These include greater transparency for investors in Taiwan’s pharmaceutical industry, intellectual property protection, especially in the medical devices market, and biotechnology and cosmetics labeling, among many others.

After signing the agricultural agreement, Minister Huang encouraged Taipei to address “the discrepancy between facts and feelings [about ractopamine-treated pork] among its people,” more than two-thirds of whom supported a zero-tolerance for allowing the chemical into Taiwan.

Ms. Maria Krol Sinclair is a program coordinator and research assistant with the Freeman Chair in China Studies at CSIS.

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