As trade tensions continue to escalate between the United States and China, Taiwan is emerging as an increasingly important economic partner for American businesses. With its highly skilled workforce, advanced technological infrastructure, and open market economy, Taiwan is an attractive destination for investment and trade partnerships. And now, with the possibility of a free trade agreement (FTA) on the horizon, the U.S.-Taiwan commercial relationship is poised to reach new heights.

The U.S.-Taiwan commercial relationship has a long history, dating back to the 1950s when the U.S. signed a Mutual Defense Treaty with Taiwan’s government. Since then, the relationship has grown to encompass a wide range of economic activities, including trade, investment, and technology cooperation. Today, the U.S. is Taiwan`s third-largest trading partner, with bilateral trade reaching $90 billion in 2019.

However, despite the close commercial ties between the two countries, there has never been a formal FTA between the U.S. and Taiwan. This is due in part to political sensitivities surrounding Taiwan’s status as a self-governed democratic island, which China claims as its territory. In recent years, however, there has been increasing bipartisan support in the U.S. Congress for a trade deal with Taiwan.

In March 2021, a group of 44 U.S. senators and representatives sent a letter to President Biden urging him to prioritize negotiations for a U.S.-Taiwan FTA. The letter cited the importance of Taiwan to U.S. national security interests and argued that an FTA would help strengthen the U.S. economy and create jobs. The Biden administration has not yet indicated its position on an FTA with Taiwan, but there are signs that it is willing to explore the possibility.

So what would a U.S.-Taiwan FTA look like? Most likely it would be modeled on previous U.S. FTAs, with provisions covering areas such as intellectual property rights, customs procedures, and market access for goods and services. The agreement would also strengthen cooperation on issues such as cybersecurity, environmental protection, and labor standards.

One potential sticking point in FTA negotiations could be Taiwan’s ban on imports of U.S. pork containing ractopamine, a feed additive commonly used in the U.S. pork industry. Taiwan’s government claims that the ban is necessary to protect public health, although many experts believe it is a non-tariff barrier to trade. The U.S. has made it clear that a removal of the ban would be a prerequisite for any FTA negotiations.

Despite the challenges, the potential benefits of a U.S.-Taiwan FTA are significant. Taiwan’s economy is already highly integrated with the global economy, with exports accounting for nearly 70% of its GDP. A trade deal with the U.S. would further boost Taiwan’s exports, particularly in high-tech products such as semiconductors and computer components. For U.S. businesses, a trade deal with Taiwan would provide greater access to a dynamic market with a highly skilled workforce and a business-friendly environment.

In conclusion, the U.S.-Taiwan commercial relationship is at a critical juncture, with the possibility of a free trade agreement between the two countries on the horizon. While there are political and economic challenges to be overcome, the potential benefits of an FTA are significant for both countries. As the U.S. looks to diversify its global trade relationships and reduce dependence on China, Taiwan’s strategic location and economic potential make it an increasingly attractive partner for American businesses.