U.S. State of the Union, Congress and TUFTA

From our viewpoint, watching President Bush's final State of the Union address on Monday night, it seemed like the president had chosen a short list of priorities to focus on for his last year in the White House, one of which is to press for Congress to pass the United States' remaining outstanding negotated Free Trade Agreements. From the address (transcript here):

I thank the Congress for approving a good agreement with Peru. And now I ask you to approve agreements with Colombia and Panama and South Korea. (Applause.) Many products from these nations now enter America duty-free, yet many of our products face steep tariffs in their markets. These agreements will level the playing field. They will give us better access to nearly 100 million customers. They will support good jobs for the finest workers in the world: those whose products say "Made in the USA." (Applause.)

These agreements also promote America's strategic interests. The first agreement that will come before you is with Colombia, a friend of America that is confronting violence and terror, and fighting drug traffickers. If we fail to pass this agreement, we will embolden the purveyors of false populism in our hemisphere. So we must come together, pass this agreement, and show our neighbors in the region that democracy leads to a better life. (Applause.)

- President George W. Bush, 2008 State of the Union Address

With free trade seemingly high on the White House's priority list, there may be better prospects ahead over the next year for the passage of these outstanding agreements. Hence the prospects for a Taiwan-U.S. Free Trade Agreement (TUFTA), which has not been hammered out yet between the two allies, seems brighter as well. Reenforcing this logic are statements made recently by Senate Finance Committee chair Max Baucus (D) of Montana and committee member Jon Kyl (R) of Arizona, as reported in this article by the publication from the Economic Division of TECRO, TaiwanNow:

from TaiwanNow, January 2008 issue
"View from Taipei - Baucus: ‘Launch U.S.-Taiwan FTA Talks’"

Congress Looks Ahead to What’s Next and Needed After Pending Trade Agreements

In late December, Senate Finance Committee Chairman Max Baucus (D-MT) introduced a concurrent resolution calling on the United States to both “increase trade opportunities” with Taiwan and launch negotiations on a bilateral free trade agreement. Co-sponsored by Senator Jon Kyl (R-AZ), the resolution, S Con Res 60, comes at a time when trade has become an easy scapegoat for U.S. economic problems on the campaign trail and as an uncertain outlook for the global economy may push the U.S. and other nations to consider protectionist measures.

During this period of economic uncertainty, it takes bold leadership to look beyond what is politically popular in the short-term to embrace good policy in the long-term. Taiwan is both grateful to Senators Baucus and Kyl for their bipartisan vision and for the longstanding support and friendship of the United States. Negotiating trade agreements with commercially significant economies will help safeguard U.S. economic competitiveness in the years to come, and the case for a U.S.-Taiwan FTA has never been stronger.

As the Senators highlight in their resolution, Taiwan and the United States are among each other’s most important trading partners. U.S.-Taiwan bilateral trade in 2006 totaled $61.2 billion, and Taiwan ranks as the 9th largest U.S. trading partner, the 11th largest export market for U.S. goods; the 6th largest market for U.S. agricultural products and the “3rd, 4th, 5th and 6th” largest buyer of U.S. corn, soybeans, beef and wheat, respectively. Not surprisingly, studies show that both the U.S. and Taiwanese economies would experience significant gains from a bilateral trade agreement. According to the Peterson Institute of International Economics, a U.S.-Taiwan FTA would increase U.S. goods and services exports to Taiwan by up to $6.6 billion annually.

Senators Baucus and Kyl have long been supporters of a U.S.-Taiwan FTA. Baucus introduced the U.S.-Taiwan Free Trade Agreement Act of 2001, and he and Kyl, along with eight other senators, wrote to President Bush in 2003 urging him to launch talks on an agreement. There has also been similar support for a bilateral FTA in the House, with members introducing resolutions calling for the launch of a U.S.-Taiwan FTA in 2003, 2006 (signed by more than 66 representatives) and most recently H Con Res 137 in May 2007, a proposal co-sponsored by Congressional Taiwan Caucus co-chairs Shelley Berkley (D-NV), Steve Chabot (R-OH), Dana Rohrabacher (R-CA) and Bob Wexler (D-FL.) as well as Rep. Jim Ramstad (R-MN).

Which brings us back to 2008: We hope that members of Congress and the private sector will support an economically significant U.S.-Taiwan FTA and the resolutions introduced by Senators Baucus and Kyl and Reps. Berkley, Chabot, Rohrabacher, Wexler and Ramstad this year. The time for Taiwan is NOW.

Taiwan-U.S. Free Trade

When Peru-U.S. Free Trade was approved in the U.S. House of Representatives by a wide margin in early November, the outlook appeared grim for the remaining agreements in the wings--Columbia, Panama and Korea--to find approval soon, as the political climate quickly began to cool towards trade. The Nelson Report in November relayed the news that, "Democratic presidential candidate Hillary Clinton late yesterday let it be known that if and when KORUS, Colombia and Panama FTA's come up for a vote, hers will be 'no'. Whether she ever gets to that point depends, of course, on the House, and today, Majority Leader Steny Hoyer announced that there will be no votes on these three at all this year."

Without Taiwan even on the docket, the prospects for a Taiwan-U.S. Free Trade Agreement in the immediately future are admittedly unlikely. Yet Taiwan is still on Congress' trade radar, as was demonstrated earlier this month when Senator Max Baucus of Montana introduced S. Con. Res. 60, a concurrent resolution which, if passed, would nudge the office of the U.S. Trade Representative towards opening extensive trade negotiations with America's eighth-largest export market.

We've listed in the past many of the prime reasons why it is in both countries' interest that a Taiwan-U.S. free trade agreement (TUFTA) become reality sooner rather than later. The economies of Taiwan and the United States are heavily symbiotic, with little overlap in their respective key industries. Although free trade is seen by many as conributing to the percieved evils of globalization, classic talking points against free trade do not apply to the situation of trade between Taiwan and the United States.

S. Con. Res. 60 has been referred to the Senate Finance Committee, which is incedentally chaired by Senator Baucus. If you have a Senator on the committee, drop his/her office a line and voice your support for the resolution.

The Case for Taiwan-U.S. Free Trade

Free Trade has for some time been a driving force behind United States foreign relations and the role many Americans envision for their nation in the twenty-first century. Scholars, economists, innovators and businessmen and women envision a global marketplace where trade barriers have been drastically lowered or eliminated altogether; where products are more easily distributed worldwide and exchanged freely internationally as well as domestically.

Free trade, of course, is not an idea that has arrived without protest. There are concerns that unique cultures and the identities of underdeveloped nations will fall prey to the larger international market, as purveyors of locally produced goods are driven out of business by large corporations producing similar goods for less elsewhere. Yet when two modern and industrially developed nations engage each other in free trade, there cannot be much doubt that the relationship is beneficial for both.In this light, there is much to gain and little to lose when it comes to a Free Trade Agreement (FTA) between the United States and Taiwan.

Proponents of such a bilateral international deal on both sides of the Pacific have brought forth various proposals for a Taiwan-U.S. Free Trade Agreement, or TUFTA. Beginning in 2001 with the introduction of a bill by Senator Max Baucus of Montana (D) entitled, “United States-Taiwan Free Trade Agreement Act of 2001,” members of Congress from both sides of the aisle have increasingly sought to hammer out a finalized version of TUFTA for approval by the governments of the United States and Taiwan.

Most recently, on May 1, 2007, House Concurrent Resolution 137 was introduced by Congresswoman Shelley Berkley of Nevada (D) on behalf of herself and Congressmen Jim Ramstad (R-MN), Robert Wexler (D-FL), Steve Chabot (R-OH) and Dana Rohrabacher (R-CA). The bill would express “the sense of the Congress that the United States should increase trade opportunities with Taiwan by launching negotiations without delay to enter into a free trade agreement with Taiwan.” H. Con. Res. 137 currently has 27 cosponsors and is awaiting action by the House Subcommittee on Trade.

We believe that a Free Trade Agreement between Taiwan and the United States is an important next step in preserving and strengthening the economic and strategic alliance between Taiwan and the United States. Taiwan is a natural economic hub for the East Asia and Pacific region, and by negotiating lower trade barriers, the U.S. government will secure an arrangement in which American firms will be better able to access supply chains throughout the region (including in China) by participating in Taiwan’s marketplace. Taiwan too will benefit by increasing the level of bilateral trade with its fourth largest trading partner and introducing American influence and competition into its large yet underdeveloped domestic services sector.

Taiwan already heavily imports quality U.S. agricultural goods such as beef, fruits, and nuts, and these imports would expand under lower tariff rates. Taiwan’s consumers would benefit from lower overall prices while American farmers, ranchers and growers would benefit from an expanded market for their products. In short, the current proposal for TUFTA would enhance and catalyze an already symbiotic economic relationship.Every year that passes without the creation of a United States-Taiwan Free Trade Agreement represents a massive missed opportunity worth billions of U.S. dollars in terms of bilateral trade and the strengthening of commercial networks in the western Pacific Rim.

As the United States continues to expand its international Free Trade portfolio, we can only hope that TUFTA appears at or near the top of the list.