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AmCham: Time is now to recognize an indispensable partnership through a US-Taiwan Bilateral Trade Agreement

Judy Lin, DIGITIMES Asia, Taipei 0

AmCham Taiwan president Andrew Wylegala

After US House of Representative speaker Nancy Pelosi's visit, Taiwan has been under intense military threats from China. Its critical role in the global semiconductor supply chain amid its vulnerability in the geopolitical crisis has been regarded as a risk by some. With the US and Europe using CHIPS Act incentives to attract investments to set up their domestic chip supply chain, will Taiwan maintain its shine in the long run? DIGITIMES has an exclusive interview with AmCham Taiwan president Andrew Wylegala to discuss how Taiwan can make itself indispensable.

Q: The government has officially announced that it plans to re-open the border in mid-October. How important is opening the border for Taiwan to become indispensable to the international community?

We think there are a whole host of reasons why a rapid, transparent, and efficient full opening of borders as soon as possible is for Taiwan's benefit, regional prosperity, and even global stability.

Number one. Taiwan has a wonderful opportunity to shine before the whole world. Taiwan has done very impressive things in the management of its economy. Taiwan is missing an opportunity to excel and to get credit, which is very important for a country that's been marginalized internationally for too long. There are specific soft power opportunities such as welcoming students, particularly, Mandarin language students, just at a time when Taiwan could and should be capitalizing and distinguishing itself from the very difficult situation in China. And unfortunately, because the border has been closed in Taiwan, we're aware of groups like Harvard University's summer Chinese program that for two years hoped to move to Taiwan but haven't been able to.

Secondly, economic costs. There are a great number of commercial transactions that can't happen if you can't come and shake a hand or look at an investment project. In November, we joined our friends at the Japanese Chamber of Commerce (JCCIT) to conduct a survey. We asked, since May 2021 when Omicron surged, from that period until November for six months, how many visitors were unable to come in from Japanese companies from American companies? How many transactions, purchases, or sales didn't happen? And how many investment projects didn't advance? And the results were, even for a small, short survey, quite significant. It showed that more than a dozen investment projects were somehow delayed, I think the figure and it's on our website, $400 million in transactions didn't happen. 68% of AmCham and 73% of JCCIT firms have had their business hurt to some extent or a large extent by the inability to obtain business visas.

Lastly, we've seen increased tensions across the strait, and also between Beijing and Washington, which is all connected. And I'm speaking about the reaction from the PLA to the visit by our Speaker of the House, Nancy Pelosi, in August. That created even more urgency, I think, for Taiwan to open its border. First of all, we're dealing with an uncertain phase, and things are shifting, and it's hard to know what's happening on the ground. So you need people to come here and see for themselves that there's no panic and that nobody's moving the factories out of Taiwan, the situation is calm and stable. Taiwan is doing okay, that's an important message that you can communicate. And not just the perception of stability, and security. But the reality, when you have those connections here, Taiwan is more connected and more protected. When the international community is here on the ground, most foreign governments will pay even more attention to Taiwan.

Q: AmCham has been a champion for bilateral agreements between Taiwan and the United States in terms of investment and also trade. So, what are the areas you would advise Taiwan to step up in order to become an irresistible partner to the free trade agreement for the US and potential partners of CPTPP?

There's a long history of talking about bilateral cooperation trade agreements for about 20 years since the time Taiwan came into the World Trade Organization. And now there's a sense that we're closer than we ever been before to initiating a process to deliver genuine opening and integration, mostly because of the changes on the United States' side, where there is a real appreciation of Taiwan as an important partner. There are some economic challenges and supply chain challenges that the US confronts. So now we have a chance. What can Taiwan do to seize the opportunity? Number one, I think Taiwan needs to commit to making it happen.

AmCham has been calling for the BTA almost for all those 20 years, certainly for the last decade. For the last two, or three years, one of the top requests that our members have in our annual Business Climate Survey is for a bilateral free trade agreement between the US and Taiwan. So it's pretty clear that the US industry says they would like that.

In response to that, we joined another trade association in Washington, DC, the US Taiwan Business Council to form the BTA Coalition about two and a half years ago. And right now, there are four association members. We don't have a single company, Taiwan capital, or American capital, or third country that has signed on and said the governments should do this.

In my experience as a former trade promoter with the US Government, every time there was a big deal like KORUS with Korea, like NAFTA, you needed mobilization of the private sector to push on all of those governments to say, "this is important for us, get it done!" And I think this is the case now. I think our members need to recognize we're in a different era, a different paradigm. And it's time to support what is a completely legal and appropriate process, free trade talks. And on the Taiwan side, I would love DIGITIMES readers to think about rendering support for the BTA.

In the Whitepaper that we published on June 22, we have about 96, very particular suggestions of policy and regulatory changes that we believe Taiwan should make. And we think a lot of those will be a part of any trade negotiation. But certainly, in terms of a BTA, Taiwan should start thinking about how it can meet some of those needs that American companies on the ground have seen. So probably some of them will be shared by our trade negotiators like USTR. Back in Washington, there are some problem areas that Taiwan should put a lot of attention to. And one of the most sensitive sectors in every country I've seen is the agricultural sector. Taiwan needs to be ready to make appropriate concessions.

Two other signature areas are the Environment and Labor in any modern, high-standard trade agreement. Environment issues will not be so hard for Taiwan to position itself. Labor could be somewhat more concerning. We've heard critical reports from NGOs and third-party bodies that look at labor practices, particularly around fishing labor on deep ocean fleets. But also look at conditions of migrant labor onshore, such as collective bargaining, and the ability to unionize and exercise union rights. So that will be an area where Taiwan needs to step up. This is another positive agenda that I think Taiwan can put out there to make itself irresistible, not just meet a high standard, which Taiwan can do, but to actually show the other party, such as the United States that they can't do without Taiwan.

One is an area of digital trade, where there's not just for the United States but a global need to write the rules for what is the most dynamic area of our economies. Privacy on cross-border data flows related to this space, cybersecurity controls, ethical rules around the application of artificial intelligence and all of these wonderful new tools from Big Data to the Internet of Things.

So why is Taiwan so important? Because it's technically savvy. It's certainly committed to this area, as shown by standing up a ministry of digital affairs under a brilliant minister in Audrey Tang. It has proven its resilience and strength in the face of great threats of disinformation of cyber-attacks, like no other place on earth. So I think Taiwan comes from a position of credibility, a position of strength, and the US has comparable strengths that they can bring to the table. So it's a win-win. Taiwan should tell the world that it's ready to move into the 21st century with digital trade.

And then the second area is technology management or technology control. So, the whole basket of issues about two-way investment screening about export controls even tighter physical and cyber security controls of our intellectual property law are involved here.

And again, I think Taiwan is in a good position. partly out of necessity, it's been the target in some cases, the victim of so many of those pressures for so long. Taiwan's got some very good solutions or counter-measures.

It's also holding a lot of wonderful IP, that's so important to the ecosystem. In a complementary, holistic semiconductor puzzle, Taiwan holds many of the key pieces, and it's a natural partner for a cutting-edge agreement. So that might take the shape of a chapter in this BTA, a comprehensive investment agreement. So, in sum, I would say, Taiwan's leadership should: commit resources, engage the private sector, and address emerging challenges around technology trade and investment, be ready to evolve on agricultural, environmental, and labor issues.

Q: Resilience is key in times of uncertainty. So what are the areas AmCham would advise Taiwan to work on its resilience, especially in the face of threats from China's military blockade?

Taiwan can continue to think about different scenarios and do more contingency planning. But because it's so uncertain, and the contingencies are so wide from a cyber-attack to a partial blockade to some type of incursion, and the new challenges of "lawfare"

I think it's really important for Taiwan to have a nimble process in place to react. So not just a whole list of individual plans, but to do its best to organize itself to be well connected to other resources and partners who can help it react to almost any contingency.

It is important to look at issues around shortages of critical supply and "single points of failure," such as energy supply and system integrity. So is there a continued need to adjust trade patterns by diversifying supply chains in and out of Taiwan, and to plan to cope with bottlenecks .

And if you read our White Paper, our members talk about strengthening Taiwan's resilience, and its defensive posture. So that's good that we're part of that dialogue. But what is really important, goes back to our last question about a bilateral trade agreement as the missing next step. There are four active negotiations that are going on. And those bilateral and multilateral linkages will build resilience for Taiwan by knitting it in and integrating it into a community of like-minded partners.

To my mind, the most important thing that Taiwan can do is partner first with the United States, which I think will open the door to more multilateral agreements. It's another reason why a BTA is so important. For historical reasons, the US has been the pacesetter for international relations with Taiwan. Taiwan already has a few trade agreements with New Zealand and Singapore. And I believe Australia and Japan have talked about seeking the same. There's a whole host of countries that I think would like to move forward on agreements but feel they must wait and see a precedent set between the US and Taiwan.

And it connects to resilience. Taiwan is weak when it's isolated. And I think that is known by folks across the Straits. It is stronger, the better connected it is.

Q: The passage of the Chips and Science Act has encouraged semiconductor companies to commit investments in the United States. And besides semiconductor companies, there are other Taiwanese technology companies that are investing in the US and Mexico. So how can the US and Taiwan companies collaborate better to complement each other in terms of innovation, supply chain management, and talent, education to capture the new opportunities?

They are all big areas, and they all have opportunities for US-Taiwan collaboration, which is again why a trade agreement makes so much sense, Through the decades we've learned that there are a lot of complementarities between the US and Taiwan. Taiwan is strong in manufacturing and hardware; the US has been traditionally stronger in software and integration. We do things like moonshot projects, like vaccine discovery. Taiwan does process-oriented detailed and patient work very, very well. And so there's a natural fit.

What can be done on technology innovation? Thousands of projects and joint ventures are already happening annually in the private sector and between universities and governments. But if you want to enable more of it, I think we need to focus on making the most of intellectual property protection, making sure they're very high in both jurisdictions. And in standards development, Taiwan can be a very strong partner. Particularly open industry standards offer promise and the chance to bring in more partners.

So, IP and standards, increasing security against the leakage of our IP are all important. On Supply Chain Management, diversification is the key. No one's strong when all their eggs – or chips -- are in one basket. Even Taiwan is not.

We're discovering that we've not been entirely well served by having too much concentration. In part, I think that's why we're seeing investment in the south of Taiwan, too. And then to spread things offshore, to Kyushu, Arizona, and perhaps to Europe, India and elsewhere. This diversity creates a big challenge in restructuring and managing new supply chains. And last comes a thorny problem: talent and education. It's a global problem – there is a shortage of engineering and STEM talent, across the tech and MedTech sectors, among others.

While everybody's working on it, we need to hook it up a little bit better. It's really impressive to see new state and federal and university consortia springing up in the US again, like a new research center in upstate New York. And Purdue University is one of the universities investing in an on-campus fabrication facility and partnering aggressively with other educational institutions, including several here in Taiwan I saw another academic-industry initiative around the Midwest and Ohio, where, of course, Intel is building a massive chip fab as well. There are 15 or 20 universities, coming together sharing their expertise, and availing of some of the new support from the federal government within the CHIPS & Science Act.

And we see the example of this trend in Governor Holcomb of Indiana's recent visit, which included the acting dean of the engineering school. And surely that's about making this linkage. So talent and training programs are important.

One thing that's happening with tech companies, it's not just semiconductors. It's Foxconn, advancing with electric vehicles. And 6G telecom companies that are trying to go to the US to participate in the infrastructure build out there. Taiwan's Deputy Economy Minister CC Chen was in the US talking about opportunities in biotechnology for two-way investment. TSMC bringing to Taiwan scores of American engineers to undergo training here because they have to touch the levels of technology that only exists here in Taiwan. So they're training for months at a time, and this is creating a new need for more cross-cultural understanding and more collaboration.

Much of this accelerated integration and supply chain restructuring will require Taiwanese multinationals and smaller companies to move overseas. And there are a lot of barriers to doing that -- understanding the US way of doing business and regulations, English and non-verbal communications can be a problem in business development, too. So, AmCham would like to help bridge the gaps.

So what do we do? We do capacity-building and policy-related workshops and seminars every week, which could be a natural meeting point and learning sandbox." I am exploring with members and partners a program that we'd like to call "NextStep," building off a leadership enhancement program we have run for three years known as Next Gen." NextStep would be aimed at Taiwan industry as it transforms and diversifies. So we'd like to be a part of that by offering English communications practice and business soft skills training in a safe, familiar setting – with trusted partner, AmCham Taiwan.

Bio

Andrew Wylegala has led the American Chamber of Commerce in Taiwan (AmCham Taiwan) since April 2021. He has represented the US Department of Commerce on four continents over several decades.

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