Updated December 23, 2020
U.S.-Taiwan Trade Relations
Taiwan is a top U.S. trade partner and key link in global
source of imports (at $54.3 billion), according to U.S. 2019
technology supply chains, supplying both the U.S. and
data. In 2019, U.S. agricultural exports to Taiwan were $3.6
China markets, although this position is increasingly
billion and U.S. service exports totaled $11 billion. U.S.
tenuous with U.S. government efforts to restrict China’s
trade data does not include production by Taiwan firms that
access to advanced technologies. Taiwan’s economy is
manufacture in China for U.S. export. Analysis of Taiwan
highly dependent on global trade, with exports accounting
companies’ orders for U.S. exports provide a more fulsome
for almost 70% of gross domestic product (GDP). Taiwan is
account of bilateral trade linkages. In 2019, Taiwan firms
seeking to overcome economic challenges (such as labor
received $140 billion in U.S. export orders, according to
mismatches and energy shortages); generate new sources of
Taiwan’s Ministry of Economic Affairs; official U.S. data
growth in emerging technologies; and diversify away from
showed $54.3 billion in Taiwan merchandise exports to the
its economic dependence on the People’s Republic of China
United States. Taiwan’s direct U.S. exports rose by 21% in
(PRC or China). Central to these ambitions is the Taiwan
2018 (over 2017) and by 19% in 2019 (over 2018) as some
government’s effort to start trade talks with the United
China-based production shifted to Taiwan to avoid U.S.
States. Also see CRS In Focus IF10275, Taiwan: Political
tariffs and in response to Taiwan government incentives.
and Security Issues, by Susan V. Lawrence.
U.S. foreign direct investment (FDI) stock in Taiwan
through 2019 (on a historical-cost basis) totaled $17.5
Taiwan’s Economy
billion, while Taiwan’s FDI stock in the United States
Taiwan (population 24 million) is the world’s 22nd-largest
totaled $11.1 billion. Taiwan’s FDI stock in the United
economy, with a 2019 nominal GDP of $605 billion. The
States is higher than official figures indicate, because U.S.
World Economic Forum ranks Taiwan as the world’s 12th-
data does not include investment via free ports that are tax
most competitive economy, and the World Bank ranks
and duty free, such as Hong Kong and the British Virgin
Taiwan as the 15th-best economy in ease of doing business.
Islands. Taiwan runs a trade surplus with the United States
Taiwan’s GDP composition by sector is 2% agricultural,
and is a top holder of foreign exchange reserves. Taiwan
36% industrial, and 62% services. Main industries include
holds $218.2 billion in U.S. Treasuries, as of October 2020,
electronics, information communications technology,
and holds $513.4 billion of foreign exchange reserves as of
semiconductors, petrochemicals, textiles, steel, machinery,
November 2020), a status that allows Taiwan to stabilize
cement, food processing, autos, and pharmaceuticals. In
exchange rates, maintain liquidity, and invest domestically
2019, Taiwan was the 20th largest trading economy with
and overseas. In December 2020, the U.S. Department of
exports of goods and services totaling $382 billion.
Treasury added Taiwan to its monitoring list of major
Taiwan’s real GDP growth averaged 3% from 2009 to
trading partners that merit close attention to their currency
2019. The economy is projected to grow by 2.5% in 2020.
practices and macroeconomic policies. Treasury cited a
Figure 1. U.S.–Taiwan Goods Trade 2000-2019
significant expansion in Taiwan’s trade (current) account
($ in bil ions)
surplus and Taiwan’s net foreign exchange purchases of
$10.5 billion between July 2019 and June 2020.
200
Prospects for Trade Agreement Talks
Taiwan’s government has expressed a strong interest in
150
starting talks toward a comprehensive free trade agreement
with the United States. Many Members of Congress have
100
called on the U.S. Trade Representative (USTR) to
prioritize such an effort, including 161 House Members
50
who signed on to a joint letter in December 2019, and 50
Senators who signed on to a joint letter in October 2020.
0
The American Chamber in Taipei has called on the Taiwan
government to remove trade irritants to improve prospects
for talks, noting in its 2019 White Paper that U.S.-Taiwan
Taiwan U.S. Export Orders (U.S. Imports)
relations appear better than in decades. A trade deal could
U.S. Imports
increase two-way trade and investment, strengthen ties, and
U.S. Exports
help Taiwan diversify away from China by giving other
Source: CRS with data from the U.S. Bureau of Economic Analysis
countries cover to resist pressure from Beijing and pursue
and the Taiwan Ministry of Economic Affairs.
similar agreements with Taiwan. Taiwan concluded trade
agreements with New Zealand and Singapore in 2013, and
U.S.-Taiwan Commercial Ties
reportedly has sought trade and investment agreements with
Taiwan is the United States’ 10th-largest merchandise
Australia, the European Union, Japan, and the United
trading partner (total trade valued at $85.5 billion), 13th-
Kingdom. U.S. withdrawal from the Trans-Pacific
largest export market (at $31.3 billion), and 13th-largest
Partnership (TPP) in 2017 hurt Taiwan’s ability to join the
https://crsreports.congress.gov
U.S.-Taiwan Trade Relations
TPP, an amended agreement, TPP-11, as well as the
Global Economic Organizations
Regional Comprehensive Economic Partnership (RCEP)
Since a 1994 U.S. Taiwan Policy Review, U.S. policy has
that were signed without the United States and Taiwan.
been to support Taiwan’s membership in international
organizations for which statehood is not a requirement, and
The U.S. government appears inclined to wait until Taiwan
to encourage “meaningful participation” for Taiwan in
removes longstanding agriculture barriers before
organizations for which statehood is a requirement. Taiwan
committing to talks. Other political, economic, and labor
is a member of the World Trade Organization, the Asian
considerations could also defer U.S. action. In August 2020,
Development Bank, and the Asia-Pacific Economic
Taiwan President Tsai announced her intention to ease U.S.
Cooperation forum, all as an economy or a separate
pork and beef restrictions by executive order. In September
customs territory, not a state. China actively works to
2020, Taiwan’s Council of Agriculture announced it would
restrict Taiwan’s participation, however.
remove restrictions on ractopamine as a feed additive for
Cross-Strait Issues
pork, and Taiwan’s Food and Drug Administration issued a
Taiwan depends on trade with China—although some trade
draft regulation to establish a Maximum Residue Limit
supports production in China that is exported—and China is
(MRL) for ractopamine in pork. Both measures are to go
Taiwan’s largest destination for FDI. In 2019, 40% of
into effect on January 1, 2021, but some Taiwan legislators
Taiwan’s goods exports went to China and Hong Kong. In
have countered by proposing a national referendum on the
2017, the Taiwan government estimated that 405,000
issue. Elected representatives have proposed legislative
citizens—2.4% of Taiwan’s working population—were
amendments to require a mandatory 60-day notification
working in China. Taiwan provides China technology and
before the government announces a new executive order
related expertise with many former semiconductor
and to mandate zero traces of ractopamine in pork products,
engineers from Taiwan now working for PRC firms. In
complicating the government’s efforts. Given the unofficial
November 2018, the U.S. Department of Justice charged a
status of diplomatic relations with Taiwan, if the U.S.
Taiwan semiconductor firm, UMC, for an alleged scheme
government were to consider a comprehensive trade
to steal trade secrets related to dynamic random access
agreement, it would need to work with Congress to address
memory (DRAM) from Micron, a U.S. semiconductor firm,
potential complexities in how to handle the negotiations.
on behalf of Fujian Jinhua Integrated Circuit Co., Ltd., a
U.S.-Taiwan Trade and Investment
PRC state company. President Tsai Ing-wen has opposed
Framework Agreement (TIFA)
Beijing’s proposed “one country, two systems” framework
for Taiwan and sought to deepen commercial ties in
The United States and Taiwan concluded a TIFA in 1994. TIFA talks
Southeast and South Asia. Beijing has sought to pressure
provide a high-level forum to discuss trade and investment market
Tsai economically, including by restricting tourism.
access issues. USTR has indicated in the past that TIFA talks could
(Between 2015 and 2019, Taiwan arrivals from China fell
lead to trade agreement talks, but Taiwan’s agricultural barriers—
by 36% from 4.2 to 2.7 million.) Taiwan’s opposition
particularly the government’s enactment of regulations in 2007
Kuomintang (KMT) party contends that economic ties with
banning U.S. pork and beef that contain ractopamine (a feed additive
China benefit Taiwan. Taiwan’s former KMT president, Ma
that promotes leanness)—prompted USTR to suspend talks in 2007.
Ying-jeou (in office 2008-16), accelerated liberalization of
TIFA talks resumed between 2013 and 2016, after Taiwan al owed
direct trade, transportation, and postal links and negotiated
some beef imports containing ractopamine. Some U.S. pork
an Economic Cooperation Framework Agreement in 2010.
producers have stopped using ractopamine in exports to China, which
Relations sourced in 2014 when a proposed cross-Strait
bans ractopamine. Other U.S. concerns include:
services trade deal led to widespread protests in Taiwan,
tariff-rate quotas on 16 agricultural products;
forcing the legislature to suspend a vote on the deal.
motorcycle and soda ash tariffs;
Strengthening U.S.-Taiwan Cooperation
country-specific quota regime for rice;
The Trump Administration elevated and deepened
restrictions on biotechnology, genetical y-modified
economic cooperation with Taiwan. It saw Taiwan as
agricultural goods, and medical devices; and
central to efforts to boost U.S. technology competiveness
rules on digital trade, energy, and tourism.
and supply chain security and counter China’s technology
policies. In November 2020, the United States and Taiwan
Economic Challenges
held the inaugural meeting of a new Economic Prosperity
Taiwan faces risks of declining competitiveness and
Partnership dialogue. In May 2020, the Department of
growing economic dependence on China as it grapples with
Commerce amended rules to restrict sales to PRC-based
stagnant wages; an aging population; land, power, and
Huawei Technologies Co. and its affiliates of chips
water shortages; and a gaps in certain technical talent.
fabricated using U.S. design software tools, equipment, or
Unemployment is low at 3.8%, but the rate for those aged
technology, a decision that affected Taiwan Semiconductor
20-24 is 12.4%. Taiwan’s government is seeking to phase
Manufacturing Company (TSMC). Also in May, TSMC
out nuclear power, but has not identified alternatives.
announced it had negotiated with the Department of
Taiwan’s “5+2” plan aims to boost emerging industries
Commerce to build a semiconductor plant in Arizona.
(e.g., advanced manufacturing and biotech) through $58
Congress might consider terms to ensure that any trade
billion in subsidies; tax incentives and loans for technology
talks would lower certain market barriers, build on TSMC’s
innovation and production; and relaxed restrictions for the
initial commitment to boost Taiwan’s technology
short-term hiring of foreign nationals to fill talent gaps.
investment and manufacturing in the United States, and
curtail specific technology support that Taiwan offers PRC
industry that may be of concern.
https://crsreports.congress.gov
U.S.-Taiwan Trade Relations
IF10256
Karen M. Sutter, Specialist in Asian Trade and Finance
Disclaimer
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congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
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https://crsreports.congress.gov | IF10256 · VERSION 15 · UPDATED