WASHINGTON — The Coalition for a Prosperous America (CPA) today released a statement calling on Congress to oppose a free trade agreement (FTA) with Taiwan. As The Wall Street Journal recently reported, “U.S. and Taiwan moved a step closer toward a bilateral trade and investment initiative.” However, an FTA with Taiwan would do little to deter China’s aggression, while undermining critical efforts to reduce U.S. dependence on Chinese supply chains and boost domestic production in critical industries. Last year, CPA submitted testimony and released a statement outlining why such a deal would work against U.S. interests while offering little in the way of meaningful protection for Taiwan. Instead, CPA called on Congress to focus upon military and diplomatic cooperation with Taiwan, rebuilding our industrial capabilities at home, and ending China’s unfettered access to America’s financial markets which fuels the economic growth of Chinese companies.
As CPA CEO Michael Stumo wrote last October in The Washington Times, “The United States should embrace a strong, secure Taiwan with the backing of a dominant U.S. military and industry. However, a free trade agreement would not beef up Taiwan’s security, and will only serve as a potential, further drain on U.S. manufacturing capabilities. Instead, the best way to support Taiwan is to pursue measures that can defund China’s ability to wage war while securing America’s future industrial stability.”
“Congress should focus on decoupling the U.S. economy from China and recognize that any trade agreement with Taiwan would do little to deter the CCP’s aggression,” said CPA Chairman Zach Mottl. “We support Taiwan’s right to defend itself from Beijing’s aggression. However, Taiwan already has a huge trade surplus with the U.S., which creates a serious vulnerability if China were to attack Taiwan. Instead of pursuing a free trade agreement, Congress should focus on providing more weapons and training for Taiwan’s military, while pursuing policies to boost domestic production and decouple the U.S. economy from China.”
- Taiwan’s bilateral trade surplus with the U.S. is very large—it exports twice as much to the U.S. as America sells to Taiwan.
- Taiwan is a top 10 country in terms of massive trade surplus with the world at 12.6% of GDP. By contrast, China’s 2021 surplus was 2.6% of GDP and Germany’s trade surplus was 5.3% of GDP. America’s 2021 trade deficit was 3.7% of GDP.
- The primary reason for this unnaturally strong export performance is Taiwan’s persistent currency manipulation. Weak currencies make for strong industrial growth and trade performance. Despite the U.S. Treasury recognizing Taiwan’s currency manipulation, the U.S. government continues to ignore it for geopolitical reasons.
- The U.S. already has the lowest tariffs in the world, including 0% tariffs on many manufactured goods, without a trade agreement. Taiwan has access to those low rates now.
In testimony to Congress, CPA noted that trade agreements carry little weight in deterring military aggression. Russia’s recent invasion of Ukraine makes this clear, given the extensive economic ties that Ukraine has held with both the European Union and the United States.
Instead, CPA urges Congress to press for a secure, economically stable U.S. industrial base — something that can offer Taiwan a reliable long-term partner. At present, the U.S. already has strong trading opportunities with Taiwan, and both countries impose low tariff rates. However, Taiwan has consistently engaged in currency manipulation while subsidizing its home industries. As a result, the U.S. ran a $40 billion goods trade deficit with Taiwan in 2021.
A key concern is semiconductors. Any Chinese attack on Taiwan would likely involve an economic blockade of the island, something that would significantly interrupt U.S. supply chains. A free trade agreement could exacerbate America’s glaring dependence on Taiwanese computer chips, leaving the United States even more vulnerable in the event of military conflict.
Additionally, the U.S. should intensify its efforts to support Taiwan’s full and meaningful participation in the global international organization system established since WWII, including the United Nations and World Health Organization. If the U.S. is serious about efforts to help Taiwan, increasing its global status, allies, and partners will do far more to help Taiwan defend itself and grow its economy than would a bilateral FTA with the U.S.