Remarks Title: The Importance of U.S.-Taiwan Economic Ties
Introduction
Good afternoon and thank you to The California Chamber of Commerce for inviting me to speak with you all today at the International Forum.
I am speaking to you as Chair of the Board of Trustees of the American Institute in Taiwan, or AIT. AIT is a non-profit corporation established in 1979 to maintain the United States’ unofficial relationship with Taiwan. AIT works with partners across the U.S. government to facilitate the United States’ “commercial, cultural and other relations” with Taiwan, which are carried out under the auspices of AIT.
As Chair of the organization, I’m based in Washington, D.C. and travel regularly to Taiwan to engage with Taiwan’s leaders, elected representatives, think tanks, civil society, and business community. I also host senior Taiwan officials when they transit the United States—in fact, my last trips to California were to accompany Taiwan President Tsai Ing-wen, and later, Vice President and current Taiwan President-elect William Lai on their transits through Los Angeles and San Francisco. On these trips, I was inspired to meet a wide range of leaders in California’s government and industry who are passionate about strengthening ties with Taiwan.
That’s why it’s wonderful to be here with you today in Sacramento. The members and leaders of the California trade and business community gathered here form the backbone of U.S. economic, cultural, and commercial ties abroad—including with Taiwan – making you key players in the flourishing U.S.-Taiwan economic relationship.
We can all appreciate that the business and community ties linking California and Taiwan are longstanding, rich, and highly productive. From the foundations of Silicon Valley to today’s cutting-edge industries and research, California and Taiwan continue to lead the way in business and tech. About 90,000 U.S. jobs supported by the trade and investment of Taiwan-affiliated companies are in California, one-third of the nationwide total. California has the second highest value of exports to Taiwan among U.S. states, is the sixth-largest importer of California goods and services, and the fourth-largest overall importer in Asia. Taiwan is the eleventh largest source of FDI in California through foreign-owned enterprises.
In my conversations here in Sacramento with California industry leaders, political leaders such as Sacramento Mayor Darrell Steinberg, and California State Senators and Assembly Members, I’ve been inspired by your depth of engagement with and expertise on Taiwan.
Today, I will first share a bit about the U.S.-Taiwan partnership and U.S. policy toward Taiwan. I’ll highlight recent wavetops in the U.S.-Taiwan partnership at the federal level, and then delve into the contours of the U.S.-Taiwan economic partnership as an area of particular opportunity and momentum. And lastly, I’ll discuss the broader significance of these growing economic ties for the resilience, stability, and prosperity of Taiwan, the United States, the region, and the world.
Taiwan’s Recent Election and Democratic Strength
I ask your indulgence to begin with a quick dose of history. For more than four decades, the U.S. approach to Taiwan has remained consistent. We have a longstanding one China policy, guided by the Taiwan Relations Act, Three Joint Communiques, and Six Assurances. For 45 years, this framework has enabled U.S. engagement with Taiwan to support Taiwan’s growth as a beacon of democracy in the Indo-Pacific and the world; as a thriving vibrant economy; as a key destination for and source of U.S. investment; as a technological powerhouse; and, of course, as a close friend of the United States.
Ours is a friendship of two like-minded partners and of democracies sharing common values. Among these values is an appreciation of free and fair elections. As many of you know, in January, Taiwan held its Presidential and Legislative elections —the island’s eighth free and fair election. I often say that Taiwan’s democracy is a model for the world, and these most recent elections were yet another example of that. Notably, this election also saw unprecedented dozens of countries release congratulatory statements in support of Taiwan and its democracy—including Taiwan’s official diplomatic partners and other friends from all around the world, like the United States, the UK, Japan, Australia, the Czech Republic and the Philippines, some of which I believe are in attendance today. In what has been called the year of elections globally, Taiwan’s was the first major election of 2024, and it set a high bar.
Taiwan is consistently ranked as one of the strongest democracies in Asia. The Economist in its 2023 Democracy Index rankings listed Taiwan tenth globally. Evidenced previously by its successful COVID-19 response, Taiwan’s strong fabric of civil society, transparent governance, and protections for freedom of expression make Taiwan a model of democracy. This strong democratic governance is also key to its growth as an innovator with remarkable resilience, making Taiwan a key contributor to a stable global economic environment.
Continuity during Taiwan’s Political Transition
Immediately following the election, I traveled to Taiwan along with a bipartisan unofficial delegation to convey the congratulations of the American people, and also to underscore continued U.S. bipartisan support for the U.S.-Taiwan partnership, Taiwan’s political transition, and our expanding cooperation.
Current Vice President Lai is the President-Elect and will be inaugurated on May 20. The United States looks forward to working with the future Lai administration to advance U.S.-Taiwan ties across many aspects of our relationship: economic, technological, security, cultural, shared values, and educational, building on the progress that we have made over the years.
These initiatives are buoyed by our overarching objective of maintaining peace and stability across the Taiwan Strait. Taiwan is a key partner in this effort, and we welcome President-elect Lai’s commitment to maintaining the status quo.
To advance this approach, the United States is focused on reinforcing deterrence in the Indo-Pacific and across the Taiwan Strait. Consistent with the Taiwan Relations Act, the United States remains committed to enabling Taiwan to maintain a sufficient self-defense capability. This includes efforts to bolster Taiwan’s ability to withstand daily pressure and coercion beyond the military space to build broader, society-wide resilience.
Indeed, maintaining peace and stability means ensuring Taiwan society is resilient, strong, and interconnected: both with the global community and economy. This means expanding the breadth and depth of the U.S.-Taiwan partnership, raising global awareness of the importance of peace and stability across the Taiwan Strait, expanding Taiwan’s international space, and, of course, maintaining open lines of communication with Beijing—all of which support our objective of ensuring that cross-Strait differences are resolved peacefully, free from coercion.
U.S.-Taiwan Economic Ties: The State of Play & Taiwan’s Strength
Which brings me to my main topic today—U.S.-Taiwan economic ties: a critical shared priority with increasing momentum and opportunity. Many of you know that business opportunities in Taiwan abound—with a highly educated population of about 23.5 million, Taiwan is an outsized contributor to the global economy. Taiwan is home to more than half of the global foundry business, and famously produces over 60 percent of the world’s semiconductors, and about 92 percent of advanced chips. Taiwan is the 8th largest economy in Asia and 20th largest in the world by purchasing power parity.
It’s in the U.S. interest to continue to deepen our commercial engagement with Taiwan, which, based on 2023 data, is the United States’ 8th largest trading partner and 6th largest agricultural export market with $127.5 billion in goods traded. Data show that Taiwan’s economy is growing, and that Taiwan is clearly doing more business globally. The GDP growth estimate this year is just under 5 percent, over 3 percentage points higher than last year. And the annual industrial export values continue to exceed pre-pandemic levels.
I’d like to outline what we in Washington are doing to broaden and deepen our economic ties with this dynamic partner – and then I’ll talk about how the private sector is a critical partner in furthering U.S. efforts.
In June last year, AIT and our Taiwan counterpart, the Taipei Economic and Cultural Representative Office, or TECRO, signed the first trade agreement under the U.S.-Taiwan Initiative on 21st Century Trade. This high-standard agreement deals with issues important to U.S. business, including reducing red tape and streamlining customs procedures, and facilitating investment and economic opportunities in both markets. Just last week, we held another productive negotiation round in Taipei building toward a second trade agreement in the areas of agriculture, labor, and the environment.
And there’s much work being done in Taipei, too. AIT’s office in Taipei has a Foreign Commercial Service team from the Department of Commerce that helps American companies export to Taiwan and Taiwan companies find investment opportunities in the United States. On the export side, they cover a variety of industry sectors but are strategically focused on exporting cybersecurity and energy solutions, semiconductors, next generation telecommunication technologies, and drones.
[As Deputy Director General Golsen mentioned,] the Department of Commerce hosts the SelectUSA Investment Summit every year to attract foreign investment to the United States. Taiwan routinely sends one of the largest – and often the largest – business delegations to this event. Next month, AIT will lead three delegations from Taiwan to the United States to promote investment and partnership opportunities in biotechnology, semiconductors, and photonics and quantum computing. The biotechnology delegation will also attend the BIO convention in San Diego next month.
We are also working to deepen our two-way technological partnership and investment. In connection with the CHIPS Act, the United States is welcoming leading edge semiconductor manufacturers from Taiwan to manufacture here in the United States. Last month, the Commerce department announced preliminary terms of $6.6 billion in direct funding via the CHIPS Act to help fund TSMC’s construction of three greenfield leading-edge fabs in Phoenix, Arizona. This is just one aspect of U.S.-Taiwan cooperation on supply chains that, through the CHIPS Act, is unlocking billions of dollars of private sector semiconductor investment across the country, creating approximately 6,000 direct manufacturing jobs, and tens and of thousands more in construction and other indirect jobs.
And we are looking at ways to address the issue of double taxation on U.S. companies invested in Taiwan and Taiwan companies invested in the United States. And we support Taiwan’s transition to an energy supply and infrastructure that is not only cleaner but even more robust, stable, and resilient.
Outcomes of This Engagement
The momentum generated by these many initiatives, coupled with the natural complementary relationship of our two economies, is bearing fruit. U.S. Foreign Direct Investment, or FDI, in Taiwan reached $16.7 billion in 2022, and the United States has remained the largest single source of FDI in Taiwan for some time. The future of these trends looks bright: in AmCham Taiwan’s 2024 Business Climate Survey, 92 percent of respondents reported they plan to maintain or increase their investment in Taiwan, and 81 percent expressed confidence in Taiwan’s economic growth outlook this year.
At the subnational level, U.S. states and localities are establishing and expanding ties with Taiwan at what feels like an unprecedented rate. The number of state and territory representational offices in Taiwan grew from 6 in 2021 to 23 projected by the end of this year. And, in 2023, six U.S. governors visited Taiwan. Michigan Governor Whitmer has already visited this year, and we expect to see more governors and state-level officials lead trade and investment delegations to Taiwan this year.
Taiwan’s ties with other partners are also growing. In addition to Taiwan’s long-standing free trade agreements with its diplomatic partners, Canada, and the UK in late 2023 signed agreements with Taiwan to strengthen and protect their trade and investment relationships. Opportunities in Taiwan’s technology, green energy, cyber, and other sectors have grown alongside an increase in global awareness of Taiwan’s global economic stature. In this post-pandemic period, Taiwan has also witnessed growth in foreign firms’ greenfield investments inside Taiwan, including from companies concerned about over-reliance on other supply chains.
And to support Taiwan’s increasing economic integration, the United States continues to work to expand Taiwan’s international space—meaning Taiwan’s ability to participate in international organizations in which statehood is not a prerequisite, such as APEC, and to participate as a non-member, where appropriate, in organizations where statehood is a requirement. This also means growing Taiwan’s unofficial ties with other likeminded partners around the world. With this expansion comes greater people-to-people ties such as educational and cultural exchange between Taiwan and foreign partners–Taiwan is the largest per capita sender of foreign students in the United States, for example. This expansion also enhances Taiwan’s ability to share its technical expertise in global and regional fora and fosters the growing global understanding of the importance of Taiwan and of peace and stability across the Taiwan Strait. This rise in awareness has grown substantially in recent years, in part due to Taiwan’s outsized technological and economic heft and increasing trade and investment ties abroad.
Broader Significance of Economic Ties
The effect of these multiplying economic ties with Taiwan transcends trade or FDI metrics. This investment and trade with Taiwan is not only a force for prosperity, but a force for peace and stability, too. Through our expansive economic partnership, we are advancing our shared vision for a more resilient and interconnected Taiwan economy. As more international, national, local, and industry-level actors increase their engagement with Taiwan, their investment, trade, innovation, and people-to-people ties form a strong network of actors who have a stake in Taiwan and Taiwan’s continued success.
There is a clear business case for continuing to deepen U.S. trade, investment, and commercial ties with Taiwan. I believe there is also an important strategic case for these efforts– as deepening private sector ties play a critical role in supporting the maintenance of peace and stability across the Taiwan Strait. We all want to see a Taiwan that is more integrated and not isolated, more resilient, and less vulnerable to coercion. When U.S. businesses pursue opportunities in or with Taiwan, you’re also helping to realize this vision.
Resilience is an area of increasing focus on Taiwan, where there is an imperative to better resist risks such as pressure and coercion in whatever forms they may take. This is not an effort that governments can achieve alone. This focus brings with it business opportunities in key sectors, such as in energy infrastructure, communications, and information technology sectors that need to be strengthened, hardened, and generally rendered more resilient against shocks. It is also seen in our focus to build the resilience of critical supply chains. There’s a natural synergy here: Taiwan has goals for resilience, and the private sector can help achieve them.
So, what do I mean by resilience? A colleague of mine imagines the concept of resilience as a trampoline – the more interwoven, interlocking, flexible fibers you have in a trampoline, the more it is able to absorb shocks, and bounce back. In this metaphor, the fibers in Taiwan’s resilience trampoline include our people-to-people and subnational ties, our shared values, support for a sufficient defense capability, Taiwan’s engagement with other global partners and – critically – economic ties. Ensuring that each of these fibers is strong is critical to Taiwan’s resilience.
Let me explain. Investment, trade, and even economic ties are often visualized as two-dimensional: a one or two-way flow of money linking two economies. Gauged more through dollars than actual impact, this measurement is useful, but does not capture the full picture of outcomes.
In reality, our economic ties are multi-dimensional. Investment and trade interweave and strengthen other aspects of U.S.-Taiwan ties and Taiwan’s ties with the world, building Taiwan’s capacity in key sectors and broadening its engagement with the United States and other partners. And these threads are mutually reinforcing in the face of pressure.
All of the efforts I’ve outlined today: from growing U.S.-Taiwan collaboration to U.S. subnational ties, to the U.S. commitment to enhance Taiwan’s self-defense capability, to allies and partners engagement, to expanding Taiwan’s international space, to U.S.-Taiwan economic ties, comprise the increasingly critical fibers that form Taiwan’s resilience, this strong trampoline. This means the private sector itself forms important fibers, alongside the U.S. government and other allies and partners. This network extends beyond U.S. shores to businesses around the world, too.
We saw this resilience in action recently when Taiwan experienced a 7.4 magnitude earthquake, which I happened to be in Taiwan during. While this earthquake tragically caused loss of life and damage, I was not surprised to see the public’s resilience, the speed and effectiveness of the emergency response services, and the strength and durability of Taiwan’s infrastructure. In turn, many of Taiwan’s key industries were able to continue operations critical to global supply chains, once again highlighting Taiwan’s resilience as a force for global economic stability. This was a result of years of work on preparedness and resilience by Taiwan at all levels and sectors.
And beyond contributing to stability, I think some of you know that Taiwan is a regular, generous contributor to addressing global challenges – from providing relief during natural disasters and pandemics, to identifying risks to our societies through advanced research and joint projects. In short, a resilient Taiwan is a Taiwan that in turns actively enhances the strength, resilience, and stability of the region and world.
Conclusion
The bottom line is that opportunities abound with Taiwan, and the effects of your ties to Taiwan transcend the prosperity, innovation, and technological advancement that is a natural outcome of your engagement.
There’s a reason why I’m giving this speech in Sacramento and not Washington, D.C. It’s because, as I’ve noted, this is not an effort that the government can achieve alone. As leaders in California’s business community, you form an increasingly critical fiber of this effort. You all are the key drivers of this economic engagement, prosperity, innovation, and resilience building. Your ongoing engagement with Taiwan, the Indo-Pacific region, and across the world is powerful and useful. For my part, I am thrilled to think about the many opportunities the California business community has yet to explore with Taiwan.
So, thank you for your engagement, for your attention today, and for your contributions to enhancing the resilience, stability, and prosperity of Taiwan, the United States, the region, and the world. I wish you all continued success.
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Source: American Institute in Taiwan (AIT)
Speaker: Laura Rosenberger, Chair of the American Institute in Taiwan (AIT)
Format: Speech
China Policy Research 