What do the Olympic Games have in common with a US-China trade war now at a stage where Washington is moving to boost chips ties with Taiwan even as it introduces new sanctions targeting China?
According to Xie Feng, China’s ambassador to the US, there is a comparison to be made. What the Americans are doing with the tech curbs, he explains, is “like someone wearing a ‘shark’s skin’ swimsuit but forcing others to wear outdated ones.” The reference is to a NASA-designed high-tech swimsuit that 2008 Olympics officials decided was giving an unfair advantage to swimmers who wore them.
Threatening retaliation if the Biden administration sticks with its plan to expand more export bans on sensitive technology, Xie offered his Speedo analogy during a forum in Washington on Wednesday.
A day earlier, the US Congress had finished approving a trade initiative between the United States and Taiwan. The initiative is intended to pave the way to deeper talks on technological partnership and bilateral trade deals. That didn’t go down well with Beijing either.
Taiwan bill ready for Biden to sign
On Tuesday it was the US Senate’s turn to vote on and pass a bill that aims to approve the first phase of the US-Taiwan Initiative on 21st-Century Trade, which was announced on May 18. As the same bill had been passed by the House of Representatives on June 21, it now awaits only the signature of US President Joe Biden before taking effect.
The government in Taipei, of course, was pleased.
“The prompt and smooth passage of the bill showed that bipartisan US lawmakers had attached a great importance to it and supported the strengthening trade and economic partnership between Taiwan and the US,” Oliver Lin, a spokesperson of Taiwan’s Presidential Office, said Wednesday. “The implementation of the trade initiative will create new opportunities for Taiwan’s economy and industries.”
Chuang Tsui-yun, Taiwan’s Minister of Finance, said the trade initiative will help Taiwan importers cut customs expenses by a total of TWD100 million (US$3.2 million) and speed up customs clearance.
Chinese state media outlets said that the trade initiative will only benefit Americans, not Taiwanese.
“The so-called US-Taiwan Initiative on 21st-Century Trade should not be called an agreement as it is only a memorandum of understanding that sets a policy direction for both sides,” the Global Times said Wednesday. “It does not include topics about tariffs and the opening of markets but the Democratic Progressive Party (DPP) is bragging about them.”
Citing some Taiwanese politicians and business people, the Global Times said Thursday there is no guarantee that Taiwan can sign a free trade agreement or a double taxation treaty with the US. It said the trade initiative focuses mainly on the areas that the US cares about, showing that the DPP had failed to stand up for Taiwan’s interests.
Li Haidong, a professor at China Foreign Affairs University, said that, as Beijing has recently resumed dialogues with Washington, both sides will talk about the Taiwan question. Li said China, while keeping Sino-US relations under control, will make clear to the US the danger of irresponsible collusion with Taiwan secessionists.
Wang Wenbin, a spokesperson for the Chinese Foreign Ministry, said on May 19 that China firmly opposes all forms of official interaction with the Taiwan region by countries having diplomatic ties with China, including negotiating or concluding agreements with implications of sovereignty and of official nature.
In June of last year, the US and Taiwan began bilateral trade talks for the trade initiative. Both sides met initially last November and held a four-day negotiation in January this year.
The first phase of this agreement covers five areas, including customs administration and trade facilitation, good regulatory practices, domestic services regulation, anticorruption and small-and-medium-sized enterprises.
Indo-Pacific Economic Framework
In fact, researchers in the US and Taiwan also agreed that this trade initiative may not benefit either party much unless Taiwan can join the Indo-Pacific Economic Framework (IPEF).
The US-Taiwan Business Council, a Chicago-based non-profit organization, said in a statement on July 8 last year that Taiwan should be a key target for exploring further bilateral trade deals – including negotiating and signing a comprehensive bilateral trade agreement. It said it hopes to see Taiwan on a path to be included in the IPEF.
The council said further discussions on a digital economy agreement, regulatory practices and standards, a semiconductor supply chain agreement and a double taxation agreement are at the top of the priority list for US firms.
“US companies are interested in exploring how the trade initiative could potentially play a role in enhancing bilateral supply chain security, particularly in the semiconductor sector,” it said. “Taiwan’s technology and semiconductor industries play such crucial roles in the US-Taiwan trade relationship, and Taiwan therefore must be part of all US attempts to improve the security and resiliency of the broader technology and ICT supply chains.” Those initials stand for information and communications technology.
In a report published last September, Kristy Hsu, director of the Taiwan ASEAN Studies Center at Chung-Hua Institution for Economic Research, suggested the US:
- invite Taiwan to join IPEF and other relevant initiatives; integrate Indo Pacific like-minded partners, including Taiwan and Southeast and South Asia, in its supply chains strategy;
- develop joint programs with Taiwan for training skilled workforce and talents;
- encourage Taiwan investments in assembly, packaging and testing in the US; help suppliers solve their problems in supporting TSMC operation in Arizona;
- work with Taiwan to provide capacity building in Vietnam, Malaysia and Mexico.
“The United States’s CHIPS Act helps attract investments of TSMC, Samsung, SK, Intel, and other major companies. But when these fabs begin operation, the fabricated chips will need to be shipped back to Asia for APT,” due to little assembly capacity and “no advanced packaging and testing at all in the US,” she said – adding that Taiwan can help the US in this area.
In May last year, the Biden administration launched the IPEF but did not include Taiwan as a founding member. Founding nations include Australia, Brunei, Fiji India, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam.
Investment curbs
Meanwhile, the US continues to push forward its “de-risking” strategy with China.
US Treasury Secretary Janet Yellen said Monday that the US will limit its coming investment curbs against China to the semiconductor, artificial intelligence and quantum computing sectors and will not extend them to the biotechnology and clean energy industries.
Predictably, that concession was not sufficient for Beijing, in view of media reports that the curbs in the three sectors that are still planned will be announced by the end of August and implemented in 2024.
“China is not afraid of and will not evade competition, but the United States’s so-called competition is obviously unfair,” Chinese ambassador Xie said at the forum on Wednesday. “First, the US used security reasons to ban Huawei’s products. Second, the US gathered its allies to beat up China.” And, he added, “Third, the US banned the exports of 14nm or below chips to China.”
Xie said the US has so far sanctioned 1,300 companies and made a large number of people lose their jobs. He said the Chinese government won’t sit on its hands in the face of US actions.
The China Semiconductor Industry Association said Wednesday that it “believes that any damage to the current global supply chain, which developed over the past decades alongside the process of globalization, could create inevitable and irreparable harm to the global economy.
It warned that the coming US investment curbs against China will jeopardize the competitiveness of the US chip firms and threaten the globalization of the semiconductor sector.
Read: China-US trade war slows down a bit – baby steps?
Read: Taiwan pushes FTA after closing US trade deal
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