Looking to the Future, Building on Past Achievements Remarks by AIT Director Stephen M. Young at the American Chamber of Commerce Luncheon Thursday, December 4, 2008

OT0818E | Date: 2008-12-04

Thank you, Chris, and thanks to everyone at AmCham for your dedication to improving one of our strongest and most vital economic relationships anywhere in the world.  I welcome today's opportunity to review where we've come from, and where we hope to go with this vibrant and multifaceted relationship, even in today's troubled times.

Economic Crisis and Opportunity

In recent months, the globe has been confronted by economic uncertainty of historic scope and scale.  There will be many difficult days ahead as leaders, businesses, and ordinary citizens alike grapple with daunting economic challenges.   A global crisis demands a global response.  The U.S. is working closely with our international partners to address the global financial crisis.  As one of the world's major trading economies, and as an active member of the Asian Development Bank, the World Trade Organization, and APEC, Taiwan has an important role to play in regional and global efforts to restore growth.

We are grateful for the contributions of former Vice President Lien Chan and the rest of Taiwan's delegation at the APEC meetings last month in Lima, where Economic Leaders agreed to coordinate on steps to stabilize their financial sectors, promote investment and consumption, and strengthen economic growth.  Individually and collectively, APEC members are restoring confidence in their economies and maintaining the region on a path of long-term growth.  America's trade with APEC now accounts for almost two-thirds of our global trade. No region of the world demonstrates the power of free markets more vividly than the Asia Pacific.  Along with Hong Kong, Singapore, and South Korea, Taiwan has been a stunning success in this regard. The potent combination of free trade and democracy has brought unimagined prosperity to the people of Taiwan, which stands as a model to emerging democracies around the world.

Faced with crisis, some may be tempted to retreat into economic isolationism - turning their backs on the openness, innovation, and free trade embraced by the U.S., Taiwan, and so many others with such remarkable success.  Nothing could be more wrongheaded than such a retreat.   Our present challenges offer in fact an extraordinary opportunity to improve the global economic system - a system that over the decades has delivered dramatic economic growth to millions in Asia and around the world.  President Bush highlighted this idea at the APEC CEO Summit in Lima last month:  "With confidence in our ideals, we can turn the challenge we face today into an opportunity -- and lead the way toward a new era of prosperity for the Asia Pacific and beyond."

I was interested to hear yesterday from my old friend and former Deputy Secretary of State Strobe Talbott in a speech he gave at the CNAPS conference here in Taipei, as he described President-elect Barack Obama's foreign policy orientation as "pragmatic multilateralism."  Mr. Talbott also predicted that the new administration would come out ultimately in favor of free trade, perhaps with some heightened stress on labor, human rights and environmental issues.  Mr. Talbott recalled that most economists believe trade protectionism during the 1930's, in particular the Smoot-Hawley Act on tariffs, had put the "great" into the term "Great Depression."  So there is an important cautionary tale for all of us.

As two of the world's most open economies, the United States and Taiwan have a shared commitment to free trade.  The United States is proud to have supported Taiwan's accession into the World Trade Organization.   We urge Taiwan to work with the U.S. and other WTO members now to help bring the Doha Round to a successful conclusion.   In the midst of economic uncertainty, our commitment to the fundamental value of free markets remains unshaken.

Our relations with Taiwan are not limited to trade and economics. For example, notification to Congress in early October of $6.4 billion dollars in military sales underscores the continued close security cooperation between the U.S. and Taiwan and our full commitment to the Taiwan Relations Act.  That decision elicited a supportive statement from the office of then-candidate Barack Obama that notification was fully consistent with U.S. obligations under the Taiwan Relations Act, and that the sale helps to contribute to Taiwan's defense and the maintenance of a healthy balance in the Taiwan Strait.

Cross-Strait relations

There has recently been a great deal of focus on cross-Strait economic relations.  Last month's historic talks between the Straits Exchange Foundation and its Mainland counterpart resulted in four agreements designed to enhance economic links between China and Taiwan.  In response to the tragic Sichuan earthquake, Taiwan led and collaborated closely with China to convene APEC members to identify ways to improve regional cooperation in emergency preparedness and large scale disaster recovery.  We look forward to further progress in building on these achievements in the months and years ahead.  Although the immediate economic benefits of this cross-Strait opening may not always be apparent, each incremental step in an ongoing process will help build a climate that favors investment and growth.

Let me reiterate what you have heard me say before:  The United States welcomes increased economic and trade ties between China and Taiwan.  Especially at a time of global economic uncertainty, enhanced cross-Strait economic links are just plain good for business.  And at a more fundamental level, such links help foster a climate of stability, progress, and hope.  AmCham has played an important part in this cross-Strait progress through its consistent calls for economic opening.  The United States will continue to support the expansion of cross-Strait economic ties, based on equality and mutual interest.

At the same time, as I believe President Ma has indicated, it is important to continue an open discussion with all parties on this issue, to ensure that the views of Taiwan's 23 million citizens are factored into the direction of future cross-Strait relations.  China needs to understand this as well, and I would note that Vice President Vincent Siew said yesterday that Beijing has not done enough at this point to demonstrate concrete goodwill in response to the steps already taken by President Ma.

U.S.-Taiwan economic relations

The expansion of cross-Strait economic ties is bolstering the value of what for the U.S. is already a very important economic partnership with Taiwan.  Quite simply, the U.S. and Taiwan enjoy a strong and growing bilateral trade and economic relationship. Taiwan is our ninth-largest trading partner, with nearly 65 billion U.S. dollars in two-way trade in 2007.  Despite the impact of the economic slowdown, we are on track to reach a similar bilateral trade figure in 2008.   The amount of our trade is especially striking when you consider that Taiwan has a population of only 23 million.  The fact that Taiwan is one of our most important trading partners is a remarkable testament to the sheer innovation, drive, and diligence of the people here.  Taiwan is also our sixth-largest market for agricultural exports, and number two behind Canada on a per capita basis.  Over the years, U.S. business has invested over 16 billion U.S. dollars in Taiwan, making the United States the largest foreign investor on the island.  You know better than me that, despite the inevitable problems that invariably crop up, most U.S. investors find Taiwan a very good place to do business.

TIFA

But that doesn't mean we can't do better.  Both sides have a mutual interest in continuing to build our trade and investment relationship.  The Trade and Investment Framework Agreement (TIFA) process is a key forum for us to resolve trade concerns and make progress on enhancing the overall trade relationship.  We recognize that improved provisions for bilateral investment remain a top priority for the U.S. business community here, and we continue to discuss an investment agreement with Taiwan.  Indeed, President Bush noted these discussions in his APEC speech two weeks ago.

In the past, TIFA has helped to achieve concrete results in improving Taiwan's regime for intellectual property rights (IPR) protection.  We applaud Taiwan's creation of an IPR climate that fosters innovation, investment, and trade for foreign and Taiwan business alike.

The U.S. supported Taiwan's accession to the WTO in 2003.  As part of that accession, we have long asked Taiwan to honor its commitment to accede to the WTO Government Procurement Agreement (GPA).  We welcomed Vice President Siew's pledge at AmCham's General Meeting last week that Taiwan will accede to the GPA.  We are pleased to note that Taiwan formally initiated accession procedures at the WTO in Geneva just last Friday.  Taiwan's accession to the GPA will enhance economic opportunities for American and other foreign firms doing business here, as well as for Taiwan companies abroad. AmCham's advocacy efforts have been a critical part of our work on the GPA issue, and we are thankful for your contribution as our common effort is in sight of fruition.

TIFA is also a valuable forum for advancing our interests in other important areas, including pharmaceutical and medical device market access, as well as specific sectors from agriculture to the chiropractor profession.  Established in 1994, TIFA has endured as one of our most effective means of advancing our economic relations with Taiwan.  Although the pace and scope of TIFA meetings may vary, we look forward to continuing an active TIFA agenda as the new administration takes office.

On a personal note, I recall when I was serving here as Deputy Director of AIT in 2000, I hosted then-Under Secretary for International Affairs at the Treasury Department Tim Geithner, who came out to Taipei to head up a round of TIFA talks.  He of course is now President-elect Obama's Treasury Secretary-designate.  So you'll have an influential friend in the new administration!

Agriculture and food safety

Despite the major challenges that lie ahead for further opening Taiwan's market to key agricultural products, I am pleased to note that the overall value of our agricultural exports to Taiwan has continued to grow for the sixth consecutive year.

Nevertheless, agricultural market access problems remain at the heart of our trade agenda.  Nearly three years ago, Taiwan led Asia in re-opening its market to imports of U.S. boneless beef.  Taiwan consumers have since welcomed U.S. beef, buying $107 million worth in 2007 alone. We expect this year's exports to Taiwan to approach $130 million dollars.  All of which is to say that the Taiwan consumers are clearly confident that U.S. beef is safe.   Imports of U.S. "bone-in" beef and other beef products continue to be banned, despite ample scientific evidence that they pose no safety risk.   We understand the Department of Health will soon publish the findings of its risk assessment on the safety of U.S. beef products.  That should bring us even closer to the early, science-based opening of this market to the full range of U.S. beef products.

Especially in the wake of the melamine scare, our own consumers fully share the public concerns here about food safety.  Transparent application of scientific principles consistent with established international norms is the best way to ensure food safety while facilitating trade.  In recent months, U.S., foreign, and Taiwan firms alike have been directly affected by food safety issues.  We appreciate the Taiwan authorities' cooperation with us as both sides share their experience addressing these issues through public risk communication, and by exchanging information on food regulatory systems.  At the same time, we urge Taiwan to adopt internationally-consistent standards when developing these regulations, as quickly as possible.  As Taiwan seeks to expand its role in the global community, it should also live up to its responsibilities as a member of that community.

Competitiveness and Deregulation

As advanced service-based economies, the U.S. and Taiwan share common challenges in improving our overall competitiveness.  Deregulation, particularly in the service sector, is a recurring theme in our bilateral trade agenda, and in AmCham's own annual "White Paper".  Recognizing the joint interest of the U.S. business community and the Taiwan authorities in improving the business climate, AIT took the lead in organizing the first "Taiwan Competitiveness Forum" in June.  We are very appreciative of AmCham's role in serving as a co-sponsor of the Forum, and to AmCham's members for their active participation in the Forum.

In close coordination with the Council for Economic Planning and Development (CEPD), another Forum co-sponsor, we are helping to facilitate concrete deregulatory changes of immediate benefit to the U.S. business community.  To build on this process and maintain momentum, we are now working with AmCham, CEPD, and the other Forum co-sponsors to organize follow-on sessions on making specific sectors such as telecommunications and financial services more competitive.

AIT activities and successes

Trade is quite rightly a primary focus of our agenda with Taiwan.  But it is not the only area where we are achieving progress in a U.S.-Taiwan relationship of astonishing breadth and depth.  This vibrant mosaic of exchange encompasses the environment, education, commerce, science, and technology, all contributing to improved opportunities for Americans and their friends here.

We benefit from extensive cooperation in scientific research.  Taiwan's National Science Council, for example, is working with its U.S. counterpart to explore outer space, using an advanced telescope array.  Our leading scientific institutions are collaborating to integrate Taiwan into the worldwide network of scientific databases.

There is also important U.S.-Taiwan cooperation in the field of energy.  Taiwan officials are exploring application of U.S. clean coal technologies here to improve the efficiency of the island's coal-fired power plants, and the U.S. is helping Taiwan to re-license its nuclear power plants.  In the fields of renewable energy, American investors are very interested in Taiwan's future potential as, like America, it seeks to reduce its dependence on imported energy, while reducing carbon emissions.  Last month, for example, the Port of Tacoma and the Harbor Bureaus of Taipei, Kaohsiung, and Keelung signed a Port Air Quality Declaration, pledging cooperation on efforts to clean up ports, reduce pollution, and promote renewable energy use.

People-to-people exchange is a critical component of our relationship, and AIT's Consular Section is one of the largest in the world.  The U.S. remains a favored study, business, and leisure destination for those in Taiwan.  In November, citizens of seven countries, including South Korea, joined our Visa Waiver Program, which permits travelers to go to the U.S. visa free for up to 90 days for business or pleasure.  I know that many in Taiwan would like to see Taiwan's people get the same visa-free treatment when they travel to the U.S.  This is a reasonable aspiration for Taiwan.  We recognize that travelers from Taiwan to the U.S. enjoy a strong reputation for abiding by our immigration laws and for spending generously while in America.  I am sure the Obama administration will be fully aware of Taiwan's interest in visa waiver and will give this matter careful consideration.

From AIT's perspective, there are, however, a number of issues that need to be resolved before Taiwan can be considered for the Visa Waiver Program.  I'll just mention one:  Taiwan should enhance efforts to ensure that its passports are issued only to those qualified to obtain them.  Too often, we have found instances where people who were not Taiwan citizens have been able to obtain genuine Taiwan passports.

We applaud Taiwan's efforts to introduce a new electronic passport, and we hope that those measures are now matched by a corresponding strengthening of passport application procedures to ensure that passports are not inadvertently issued to people who are not citizens of Taiwan.

According to our Department of Homeland Security, there are now 36,000 students from Taiwan in the U.S., making Taiwan second only to South Korea worldwide in the terms of the portion of its overall population studying in the U.S.  We're glad to see that these numbers remain strong.  On the other hand, we have seen some drop in applications for visitor visas, and we suspect that this trend is due to the current weak economic climate.  Hopefully lower air fares and other efforts to encourage Taiwan's tourism can address this issue in the coming months.

In 2007, our Commercial Section hosted special promotions and trade events for over 150 U.S. companies, many of whom are AmCham members.  In addition, the Commercial Section supported our growing bilateral trade relationship by sending Taiwan buyer delegations to fourteen U.S. trade shows, ranging from medical devices to franchising.  At the same time, AIT hosted over 800 U.S. companies visiting Taipei for trade shows.

Meanwhile, the Agricultural Trade Office is providing similar support to U.S. exporters through its strong partnership with the food and agricultural business community, with whom the ATO is working closely to organize high-visibility trade events such as the recent "Taste of America" promotional campaigns held in Taipei and Kaohsiung.

In addition to hosting numerous visitors from Washington, AIT supports an active series of visits from state governments.  This year, we were happy to host a wide range of state officials, including the governors of Nebraska, Idaho, and most recently Hawaii.  America's individual states play an important role in promoting business, trade, educational, and cultural ties between the U.S. and Taiwan.  Today, 17 states maintain representative offices in Taipei.  We are grateful for their active efforts to build the robust trade and economic relationship we enjoy with Taiwan.

Proving that there can indeed be such a thing as a "free lunch" in this world, we are proud that AIT and AmCham launched a free luncheon speaker series this year.  We are grateful to President Andrea Wu for approaching us with the idea to offer free brown bag lunches for AmCham members, hosted at the AIT Commercial Section.  We look forward to seeing more members at the AIT/AmCham speakers' series next year.

Nearly three decades after its establishment, AIT is laying the groundwork to continue the cooperation with Taiwan that has been of such great benefit to both sides.  Many of you have visited our current main office, which despite the best efforts of our management team is increasingly outdated and inadequate as a base for our many and growing activities.

We have made considerable progress towards the construction of a New Office Compound in Neihu.  We expect to begin construction of our new office next year, and anticipate moving into our safe, modern, environmentally-friendly new office building in 2012.  The new facility will allow us to better serve our American and Taiwan friends, and will provide a vastly improved working environment for our 500 American and Taiwan staff members.  All of us are proud that AIT will in a few years have a facility that truly reflects the dynamic nature of our relationship with Taiwan in the 21st century.

Of course, AIT's presence and services are not limited to Taipei.  Our branch office in Kaohsiung is actively engaged with the southern part of the island.  In addition, earlier this year, I was happy to inaugurate our online "Virtual Presence Post" in Taichung, improving our outreach to Taiwan's third-largest city and the rest of central Taiwan.

Continuity in relations

To sum up, I have spent a total of ten years in Taiwan, from the first time I stepped off a plane in Song Shan airport 45 years ago through today.  During that time, I have been fortunate to bear personal witness to Taiwan's remarkable transformation:  from an economy dominated by agriculture to one of the world's leading high technology powerhouses, and from one-party authoritarianism to a model of freedom and democracy.  As President Bush stated on the occasion of Taiwan's presidential election in March:  "Taiwan is a beacon of democracy to Asia and the world."  Through all these changes, the adaptability, diligence, and unshakeable warmth and friendliness of the Taiwan people have never varied.

The past three decades have seen dramatic changes in the global environment.  However, the U.S. has maintained a remarkably consistent policy regarding its relationship with Taiwan.  It is precisely this consistency that has helped form the basis for the extraordinary political and economic progress now enjoyed by everyone in Taiwan - progress that benefits the United States and serves as an example to all who seek to build a society that combines prosperity and freedom.   I am confident the consistency that has served us so well in the past will continue as the U.S. prepares for the transition to a new administration under President-elect Obama.  While he faces daunting problems in this troubled world of ours, there is tremendous expectation, and tremendous enthusiasm, about this historic moment in U.S. history.

Together, the U.S. and Taiwan have every opportunity to build on their past successes and look to the future with confidence and optimism.

Thank you.  Now I'm ready to take your questions.