(MENAFN- Caribbean News Global)
By Roman Shemakov
Taiwan is one of the United States' most reliable economic partners. Taipei maintains a USD $600 billion gross domestic product (GDP) and was the United States' 9th largest trading partner in 2020 (with USD $90.6 billion in total goods traded during 2020). According to the Office of the US Trade Representative (USTR), Taiwan imported USD $30.2 billion worth of American goods in 2020 (including machinery, optical instruments, and agricultural products); this was a 16 percent increase from 2010, and represents 2.1 percent of total US exports.
Simultaneously, Taiwanese firms are responsible for 60 percent of the global semiconductor supply, a fundamental component in phone, computer, and car manufacturing. Due to semiconductor shortages in 2021, firms ranging from General Motors to Apple were forced to significantly curtail production. The United States is currently considering national legislation to improve domestic semiconductor supply.
In the last few years, US-Taiwan industrial collaboration has significantly expanded, marking a major turn in bilateral relations. SelectUSA, a federal program housed in the US Department of Commerce that it designed to facilitate foreign investment into the United States, has recently emphasized its focus on attracting Taiwanese firms . On June 27, the Taipei Economic and Cultural Representative Office, the American Institute in Taiwan, and the United States Trade Representative Office launched the US-Taiwan Initiative on 21st-Century Trade .
The initiative is focused on“digital economy, trade facilitation, enhanced regulatory practices, support of small and medium enterprises, environmental and climate action, and promotion of standards, non-market practices and policies.” In October 2022, the Taiwan External Trade Development Council (TAITRA, 中華民國對外貿易發展協會) will host an event in Washington D.C.“inviting 50 leading Taiwanese tech suppliers in [electric vehicles], smart medical equipment and 5G technologies to participate in the expo. The event is intended to demonstrate to Americans that Taiwan not only shares the same 'democratic values' with the US but also has technological strengths that go beyond semiconductors.”
While national-level frameworks are important channels for setting top-down expectations for long-term economic development, mutual cooperation between Taiwan and the United States at the subnational level offers a more flexible and expansive opportunity for joint ventures in emerging industries. Such a bottom-up approach can establish the building blocks for economic and regulatory cooperation in the most important technological fields of this century. Some of the effort for cooperation must come from Taiwanese firms partnering directly with American states, a process that will be dependent on state-level regulatory frameworks to ensure that bilateral links are properly nurtured.
Cooperation linking Taiwan and the American States
The global shortage of semiconductors for which Taiwan serves as one of two primary global suppliers has accelerated the need for closer cooperation. One such collaborative model is currently being developed in Phoenix. Arizona's economic alignment, friendly regulation, and industrial expertise have attracted Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) to partner directly with the state in order to build a 5-nanometer semiconductor fabrication lab. The project is expected to inject more than USD $38 billion into the state's economy over the next 20 years , and will stabilize the global production of wafers.
When talking to the author, Peter Cleveland, vice president at TSMC, explained the firm's move to Arizona thusly:“Phoenix is the semiconductor capital of the US, so the infrastructure and the supply chains are already there. Arizona has extensive experience with semiconductor manufacturing, so the governor, the commerce authority, and the mayor offered a thoughtful and forward-looking cooperative agreement – it was a great match for TSMC.” Cleveland also points out the future growth potential outside of established industries:“Taiwan as a whole, regardless of industry, is incredibly innovative. Through the right partnerships, there is a lot of room for Taiwanese firms to expand in a range of fundamental technologies.”
Existing industrial partnerships with American states have ranged from semiconductors to electrical vehicles. In June 2022, GlobalWafer, a global semiconductor company based in Hsinchu, announced plans to begin construction of“a state-of-the-art 300-millimetre silicon wafer factory in Sherman, Texas.” In 2021, Foxconn, the world's“largest contract electrical producer,” has also announced plans to build an electric vehicle factory in the United States.
State trade offices
Taiwan-led initiatives are only one side of the expanding partnership with the United States.“Four states have opened offices in Taiwan. They are becoming much more proactive. Many are looking at Arizona as a success story and working to emulate it,” said Rupert Hammond-Chambers, the president of the US-Taiwan Business Council, in an interview with the author. These quickly expanding connections are a sign of deeper transnational cooperation, but also of Taiwan's role in the global supply chain. Hammond-Chambers continued,“if I can use one word essential for supply chains, it is trust. That is the core of Taiwan's global role.”
So far, the most impactful international partnerships have occurred directly between Taiwanese industry and American states. In October 2021, the Arizona Commerce Authority and Taiwan's Bureau of Foreign Trade committed to partnering on trade and economic development by signing a Memorandum of Understanding (MOU). The MOU will remain valid for five years and includes efforts in“exchanging trade, industry and investment information, encouraging organization and programming of delegations for onsite visits, and providing assistance for establishing or expanding operations in Arizona or Taiwan.”
Other states are establishing a footprint in Taipei with hopes of attracting capital and technology. Last year, New Mexico set up an office in Taiwan following the in-state growth of Admiral Cable, a Taiwanese manufacturer. Back in 2019, Alicia J. Keyes, New Mexico's Economic Development Secretary, explained the establishment of the office on grounds that state officials“realized there are quite a few companies in Taiwan” looking to expand into the United States.
At the 2021 opening of the Montana Asia Trade Office, Montana Governor Greg Gianforte said :“One of our greatest sources of pride as Montanans is the world-class products grown, raised, or made here in the Treasure State, and we're fortunate to have a trading partner and friend in Taiwan that recognizes the superior quality of our commodities.” This comes on the heels of Illinois, Wisconsin, and Minnesota establishing bipartisan groups in their state legislatures dedicated to Taiwan affairs. So far, the majority of these expansions have been focused on agriculture and manufacturing.
The opportunity is ripe for Taiwan to work even closer with American states as both develop aspirations for global markets in emerging technologies. Inspiration should be drawn from TSMC's cooperation with Arizona and bilateral expansion of state partnerships. Because the majority of regulatory experimentation in the United States happens within state legislatures, rather than at the national level, Taiwanese enterprises should consider developing relationships directly with governor's offices and local commerce authorities.
With adequate industrial integration and regulatory cooperation, Taiwan can use its comparative advantages of trust, capital, and global supply chain integration to expand into quickly developing markets. Beyond the products and services that will move across the world, supply chains themselves need a trusted partner in Asia. The digital bill of ladings, data ports, and smart city integration will require reliable and effective global actors. Right now, Taiwan has the opportunity to diversify its global economic penetration, and become a central node in emerging industries and the digitization of supply chains.
As Iris Shaw, a senior political analyst on US-China strategic issues at the Taipei Economic and Cultural Representative Office (TECRO), stated in an interview with the author:“Taiwan and the US share the same values: democracy, rule of law, and human rights.” Furthermore, industrial cooperation does not stop at economics,“economic security is national security,” Shaw emphasized.
One area where the links between economic security and national security are abundantly clear is in supply chains. In an interview with the author, Michael Nelson, a senior fellow at the Carnegie Endowment's Technology and International Affairs Program, proposed that“Taiwan-based players could potentially leverage existing technology advantages and new tech-related investments in the Internet of Things (IoT) and blockchain […] So, in a creative and expansive view of supply chains, Taiwan's ecosystem could deploy these technologies to insert itself into, disrupt, and upgrade global supply networks. This is consistent with the idea of Taiwan as a trusted conduit and technological innovator.”
Another potential area for growth is the Internet of Things (IoT). In an interview with the author, Dr Wei Feng Lee, managing director at Paul Hsu & Partners, noted that“Taiwan remains dominant in component manufacturing, but it has the most room to grow in innovative smart home and smart city systems. […] [T]he future is in integrating all the manufacturing components with the operating system as a whole, by focusing on the entire system.”
As states across America experiment with regulatory sandboxes to test emerging technologies, they can become effective partners in drafting constructive regulations for emerging industries globally. More importantly, states can become focused conduits for realigning supply chains, reaching American markets, creating American jobs, and fostering cross-cultural dialogue. Novel developments in bilateral relations with American states as with the case of TSMC and Arizona – can begin to lay the groundwork for future economic and regulatory cooperation in emerging technologies.
The main point: Trust and shared values have created the foundation for much of the cooperation between Taiwan and Arizona. TSMC's move to the state generates space to imagine new possibilities for global engagement between Taiwan and state-level governments in the US including initiatives beyond the field of semiconductors.
This article originally published by Global Taiwan Institute Vol. 7, Issue 15, July 27, 2022, Global Taiwan Brief .
Roman Shemakov is a visiting scholar at Zhejiang University on a fellowship from the China-US Scholars Program (CUSP) funded by the Harvard-Yenching Institute, Carnegie Corporation of New York, Ford Foundation, and the Rockefeller Brothers Fund. He was previously a Henry Luce Scholar in Taipei, investigating urban technology, digital platforms, and climate regulations. His co-edited collection of essays on climate change and emerging technology titled Decarbonizing the Asian Century: Innovation, Investment, and Opportunities (World Scientific Publishing) will be published this summer.
MENAFN01082022000232011072ID1104625851