U.S. Moves to Increase Trade with Taiwan and Kenya

May 30, 2023
By: Chaney A. Finn

We have known for months that the Biden Administration looked with disfavor on traditional free trade agreements, instead seeking “deeper economic engagement” with economic partners. Thus, we’ve seen the Indo-Pacific Economic Framework for Prosperity focusing on issues as diverse as supply-chain resilience and climate change. Bilateral agreements focused on tariff reduction and ease of doing business seemed to be on the wane. Until they weren’t.

The U.S. Trade Representative (USTR) recently announced the conclusion of negotiations on the U.S.-Taiwan Initiative on 21st Century Trade that has resulted in a new agreement with Taiwan's Office of Trade Negotiations. It is expected to result in increased imports of U.S. goods into Taiwan and marks the first product of the U.S.-Taiwan Initiative on 21^st Century Trade. The agreement, technically a deal between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States, allows the government offices to serve as the "designated representative" for each side. This agreement is regarded as a necessary building block towards a formal free trade agreement in the future. Even without a free trade agreement currently in place, goods and services trade with Taiwan totaled an estimated $105.9 billion in 2020. Establishing a formal free trade agreement would expand market access, reduce trade barriers, and increase trade between the two countries.

The agreement pertains to customs administration and trade facilitation, good regulatory practices, services domestic regulation, anti-corruption, and small and medium-sized enterprises, or SMEs. Pretty traditional free trade agreement topics. USTR Tai said in a statement, "This accomplishment represents an important step forward in strengthening the U.S.-Taiwan economic relationship. It demonstrates how we can work together and advance mutual trade priorities on behalf of our people. We look forward to continuing these negotiations and finalizing a robust and high-standard trade agreement that tackles pressing 21st century economic challenges." In an informal translation, Taiwan Officials called the agreement “the most comprehensive trade agreement signed between Taiwan and the United States since 1979.”

Another trade deal in the works is between the U.S. and Kenya where negotiations are being under the U.S.-Kenya Strategic Trade and Investment Partnership, established to develop enhanced cooperation and high level commitments as a roadmap to reaching a formal trade agreement. Major areas of focus pertain to agriculture, anticorruption, and micro, small, and medium sized enterprises (MSME). In a recent publication of negotiations, the USTR used language that reflected the administration’s commitment to the highest levels of transparency in negotiations, similar language used in the Indo-Pacific Economic Framework for Prosperity. Kenyan officials are reportedly expecting negotiations to conclude by the end of 2023 for a formal agreement to be signed in the spring of 2024, however, the USTR has not confirmed or denied any timeline for conclusion.

Notably, U.S. Congress objects to these types of trade deals, arguing that the USTR lacks the Constitutional authority to enter the U.S. into trade agreements without Congressional approval. So far, that has not stopped, or slowed the USTR from announcing new deals, like the U.S. – Japan Critical Mineral Agreement that allows critical minerals produced in Japan to qualify for EV tax credits for batteries produced in North America. Pending the outcome of Congressional objections, this could be a new era for U.S. trade negotiations.

Should you have any questions on trade agreements, EV tax credits, or any other trade-related questions, please contact any attorney at Barnes, Richardson & Colburn LLP.