June 04, 2009
AIT Official Text #: OT-0910E
I am honored once again to address our friends at AmCham. Over the past three years, I’ve had the privilege of working with Andrea and her predecessor, the inimitable Richard Vuylsteke. I understand that AmCham Hong Kong used to be a quiet place; now I bet they are still trying to figure out what hit them!
AmCham contributions
AmCham is only as strong as its membership. I would like to recognize the contributions of AmCham’s past and current leadership. While old friends like Tom Johnson and Tai-chin Tung have moved on, I am happy that Paul Cassingham, Jane Hwang, Chris Fay, and of course Alan Eusden are still actively engaged in making AmCham such an effective organization.
AIT and AmCham have long enjoyed a remarkable degree of cooperation. Recently, as we celebrated the 30th anniversary of the Taiwan Relations Act, I saw a Topics magazine article by former AmCham president “Dutch” van Gessel. Mr. van Gessel’s account of AmCham’s instrumental support for such community pillars as the Taipei American School and ICRT reminded me of the vital role AmCham has long played in our ties with Taiwan. And speaking of Topics – I’d like to recognize the extraordinary contributions of Don Shapiro and his team in making that magazine a mainstay of Taiwan’s economic and business policy dialogue.
With over $16 billion in cumulative investment, America remains the largest foreign investor in Taiwan. Over the decades, AmCham members have played a key role in Taiwan’s economic transformation by providing valuable funds, jobs, and technology. Just as important, AmCham members have also been responsible corporate citizens. Your good example has served as a model for our friends here, and helped to build the overall relationship between the U.S. and Taiwan.
At the same time, AmCham has been an indispensible partner in our longstanding efforts to expand our economic relationship. In the first quarter of this year, Taiwan was the U.S.’s 11th-largest trading partner, a remarkable feat for an economy with a population of only 23 million. Through your annual White Paper and Washington “Door Knock”, publication of Topics magazine, support for initiatives such as the Taiwan Competitiveness Forum, and targeted advocacy, AmCham is at the forefront of U.S. efforts to build economic and commercial ties with one of the world’s leading and most dynamic economies.
Progress in U.S.-Taiwan Eeconomic Relations
My own experience in Taiwan runs the gamut from the 1960s, as Taiwan was beginning its economic rise, to today, when Taiwan’s stunning success has made it one of the world’s major trading powers and leading sources of high technology exports. Since I arrived to begin my current duties in March 2006, much in the U.S.-Taiwan economic relationship has changed for the better.
As highlighted in your influential White Paper, Taiwan made some breakthrough achievements over the past year. This steady improvement has led Taiwan to become a leader in the protection and enforcement of IPR in the region. This was acknowledged by Taiwan’s removal from the Special 301 Watch List in January of this year. This strong support for IPR will form the basis for creating and developing the knowledge-intensive industries needed to fuel Taiwan’s future economic growth. We applaud Taiwan’s sustained progress on improving IPR protection.
Last month, the Legislative Yuan approved Taiwan’s accession to the WTO Government Procurement Agreement. This act fulfills a commitment Taiwan made when it joined the WTO, and will open Taiwan’s large and growing public procurement market to U.S. investors – even as Taiwan firms will gain enhanced access to our own market.
On a more dramatic scale, we have seen the historic expansion of cross-Strait economic ties. The U.S. welcomes this expansion, which is consistent with our goals of helping to foster Taiwan’s security while avoiding unnecessary frictions across the Taiwan Strait.
The Ma administration has played a positive role in exploring ways to enhance cooperation and reduce tensions with the PRC. The acceleration of cross-Strait economic links, including direct air, sea, and postal ties, promotes our own long-term goals for cross-Strait peace and stability. In addition, these cross-Strait economic links are boosting Taiwan’s underlying economic competitiveness and enhancing Taiwan’s attractiveness as a destination for U.S. and other foreign investment.
Last week I paid my first visit to Jinmen, one of those items on my Taiwan “bucket list” of things to do before I depart this summer. During my visit, I was struck by both the echoes of the turbulent history between China and Taiwan that this former battleground contains, and the hope for the future that developing trade and tourism ties contains.
There’s a merchant there named “Maestro Wu,” who collects old shell casings from PRC propaganda projectiles fired at the island in years gone by, and melts them down to make souvenir knives. As I understand it, among his biggest customers are PRC tourists who daily flood in the thousands across the short water space between Jinmen and Xiamen, taking advantage of the “mini-three links” in effect since 2002. It seems to me Mr. Wu’s thriving business is a fitting symbol of the dramatic transformation that is continuing to redefine cross-Strait relations as we speak.
Priorities for Improving Economic Ties
Although we have seen impressive progress in many areas, important obstacles remain. Your White Paper highlights many of the priorities we share: encouraging greater transparency and openness in Taiwan government, improving consultation with industry and other stakeholders, and limiting the number of “Taiwan unique” regulations in favor of established international standards.
We are also working together on individual sectors, from pharmaceuticals to retail to telecommunications. As happy as we are about GPA accession, we realize that we must monitor public infrastructure spending to help ensure that implementation is consistent with Taiwan’s obligations.
Beef and Other Agricultural Market Access Problems
Removing outstanding trade irritants will be necessary before U.S.-Taiwan economic relations can reach their full potential. Now I bet you’re waiting for me to mention beef. I don’t want to disappoint you. As one of the world’s biggest trading economies, Taiwan must demonstrate its readiness to play by the rules of international trade. The World Organization for Animal Health, the OIE, has certified U.S. beef as safe. We have long urged Taiwan to use sound science as the basis for opening its market to all U.S. beef imports.
We are getting close, and I sincerely hope we can conclude this longstanding issue between us and the Taiwan government in the coming weeks, so it doesn’t become a trade impediment for my successor to manage, as I have these past three years.
Beef, is far from our only agricultural concern. Our agenda also includes ensuring that Taiwan fulfills its WTO rice quota, fully opens its market to U.S. pork, and sets internationally-consistent “maximum residue limits” (MRLs) for hundreds of common pesticides used to grow a wide range of agricultural products. The good news is that we are talking with our Taiwan friends about these issues. But they should understand that all we are seeking is fair application of globally recognized safety and trade standards to our bilateral commerce.
I realize AmCham’s membership is not dominated by agricultural companies. But you should care about these issues, if only because they serve as important benchmarks for how Taiwan manages its overall engagement with the world economy.
TIFA Agenda
The U.S. wants a broad, growing, and dynamic economic relationship with Taiwan. Our Trade and Investment Framework Agreement (TIFA) is at the center of our efforts to build this relationship. I have carefully read your White Paper recommendations on all this, including the desire to reengage soon on the whole range of trade issues. Believe me; both AIT and the Obama Administration hear your concerns!
Removing the agricultural irritants I just mentioned will help contribute to an atmosphere in which we can once again squarely concentrate on the full range of options at hand. We will be examining measures to enhance bilateral investment, electronic commerce, and other concrete steps to grow our economic ties.
A vital TIFA process will remain at the heart of U.S.-Taiwan economic relations. TIFA exists not only to solve trade problems, but also to serve as a vehicle for building links between two of the world’s major economies. Despite the inevitable vagaries of specific disputes, I am confident that TIFA will continue to play this critical role.
Cooperation on global issues
Taiwan has an important part to play in an increasingly global economy. We value Taiwan’s contributions in the WTO, APEC, and the Asian Development Bank.
We warmly welcome Taiwan’s participation since last month as an observer in the World Health Assembly (WHA). This is going to be a two-way street, as Taiwan has a lot to offer the global health community. The recent H1N1 virus outbreak — like the SARS scare six years ago — only underscores the importance of full cooperation to support global public health. Taiwan’s Center for Disease Control is modeled in part on its U.S. counterpart. The U.S. and Taiwan CDCs are cooperating as part of a global effort to study and halt the spread of the H1N1 virus, following in the path of similar collaborative efforts on HIV/AIDS and tuberculosis.
In fact, the U.S.-Taiwan relationship encompasses much more than huge bilateral trade flows. It is also at the forefront of addressing some of the world’s most urgent challenges, from halting the spread of infectious diseases to countering the effects of global warming.
The U.S. and Taiwan, for example, share the common goal of contributing to global efforts to reduce greenhouse gas emissions. The U.S. ports of Seattle and Tacoma are already cooperating with their counterparts in Kaohsiung and Keelung in reducing air pollution. The U.S. Environmental Protection Agency is working with its Taiwan counterpart to monitor trans-boundary air pollution.
Taiwan has set the admirable goal of reducing carbon emissions to 2008 levels by 2020, and to 2000 levels by 2025. Taiwan’s leadership in alternative energy technology, from hydrogen to solar to nuclear, will be an important part of helping it achieve those goals. In addition, Taiwan’s alternative energy sector presents important business opportunities for AmCham members. Furthermore, Taiwan’s unique research capabilities highlight its critical role as a valued U.S. partner in addressing some of our most urgent global challenges.
This is personal to me, as my wife and partner of 26 years Barbara Finamore — who is here this afternoon — has devoted her career over nearly three decades to environmental concerns.
Underlying Strength of the Taiwan Economy
Pessimism may be tempting in the depths of Taiwan’s worst-ever economic crisis. The economic situation is tough here, and it’s tough in the U.S. On my last trip home, I saw a bumper sticker that said: “Honk if I pay your mortgage.” Fortunately, at least thus far, Taiwan doesn’t seem to share the U.S.’s real estate problems!
In all seriousness, some of you may remember my initial remarks to AmCham soon after I arrived as Director over three years ago. On that occasion, I spoke of my first tour as a junior officer at AIT in the early 1980s. At the time, Chuck Cross was serving as the first Director of AIT. As a young diplomat Chuck himself was assigned to Taipei for his first tour, back in 1949. Concerned that Taiwan at the end of the Chinese civil war might be too dangerous a place to send a first-tour officer, Chuck’s superiors told him they planned to assign him somewhere else. They had in mind some place safe, like Seoul, or Saigon.
Well Chuck, an ex-Marine veteran of World War II, spoke up to tell his bosses that, despite his inexperience, he was confident “Taiwan was going to be just fine.” Chuck kept that first assignment in Taipei, which proved to be the beginning of a distinguished career. Chuck died earlier this year. I can think of no better way to honor his memory than by embracing as my own the conviction he stated some 70 years ago: “Taiwan is STILL going to be just fine!”
Many of my friends have recently asked me how I feel as I prepare to leave the post of AIT Director, and more broadly, conclude my fifth — and probably final — time living in Taiwan, a period that stretches back nearly half a century. Over this long span, I have been privileged to observe firsthand the fundamental diligence, adaptability, and drive of the people of Taiwan. These qualities helped build Taiwan’s economic miracle. I am convinced these same qualities will form the foundation for Taiwan’s recovery and continued success.
As an open trading economy, Taiwan has been particularly vulnerable to the ongoing global downturn. Like the U.S., Taiwan must resist protectionist pressures and honor the free trade principles on which our success is based.
Our past success should not lead to complacency. Enhancing Taiwan’s openness to its major trading partners is a critical step, but it won’t be enough to ensure sustained economic growth. Along with the U.S., Taiwan is faced with the daunting challenge of improving productivity and raising living standards in a rapidly-changing global economy marked by fierce competition. Success in this environment involves sometimes painful choices on reforming education, health care, and regulation to foster success in a service economy.
Taiwan’s Democracy
Taiwan’s success in other areas has given it ample tools to fix these problems. In only a few short decades, Taiwan has built a vibrant democracy and a thriving civil society, along with a powerhouse economy. Together, these achievements have made Taiwan a model not just for the region, but for the whole world. Fertilized by a free civil society, the soil of Taiwan democracy is the best ground on which its economy will continue to thrive. As it continues to consolidate its democratic gains, this island daily reminds the world that Asian culture and Confucian traditions are far from incompatible with democracy.
For obvious reasons, Taiwan is often thought of in terms of its relationship across the Strait. Even as we welcome Taiwan’s increased engagement with the PRC, however, we must not lose sight of the qualities that underpin Taiwan’s unique success: the vibrant democracy, civil society, and open economy I have spoken of so often. These qualities elevate Taiwan’s role as a model for others on the road to development, and highlight Taiwan’s own importance as a partner to the United States. It is important, in these tumultuous economic and political times, that Taiwan sustain its achievements in this area, including by fostering open dialogue and consensus-building across party lines.
As I prepare to end my most recent stay in Taiwan, I have nothing but admiration for what our friends in Taiwan have been able to accomplish. I am proud of the partnership that AIT and AmCham have together forged in supporting Taiwan’s economic achievements. A new regional economy may be emerging from the economic crisis, one that relies more on domestic and intraregional demand.
You may be assured, however, that the U.S. will maintain its active engagement in a region that matters increasingly to our own future well-being – and a region in which Taiwan serves as a powerful embodiment of so many of our common ideals.
Thank you.
Director Stephen M. Young
American Chamber of Commerce
Q&A Session June 4, 2009
Question: Steve, you’ve talked about the fact that you’re leaving. You’ve talked about some of the challenges and opportunities for your successor. But you have not yet talked about who your successor is. [Laughter]. Do you have anything to share with us on that subject?
Director Young: I thought you said they were going to be easy questions. [Laughter].
The decision on a successor for me is still being worked in Washington and that’s where it will come from. I don’t have anything for you.
I do note that recently they have announced nominees for Senate confirmation for Beijing and Tokyo and other important places. I can only imagine that they’re having trouble finding somebody who is reckless enough to go biking on the roads of Taiwan. [Laughter]. And crazy enough to climb Taipei 101 not once, but six times. [Laughter]. And when they find the right person I’m sure that they’ll let us all know.
But I am an interested party, Allen, because Barbara and I do expect to leave this summer and so does Bob Wang, my very able deputy, who will be speaking in a couple of minutes. Unlike me, though, Bob has a successor already named.
I will let you guys know just as soon as I do. Thanks.
Question: I’m very happy to be here, and Steve and Barbara, thank you very much for your support of the Chamber and all the members, although I’m not a member right now. But my question for you, Steve, is what you talked about in your speech in terms of the productivity, the progress the government has made. On a scale of one to ten in terms of the pace of cross-Strait openness do you think Taiwan is making adequate, too fast, or too slow progress? And what kind of impact is the pace having in influencing American businesses and local businesses? Thank you.
Director Young: I’m not going to be able to quantify this as accurately as you would like, but I would say they’re doing well here in the first stages of what has been a long overdue process of reducing tensions and building cooperation with the PRC.
President Ma and myself and many others have said publicly before that this is not an easy process, because of the accumulated tension and distrust that has built up over the last several decades. Actually, I always like to highlight that in terms of the first steps of opening up the economic cooperation across the Strait, both candidates last year spoke in fairly similar terms about wanting to break down some of the barriers and give you all and your Taiwan counterparts a better shot at this.
When you talk in the broadest terms of cross-Strait relations, President Ma has indicated that the first stage which he’s still involved in is the economic stage, and that the second stage of international space — which he’s beginning to work on — and then political difficulties and security difficulties, are going to take a long time. It’s sort of like those computer games that our kids play and maybe some of us play, where if you do well at the first stage it gets harder and you go up to another stage. I think that’s the way it’s going to be and I think the Ma administration understands that.
I also think, as I said in my prepared remarks, that it is important for there to be a broad-based dialogue within democratic Taiwan so that as close to a consensus as possible can be forged as you move into those more difficult stages. I think the democracy which we celebrate today in Taiwan is an important tool and a force for managing this very difficult process.
You talk about the possibilities for American business. I think going back and looking at your white papers in the past, you have been highlighting for years the desire to see more productive relations between Taiwan and its large neighbor across the Strait. So I think I could dig up your own words to say this is a very positive thing for U.S. business. Not just here, but back in the United States and businesses in the PRC, some of whom — as we’ve discussed informally — might choose to shift their regional headquarters over to Taiwan if they are offered the opportunity to do so with the direct flights and the breakdown of some of the barriers that have made it harder to consider that in the past.
There are an awful lot of challenges ahead, no question. Ones that are going to have to be vetted through the political process as well as the negotiated process across the Strait, but I think things are off to a good start.
I hope that my successor and AmCham will continue to work very collaboratively in ensuring that our voice is heard in this process, as appropriate, given the very real American economic interests both here in Taiwan and across the Strait.
Question: Since I have the microphone I’m going to ask a question. We’ve started hearing discussions or recommendations on a China policy review. What is your view — is now a good time, or is it necessary that we conduct that review?
Director Young: It’s a valid question but my sense is that the dynamism of our informal relationship with Taiwan over the last 30 years is premised upon always searching for new approaches to advance our mutual interests. I think sometimes friends here in the Taiwan media have it a little wrong talking about whether there is going to be a new policy, is there going to be a review of the policy. The fact is, both in the natural course of events and through the electoral process that brings new governments to the United States and Taiwan, there is a continual effort to refine a model that has been pretty flexible and pretty successful now for a long time. So whether it is in terms of the channels by which we advance our economic interests, or it’s a question of areas for enhancing security cooperation between Taiwan and the United States, it’s going on all the time. It doesn’t necessarily require a sort of finite review process.
I think the Obama administration has naturally taken a look at what works and what doesn’t work with Taiwan as well as our relationships with a lot of other important partners around the world and that process is ongoing. I think it’s the dynamism of the relationship that has made us all so successful. I think you guys played a big part in it. Your [door knock]trip in the middle of the month to the United States and your ability to call on people in Congress, people in the administration, people in the business community is all part of this sort of interaction that creates new opportunities for us to advance the relationship. So I think we’re partners in that.
Question: One of the points we raised in the white paper was to encourage more interaction between the regulatory agencies in the U.S. and in Taiwan; more experience sharing. Do you have any thoughts on how that could be fostered?
Director Young: You mean between America and Taiwan?
Question: That’s right.
Director Young: I actually think it works pretty well. There’s a lot of discussion about law enforcement cooperation, for example, and I know that Taiwan wants an extradition agreement. We’ve got that and I think we’re working on that. We have very good law enforcement cooperation already, some of it based in the Mutual Legal Assistance Agreement, the MLAA, that we negotiated when I was Deputy Director. With the Nuclear Regulatory Commission or the Department of Agriculture or EPA, we do have these kinds of interactions. Some of them are maybe so quiet that you don’t notice them. But the fact of the matter is I think as befits a relationship this important, with something like $60 billion in two-way trade, it’s natural for us to be looking at ways we can cooperate.
Another example is CSI, the Container Security Initiative, which has us working with the Taiwan Customs authorities in Keelung and Kaohsiung to strengthen security in ports that service both Taiwan and the United States.
So you guys help us to see new areas where we need to work, but I think the willingness is there, and the infrastructure to do it already is pretty strong.
Question: One of the things the Chamber has pushed for continuously over the years is having more high level visitors from Washington come to Taipei. Frankly, we’ve been disappointed the past several years that there’s been no sitting U.S. Cabinet member who has visited Taipei.
What would you recommend to the Chamber as a way to put more attention on this issue and hopefully get a Cabinet member with an economic portfolio to pay a visit sometime in the near future?
Director Young: Well, that’s never been excluded and I agree with you that it’s been a while since the last one, but I think the important thing is to work on the nuts and bolts of our economic relationship. Reinvigorating TIFA is an important part of that. There’s another mechanism that was negotiated in principle a while ago but that hasn’t been launched yet, and that is the Consultative Committee on Agriculture, or CCA. I think that progress on some of the agricultural issues I discussed might allow us to have somebody at a more senior level come out to inaugurate that dialogue.
While you’re in Washington you can raise this question with important policymakers back there and let them know how important it is to you.
I do think that we do pretty well given the informal nature of our relationship and the fact that yes, maybe another economy of this size would have more visible visitors from higher levels of the U.S. government, and people who do come here perhaps a little more quietly because, looking at it from AIT’s perspective, we have visitors coming here on the kind of regulatory questions that Don was mentioning on a fairly regular basis. The symbolism of higher level visits is important. I understand that, and I think you should talk about it when you go back to Washington. I’m not distressed by the channels that we have between us in terms of cooperation. Even in the military area which is perhaps more sensitive, and I can’t delineate all the details, I think that we have some pretty good interaction between the type of visitors who come here in a low key way and the type of visitors that go from Taiwan’s military to the United States and see their counterparts.
I think the trick, and it’s back to what we were talking about when Andrea asked her question, is that over the 30 years since formal relations were terminated, we’ve built up a pretty good mechanism for getting our two sides engaged where it counts and when it counts.
Question: Today, coincidentally, is June 4th. It’s the 20th Anniversary of the Tiananmen Square incident. Any thoughts on democracy in Asia as a result of that?
Director Young: Yes. I figured that’s why it was raining. [Laughter]. Actually so that every now and again the Central Weather Bureau could be right in their broadcast. [Laughter].
Obviously Tiananmen was a major event and a major tragedy and Secretary Clinton issued a very moving and strong statement earlier today from the United States calling for China to address the outstanding question of responsibility for 1989 and also to free remaining prisoners and to seek some reconciliation. I think that’s an important American policy point and I shouldn’t go beyond what my Secretary of State has said.
Given the way you asked the question, I think the key counterpart is to emphasize how far Taiwan has come in the last 20 years in its own democratic process. I know because I was here in 1989, 1990, and I remember in those days I could still run, and I was running up from Shanzihou toward the top of Yangde Dadao (I say this for my biking friends), and I had to run through phalanxes of riot police who were situated below the Assembly Hall where the National Assembly was meeting because they feared that there would be attempts to violently break up the meeting of what some people fondly called the “gathering of Laozei (老賊)”, or old thieves.
Taiwan has come an incredible distance in the last 20 years in building a vibrant young democracy and as President Bush had said, it is a beacon of hope for your neighbors around Asia and the world. That example of a Confucian, Asian society building a democracy in which free press and active NGOs and an independent judicial system and all these other things are emerging is a great example to the rest of the world including the folks that are not celebrating today across the Taiwan Strait.
Andrea, you have the last question.
Question: Since you are leaving you can give us a true answer now. [Laughter].
Director Young: Are you suggesting I haven’t been being honest with you? [Laughter].
Question: We want to put this on the official record. In your view, who is the best biker among our [inaudible]? [Laughter]. Put him on the spot.
Director Young: This should be like the Academy Awards. I have various things. The most supportive of neophytes, the fastest climber, the fastest flat rider, the person that can come back from a tough ride and do another tough ride the next day. But I think everybody who gets out there on the bike these days is a winner. And there’s a lot of them. Thank you.
[Applause].
Director Young: We will see a lot of you, I hope, at the 4th of July reception in early July. And hopefully we’ll have a few more non-rainy days where we can go out and do rides and so forth. Thank you for your support over the last three and a half years, and good luck to all of you in the future.
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