Reinforced the relationship between the United States of america and the republic of china but also people of two countries to understand, better relationships than ever, so a very short speech, i thank you for coming and your support, enjoy this afternoon, thank you. I would like to introduce another cohost, america studies. Now we are going to start the panel 2 and talking about an economy issue, it is fundamental, everything is fundamental. Aside from that, Heritage Foundation and from csis and the final essence from that. Good afternoon. As representative for the Heritage Foundation i thought i would talk about our index of Economic Freedom where taiwan ranks among 180 economies, those who are not familiar with it, the index of Economic Freedom published by the Heritage Foundation every year for the past two or three years, scored on a 100 point scale, completely repressed economy, this ranges from north korea with core of 5 to hong kong with a score of 90. The score reflects each countrys Economic Freedom, the score is based on 12 integrators mentioning rule of law, government size, regulatory efficiency and market openness, the most recent 2017 index taiwan scored a 76. 5 points placing it in the category of mostly free and ranks 11th among all other economies. For some perspective the us ranks only 17 for the score of 75. Taiwans overall score for Economic Freedom and global ranking in Economic Freedom have been increasing over the past several years. The us is stagnant and decreasing. Among other Asian Countries taiwan ranks fifth behind hong kong, singapore, new zealand and australia, maintaining property rights, limited governments, and trade freedom and also maintaining labor freedom, and financial freedom. What does this mean . The short answer is taiwan have done a good job with Economic Freedom but improvements can be made and should be made. On average the more economically free a country is the more prosperous people will be, for example whether you measure prosperity by the income per person or measure of social progress or something else, historically taiwans economy has thrived off of relatively open market policies. If you look at the wealth in taiwan, not just Gross National product the total wealth between 16, taiwan totaled us 3. 2 trillion, 50 increase from what it was in 2006 making on par countries like switzerland and india purchasing power of taiwanese about 10,000, more per capita than it was 10 years ago. There are growing concerns about growth for the us taiwan economic relationship becoming ever more important. I might not going to how taiwan ranks as one of the uss largest trading partners or the size of two individual economies, the us and taiwan have maintained some economic relations for decades now and make sense for this trend to continue for the sake of us economic interests in the region whatever those might be or the future of taiwans growth in china. One of the easiest ways to solidify the relationship would be through a freetrade agreement. Current Us Administration has highlighted preference for bilateral economic negotiations over multilateral dialogues and the administration is as focused on transactional outcome from negotiations with trading partners this pound for pound mentality, perhaps taiwan has already proven itself to merit the launch of World Trade Agreement negotiations. We at the Heritage Foundation have been arguing for us taiwan freetrade agreement for 30 years now. Back in the 80s it was seen as a way to balance large trade surplus taiwan had with the us which means leverage opening of japanese markets as market barriers limit for investment taiwanese officials attempt to appease concerns over the growing trade deficit encouraging self initiated, this includes taiwan adopting favorable measures for us physicists and removal of tariff and nontariff barriers and outright purchase of us agricultural and industrial products. In the past 40 years a strong economic relationship is not enough for current officials in taiwan and the last 13 years, dialogues established through the us taiwan Trading Investment framework agreement, if that is not in of the administration is looking more nearterm, taiwans ability to open its market to us beef and pork imports may be one aspect of leverage in the opening round. Us taiwan freetrade agreement would be more than a focus on tariffs of course, taiwans total average tariff rate is relatively low at 6 . Nonagricultural tariffs at 4 , agricultural tariffs average 16. Taiwan scores relatively high on trade freedom at 86 out of 100 but there are other issues including continued establishment of norms regarding investments, regulatory and Market Access transparency. Taiwan has made efforts to adhere to national norms, taiwans labor investment freedoms are still lacking as labor freedom scores 55 and investment freedom at 65 out of 500. There are often concerns by us Companies Regarding the inconsistency of regulations not to mention limitations on investment sectors and increased 60 day commenting period on new proposed regulations was a step in the right direction. Important to remember that Free Trade Agreement are not just means for Economic Cooperation and establishing stable economic norms but the removal of government intervention, interfering with market forces. It take strong leadership on both sides to push past private and public interests that might not want a freetrade agreement. In the 80s, the Prime Minister took the initiative to push the privatization past the bureaucrats, labor unions and other members, to quote a former representative, benjamin lou, speaking at a heritage conference while he was director of the economic division, back in 1987 and advocated the launch of trade talks with the us, said we are anxious to look at ways of protecting us taiwan trade relationship from wide swings in Political Activities generated in both countries on an increasingly regular basis. Donald trump has what it takes to push past the swings that exist today and expand us taiwan economic relationships and commit to Economic Partnership by signing freetrade agreement. In the meantime im enthusiastic about the initiative to invest in Southeast Asia as well as the initiative to make taiwan into the Asian Silicon Valley but it will be difficult. Us Tech Startups have nothing of their own in silicon valley, competition can be fierce and uncertainty exists for all startups. It will be important to create an environment where investors not only invest their money but environment that allows innovation to take place even if those results are reconstructed. To conclude i am optimistic about the future of us taiwan economic relations and i hope the Taiwan Administration can continue to prosper. Thank you. [applause] now serving as director on the chinese economy. I think the Heritage Foundation and other sponsors for putting on this event and inviting me. I wanted to use my time to talk about the ways the us and taiwan can expand Economic Cooperation. I dont hold a lot of optimism for the likelihood of a bilateral Free Trade Agreements or bilateral Investment Agreement but there are a lot of practical ways to expand Economic Cooperation and so i want this is a glass 3 quarters full story with that one element missing but i dont think that is the entire story. That is what i want to leave you with today. Let me elaborate for points, there are already extensive economic ties between taiwan and the United States, trade, investment, integration into supply chains, partners around the globe and these ties are mutually beneficial with very few losers on either side. The reason highlighting of taiwans trade surplus with the United States is not reflected my judgment or the judgment of most economists of who is winning or losing and what is the score in the relationship, the trade surplus is a product not of protectionism but the arrangement of the Global Supply chain and the oddities of how one keeps track of trade, geographically as opposed to by ownership. This has been a strong relationship for for some time and strong because there is high mutual complementary between the two economies. Both are wto members, both are signatories to the Information Technology agreement. And so we already have a very strong relationship. The announcement to fox con investment in wisconsin is a natural outgrowth of this and we will see more. Both second point. The us and taiwan have benefited on Global Supply chain and supply chains that include china. Taiwan has benefited from the inclusion in Global Supply chains. Taiwan has offered technology, management skill, investment in china. The common language, that helped a great deal. There are around 1 million taiwanese which helped further those ties and benefits to taiwans economy. In addition, both are wto members, the economic relationship is not entirely consistent with wto keeps towards each other, and as a result of that, massive barriers to import from the mainland, a quarter of all tariff minds are banned for being imported from china. Lots of investment from china is blocked though not entirely. This type of ability to maintain those types of protections for taiwans economy is something no one else has had and the downside, the economic relationship with china and the supply chain, the best statistic that shows that is the proportion of labor and manufacturing, almost every industrialized country has fallen dramatically over the last 20 some years. There is a single exception and that is taiwan. In 1993, taiwan had its workers in manufacturing, 20 in manufacturing, essentially no change. The way it has engaged china as part of the Global Supply chains is instinctive and relatively strong position. This is a backward looking statement. Doesnt necessarily guarantees of future. Lots of challenges everyone faces as a result of Chinese Industrial policy which is much more aggressive over the last several years and more challenging for everybody that is part of the Global Supply chains. If you are doing a historical analysis it is a big boon for taiwan compared to everybody else. In terms of thinking how the us and taiwan can expand cooperation, the fta or bilateral Investment Agreement would be nice but relatively limited benefit. It would be politically very risky for taiwan to take on a limited benefit because most of the benefits between the two economies in Global Supply chain, the Global Supply chains that are big benefits so unless you improve Global Supply chains or regional supply chains, simply reducing barriers bilaterally giving you a big bang for the buck. As riley already said taiwan scored 76. 5 and the us, 75. I am sure if you look at bilateral arrangements, there are low barriers. Most of the easy stuff has been picked off. There are other things we could do in the short terms that would yield positives for both economies particularly taiwan. First thing at the top of my list, my fourth point, the first thing at the top of my list is both the United States, taiwan and everybody else pushed back hard on chinese protection, the number one challenge, everyone in the Global Economy faces, chinas efforts to expand and dominate Global Supply chains where everybody else is, bilaterally, regionally, tpp is an important initiative, tpp 11, taiwan, and job number one with consequences of chinas movement to the supply chain to subsidizing and forcing technology transfer, number one for everybody. Riley touched on this, and the government is the new Southbound Policy and i was in taiwan in june, in the fall, the new Southbound Policy, and economic ties with countries in east asia, south asia, in new zealand, some are more promising than others, there is more meat on the bones, helping to modify taiwans economic structure, particularly in areas of education, the us isnt one of the members of the Southbound Policy countries, the us can do a lot to encourage all of those countries to participate but facilitates interactions. These taiwanese businesses moving more towards that region are part of the supply chain affecting interest in American Companies as well. There is a lot the us can do to facilitate implementation of the Southbound Policy. Big Regional Initiative beyond Southbound Policy and tpp is the initiative. Taiwan, you wouldnt think of the dominant country in investing in infrastructure, taiwan to participate and develop those. And our investment initiative, opportunities that are not part of it, the us is not part of it, the price tag is so large, getting a tiny sliver of investment would be helpful of taiwans economy. Fourth, the United States, bilateral Investment Agreement, unlikely soon and covering the last 13. 5 points, and tied with hong kong. That gap is often framed, consistently framed as bilateral negotiation. 13. 5 points and taiwans selfinterest with liberalization, would help the economy. Regardless whether the us provides reciprocating concessions on the other side. And the Service Market liberalizing those markets, the second would be immigration, and into taiwans economy, in june, still going through legislative un, there is discussion over whether there should be modification of taiwanese to increase immigrants by 700. These are small numbers, taiwan needs tens of thousands of immigrants to contribute to it economy, should not be talking hundreds or thousands but tens of thousands. There needs to be a significant liberalization of thai wheeze taiwanese in taiwans interest in shabbat confessed to anybody else. Lastly, the United States at 75, the us isnt going in the right direction and a lot of taiwan and everyone else can do to encourage the us to maintain or stand its market and commit itself to the multilateral trading system to the wto, the g 20. Maintaining the open multilateral system is critical to the health of the american economy, the taiwanese economy, bilateral relationships. I try to come up with 5 practical things, i cant say they will all be adopted. I would put my money on those things and my energy on those things and have less eggs in the basket of bilateral investments. Vincent wang is with the inside edition. Thank you for Heritage Foundation. Organizing this Important Forum for for elevating the awareness of important us taiwan relationships. Why good economic proposals make good politics. Trying to argue, many ways of looking at us taiwan Economic Partnerships. And you say a strong relationship, mutually beneficial, the us, taiwans second trading partner, 23 million, the ninth largest trading partner of the United States, a two way trade between the two economic partners, goods and services, 85 billion last year, 65 billion in the good trade, the us has a deficit with taiwan of 13 billion but if you look at the services which is another 2 billion, the us has a trade surplus of 4 billion so if you look at the total picture it is mutually beneficial and i agree with the Service Utilization of one area further advancing Mutual Benefit and according to the Us Department of commerce, us export of goods and services to taiwan supported an estimated 208,000 jobs in 2015, the latest data available, 130,000 supported by the good export and 79,000 supported by Service Exports so us taiwan trade supports a lot of us jobs. I think we will support a few more. In goods alone, right now, 10. 3 of taiwans exports go to the United States, 9. 5 of taiwan and imports come from the us. We know as recently as 1985 about 40 of taiwans exports came to the United States. The diffusion of technology, the transfer of highly skilled talents and so on. For taiwan the reversal of the roles between the us in china in the last 30 years has of the most important economic partner looks at chinas globally and all americas relatively declining to chinas. Former president obama reasserted important pivot to asia and unfortunately well, i think when all is said and done President Trump will rediscover the importance of asia but, of course, one of the first things he did was to withdraw for the in my opinion was a lost opportunity. Why just like on the surface the relationship is pretty good but why do we continue hearing about squabbles over the last 25 . For example, in the 1980s it was the super 301, section 301 mainly that the us unilateral action to pry open the markets of Major Trading partners in trace surplus. Visavis the United States. The Treasury Department now puts taiwan among six other trading partners on the socalled enhanced analysis so a trading partner is put on the enhanced analysis if they enjoy a significant bilateral trade surplus with the us defined as over 20 billion. Taiwan does not fit this because its 9 billion but the surplus is at least 3 of gdp taiwan does fit this and i will come back to this in a moment. Persistent onesided intervention occurs when net purchases of foreign currency are conducted repeatedly in total over 2 of the gdp, taiwan does not fit this. Of the three criteria, treasury scrutinized taiwan since one but of course taiwan is not the only trading nation that has very high current account surpluses. In fact, i will argue district of course people usually say that if you have a large current of us that you are suspicious that you have a high trade surplus and that your currency is undervalued. Lets examine if this is true. I think that taiwan has extenuating circumstances. For example, taiwan fiscal policy historically has been a very conservative and taiwan, believe it or not, has actually seen a rising external debt. As of last year taiwan external debt was 159 billion making taiwans foreign debt the 37th largest in the world. Taiwan, course, is not a member of the International Monetary sum so it has no recourse in taiwan fiscal in other words, taiwan try to stay as much as possible. After democratization the population in taiwan wants distribution rather than saving. All these contribute to a very large current account balance but it will gradually shift. Having said all this and i will argue that it is very important to the management of economic relations under a larger Foreign Policy and strategic plans. For example, us and japan are very close allies but in the 80s all we heard was us and japan was in a trade war quote unquote. How can allies be in war . Of course, it is a metaphor but then first, often all we hear about the us taiwan trade is that its about beef. Beef is now open and its all about pork. This economic relationship has more substance in strategic importance than simply pork or beef. I know that we are before dinner but. [laughter] the larger points is that we need to conceptualize this economic relationship in broader strategic terms. In fact, i will argue that the Us Government may need to cut some slack for taiwan. I agree that it is in everyones benefit for taiwan to become freer to rise from 76. 5290 in taiwan self interest to become a better candidate for regional integration for multilateral trade. Consider this, i think that taiwan is in a unique situation and especially tough among americas trading partners. Even though china is the largest trading partner of many countries of all its trading partners taiwan is the one facing chinas sovereignty claim and maybe Security Threat and in fact china is also diplomatically string relating taiwans participation in International Economic rome so, taiwan faces a triple whammy what i will call. Taiwan joins us the wto in 2002 which would have been fantastic for taiwan but unfortunately the next year the. [inaudible] taiwan did not benefit from multilateralism. How about regionalism. Regionalism in the asiapacific the two most important movements currently are the tpp, Transpacific Partnership which the us led until the Trump Administration and the rce piece which is the regional comprehensive Economic Partnership which many said was led by china but in fact it was led by. [inaudible] taiwan is not a part of that. Taiwan is also facing pressure in difficulty benefiting from regionalism. How about bilateral is him . This is the possibility of finding freetrade agreements and i hear people talk about the pros and cons and the feasibility of us taiwan state trade agreements. Consider this. I think the case for signing the fda with taiwan should not be ruled out. Either on economic or security grounds. Economically one can argue that taiwan present a more attractive case than most of the trading partners that already have freetrade agreement with the us except maybe south korea. For example, in the aftermath of 911 the United States signed an fda with jordan, bahrain, oman, israel and columbia. I dont think anyone of these would be economically more important than taiwan. In fact, if taiwan should be a member of the tpp or 12 or 11, taiwan would instantly become the six largest number in the tpp. I think on economic ground scott is also right that when you have an fda you have specific negotiations of certain sectors of the us will benefit. Articulate the service areas. Many years ago both the Peterson Institute in the government officer estimated that there would be a small next benefits to the us. On the security realm signing the fda also make sense because this will help overcome or offset some of the triple whammy that i just talked about, particularly the diplomatic isolation and Security Threat for taiwan as a Major Economic player on the world stage and will also possibly prevent the further gravitation of the taiwanese economy to the mainland china. Think about this that in the 80s taiwans economy was already bent toward the east which means the United States and with chinas opening to the outside world and economic incentive in the 90s and 2000 the taiwanese economy was already engineered toward the west but with the election last year the taiwanese have actually noticed that too much economic dependence on china actually posed Security Threats. Now it is trying to orient itself with the new cell phone policy. I agree that the new stuff on policy has a lot of potential but at the same time, i think, the orientation, re orientation towards the piece, the United States should not be ruled out. That is why i am making a strategic case for strengthening us taiwan relationship. Cut bac[applause] we will open it up for questions. Thank you. This is a quick thing. I dont believe taiwan should limit itself to meeting 90 points in our index and it can go much further, ten points above that. For your reference, former committee and joined the tpp in the past few years fine. Yes. You very much for the excellent speech and discussion. The former president of. [inaudible] earlier this year that trump was drawn from tpp and the Us Government is planning to participate one bill, one road in the future which was mainly organized by china. So, i agree with your points about the news cell phone policy it may not benefit taiwan at a all. Rc ep they have to serve third discussion of meetings in may and they will sign in november in taiwan is discredited from that, as well. So, what can taiwan do not to be excluded from the World Economy right now because i understand the cross street relationship is a frozen degree and what else can taiwan do . Thank you. I think despite the diplomatic or political isolation taiwans economy is heavily integrated in the Global Economy and being a part of wto in the ita and aipac have been extremely helpful. I think in talking with friends from taiwan for the last several years about tpp the concern is always that the top concern was always when would taiwan be able to join. I think now we have seen the real top concern is will tt p ever come into existence. In fact, the existence of tpp is more important to taiwan than taiwan being a member. That is because tpp puts tremendous pressure on china to liberalize its economy. That is the number one biggest benefit from tpp. China would lose its competitive advantages by not meeting the norms of tpp because tpp covers so many areas that were not covered by existing rules and filling in those blanks are important particularly relating to investment and ecommerce and so, i think the number one goal is to figure out how to keep tpp alive whether its the current 11 and hopefully at some point down the road the us will regain interest and hopefully, maybe not in the next three and half years, but in three years and seven months perhaps. Then maybe creating opportunity for taiwan to join. So, i wouldnt worry about our sept even if it is signed and adapted it is such a thin superficial agreement that doesnt touch upon a lot of key areas that i dont think taiwan not being a member would have significant impact. I would focus more on what taiwan can do that is new cell phone policy and other ways in which taiwan can establish and expand ties with the United States. I would say one thing to answer your question but to comment on on chinas economic gravity and that the usual for that depth of interaction with strategic enemy. There is no escaping that gravity. Not just for taiwan but for everybody. China economy is a huge driver of global growth. You have to figure out the strategic choices is figure out how to not escape that gravity but limit the risks on the gravity and how to make it so that the downside in the near term in the short term are limited to some extent but you cant entirely escape it. Its just too big, too importa important, too large of an opportunity and that is why so many Taiwanese Companies are in china havin and how many americn companies are in china because of the size of the economy. It puts everyone in a precarious position that we would rarely end. You have to figure out how we limit the risks of that gravity even though its escaping to an impossibility. Maybe i can pick up scotts points. I agree. If any us trade allies including the United States fix this problem of chinas gravity in trying to manage this collective problem then perhaps the us district it would be helpful for the Us Government to see that maintaining taiwanese economic street and independence is in the us interest. It will bolster the us position in the asiapacific and thats the point. Im trying to make a larger point is sometimes Us GovernmentInternational Trade commission for the us theyre doing their job by focusing on sector openness, trade deficit and mobilization and so on and all of this is great but sometimes we focus too much on the trees and forget about the forest and im trying to make a point about seeing the larger picture. To look at the what to do, i think, aspect setting that aside and policy engagement with the ease from policy in their both have merits in their own but if we could foresee the future we would all be millionaires. If i could predict the growth or decline in growth for chinas economy in the effect it will have relative to the growth of south and Southeast Asia economy and what that will play for taiwan i would be a billionaire. [laughter] as chinas economy begins to slow growth while the Southeast Asia economy grows themselves and maintains this restriction on the Market Access, political restrictions and considerations while these new and emerging economies find their own voice in my opinion it will lean more toward taiwan who show themselves to be a beacon of growth in asia for both the democracy. I would like to add one point on the cell phone policy that due to the geographical proximity and cultural closeness and so on taiwan should have done this a long time ago and i wish the policy well and i hope that it will be implemented not in an instrumental way. For example, if you ask most taiwanese students what Foreign Language they would like to learn the first choice would not be the invoice or indonesian. Right . In fact if you look at the demographics that there are many new immigrants in taiwan and one in four children in taiwan have a mother who is not taiwanese and so society is changing. The point im making is that it should have been done a long time ago and its a very natural thing to know your neighbor better. As to your question about what taiwan can do and i want to do everything. Taiwan should liberalize its economy unilateralism is to make itself more attractive and make more on this pork issue really engage the us pr on the scientific resolution. Taiwan should continue pursuing regional integration opportunities. In fact, in that regard theres a Snowball Effect that taiwan should pursue Free Trade Agreement with a Major Trading partner such as the us and if the us is willing to do that it will have a Snowball Effect in taiwan should continue to pay a constructive role in several multilateral forums that it is a member of such as aipac and so on. Im cautiously optimistic about the Economic Future of taiwan and it is in a sense very integrated in the World Economy despite its former dramatic isolation. We can take the last questi question. Good afternoon. For 14 years i worked in taiwan economies, their Computer Systems and during the past ten years the brands grew up in china markets but for people like me born in 1980s in our memory most taiwan brands like stc made in taiwan is a guarantee of quality and its very good memory. We feel importantly that we cannot see many taiwan brands and product day by day so today i really want to see comparing with the brands in japan or korea where we feel. [inaudible] most realtor people go to japan to buy the electric are in the you know the brand and not an electric current uses more than 20 years. I have a question that how can we do promote to recover the booming market of taiwan brand . Thank you. Any comments . [laughter] i think it points to an important but economic transition that is difficult. That is how do you move from an economy that price on the gain and original equipment manufacturer that basically you make the apple but you put a shelf on that machine and call it an apple. To have your major brand and to reap more value added and so on. Taiwan has notable success in the Informational Technology sector for more than 20 years it has been searching for another sector. I dont think they have found it yet. In fact, this reliance on the single sector is not optimal and i dont have an answer to your question but i agree with your observation. I would say that whether or not theres a lot of taiwanese brands that are famous for in stores or in your home that its probably not the number one concern that you ought to have the health of taiwans econom economy being in oem and part of the Global Supply chain has beneficial and there can only with an economy the size with 23 Million People which is the equivalent to the number of people have in shanghai, there are not a lot of global shanghai brands but having several brands is quite an achievement in and of itself if i was looking, i know that the president has put Industries Forward to be focused on and for me the Life Sciences and healthcare seem like a natural for taiwan and i think thats because of how excellent taiwans Healthcare System is relative to the rest of the world. So, having such a high quality Healthcare System provides the opportunity to have a market, home market, that is also having the engagement with china you can have three Clinical Trials with chinese companies, strong ip rights although they could be stronger and so of course but there will be some specialization that is hard i think economist talk about the dutch disease. There may be a new term that eventually calls the taiwan disease which is not how does the country get so focused on a single sector which drives the growth for so long but very difficult because you get entrenched interest in other areas to transition to other sectors or move up which is a big challenge. I think what taiwan is doing thank you so much. Lets have a big applause for our three distinguished panelist. [applause] casey, dont go away. I want to thank casey. I am honored to serve on this panel and thank you so much. Stay with us. I wish you have a good weekend. Thank you very much. [applause] the u. S. Senate is meeting in a pro forma session today, their second to last of the august recess. Note legislative business plans. The hill reporting that former Alabama StateSupreme Court chief Justice Roy Moore now holds a narrow lead over incumbent senators luther strange. In the final weeks before special Republican Senate primary runoff according to a new poll the pool from harper pulling puts justice more at 47 in senator strange is 45 , 8 of voters undecided. Five coverage of u. S. Senate now on cspan2