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Interview: US, Taiwan Trade Talks and Global Semiconductor Shortage

FILE - Shipping containers are seen at the harbor in Keelung, Taiwan, Dec. 8, 2020.
FILE - Shipping containers are seen at the harbor in Keelung, Taiwan, Dec. 8, 2020.

At a time of global semiconductor shortages and rising trade tensions with China, U.S. officials are pledging to continue “strong, robust, and dynamic engagement” with Taiwan on economic and trade issues.

Taiwan Semiconductor Manufacturing Company, Taiwan’s biggest chip producer, accounts for more than half of the world’s supply of semiconductors. When it comes to highly advanced semiconductors, experts say Taiwan accounts for 92% of global supply. But U.S. officials say the trade relationship with the United States goes much further.

A week ago, the U.S. and Taiwan resumed trade talks through the Trade and Investment Framework Agreement (TIFA) Council after a five-year pause.

“Taiwan is one of our most important partners in the region. They're also a very critically important economic and trade partner as our ninth largest trading partner,” said Matt Murray, the State Department’s deputy assistant secretary for trade policy and negotiations, during an interview on Wednesday.

Murray told VOA the U.S. will continue trade talks with Taiwan under the framework of TIFA, along with working-level consultations under the so-called Economic Prosperity Partnership Dialogue (EPPD) which was launched last November. Additional talks are focused on the resilience of global supply chains, including semiconductors.

The following are excerpts from the interview. It has been edited for brevity and clarity.

VOA: The U.S.-Taiwan trade talks resumed after a five-year pause. Is the U.S. now focusing on a bilateral trade deal with Taiwan? What is its implication to the ongoing review of U.S.-China trade policy?

Matt Murray: We continue to go step by step and look for opportunities with Taiwan. My team is focused on three areas. One is the TIFA talk and resumption of that, which was successful last week. Another area that's really important to us is the Economic Prosperity Partnership Dialogue (EPPD,) which was launched by our former Undersecretary of State Keith Krach last November, and which we have continued at the working level these past several months.

For example, in February, under the auspices of the EPPD, the United States and Taiwan held a very successful public-private partnership type seminar on semiconductor supply-chain, which I was able to participate in. And so those kinds of engagements have also been hugely important.

And then third, we've been very focused on the supply chain issue more broadly and talking to our friends in Taiwan about ways that we can address common concerns over supply chain resilience. So, I think as we go step by step and move forward with Taiwan, you know, we'll see eventually what some of the outcomes might be over time.

We continue to be undergoing a review on our China economic policy, as well as our friends at the Office of the U.S. Trade Representative, who are focused on reviewing the Phase One trade agreement. And so, we want to continue to have the time to figure that out, but certainly it's whatever we do going forward with respect to China, engaging with like-minded partners and allies is going to have to be critically important.

I would say that engagement with Taiwan, with Japan, with Korea, with our European allies, Australia, and many others — that's going to be really the key for us going forward.

VOA: In February, you had a virtual meeting with Taiwan’s Economics Minister Wang Mei-hua (王美花), where the global automotive semiconductor shortage was discussed. What was your takeaway?

Murray: Several takeaways. It’s held under the auspices of the EPPD where we were able to set up a supply chain seminar to focus on semiconductors. And I think, you know, as often is the case, we were arranging for that meeting to happen before we realized that there was going to be a crisis in terms of the shortages in the auto sector. So that supply chain seminar was more broad than that — it wasn't just focused on the shortages in the auto sector, it was really about how we could collaborate with Taiwan, with the many companies in Taiwan, with government agencies there. And again, we set that up through, under the auspices of Taipei Economic and Cultural Representative Office in the United States (TECRO) and our American Institute in Taiwan (AIT) to have that discussion.

I think the key takeaway is that Taiwan is a really important partner, and they want to be a part of the solutions moving forward. So, whether that's, you know, open communication with us on what's available in the supply chain, what isn't, where there might be issues coming forward, that's really important. Whether that's investments here in the United States, it's also really important or whether that's also coordinating with third countries and in the region, I think it is really important as we seek to address some of these disruptions to our supply chain that have happened over the last year.

VOA: The global chip shortage — it is still a problem. Do you expect the situation to improve by the end of this year?

Murray: I think there's a lot of people in government and industry that are working very hard to make sure the problem does improve. I think one of the key things we found over the last six months is just how important it is to communicate about shortages, about where we might have problems or disruptions, because I think that the global supply chain particularly for semiconductors is so complex, it might start with wafer production in one economy but then move somewhere else for refinishing into another chip, then it ultimately goes into an auto part which ultimately goes into a car, but again it's not just about the auto sector either.

I mean, these are the same chips that also ultimately go into our phones or into the computers we use or into medical devices. And I think we've certainly seen, and the administration has been very clear about this, that semiconductors are very critically important sector, and that's why it was one of the sectors identified in the 100-day report that was released by the White House on June 8th.

VOA: As you mentioned, the Biden administration has issued a 100-day review on steps to strengthen critical supply chains. One of the recommendations is to use diplomatic tools, working with like-minded allies such as the Quad and the G-7, to facilitate resilient supply chains. What are the specifics? Can you unpack it for us?

Murray: In the 100-day report, we identified four critical supply chains. One is semiconductors, another one is pharmaceutical APIs, another one is advanced capacity batteries, another one is critical minerals and critical materials. For each of those parts of the report, one U.S. government agency was designated as the drafter and then a lot of us then were able to contribute to those reports to look at what are some of the vulnerabilities in our supply chain, where are some of the opportunities that we could build a better supply chain, a more resilient supply chain. And so, we've taken those findings and we've gone out to a lot of our international partners just to share what we are finding out, what we are discovering, what we are learning, but also to hear from them, because every single government, every single country is going to have a slightly different twist or slightly different issue to deal with when it comes to supply chains.

Ultimately, it's going to be more of the multilateral organizations where we can have strong engagements on the margins to talk about supply chains, whether that's the G-7, whether that's the Quad, whether that's the newly announced U.S.-EU Trade and Technology Council or so many other different opportunities, and we want to take advantage of those opportunities because these are issues of shared concern, not just for the United States but around the world.

VOA: You were the Economic Minister Counselor at the U.S. Embassy in Beijing. China has opposed any official contacts between the U.S. and Taiwan. Is promoting the U.S.-Taiwan trade relationship an irritant to the U.S.-China relationship?

Murray: Well, I think we've been very clear historically to Beijing and the Chinese government what our approach to Taiwan is, and how we want to continue to have a relationship with Taiwan.

Given my new role here as the deputy secretary for trade policy negotiations, clearly when we talk about Taiwan being our ninth largest trading partner, we need to have a strong, robust, dynamic, engagement with Taiwan about economic and trade issues. That — that's very clear to us.

Looking at the China issues both from the time I was in Beijing and now, we're addressing those issues separately. We have to address our own economic and trade concerns with China, and we've done that through a number of different dialogues and negotiations over the years. I've been working on China off and on for more than 15 years, and, you know, it goes back to when China also joined the World Trade Organization in 2001, but we still have very serious concerns about China's behaviors in terms of whether it's intellectual property rights, or whether it's forced technology transfer, or its lack of market access for U.S. and foreign companies.

We have very strong concerns about the way China treats U.S. companies and other foreign companies when they're in China. We have very strong concerns about China not living up to the commitments that it's made — either to the international community or to us bilaterally. And so we want to address those with China and separately from anything that we're doing with Taiwan.