The Catalyst for Stronger US-Taiwan Ties
How Frm. Under Secretary of State Krach Became “Taiwan’s Number One Friend”
On September 17th, 2020, U.S. Frm. Under Secretary of State Keith Krach landed at the Shung Shan Air Force Base in Taipei to become the highest-ranking State Department official to visit the island since the U.S. established diplomatic relations with Beijing in 1979. Wearing a face mask and giving his clasped hands signature salutation, Krach descended from a Gulfstream G-V jet to bump elbows with a greeting party of senior Taiwanese officials.
He was there to attend a memorial service for former President Lee Teng-hui, who led the island’s transition to democracy and died at age 97. It is hard to overstate President Lee’s importance, who is considered to be the father of Taiwanese democracy and viewed by many as Taiwan’s George Washington. During his three-day visit, Krach would meet with high-tech business leaders and top government officials, hold discussions on creating a new economic dialogue, and attend a banquet in his honor hosted by Taiwanese President Tsai Ing-wen and Taiwan Semiconductor Manufacturing Company (TSMC) founder Morris Chang.
Krach was no stranger to Taiwan. Before beginning his government service, he was an international business leader who helmed multi-billion-dollar tech companies, including DocuSign and Ariba. He forged partnerships with business leaders in Taiwan’s growing technology sector and forged business relationships based on trust and transparency. After becoming Under Secretary, one of Krach’s early achievements was a $12 billion deal with Taiwan semiconductor giant TSMC to build an advanced chip fab in Arizona.
In the months that followed his September trip, Krach would draw on these experiences to become, as Taiwan’s ambassador to the U.S. has dubbed him, “Taiwan’s Number One Friend,” strengthening the U.S.-Taiwan relationship, while turning the global tide against the Chinese Communist Party (CCP). “Taiwan is under tremendous pressure against China’s pervasive military, economic, and political coercion. Clear and concrete support from the United States and like-minded countries is more critical than ever,” said Hsiao Bi-khim, President Tsai’s most trusted advisor and Taiwan Ambassador to the U.S. “We welcome Frm. Under Secretary of State Krach to Taiwan as the highest-level State Department in 41 years.”
Krach’s trip to Taiwan played a pivotal role in his mission of developing and operationalizing a global economic security strategy that would drive economic growth, maximize national security, and combat the CCP’s economic aggression. Krach’s strategy consisted of building a network of trusted partners comprised of an alliance of democracies, companies, and civil society that operate by a set of trust principles grounded in democratic values for all areas of economic collaboration. The network is designed to be a bipartisan, enduring strategy in the epic battle of freedom versus authoritarianism.
Krach’s plan resulted in the rapidly growing Clean Network, which consists of more than 50 countries, representing 2/3 of the world’s GDP, and hundreds of industry-leading companies. Krach secured an early Clean Network win by recruiting Taiwan as a member, knowing that tightening ties with the island democracy was crucial to national security and provided an ideal showcase for his three-part approach to confronting CCP aggression.
He first spoke about this three-part strategy during his Senate confirmation hearing when Democrat Senator Chris Coons asked about his strategy for dealing with the “China Challenge”. Krach stated, “It would consist of a harnessing three facets of U.S. comparative advantage by: strengthening our partnerships with our friends and allies; leveraging the innovation and resources of our private sector; and amplifying the moral high ground of our democratic values.” Senator Coons responded, “I could not agree with you more.” These are now the 3-pillars of the Clean Network.
November 9, 2019: The Courage to Recognize Taiwan
Both parties in Washington acknowledge the strategic importance of Taiwan. It is a leading democratic society, as well as both an economic and scientific powerhouse. In recent decades it has become a key U.S. ally, with trade in goods and services worth almost $100 billion. The island hosts 200 American diplomats in a massive new complex that we cannot call an embassy. Taiwan considers itself as a sovereign state with no intention to control, or permit itself to be controlled by, the mainland.
The vast majority of countries are unwilling to stand up to Chinese bullying by recognizing Taiwan. Many nations that once recognized Taiwan have caved into Chinese pressure to acknowledge Beijing’s supremacy instead, as America itself did 41years ago. However, the American tone has changed dramatically and not only through Krach’s leadership. Last September, for example, when the Solomon Islands switched recognition from Taipei to Beijing, Vice President Pence declined to meet with the Solomon Islands leader to discuss development partnerships, and reassessed U.S. assistance.
Krach has worked to ensure that those nations with the courage to recognize Taiwan are given the support they deserve. In November 2019, Krach hosted at his home the finance Ministers from countries with the courage to still recognize Taiwan. He led an in-depth discussion about the stakes of defending the island democracy and how freedom-loving nations could stand up to the aggression of the CCP.
This support is a stark contrast to the lukewarm support for Taipei offered by previous administrations. Washington long has been paralyzed on the Taiwan issue for fear of disrupting the delicate sensibilities of the CCP and harming U.S.-China relations. But the pandemic has disrupted all of that for the world, putting on full display for the world to see that human rights abuses, intellectual property theft and economic blackmail are cornerstones of the Chinese regime. The Clean Network alliance of democracies is steadily gaining traction and Beijing’s strident responses are backfiring, as China is increasingly isolated at a time when export markets and diplomatic partners are crucial to revive its economy and regain international credibility.
We live in an era when illusions are being painfully removed from international politics. The CCP’s claim over Taiwan is one such vestigial illusion and the Chinese people, as well as Taiwan and the international community, will be better off with it gone. As former national security adviser John Bolton wrote 20 years ago, recognizing both Taiwan and China simply mean recognizing reality. The CCP does not represent the people of Taiwan, and never will. As the world watches the CCP’s abuses in Hong Kong, Krach presses vehemently for freedom-loving nations to not take for granted that the sovereignty of Taiwan is inevitable, believing that America must continue to lead through the Clean Network and that Taiwan is critical in this fight.
May 15, 2020: The Most Crucial Onshoring Deal in US History
To understand the inroads Krach has made with Taiwan, one must look to the massive TSMC deal he brokered, which was one component of a rapid succession of victories in support of 5G freedom that Krach helped secure in the spring of 2020. On May 18, a Washington Times headline blared “U.S. scored ‘5G trifecta’ in competition with China.”
In addition to the crucial onshoring of TSMC’s semiconductors, the trifecta included the locking down of advanced semiconductors from Huawei through export controls and the unveiling of the innovative Clean Path strategy. Together, these three actions put China’s 5G giant, Huawei, on the defensive and began to turn the tide against untrusted 5G vendors. This trifecta of accomplishments served as the launchpad for Krach’s Clean Network and will help to safeguard the security of America’s technological assets for years to come.
Krach knew from his Silicon Valley days that TSMC is one of most vital and vulnerable companies to US national security. Krach’s partnership with the Commerce Department resulted in the largest onshoring deal in U.S. history with TSMC building the world’s most advanced five-nanometer chip fabrication facility in Arizona. The deal represents a quantum leap forward in securing the semiconductor supply chain and 5G security for the United States and its partners. It ensures that the chips powering everything from smartphones, to 5G base stations, to advanced artificial intelligence will be “Made in America.”
The decision by one of the world’s largest manufacturers of semiconductors to build a $12 billion plant in Arizona has been heralded as a “game-changer” for the U.S. tech industry and for national security in the competition against China. The New York Times called it a win for the administration, which had called for building up U.S. manufacturing capabilities and criticized the fragility of a tech supply chain heavily centered in China.
The impact went on to be even more profound because it catalyzed a critical piece of legislation that Krach championed called the Chip Act, a bipartisan, bicameral bill that will help bring semiconductors production vital to national security back to the U.S.
Democrat Senator Mark Warner, co-sponsor of the bipartisan bill, Vice Chair of the Senate Intelligence Committee said, “America’s innovation in semiconductors undergirds our entire innovation economy, driving the advances we see in autonomous vehicles, supercomputing, IoT devices and more. Unfortunately, our complacency has allowed our adversaries to catch up.” The Chip Act reinvests in this national priority by providing targeted tax incentives for advanced manufacturing, funding research in microelectronics, and emphasizing the need for multilateral engagement with our allies in bringing greater attention to security threats to the global supply chain.
September 17-19, 2020: Krach’s visit
With Krach’s creditability established through the TSMC deal, he was chosen to lead the U.S. delegation to attend former President Lee’s memorial service and conduct an economic dialogue. While the main purpose of the trip was to attend the memorial service, Krach held many closed-door meetings with Taiwan’s top government officials and CEOs sharing his Clean Network message. During his three-day visit, he met with Premier Su Tseng-chang and Minister of Foreign Affairs Joseph Wu and held private meetings with Vice Premier Shen Jong-chin and Minister of Economic Affairs Wang Mei-hua.
On Friday evening, President Tsai Ing-wen hosted a banquet for Krach, which was also attended by Morris Chang founder of TSMC. Chang’s presence at the banquet was an indicator of his company’s significant role in the global supply chain. The importance of that role to both Taiwan and the U.S. is evident, particularly at this time when Beijing and Washington are engaged in a technology war, Liu said.
“Krach fully utilized his time of less of 48 hours in Taiwan,” Foreign Minister Wu said. “He met with high-level government officials and people from various sectors and held discussions with them on many issues.” However, Krach’s trip was relatively low-keyed, as he did not visit the Presidential Office or MOFA’s headquarters. He also did not hold any press conferences or issue any public statements.
“Frm. Under Secretary Krach’s visit not only highlights the robust and enduring partnership between Taiwan and the United States, but also paves a solid foundation for future discussion on important topics such as secure technology, energy, infrastructure, and global supply chain realignment,” said Ambassador Hsiao Bi-khim. “Among significant projects in the U.S.-Taiwan partnership are the Clean Network which provides a framework to strengthen infrastructure and enhancing our digital cooperation and providing tremendous economic opportunities for the future.”
“Frm. Under Secretary Keith Krach’s visit exemplified the remarkable possibilities of Taiwan-US economic relations,” said President Tsai.
Before Krach left, he set the goal to meet again in DC before the end of November to establish a U.S. – Taiwan inaugural prosperity partnership dialogue to advance shared priorities advance shared priorities regarding economic growth and security. And for Krach, a promise made is a promise kept, and on November 20th he welcomed the Taiwanese delegation to Washington. The momentous meeting would be led by Krach and Taiwan’s deputy minister of economic affairs, Chen Chern-chyi, with the stated aim of building on historical ties and shared democratic values. Senior government officials would meet for the first time to sign a five-year memorandum of understanding called the Lee Economic Prosperity Partnership in honor of “Taiwan’s Father of Democracy” and memorialize Krach’s historic visit.
Over the next two months, the parties established working groups on global health security, science and technology, 5G and telecommunications security, supply chains, women’s economic empowerment, infrastructure cooperation, and investment.
September 19, 2020: Honoring Taiwan’s Father of Democracy
At the memorial service of the late President Lee, Krach was seated next to former Japanese prime minister Yoshiro Mori. Of the many dignitaries and inspirational leaders attending and speaking at the funeral, perhaps most impactful and emblematic of the importance of President Lee’s place in history was told through the eulogy by Tibetan spiritual leader the Dalai Lama. Lee, who died in July aged 97, was a towering figure in Taiwan’s history, helping the once authoritarian island transition to a vibrant democracy and later angering China by pushing for it to be recognized as a sovereign country.
Krach says about Taiwan’s first democratically elected president, “President Lee’s courage and vision helped put an end to decades of authoritarianism and ushered in a new era of economic prosperity, openness, and rule of law. The reforms during his 12-year tenure played a crucial role in transforming Taiwan into the beacon of democracy we see today. His story is truly a profile in courage.“
“Former President Lee was the pioneer of an era,” Ms. Tsai wrote on Facebook. “In an era when democratic movements were surging, he led the country amid authoritarian counterattacks and democratic ideals, guided Taiwan through a quiet revolution, and helped Taiwan become the Taiwan of the Taiwanese people.”
Beijing meanwhile restated its animosity toward Mr. Lee by issuing this stark and chilling warning. “‘Taiwan independence’ is an impassable dead end,” a spokeswoman for China’s Taiwan Affairs Office said in response to the former president’s death. “The historical trend toward national unification and national rejuvenation can’t be stopped by any person or any force!”
The foreboding and disrespectful response from Beijing only makes the point more poignant that leaders of the free world must carry on Lee’s legacy and help preserve the progress Taiwan has made toward asserting its independence and sovereignty. As Krach stated, “Lee forged the consciousness of Taiwan as Nelson Mandela did for South Africa. He created an identity for Taiwan and enabled the Taiwanese to imagine an independent state free of foreign control.”
Krach’s trip attracted attention from Taipei, Washington, and another major capital city: Beijing. China expressed its displeasure, conducting combat exercises near the Taiwan Strait throughout Krach’s visit, in a round of war games aimed at intimidating supporters of the island’s independent identity. In a brief message, China’s Eastern Theater Commander said the exercises involved naval and air force units in the Taiwan Strait to gauge their ability to carry out joint operations Chinese defense ministry called the drills a “legitimate and necessary action taken in response to the current situation across the Taiwan Straits to safeguard national sovereignty and territorial integrity.”
Ministry of Foreign Affairs also defended the move in a press briefing by strongly condemned the US for sending Frm. Under Secretary of State Keith Krach to Taiwan. “China has always been firmly opposed to any official exchanges between the US and Taiwan,” Wang said. “Such actions will further damage China-US coordination and cooperation on major international issues. China will take legitimate countermeasures, including targeting relative individuals,” warning that “the US must bear full responsibility for the outcome.”
Taiwan’s military held a different view, saying in an official statement that China’s “provocative actions have violated our sovereignty and seriously damaged the status quo of peace and stability in the strait and the region.” Taiwan’s defense ministry said that it was an unusually large show of force and caused Taiwan to scramble its own jets in response and monitor the movements of the Chinese planes.
“US announced a $7 Billion arms deal with Taiwan to help repel a Chinese invasion, including sea mines, drones and air-to-surface missiles that could hit Chinese targets far away. The timing was hardly chosen by chance – because at that time the highest-ranking US diplomat Keith Krach was in Taiwan having dinner with President Tsai.” – Der Spiegel
November 20, 2020: The Lee Economic Prosperity Partnership
Krach led the dialogue meeting from Washington in November, just two months after his trip to Taipei, along with C.C. Chen, Taiwan’s vice minister of economic affairs. The meeting included signing a memorandum of understanding that lays the groundwork for more in-depth and comprehensive cooperation.
Chen said Krach sees Taiwan as a reliable partner during the first U.S.-Taiwan Economic Prosperity Partnership (EPP) Dialogue, which included the Clean Network, 5G networks, and telecommunications security, pandemic response, supply chains, clean infrastructure cooperation, renewable energy, global health, science and technology, and women’s economic empowerment, education and entrepreneurship. “The EPP Dialogue is an opportunity to continue work in existing areas of economic cooperation while forging new economic ties between the U.S. and Taiwan,” says Krach.
“Future EPP Dialogues will help strengthen the U.S.-Taiwan relationship, further magnify the two societies’ respect for democracy, and strengthen our shared commitment to entrepreneurship, free markets, and freedom.” The dialogue came at a time when U.S.-China tensions are their highest in decades, global supply chains have taken a beating because of the pandemic, and American officials are increasingly intent on strengthening relationships with like-minded partners, as Krach has done through the Clean Network.
Given the growing importance of the digital economy and concerns about cybersecurity, their discussions addressed U.S. efforts to build a clean telecommunication network (or 5G Clean Path). The goal is to ensure that companies with a questionable dedication to security and transparency are prevented from supplying telecommunication infrastructure. And indeed, the U.S. would like its friends and allies to follow suit.
Thanks to Krach’s tireless wooing of allies and partners, what once seemed impossible is becoming a reality..
But Krach did not give up there. After both sides wrapped up an economic partnership dialogue that day and signing the Lee Prosperity Partnership, Frm. Under Secretary of State Krach announced that the United States and Taiwan will kick off talks on technology cooperation and challenged the team with a target date of completion being December 15th.
December 15, 2020: Science and Technology Cooperation Pact
Ambassador Bi-khim kicked off the signing ceremony by praising the team for meeting Frm. Under Secretary Krach’s call to action date of December 15 and then introduced him to preside over the formalities by saying Keith Krach has become “Taiwan’s Number One Friend.”
The following are Frm. Under Secretary Krach’s remarks: “This historic agreement expresses the United States’ and Taiwan’s shared commitment to values that are critical to science, technology, and freedom. Values like trust, transparency, innovation, and respect for the rule of law, intellectual property, research integrity, the environment and human rights. Values that allow science and technology to be used to benefit people around the world, to lift them up economically and allow them to live longer and healthier lives.
Taiwan is an indispensable partner in advancing these values and demonstrates the power of free markets and democracy as a counterweight to authoritarian states. To preside over this ground-breaking Science and Technology Agreement is a great privilege for me for three reasons.
It also builds upon the inspiration of President Lee for which I had the honor of representing the United States at his memorial service. And It builds upon the momentum the Lee Economic Prosperity Partnership which further strengthens the already strong U.S.-Taiwan economic relationship.
Finally, it builds upon my love for the Taiwanese people and the friendships made along the way. We have a bond based on common values. We’re built of similar stuff. Tough, honest, hardworking, creative, independent. We are both founded on belief in freedom and the pride in moving forward.”
Taiwan is an indispensable partner in advancing these values. Taiwan demonstrates the power of free markets and democracy as a counterweight to authoritarian states. The agreement recognizes that Taiwan has become a global technology powerhouse. In the New York Times, Taiwan was recently called “pound for pound, the most important place in the world” for its leadership in advanced chip manufacturing.
Among much else, the Science and Technology agreement expressed the U.S. and Taiwan’s shared commitment to research integrity. That means no bad actors will have access to critical R&D. The agreement builds on a strong foundation of past cooperation and shared principles, including our membership in the Clean Network.
The Quest for a Free Trade Agreement
Even after all of these accomplishments, Krach isn’t resting on his laurels. He says a free trade agreement is long overdue and believes fervently that it should be a priority for 2021. Trade agreements are about more than correcting trade imbalances, strategic and political considerations play a vital role. In August, President Tsai announced the lifting of import restrictions on U.S. beef and pork in an apparent effort to clear the way for a trade deal. Krach believes that the U.S. cannot be seen to ignore an important positive and difficult step by a friend
Senator Rubio called on Pompeo to send Frm. Under Secretary Krach to visit Taiwan to demonstrate U.S. determination to complete an FTA in a timely manner. “I write concerning the recent move by Taiwanese President Tsai that Taiwan would be lifting import restrictions on U.S. pork and beef products. I urge you to send Undersecretary of State Krach to Taipei as soon as possible to demonstrate U.S. determination to complete an FTA promptly. Now is the time to begin negotiations. Sending Undersecretary Krach would show the U.S. commitment to achieving an FTA with Taiwan.”
Krach recommended pursuing the completion of a TIFA as a first step towards negotiating a Free Trade Agreement with Taiwan. However, the U.S. failed to pursue negotiations with Taiwan on an agreement — even after President Tsai Ing-wen took the politically courageous step of lifting restrictions on imports of U.S. pork and beef imports. But the State Department does not dictate US trade policy towards Taiwan, the Office of the US Trade Representative does.
However, Taiwan expressed confidence in a trade deal with the United States after the prosperity partnership dialogue. Speaking to reporters in Taipei, Joseph Wu said that he expected the incoming government of U.S. President-elect Joe Biden to support a long-sought-after bilateral trade agreement, given bipartisan support for the move among legislators in Washington.
“I think bipartisan support on Capitol Hill is still very strong, and I think that kind of support for a Taiwan-US BTA will continue into the new administration,” he said, following the high-level economic talks with Krach and other officials.
Wenchi Yu, a fellow at Harvard Kennedy School’s Ash Center and former Department of State official, explains that the Biden team is seriously considering a bilateral trade agreement between Taiwan and the U.S. and that Biden would take a multilateral approach to address issues. The Biden administration would bring in Europe and other traditional allies to build an alliance that would support Taiwan. By taking a multilateral approach with allies, the case for Taiwan’s participation in international organizations would be much stronger.
Krach’s multilateral strategy of leveraging partners by uniting allies with the Clean Network appears to align perfectly with Biden’s approach, as does Krach’s belief in the importance of a bilateral trade agreement and securing Taiwan’s participation in international organizations.
Yu also asserts that Biden’s team will focus on developing policies that support democracy and reclaim American leadership around the world. Taiwan will be integral as a great democratic story as the first true democracy in Asia to stand up to China. This equates to what Krach said in his own Senate confirmation hearing, “There is no substitute for American leadership, and we must amplify the moral high ground of democratic values.” He followed through on this during his historic trip to Taipei, “Taiwan is a great partner, a great friend and a magnificent role model of democracy for the region.”
Yu points out that given Taiwan’s key role in the critical supply chains that the coronavirus pandemic exposed, and in the global semiconductor supply chain, the Biden administration will focus on securing and protecting them from Chinese coercion. These were two main areas of focus of the Lee Economic Prosperity Partnership and Krach’s onshoring of TSMC, which was the most essential move for securing semiconductors.
Finally, she believes that the Biden administration would honor the precedent of high-level U.S. official trips to Taiwan based on issues and interests, which is perhaps a tip of the hat for the results that Krach achieved.
Krach’s good friend and former partner of the Global Mentor Network, retired four-star General Stanley McChrystal, briefed Biden and his transition team, and shared his stark warning about China. As a top military adviser to Biden, he cautioned that China is rapidly growing more powerful and that it’s possible that the emerging Communist superpower will retake democratic Taiwan by force. “Their ability with rocketry and whatnot has essentially changed the dynamic,” said McChrystal in an interview with Axios. “My concern would be, we wake up one morning and China has just done a fait accompli. They have just showered Taiwan with rockets,” he said. “Are you really prepared to fight for Taiwan?”
Biden pledges to continue to uphold American obligations under the Taiwan Relations Act, which he voted for as a senator in 1979. As promulgated in new legislation such as the TAIPEI Act, Biden will also help Taiwan resist the CCP pressure tactics. A source close to the Biden campaign dispelled rumors that Biden would balk at selling weapons to Taiwan, and that a key point of Biden’s Taiwan doctrine would be the continuation of arms sales to help it defend itself from the People’s Liberation Army (PLA).
“We’re a Pacific power, and we’ll stand with friends and allies to advance our shared prosperity, security, and values in the Asia-Pacific region,” the president-elect wrote in a piece for the Chinese-language World Journal newspaper. “That includes deepening our ties with Taiwan.”
The Future US Taiwan Relationship
Krach believes more high-level exchanges are needed, given Taiwan’s strategic importance. He also thinks there are opportunities for supporting Taiwan’s membership in international organizations because nothing in the Taiwan Relations Act can be construed as a basis for Taiwan’s exclusion from membership of international organizations. Thanks in part to Krach’s patient advocacy, there are strong reasons for optimism about the continued development of US-Taiwan relations in the coming years. There is deeply rooted bipartisan support in the United States for Taiwan.
President Tsai and her administration have nurtured this support through persistent engagement with leaders and leading thinkers on both sides of the political aisle, including the president-elect. Tsai’s prudent, moderate, predictable approach to cross-Strait issues has earned the confidence of Washington.
Biden’s incoming Secretary of State, Antony Blinken, said recently on Twitter that “stronger economic ties with Taiwan also support our shared democratic values, and our common commitment to regional peace and stability.”
US–Taiwan relations under the incoming Biden administration are also off to an optimistic start. Blinken took a phone call with Taiwan’s chief representative to the United States, Hsiao Bi-khim in a sign that high-level dialogue will continue under the Tsai and Biden administrations.
Taiwan has found itself in something of an economic sweet spot in the escalating battle for global dominance between the US and China, with exports to the world’s two largest economies surging over the past year. Taiwan’s exports to the US are likely to continue their strong growth with an end to the trade war nowhere in sight. Taiwan’s economy should also continue to benefit from Taiwanese companies bringing investment back from China.
As for Krach, who was unanimously confirmed and garners true bipartisan support on Capitol Hill for his Clean Network initiative, he is prepared to continue serving his country in whatever capacity he is called upon to do so—whether as a government official, a private citizen, or back in the business sector.
“Serving as Frm. Under Secretary of State has been the honor of a lifetime,” he said recently. “It is a privilege to give back the country that has given so much to my family and me.”
No matter where his life of service leads him next, we can be sure of one thing: Krach will always be Taiwan’s Number One Friend.