The United States and Taiwan reached an agreement on the first part of their “21st Century” trade initiative, which will cover customs and border procedures, regulation and small business, The U.S. Trade Representative’s Office (USTR) said. After the initial agreement is signed, negotiations will commence on other, more complicated trade areas including agriculture, digital trade, labor and environmental standards, state-owned enterprises, and non-market policies and practices, USTR said.

U.S. Trade Representative Tai said in a statement that the deal strengthens U.S.-Taiwan relations and demonstrates they can work together to advance trade priorities for their populations.

“We look forward to continuing these negotiations and finalizing a robust and high-standard trade agreement that tackles 21st Century economic challenges,” Tai said.

Taiwan’s Office of Trade Negotiations in a statement described the agreement as “historically significant” and said Taiwan aimed to finalize negotiations on all remaining issues by the end of the year.

Although the agreement will not change tariffs, proponents argue that it will strengthen economic bonds between the U.S. and Taiwan, open the island for more U.S. exports and increase Taipei’s ability to resist economic coercion from Beijing.

China has been rattled by Taiwanese President Tsai’s recent engagements with high ranking U.S. officials, including an April meeting with U.S. House of Representatives Speaker McCarthy. Announcement of the trade pact comes just ahead of planned meetings between China’s commerce minister Wang and U.S. Trade Representative Tai and U.S. Commerce Secretary Raimondo.

The bilateral talks commenced last August, after the Biden administration excluded Taiwan from its larger pan-Asian trade initiative, the Indo-Pacific Economic Framework.

USTR said customs and trade facilitation will reduce red tape for U.S. firms to export products to Taiwan, allowing for electronic filing of customs forms and online payment of duties and fees, cutting waiting times for vessels.

The texts on good regulatory practices and services regulation seek to streamline operating licenses for firms seeking to operate across borders and promote fair competition opportunities, USTR said.

USTR added that anti-corruption texts are based on those in the U.S.-Mexico-Canada Agreement on trade and address money laundering, denial of entry for foreign public officials. The small- and medium-sized enterprises text aims to facilitate cross border investment and finance in the sector, USTR said.