The U.S.-Taiwan Initiative on Twenty-First Century Trade facilitates customs procedures and looks forward to anti-corruption measures.

After receiving the green light in the House of Representatives, it is due to be put to a vote in the Senate of Congress, where it is also expected to be approved.

The United States does not have formal diplomatic relations with Taiwan, which is self-governing and claimed by China as part of its territory.

But Washington maintains informal ties with the island through the American Institute in Taiwan, which acts as a de facto U.S. embassy, which earlier this month signed the trade agreement with Taipei's U.S. Economic and Cultural Representative Office.

Washington remained a key ally of Taiwan despite the transfer of diplomatic recognition from Taipei to Beijing in 1979. It is also the island's second largest trading partner and one of its leading arms suppliers.

But Beijing opposes any hint of diplomatic relations between Taiwan and foreign governments, and Washington warned ahead of signing the agreement against any agreement "with indications of sovereignty or official nature with China's Taiwan region."

In April, Beijing held a three-day military drill to simulate a blockade of the island in response to U.S. House Speaker Kevin McCarthy's meeting with Taiwanese leader Tsai Ing-wen in California.