"We are aware that Taiwan has expressed interest in a free-trade agreement with the United States," Stephen Young, director of the American Institute in Taiwan, told a group of business people, according to the text of his speech that was sent to media.

"With the expiration of Trade Promotion Authority in July, we are not in a position to consider new FTA partners at this time," he said. "With this in mind, however, we are open to considering other mechanisms to advance bilateral economic cooperation that make sense to both sides."

Young made his remarks after the United States recently reached a free-trade agreement with South Korea, a regional rival of Taiwan that competes with the island in many areas. Some analysts have said the agreement could benefit South Korea at Taiwan's expense.

Young also called on Taiwan to improve its ties with China. Despite icy political relations, trade and investment between the two has flourished.

China is now Taiwan's top trading partner. China and the United States are the island's top customers in terms of exports.

"A critical way to improve the U.S.-Taiwan trade partnership is for Taiwan to further open its economic relationship with China," Young said.

"More cross-Strait economic opening will strengthen Taiwan's global competitiveness. It will help Taiwan to realise its potential as a regional center for logistics, finance and other services."

Like most countries in the world, the United States has no formal ties with Taiwan because of the "one China" policy insisted on by Beijing.

The United States conducts its diplomatic business through the American Institute in Taiwan.

Taiwan and China split at the end of a civil war in 1949. Despite its self-governing status, China still claims the island as part of its territory and has vowed to reunite the two sides, by force if necessary.