The importance of US-Taiwan economic relations

Taiwan is one of the most dynamic nations in Asia. Taiwan shows how it is possible to use market-oriented policies to transform from a developing, largely agrarian economy to an industrial and high-tech, knowledge-based economic powerhouse. Its experience has inspired many other developing countries in the world to adopt domestic reforms and actively participate in global trade. While Taiwan is one of the key players that contribute to the buoyant economic growth in Asia, its participation in the regional free trade arrangement boom during the last decade has just been catching up.

Taiwan just signed a milestone economic cooperation agreement with New Zealand on July 10. The Taiwan-New Zealand agreement is a comprehensive trade agreement of which Taiwan will liberalize 99.88 percent of its tariff lines, covering most sensitive agricultural goods. Many said it couldn’t be done, doubtful Taiwan had the political will to implement difficult domestic economic reforms. The agreement shows Taiwan’s resolve to engage in meaningful trade liberalization and its commitment to necessary economic reforms. Taiwan is in the final stages of concluding a similar agreement with Singapore. We will continue to pursue similar agreements with other countries, including the U.S., and join in regional and global trade initiatives.

A new and extremely noteworthy area of Taiwan’s economic relations is the rapidly expanding trade and investment relationship with mainland China. The conclusion of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and mainland China in 2010 has led to a series of bilateral agreements on protection and liberalization of investment and services trade between them. Both sides aim to complete a goods trade agreement by the end of this year. 

The agreements — though signed between Taiwan and mainland China — have important strategic and economic implications for the United States. The ECFA has lowered tension across the Taiwan Strait and provides important opportunities for engagement between Taiwan and the mainland on a wide range of issues. The cross-strait agreement also extends commercial benefits to U.S. firms. 

They can take advantage of Taiwan’s global competitiveness in information and communications technology by contracting with Taiwanese firms, which then assemble many of the name-brand electronic goods in China. Combining Taiwan’s high-tech know-how and productivity with American ingenuity has supported U.S. manufacturing, services and jobs by enabling U.S.-developed technologies to spread around the world in record time. 

As a result, U.S. consumers gain access to electronic goods at more affordable prices and within time frames that are responsive to market demands. U.S. companies are able to take advantage of Taiwan’s central geographic location and globalized production networks to use Taiwan as a gateway to mainland China and the rest of Asia (and beyond).

With all these momentous and historic changes taking place in Asia, it is time that U.S.-Taiwan economic relations move forward as well. One way to accomplish this is for Taiwan to join the Trans-Pacific Partnership (TPP), the 12-nation trade agreement that is currently being discussed among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

Taiwan brings strong credentials for TPP membership. As a nation dependent on international trade, Taiwan knows the growth and job creation benefits that come from lowering trade barriers and improving conditions for overseas investors. Taiwan has shown itself to be a willing partner for engaging in trade liberalization. 

Joining the TPP would significantly benefit Taiwan’s economy while also boosting economic growth for the other TPP members. The current 12 TPP partners account for roughly 25 percent of Taiwan’s exports. With Taiwan’s links to production supply chains extending across Asia and around the globe, Taiwan’s membership in the TPP could significantly add to economic integration, within Asia as well as between Asia and other important regions. 

The U.S. should consider the benefits to be gained from greater economic integration with Taiwan. With two-way trade totaling $63.2 billion in 2012, Taiwan is the 11th largest trading partner of the U.S., its 16th largest export market and the 7th largest destination for U.S. agricultural exports. 

As the U.S. looks to Asia, Taiwan presents an opportunity for economic partnership not to be missed.

Chang is deputy representative of the Taipei Economic and Cultural Representative Office in the U.S.