Economy of Taiwan - Foreign Trade

Foreign Trade

Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, thus it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased over fivefold in the 1960s, nearly tenfold in the 1970s, and doubled again in the 1980s. The 1990s saw a more modest, slightly less than twofold, growth. Export composition changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment. Taiwan, as an independent economy, became a member of the World Trade Organization (WTO) as Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (often shortened to "Chinese Taipei"-both names resulting from PRC interference on the WTO) in January 2002. In a 2011 report by Business Environment Risk Intelligence (BERI), Taiwan ranked third-best globally for its investment environment.

Taiwan is the world's largest supplier of contract computer chip manufacturing (foundry services) and is a leading LCD panel manufacturer, DRAM computer memory, networking equipment, and consumer electronics designer and manufacturer. Textiles are another major industrial export sector, though of declining importance as Taiwan due to labor shortages, increasing overhead costs, land prices, and environmental protection. Imports are dominated by raw materials and capital goods, which account for more than 90% of the total. Taiwan imports most of its energy needs. The United States is Taiwan's third largest trading partner, taking 11.4% of Taiwanese exports and supplying 10.0% of its imports. China has recently become Taiwan's largest import and export partner. In 2010, the PRC accounted for 28.0% of Taiwan's exports and 13.2% of imports (excluding Hong Kong). This figure is growing rapidly as both economies become ever more interdependent. Imports from China consist mostly of agricultural and industrial raw materials. Exports to the United States are mainly electronics and consumer goods. As Taiwanese per capita income level has risen, demand for imported, high-quality consumer goods has increased. Taiwan's 2002 trade surplus with the United States was $8.70.

The lack of formal diplomatic relations between the Republic of China (Taiwan) with Taiwan's trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce. The Republic of China maintains cultural and trade offices in more than 60 countries with which it does not have official relations to represent Taiwanese interest. In addition to the WTO, Taiwan is a member of the Asian Development Bank as "Taipei, China" (a name resulting from PRC influence on the bank) and the Asia-Pacific Economic Cooperation (APEC) forum as "Chinese Taipei" (for the same reason as above). These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.

The Economic Cooperation Framework Agreement (ECFA) with the People's Republic of China was signed on June 29, 2010, in Chongqing. It could potentially widen the market for Taiwan's exports. However, the true benefits and impacts brought by ECFA to Taiwan's overall economy are still in dispute. The newly-signed agreement will allow for more than 500 products made in Taiwan to enter China at low or no tariffs. The government is also looking to establish trade agreements with Singapore and the United States.