Taiwan-European Relations after WTO Accession
Wu Rong-i
President
Taiwan Institute of Economic
Research
 |
| Taiwan's exports to Europe
have increased considerably over the past five years, with technology-intensive
products, such as office machinery and computers, the major exports to that
region. |
Although Europe is one of the ROC's most important trading partners, trade
with the continent is not as large as with Asia or North America because of
distance, language barriers, and the ROC's withdrawal from the United Nations
in 1971. In 1999, for example, Taiwan's exports to the United States totaled
US$30.9 billion, while exports to the European Union (EU) reached only US$19.06
billion.
Taiwan's trade with Europe did not take off until the mid-1980s. In 1999, ROC-EU
two-way trade was US$33.5 billion, accounting for 14.4 percent of Taiwan's total
trade. The EU was Taiwan's third-largest trading partner after the US and Japan,
while Taiwan was the EU's tenth-largest trading partner and seventh-largest
supplier.
Taiwan's exports to Europe have increased considerably over the past five years,
especially during the recent Asian financial crisis. While most Asian countries
were in recession at that time, Taiwan was able to maintain healthy economic
growth by increasing exports to the European market.
Table IV shows that Taiwan's exports to the EU outperformed
the exports to all other Asian countries between 1996 and 1998. This
fact reflects the importance of Europe as a market for Taiwan's trade
diversification.
Initially, Taiwan's exports to Europe consisted primarily of textile products,
garments, and shoes. Today, technology-intensive products have replaced these
items. For example, office machinery and computer exports to the EU increased
from 1.4 percent in 1980 to 34.4 percent of Taiwan's exports to Europe in 1997,
making Taiwan the EU's third-largest supplier of such products. Electronics
exports during that period also registered a notable increase, rising from 7.1
percent to 16 percent of Taiwan's exports to Europe. Taiwan's imports from the
EU consist primarily of military goods and raw materials used in the manufacture
of automobiles, IC chips, factory machinery, and steel.
As of December 1999, total European investment in Taiwan was US$4.1 billion,
or 12.4 percent of all direct foreign investment in Taiwan. This figure is significantly
less than the 26.3 percent for US investment and the 25 percent for Japanese
investment. The majority of the European enterprises have invested in Taiwan's
chemical manufacturing industry, electronic and electrical manufacturing industries,
and finance and insurance sectors.
Among the EU countries that invested in Taiwan, the Netherlands ranked first,
accounting for 31.9 percent of total European invest- ments, followed by the
United Kingdom with 26.4 percent. The largest European companies which have
invested in Taiwan are Philips, ABB, Siemens, and ICI. At present, there are
over 900 European investment plans related to public construction projects or
joint ventures with Taiwan's high-tech industry.
 |
| After Taiwan enters the WTO, many local products, such as cigarettes and wine,
will be affected by lower tariffs. (Photo by Huang Chung-hsin) |
As of December 1999, ROC investment in Europe totaled only US$0.72 billion,
or 2 percent of the ROC's direct overseas investments. This low percentage is
mainly due to the fact that the majority of the Taiwan companies entering European
markets only established sales headquarters, which require much lower set-up
costs. Taiwan investments in Europe involving manufacturing projects have been
located primarily in the United Kingdom, with the largest being the Scotland-based
Chung Hwa Picture Tube, which manufactures information technology components
and supplies some of the largest international IT companies in the world, including
Digital and IBM.
As Taiwan gradually develops into a global high-tech center, there will certainly
be many opportunities for cooperation and development. In 1997, the EU had 6.5
percent of the world's population but 28 percent of the world's GDP. As the
EU continues to expand its membership, the potential of this vast market will
increase.
Since 1995, Taiwan investors have developed industrial zones in Poland and
the Czech Republic as springboards for sales to the EU. Taiwan's trade deficit
with the EU has slowly been turned into a trade surplus. The ROC-EU trade surplus
for 1999 was valued at US$4.6 billion, and the trade surplus for the first eight
months of 2000 exceeded US$4 billion. These figures reveal Taiwan's active effort
to develop the European market.
The ROC expects to accede to the World Trade Organization (WTO) in 2001, and
its domestic market will necessarily be fully opened. The trade opportunities
that the ROC will offer after its accession are too valuable for European enterprises
to ignore. Aside from Taiwan's automobile tariff, which will be reduced annually
from the current rate of 30 percent to 17.5 percent by 2008, agricultural imports
will also increase.
Taiwan's service industry, which in the past was extremely protected, will
be opened to competition from foreign companies. The EU's service industry has
always been extremely competitive and accounted for 42.3 percent of the world's
total service exports in 1999. In fact, four of the top five service-exporting
countries are members of the EU. Thus, European enterprises will find outstanding
investment opportunities in Taiwan.
More importantly, Taiwan is currently ranked 16th-largest in the world for
outward investment and is one of the largest investors on the Chinese mainland.
After the Chinese mainland accedes to the WTO, its enormous markets will attract
innumerable foreign enterprises. Taiwan businesses have been investing on the
Chinese mainland for several years, with accumulated investments of over US$20
billion, or 40 percent of Taiwan's total outward investments. Thus, Taiwan businesses
will be able to offer their expertise to European enterprises investing on the
Chinese mainland.
Furthermore, as Taiwan develops into a Global Logistics Center, European enterprises
will be able to use the island as their base for entering Asian markets,
working with Taiwan businesses to develop markets on the Chinese mainland
and in Southeast Asia.
