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International Trade

Taiwan eyes a greater geo-economics role to assert its presence in the international arena

Even though it has sustained many blows affecting its existence after vacating its seat in 1971 at the United Nations Security Council to China, the island republic of Taiwan has come a long way not only to survive but also assert its position in the international arena. Taiwan has built up its image as an economic powerhouse and a vibrant democracy, with a thriving global trade, underscoring its important role in global supply chains.

Indeed, trading with the entire world, despite being denied diplomatic recognition from the majority of nations, has become Taiwan’s forte.

“Trade is vital for Taiwan … our trade with the United States exceeds that of India and France with the U.S. Taiwan is today the 9th largest trading partner of the U.S. with two-way trade touching US$ 91 billion. We may rank as the world’s 160th country in terms of population size (23.57 million) but we are among the top trading partners of many developed countries,” observed Ambassador James K.J. Lee, the director general of the Taipei Economic and Cultural Office (TECO) in New York, in an interview with the American Journal of Transportation. The TECO is de facto Taiwan’s diplomatic mission in New York from where Taiwanese officials represent Taiwan’s interests and perform all the services incumbent on an embassy or consulate general.

Given the current turmoil in Hong Kong following the crackdown and restrictions imposed by China, many foreign companies and potential investors – these include a large number of Taiwanese companies operating in China and Hong Kong - are looking for alternative sites for business opportunities elsewhere.

“Thousands of Taiwanese companies in the mainland are now looking for better locations. China and Hong Kong together account for roughly 40% of Taiwan’s exports. That’s why we are trying to restructure our supply chains. Taiwan has invested more than US$ 200 billion in China. But we have a strong commitment to bilateral trade and economic ties with the U.S. and are confident that our ties will become stronger still in the years ahead,” the envoy said.

Taiwan is a member of the World Trade Organization since 2002, and of the Asia Pacific Economic Cooperation (APEC) since 1991; it has also joined the Central American Bank for Economic Integration, the Pacific Economic Cooperation Council (PECC) and the Pacific Basin Economic Council (PBEC).

The U.S., which has since years emphasized the significance of the Indo-Pacific, could realize its long-term vision for the region by entering into negotiations with Taiwan on a free trade agreement.

Taiwan Ambasssador James K. Lee Director General of TECO in New York
Taiwan Ambasssador James K. Lee Director General of TECO in New York

Taiwan, on its part, is equally keen to sign a FTA with the U.S. Both sides held virtual talks recently on the Trade and Investment Framework Agreement (TIFA). The talks were revived after former U.S. President Barack Obama left office in 2016 without closing the deal, while the U.S. trade representative Robert Lighthizer, during President Donald Trump’s term, dedicated his attention to China.

Taiwan’s chief negotiator John Deng had conveyed to the U.S. Taiwan’s interest in the FTA and hoped both sides to sign the FTA soon; the deal would be a show of U.S. support for Taiwan facing Chinese pressure.

The Biden administration has also reaffirmed its commitment supporting the democratically-governed island. A bipartisan group of 42 U.S. senators have already written to President Biden’s USTR Katherine Tao, calling on her to initiate steps to lay the groundwork for negotiating the FTA or other preliminary agreement with Taiwan. The senators emphasized that it was essential to maintain U.S. economic influence in the region and reduce Taiwan’s dependence on China with the goal of making the region free and open.

Ambassador Lee argued that the signing of a FTA would attract Taiwan companies which are leaving China “and their investments could flow to the U.S.” He pointed out that in 2020 Taiwan’s investment flow to the U.S. rose by 600% over the previous year.

Taiwan has established itself as Asia’s semi-conductor and electronics hub. “Foreign investors will tell you the advantages Taiwan offers. Taiwan is an important logistics center, a gateway to the ASEAN (Association of Southeast Asian Nations) region and China, providing a strong industrial cluster and IPR safeguards, etc.,” Lee said.

The Taiwan government’s “New Southbound policy” was ironed out to reduce the heavy dependence on trade with China by diversifying to important markets and partner countries in the south. “Taiwan wants to reduce this dependency and build ties with countries of South and Southeast Asia, Australia and New Zealand. There are 18 countries with whom Taiwan is currently trying to intensify its relations with. They include members of the ASEAN group, South Asia, Australia and New Zealand. Trade with these countries has crossed the US$ 114 billion threshold. Taiwan’s investments in these countries exceeded US$ 100 billion, with investment into Vietnam, India and Indonesia continuing to rise. “Investments into Thailand, Malaysia and the Philippines are also growing.”

Citing the mantra “Persistence creates hope”, the ambassador said that the Covid-19 pandemic had demonstrated that “Taiwan is indeed an integral part of the globe”. Taiwan’s exclusion from the multilateral organizations such as the World Health Organization (WHO) or the International Civil Aviation Organization (ICAO) had been detrimental to Taiwan’s as well as the world’s interests. Even though WHO did not allow Taiwan’s participation in the World Health Assembly (WHA), Taiwan elicited strong support from the international community. Indeed, U.S. Secretary of State, Anthony Blinken, supported Taiwan’s “meaningful participation” in the WHA as an observer. The G-7 countries had also supported Taiwan, emphasizing that Taiwan’s exclusion is “not in the interest of the world”.

“We may have diplomatic relations with only 15 countries but we got support from 40 countries,” Lee said. “Our intention is to contribute to the United Nations and to its agencies to make this world a better place to live in,” he said.

The ambassador, a seasoned diplomat with postings in several important world capitals in the past, also spoke about the importance of Taiwan’s ports, which have always been at the forefront of Taiwan’s push for international trade and sustained Taiwan’s sea trade, the lifeline of the island’s economic survival. “… all our major ports are equipped with the latest state-of-the-art technological requisites and provide important connections to world markets,” he said.

According to the Taiwan International Ports Corp. Ltd. (TIPC), the island republic’s port authority, Taiwan’s ports had a total throughput of 228,416,742 m.t. in 2020, slightly down from 230,845,469 m.t. in 2019, thanks to the slowdown caused by the pandemic, though traffic has, meanwhile, regained its robust growth characteristics in the first half of 2021.

Two-way container traffic touched 14,593,577,00 TEU in 2020 down from 15,298,290,50 TEU in 2019.

The TIPC’s core business includes shipping logistics, vessel services, free trade zone operations, cruise operations, port recreation services, etc. Major ports are Keelung, Taichung, Kaohsiung, Hualien, Taipei, Suao and Anping.

Manik Mehta
Manik Mehta

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