July 14, 2015Updated March 19, 2019
U.S.-Taiwan Trade Relations
Overview
With a population of 23 million people, Taiwan has evolved
to become a highly- developed, dynamic, and globallycompetitiveglobally
competitive economy. In 20142018, Taiwan’s gross domestic
product (GDP) on a purchasing power parity (PPP) basis
was $1.025 trillion, making it the world’s 22nd 22st-largest
economy. Its per capita GDP on a PPP basis (a common
measurement of living standards) was $43,540,18% greater
than 19% greater than
Japan’s and about 80% that of the United States.
Taiwan is the world’s 18th largest merchandise exporter (at
$322 billion) and the 17th largest merchandise importer (at
$273 billion). The World Economic Forum’s 2014-2015
Global Competitive Index, which assesses the
competitiveness of 144 economies, based on factors that
determine productivity growth, ranked Taiwan 14th (the
United States ranked third).
U.S. trade data indicate that in 2014, Taiwan was the
United States’ 10th largest merchandise trading partner (at
$67.4 billion), 14th largest export market ($26.8 billion),
and 12th largest source of imports ($40.6 billion). The top
three U.S. exports to Taiwan in 2014 were semiconductors
and other electronic components, aerospace products and
parts, and industrial machinery. The top three U.S. imports
from Taiwan were semiconductors and other electronic
components, communications equipment, and computer
equipment. From 2005 to 2014, U.S. exports to Taiwan
grew by 21.8.%, compared to a 79.5% increase in total U.S.
exports, while U.S. imports from Taiwan increased by
16.7%, compared to a 40.4% rise in total U.S. imports.
Figure 1. U.S.-Taiwan Merchandise Trade: 2005-2014
$ in billions
85% of the U.S. level. In 2018, Taiwan
was the world’s 21st-largest trading economy for goods and
services. The World Economic Forum ranked Taiwan as the
world’s 13th-most competitive economy in 2018, and the
World Bank ranked Taiwan the 15th-best economy in terms
of the ease of doing business. Taiwan is a major global
producer of information and communications technology
(ICT) products (e.g., notebook PCs, tablets, smartphones,
and computer peripherals) and semiconductors.
agreements, will put Taiwan in a good position to take
advantage of opportunities that might arise as China
pursues new economic reforms and seeks to promote
private consumption as the main driver of its economy.
Taiwan’s Economic Challenges
Taiwan’s economy is very dependent on international trade.
Taiwan’s exports of goods and services in 2018 totaled
$393 billion (equivalent to 67% of its nominal GDP), and
were up 5.4% over 2017 levels. Taiwan’s real GDP
averaged 2.9% from 2009 to 2018, and the International
Monetary Fund projects that rate will average 2.1% over the
next five years. Taiwan faces a number of economic
challenges, including declining competitiveness for many
industries, inability to participate in various regional trade
agreements, stagnant wages, and lack of job opportunities
for some college graduates. A 2018 survey by the Importers
and Exporters Association of Taipei assessed Taiwan to
have the 17th-most competitive trading economy out 54
major countries surveyed, which was down from 9th in its
2011 survey. While unemployment is low at 3.6% (January
2019), the rate for those aged 20-24 is 11.7%. The
Taiwanese government estimates that in 2016, 728,000
Taiwanese citizens were employed overseas, of which
407,000 (56%) worked in China. The Taiwanese
government has raised concerns over China’s attempts to
expand incentives for Taiwanese people to move to China
for work, investment, and study.
U.S.-Taiwan Trade Relations
U.S. trade data show that in 2018, Taiwan was the United
States’ 11th-largest merchandise trading partner (at $76
billion), 15th-largest export market ($30 billion), and the
13th-largest source of imports ($46 billion). From 2000 to
2018, U.S. exports to Taiwan grew by 24%, while imports
grew by 13%. In comparison, U.S. global exports and
imports rose by 113% and 109%, respectively.
Many in Taiwan, especially those in the Democratic
Progressive Party (DPP), view the slowing Taiwanese
economy as a consequence of Taiwan becoming overly
reliant on China for economic growth (In 2018, 41% of
Taiwan’s merchandise exports went to mainland China and
Hong Kong), and because closer cross-strait economic ties
have led to the relocation of many Taiwanese industries to
mainland China, which, many argue, may have contributed
to lost jobs and stagnant wages in Taiwan. Others in
Taiwan, especially those in the Kuomintang (KMT),
contend that closer economic ties with China have benefited
Taiwan’s economy and argue that boosting those ties
further, such as through the implementation of new trade
Economic issues were a major focus of the January 2016
election in Taiwan, which resulted in a major victory for the
DPP and its presidential candidate, Dr. Tsai Ing-wen. She
proposed a “New Model for Economic Development”
focused mainly on innovation, job creation, and addressing
widening income gaps, such as by boosting social safety net
policies. In an effort to lessen Taiwan’s reliance on China’s
economy, Tsai has called for closer economic cooperation
with the United States and has said that “there is an urgent
need” for Taiwan to participate in the proposed TransPacific Partnership (TPP), although the U.S. withdrawal
from the TPP in January 2017 complicated this strategy.
Figure 1. U.S.-Taiwan Merchandise Trade: 2000-2018
$ in billions
Source: U.S. International Trade Commission (USITC).
U.S. data on trade with Taiwan may understate the
importance of Taiwan to the U.S. economy because of the
role of global supply chains. For example, many of the
consumer electronic products developed by Apple Inc.
(such as iPads and iPhones) are assembled in China by
Taiwanese-owned firms. Taiwan has moved a significant
level of its labor-intensive manufacturing overseas,
especially to China. This is reflected in Taiwan’s data on
export orders received by its firms from abroad. That data
indicate that the percentage of export orders manufactured
produced
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U.S.-Taiwan Trade Relations
abroad rose from 13.3% in 2000 to 52.6% in 2014; and for
information and communications technology products (such
as computers), this rose from 24.9% to 90.2%. Taiwanese
2018; and for ICT
products, this figure rose from 25% to 94%.
Taiwanese government data indicate that its manufacturing firms
firms received export orders from the United States worth $118.5
$146 billion in 20142018, which was nearlymore than three times
larger than
official U.S. data on its imports from Taiwan in 2014. This
indicates that U.S.-Taiwan commercial ties are significantly
greater (and more complex) than are reflected in bilateral
trade data.
Figure 2. Comparison of U.S. Export Orders Placed
with Taiwanese Firms and U.S. Merchandise Imports
from Taiwan: 2000-2014
$ in billions
120
100
80
60
40
20
0
2000
2002
2004
U.S. Imports
2006
2008
2010
2012
2014
U.S. Exports Orders to Taiwan Firms
Source: Taiwan export order data are from the Taiwan Ministry of
Economic Affairs. Data on U.S. imports are from the USITC.
45
According to Taiwanese data, in 2014, the United States
was Taiwan’s second largest trading partner, third largest
destination of its exports, and third largest source of its
imports. The United States is the largest source of foreign
direct investment (FDI) inflows into Taiwan. The total
stock of U.S. FDI in Taiwan through 2014 was $23 billion.
40
35
30
25
20
15
10
Taiwan’s Efforts to Expand its Trade Ties
5
0
2005
2006
2007
2008
2009
Exports
2010
2011
2012
2013
2014
Imports
Source: U.S. International Trade Commission (USITC).
U.S. data on trade with Taiwan may understate the
importance of Taiwan to the U.S. economy because of the
role of global supply chains. For example, many of the
consumer electronic products developed by Apple Inc.
(such as iPads and iPhones) are assembled in China by
Taiwan’s economy is heavily dependent on trade. In 2014,
Taiwan’s exports of goods and services were equal to 70%
of its gross domestic product (GDP). Yet, Taiwan’s share of
global merchandise exports fell from 2.3% in 2000 to 1.6%
in 2014. Taiwanese officials attribute this trend in part to
the proliferation of bilateral and regional free trade
agreements (FTAs), especially among other major Asian
economies (such as South Korea). Taiwan is currently not a
party to these FTAs, in large part, it is believed, because
China often pressures other countries to avoid signing trade
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U.S.-Taiwan Trade Relations
deals with Taiwan. Taiwanese officials have expressed
concern that its exclusion from FTAs could hurt the longterm competitiveness of many Taiwanese industries, which
could reduce trade flows and diminish economic growth.
For example, countries with FTAs often reduce most or all
of their tariff levels to zero. If Taiwan is not an FTA
member, its products will be assessed the non-FTA tariffs,
which could put them at a competitive disadvantage vis-àvis the FTA members. Taiwan has sought to expand
commercial ties with its major trading partners and gain
access to various FTAs.
Taiwan-China Economic Ties
Taiwan has increased its commercial ties with China in
order to help its firms take advantage of the opportunities
arising from China’s large and rapidly- official U.S. data on its imports from Taiwan in
2018. From 2000 to 2018, U.S. orders to Taiwanese firms
increased by 199%. The United States is the largest source
of Taiwan’s export orders, accounting for 29% of the total
in 2018 (China and Hong Kong together accounted for
25%). This indicates that U.S.-Taiwan commercial ties are
significantly greater (and more complex) than are reflected
in standard bilateral trade data. Cumulative U.S. FDI flows
to and from Taiwan through 2017 (on a historical-cost
basis) totaled $17 billion and $22.4 billion, respectively.
Figure 2. Comparison of U.S. Export Orders Placed
with Taiwanese Firms and U.S. Data on Merchandise
Imports from Taiwan: 2000-2018 ($billions)
Source: Taiwan export order data are from the Taiwan Ministry of
Economic Affairs. Data on U.S. imports are from the USITC.
Taiwan’s Dilemma on Trade
Taiwan’s economy is heavily dependent on trade. Yet, its
share of global merchandise exports fell from a peak of
2.5% in 1993 to 1.6% in 2018. Taiwanese officials attribute
this trend in part to the proliferation of bilateral and
regional free trade agreements (FTAs), especially among
other major Asia-Pacific economies. Taiwan is currently
not a party to these FTAs, in large part, it is believed,
because China often pressures other countries to avoid
signing trade deals with Taiwan. Taiwanese officials have
expressed concern that its exclusion from FTAs could hurt
the long-term competitiveness of many Taiwanese
industries, which could reduce trade flows and diminish
economic growth. To illustrate, countries with FTAs often
reduce most or all of their tariff levels to zero. If Taiwan is
not an FTA member, its products will be assessed the nonFTA (and thus higher) tariffs.
Taiwan has sought to boost commercial ties with China in
order to help its firms take advantage of the opportunities
arising from China’s large and rapidly growing economy
and to help reduce political tensions with China (including
the hope that by expanding economic ties, China will lessen
its opposition to Taiwan’s attempts to negotiate FTAs).
After coming into office in 2008, TaiwanTaiwanese President Ma
Ying-jeou sought to expand cross-strait commercial ties by
lifting restrictions on direct trade, transportation, and postal
links. He further proposed moving toward a comprehensive
economic cooperation agreement with China, which was
eventually named thean Economic Cooperation Framework
Framework Agreement (ECFA) with China, described as a
plan to significantly
liberalize trade and investment barriers
over time. ECFA
negotiations began in January 2010 and
concluded in June
2010. The ECFA identified four main
agreements that
would be negotiated: trade in goods, trade
in services,
investment, and dispute settlement. The ECFA also
included an “early harvest” agreement to eliminate tariffs
on various products within three years. A Cross-Strait
Bilateral Investment Protection and Promotion Agreement
was reached in 2012 and a Cross-Strait Trade in Services
Agreement (TiSA) in 2013. investment, and dispute settlement.
Following the signing of the ECFA, press reports indicated
that China appeared to be less opposed to Taiwan seeking
trade agreements with other countries, which Taiwan often
refers to as “economic cooperation agreements.” Taiwan
concluded such agreements with New Zealand and
Singapore in 2013. Taiwan also signed a bilateral
investment agreement with Japan in 2011. Trade relations
between Taiwan and China soured somewhat during the
China-Taiwan trade relations soured
somewhat in the spring of 2014 when consideration of the a
cross-straits TiSA
agreement by Trade in Services Agreement (TiSA) by
Taiwan’s Legislative Yuan (LY) led to
widespread protests (the
“Sunflower Movement”) and forced the government to
suspend a
vote on TiSA. Part of the opposition to the TiSA appears to
have been generated by concerns among some groups in
Taiwan that the agreement could negatively impact various
services sectors in Taiwan or that some sectors would
become dominated by Chinese state-owned firms. This
attitude may also reflect wider concerns by some Taiwanese
over the impact growing economic integration with China
may be having on Taiwan’s economy (which many see as a
double-edged sword). Taiwan’s economy has been sluggish
in recent years and a significant amount of labor-intensive
manufacturing has moved to China. In addition, wages in
Taiwan have been relatively flat, resulting in a growing
brain drain of workers in various technology sectors from
Taiwan to China and other parts of Asia. After the LY put
the TiSA on hold, cross-strait talks on a goods agreement
were temporarily suspended. In December 2014, President
Ma publicly complained that China was again attempting to
block Taiwan’s efforts to negotiate FTAs.
China is a large and rapidly growing trading partner for
Taiwan, enhanced in part by the reduction of trade and
investment barriers since the signing of the ECFA in 2010.
In 2014, China was Taiwan’s largest trading partner, largest
destination of exports, and largest source of imports.
Taiwan’s exports to China as a percent of its total exports
increased from 16.9% in 1990 to 26.2% in 2014 (39.8% if
exports to Hong Kong are included), while its imports from
China as a share of total imports rose from 4.4% to 17.5%.
The Taiwanese government puts the total level of
Taiwanese FDI in China through 2014 at $143 billion, but
some analysts contend that it could be $300 billion.
Figure 3. Taiwan’s Trade with China as a Percent of
its Total Trade: 2000 and 2014 (%)
30
26.2
25
22.2
20
16.9
17.5
15
10.9
10
4.4
5
0
Total Trade
Exports
2000
Imports
2014
Source: Taiwan Mainland Affairs Council.
Taiwan and the TPP
Taiwan has expressed interest in joining the Trans-Pacific
Partnership (TPP) negotiations, which currently consist of
the United States and 11 other countries, and has sought
U.S. support. During a March 2014 hearing before the
House Foreign Affairs Committee on U.S.-Taiwan
Relations, Kin Moy, Deputy Assistant Secretary of State for
East Asian and Pacific Affairs, when questioned on
Taiwan’s possible inclusion in the TPP, stated: “We
welcome their interest. I don’t think the conversations have
gone so far as to be, you know, pro or con. We're a long
way from that. But we welcome their interest.” U.S.Taiwan commercial relations have been strained in recent
years over Taiwan’s sanitary and phytosanitary restrictions
on imports of U.S. agricultural products, especially beef
and pork. Some analysts warn that these issues could hurt
U.S support for Taiwan’s inclusion in the TPP until these
issues are resolved. Further complicating the issue are
concerns by some analysts that China might try to prevent
Taiwan from joining the TPP through political pressure on
other TPP members.
Wayne M. Morrison, wmorrison@crs.loc.gov, 7-7767
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IF10256 vote on TiSA.
The DPP has sought to maintain stable economic relations
with China, but has not indicated whether it plans to
reconsider the TISA agreement or purse a new goods
agreement under ECFA. President Tsai has not explicitly
reaffirmed Taiwan’s acceptance of the “1992 consensus”
(where the two sides essentially agreed that there was one
China but two interpretations), and this appears to have
angered Chinese authorities, enough so that they appear to
have imposed restrictions on mainland tourists visiting
Taiwan (the number of such visitors fell by 28% in 2017).
Recent U.S. Trade action and Taiwan
The Trump Administration has pursued a number of trade
policies that could hurt Taiwan’s economy. In March 2018,
President imposed increased tariffs on U.S. imports of steel
(by 25%) and aluminum (10%) under Section 232. In
August 2017, the Trump Administration initiated a Section
301 investigation of China’s policies on intellectual
property, forced technology transfer, and innovation that
may harm the U.S. economy, and it has subsequently
increased tariffs on $250 billion worth of products from
China. China has raised tariffs on $110 billion worth of
imports from the United States. These tit-for-tat retaliation
measures could disrupt global supply chains where
Taiwanese firms play a significant role, especially for
products assembled in China and exported to the United
States. A January 2019 business survey by the American
Chamber in Taipei found that 45.8% of those surveyed said
they were very or somewhat confident about the economic
prospects in Taiwan for 2019, a 10 percentage point drop
from last year, caused in part by the ongoing U.S.-China
trade conflict.
Several Members support boosting economic ties with
Taiwan. In March 2018, legislation was enacted (P.L. 115135) to encourage visits between U.S. and Taiwan officials
at all levels. H.Res. 271 included a provision encouraging
the U.S. Trade Representative to begin negotiations for a
U.S.-Taiwan FTA. Taiwan’s trade barriers on U.S. beef and
pork products are a major source of bilateral tensions, in
particular Taiwan’s zero tolerance policy on pork imports
containing ractopamine.
Wayne M. Morrison, Specialist in Asian Trade and
Finance
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IF10256
U.S.-Taiwan Trade Relations
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