July 14, 2015
U.S.-Taiwan Trade Relations
Taiwanese-owned firms. Taiwan has moved a significant
Overview
level of its labor-intensive manufacturing overseas,
especially to China. This is reflected in Taiwan’s data on
With a population of 23 million people, Taiwan has evolved
export orders received by its firms from abroad. That data
to become a highly-developed, dynamic, and globally-
indicate that the percentage of export orders manufactured
competitive economy. In 2014, Taiwan’s gross domestic
abroad rose from 13.3% in 2000 to 52.6% in 2014; and for
product (GDP) on a purchasing power parity (PPP) basis
information and communications technology products (such
was $1.0 trillion, making it the world’s 22nd largest
as computers), this rose from 24.9% to 90.2%. Taiwanese
economy. Its per capita GDP on a PPP basis (a common
government data indicate that its manufacturing firms
measurement of living standards) was $43,540,18% greater
received export orders from the United States worth $118.5
than Japan’s and about 80% that of the United States.
billion in 2014, which was nearly three times larger than
Taiwan is the world’s 18th largest merchandise exporter (at
official U.S. data on its imports from Taiwan in 2014. This
$322 billion) and the 17th largest merchandise importer (at
indicates that U.S.-Taiwan commercial ties are significantly
$273 billion). The World Economic Forum’s 2014-2015
greater (and more complex) than are reflected in bilateral
Global Competitive Index, which assesses the
trade data.
competitiveness of 144 economies, based on factors that
determine productivity growth, ranked Taiwan 14th (the
Figure 2. Comparison of U.S. Export Orders Placed
United States ranked third).
with Taiwanese Firms and U.S. Merchandise Imports
from Taiwan: 2000-2014
U.S. trade data indicate that in 2014, Taiwan was the
$ in billions
United States’ 10th largest merchandise trading partner (at
$67.4 billion), 14th largest export market ($26.8 billion),
120
and 12th largest source of imports ($40.6 billion). The top
100
three U.S. exports to Taiwan in 2014 were semiconductors
and other electronic components, aerospace products and
80
parts, and industrial machinery. The top three U.S. imports
60
from Taiwan were semiconductors and other electronic
components, communications equipment, and computer
40
equipment. From 2005 to 2014, U.S. exports to Taiwan
20
grew by 21.8.%, compared to a 79.5% increase in total U.S.
exports, while U.S. imports from Taiwan increased by
0
16.7%, compared to a 40.4% rise in total U.S. imports.
2000
2002
2004
2006
2008
2010
2012
2014
U.S. Imports
U.S. Exports Orders to Taiwan Firms
Figure 1. U.S.-Taiwan Merchandise Trade: 2005-2014

$ in billions
Source: Taiwan export order data are from the Taiwan Ministry of
Economic Affairs. Data on U.S. imports are from the USITC.
45
40
According to Taiwanese data, in 2014, the United States
35
was Taiwan’s second largest trading partner, third largest
30
destination of its exports, and third largest source of its
25
imports. The United States is the largest source of foreign
20
direct investment (FDI) inflows into Taiwan. The total
15
stock of U.S. FDI in Taiwan through 2014 was $23 billion.
10
5
Taiwan’s Efforts to Expand its Trade Ties
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Taiwan’s economy is heavily dependent on trade. In 2014,
Taiwan’s exports of goods and services were equal to 70%
Exports
Imports
of its gross domestic product (GDP). Yet, Taiwan’s share of
Source: U.S. International Trade Commission (USITC).
global merchandise exports fell from 2.3% in 2000 to 1.6%
in 2014. Taiwanese officials attribute this trend in part to
U.S. data on trade with Taiwan may understate the
the proliferation of bilateral and regional free trade
importance of Taiwan to the U.S. economy because of the
agreements (FTAs), especially among other major Asian
role of global supply chains. For example, many of the
economies (such as South Korea). Taiwan is currently not a
consumer electronic products developed by Apple Inc.
party to these FTAs, in large part, it is believed, because
(such as iPads and iPhones) are assembled in China by
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
the TiSA on hold, cross-strait talks on a goods agreement
concern that its exclusion from FTAs could hurt the long-
were temporarily suspended. In December 2014, President
term competitiveness of many Taiwanese industries, which
Ma publicly complained that China was again attempting to
could reduce trade flows and diminish economic growth.
block Taiwan’s efforts to negotiate FTAs.
For example, countries with FTAs often reduce most or all
of their tariff levels to zero. If Taiwan is not an FTA
China is a large and rapidly growing trading partner for
member, its products will be assessed the non-FTA tariffs,
Taiwan, enhanced in part by the reduction of trade and
which could put them at a competitive disadvantage vis-à-
investment barriers since the signing of the ECFA in 2010.
vis the FTA members. Taiwan has sought to expand
In 2014, China was Taiwan’s largest trading partner, largest
commercial ties with its major trading partners and gain
destination of exports, and largest source of imports.
access to various FTAs.
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
Taiwan-China Economic Ties
exports to Hong Kong are included), while its imports from
China as a share of total imports rose from 4.4% to 17.5%.
Taiwan has increased its commercial ties with China in
The Taiwanese government puts the total level of
order to help its firms take advantage of the opportunities
Taiwanese FDI in China through 2014 at $143 billion, but
arising from China’s large and rapidly-growing economy
some analysts contend that it could be $300 billion.
and to help reduce political tensions with China (including
the hope that by expanding economic ties, China will lessen
Figure 3. Taiwan’s Trade with China as a Percent of
its opposition to Taiwan’s attempts to negotiate FTAs).
its Total Trade: 2000 and 2014 (%)
After coming into office in 2008, Taiwan President Ma
30
Ying-jeou sought to expand cross-strait commercial ties by
26.2
lifting restrictions on direct trade, transportation, and postal
25
22.2
links. He further proposed moving toward a comprehensive
20
economic cooperation agreement with China, which was
16.9
17.5
eventually named the Economic Cooperation Framework
15
Agreement (ECFA), described as a plan to significantly
10.9
10
liberalize trade and investment barriers over time. ECFA
negotiations began in January 2010 and concluded in June
4.4
5
2010. The ECFA identified four main agreements that
would be negotiated: trade in goods, trade in services,
0
Total Trade
Exports
Imports
investment, and dispute settlement. The ECFA also
included an “early harvest” agreement to eliminate tariffs
2000
2014
on various products within three years. A Cross-Strait

Source: Taiwan Mainland Affairs Council.
Bilateral Investment Protection and Promotion Agreement
was reached in 2012 and a Cross-Strait Trade in Services
Taiwan and the TPP
Agreement (TiSA) in 2013.
Taiwan has expressed interest in joining the Trans-Pacific
Following the signing of the ECFA, press reports indicated
Partnership (TPP) negotiations, which currently consist of
that China appeared to be less opposed to Taiwan seeking
the United States and 11 other countries, and has sought
trade agreements with other countries, which Taiwan often
U.S. support. During a March 2014 hearing before the
refers to as “economic cooperation agreements.” Taiwan
House Foreign Affairs Committee on U.S.-Taiwan
concluded such agreements with New Zealand and
Relations, Kin Moy, Deputy Assistant Secretary of State for
Singapore in 2013. Taiwan also signed a bilateral
East Asian and Pacific Affairs, when questioned on
investment agreement with Japan in 2011. Trade relations
Taiwan’s possible inclusion in the TPP, stated: “We
between Taiwan and China soured somewhat during the
welcome their interest. I don’t think the conversations have
spring of 2014 when consideration of the cross-straits TiSA
gone so far as to be, you know, pro or con. We're a long
agreement by Taiwan’s Legislative Yuan (LY) led to
way from that. But we welcome their interest.” U.S.-
widespread protests and forced the government to suspend a
Taiwan commercial relations have been strained in recent
vote on TiSA. Part of the opposition to the TiSA appears to
years over Taiwan’s sanitary and phytosanitary restrictions
have been generated by concerns among some groups in
on imports of U.S. agricultural products, especially beef
Taiwan that the agreement could negatively impact various
and pork. Some analysts warn that these issues could hurt
services sectors in Taiwan or that some sectors would
U.S support for Taiwan’s inclusion in the TPP until these
become dominated by Chinese state-owned firms. This
issues are resolved. Further complicating the issue are
attitude may also reflect wider concerns by some Taiwanese
concerns by some analysts that China might try to prevent
over the impact growing economic integration with China
Taiwan from joining the TPP through political pressure on
may be having on Taiwan’s economy (which many see as a
other TPP members.
double-edged sword). Taiwan’s economy has been sluggish
in recent years and a significant amount of labor-intensive
Wayne M. Morrison, wmorrison@crs.loc.gov, 7-7767
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
IF10256
Taiwan to China and other parts of Asia. After the LY put
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