Updated March 19, 2019
U.S.-Taiwan Trade Relations
Overview
agreements, will put Taiwan in a good position to take
With a population of 23 million people, Taiwan has evolved
advantage of opportunities that might arise as China
to become a highly developed, dynamic, and globally
pursues new economic reforms and seeks to promote
competitive economy. In 2018, Taiwan’s gross domestic
private consumption as the main driver of its economy.
product (GDP) on a purchasing power parity (PPP) basis
was $1.25 trillion, making it the world’s 22st-largest
Economic issues were a major focus of the January 2016
economy. Its per capita GDP on a PPP basis (a common
election in Taiwan, which resulted in a major victory for the
measurement of living standards) was 19% greater than
DPP and its presidential candidate, Dr. Tsai Ing-wen. She
Japan’s and about 85% of the U.S. level. In 2018, Taiwan
proposed a “New Model for Economic Development”
was the world’s 21st-largest trading economy for goods and
focused mainly on innovation, job creation, and addressing
services. The World Economic Forum ranked Taiwan as the
widening income gaps, such as by boosting social safety net
world’s 13th-most competitive economy in 2018, and the
policies. In an effort to lessen Taiwan’s reliance on China’s
World Bank ranked Taiwan the 15th-best economy in terms
economy, Tsai has called for closer economic cooperation
of the ease of doing business. Taiwan is a major global
with the United States and has said that “there is an urgent
producer of information and communications technology
need” for Taiwan to participate in the proposed Trans-
(ICT) products (e.g., notebook PCs, tablets, smartphones,
Pacific Partnership (TPP), although the U.S. withdrawal
and computer peripherals) and semiconductors.
from the TPP in January 2017 complicated this strategy.
Taiwan’s Economic Challenges
U.S.-Taiwan Trade Relations
Taiwan’s economy is very dependent on international trade.
U.S. trade data show that in 2018, Taiwan was the United
Taiwan’s exports of goods and services in 2018 totaled
States’ 11th-largest merchandise trading partner (at $76
$393 billion (equivalent to 67% of its nominal GDP), and
billion), 15th-largest export market ($30 billion), and the
were up 5.4% over 2017 levels. Taiwan’s real GDP
13th-largest source of imports ($46 billion). From 2000 to
averaged 2.9% from 2009 to 2018, and the International
2018, U.S. exports to Taiwan grew by 24%, while imports
Monetary Fund projects that rate will average 2.1% over the
grew by 13%. In comparison, U.S. global exports and
next five years. Taiwan faces a number of economic
imports rose by 113% and 109%, respectively.
challenges, including declining competitiveness for many
industries, inability to participate in various regional trade
Figure 1. U.S.-Taiwan Merchandise Trade: 2000-2018
agreements, stagnant wages, and lack of job opportunities
$ in bil ions
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.
Many in Taiwan, especially those in the Democratic

Progressive Party (DPP), view the slowing Taiwanese
Source: U.S. International Trade Commission (USITC).
economy as a consequence of Taiwan becoming overly
U.S. data on trade with Taiwan may understate the
reliant on China for economic growth (In 2018, 41% of
Taiwan’s
importance of Taiwan to the U.S. economy because of the
merchandise exports went to mainland China and
role of global supply chains. For example, many of the
Hong Kong), and because closer cross-strait economic ties
consumer electronic products developed by Apple Inc.
have led to the relocation of many Taiwanese industries to
(such as iPads and iPhones) are assembled in China by
mainland China, which, many argue, may have contributed
Taiwanese-owned firms. Taiwan has moved a significant
to lost jobs and stagnant wages in Taiwan. Others in
level of its labor-intensive manufacturing overseas,
Taiwan, especially those in the Kuomintang (KMT),
especially to China. This is reflected in Taiwan’s data on
contend that closer economic ties with China have benefited
export orders received by its firms from abroad. That data
Taiwan’s economy and argue that boosting those ties
indicate that the percentage of export orders produced
further, such as through the implementation of new trade
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U.S.-Taiwan Trade Relations
abroad rose from 13% in 2000 to 52% in 2018; and for ICT
plan to significantly liberalize trade and investment barriers
products, this figure rose from 25% to 94%.
over time. ECFA negotiations began in January 2010 and
Taiwanese government data indicate that its manufacturing
concluded in June 2010. The ECFA identified four main
firms received export orders from the United States worth
agreements that would be negotiated: trade in goods, trade
$146 billion in 2018, which was more than three times
in services, investment, and dispute settlement.
larger than official U.S. data on its imports from Taiwan in
Following the signing of the ECFA, press reports indicated
2018. From 2000 to 2018, U.S. orders to Taiwanese firms
that China appeared to be less opposed to Taiwan seeking
increased by 199%. The United States is the largest source
trade agreements with other countries, which Taiwan often
of Taiwan’s export orders, accounting for 29% of the total
refers to as “economic cooperation agreements.” Taiwan
in 2018 (China and Hong Kong together accounted for
concluded such agreements with New Zealand and
25%). This indicates that U.S.-Taiwan commercial ties are
Singapore in 2013. China-Taiwan trade relations soured
significantly greater (and more complex) than are reflected
somewhat in the spring of 2014 when consideration of a
in standard bilateral trade data. Cumulative U.S. FDI flows
cross-straits Trade in Services Agreement (TiSA) by
to and from Taiwan through 2017 (on a historical-cost
Taiwan’s Legislative Yuan led to widespread protests (the
basis) totaled $17 billion and $22.4 billion, respectively.
“Sunflower Movement”) and forced the government to
suspend a vote on TiSA.
Figure 2. Comparison of U.S. Export Orders Placed
with Taiwanese Firms and U.S. Data on Merchandise
The DPP has sought to maintain stable economic relations
Imports from Taiwan: 2000-2018 ($billions)
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
Source: Taiwan export order data are from the Taiwan Ministry of
August 2017, the Trump Administration initiated a Section
Economic Affairs. Data on U.S. imports are from the USITC.
301 investigation of China’s policies on intellectual
property, forced technology transfer, and innovation that
Taiwan’s Dilemma on Trade
may harm the U.S. economy, and it has subsequently
Taiwan’s economy is heavily dependent on trade. Yet, its
increased tariffs on $250 billion worth of products from
share of global merchandise exports fell from a peak of
China. China has raised tariffs on $110 billion worth of
2.5% in 1993 to 1.6% in 2018. Taiwanese officials attribute
imports from the United States. These tit-for-tat retaliation
this trend in part to the proliferation of bilateral and
measures could disrupt global supply chains where
regional free trade agreements (FTAs), especially among
Taiwanese firms play a significant role, especially for
other major Asia-Pacific economies. Taiwan is currently
products assembled in China and exported to the United
not a party to these FTAs, in large part, it is believed,
States. A January 2019 business survey by the American
because China often pressures other countries to avoid
Chamber in Taipei found that 45.8% of those surveyed said
signing trade deals with Taiwan. Taiwanese officials have
they were very or somewhat confident about the economic
expressed concern that its exclusion from FTAs could hurt
prospects in Taiwan for 2019, a 10 percentage point drop
the long-term competitiveness of many Taiwanese
from last year, caused in part by the ongoing U.S.-China
industries, which could reduce trade flows and diminish
trade conflict.
economic growth. To illustrate, countries with FTAs often
reduce most or all of their tariff levels to zero. If Taiwan is
Several Members support boosting economic ties with
not an FTA member, its products will be assessed the non-
Taiwan. In March 2018, legislation was enacted (P.L. 115-
FTA (and thus higher) tariffs.
135) to encourage visits between U.S. and Taiwan officials
Taiwan has sought to boost commercial ties with China in
at all levels. H.Res. 271 included a provision encouraging
order to help its firms take advantage of the opportunities
the U.S. Trade Representative to begin negotiations for a
arising from China’s large and rapidly growing economy
U.S.-Taiwan FTA. Taiwan’s trade barriers on U.S. beef and
and to help reduce political tensions with China (including
pork products are a major source of bilateral tensions, in
the hope that by expanding economic ties, China will lessen
particular Taiwan’s zero tolerance policy on pork imports
its opposition to Taiwan’s attempts to negotiate FTAs).
containing ractopamine.
After coming into office in 2008, Taiwanese President Ma
Ying-jeou sought to expand cross-strait commercial ties by
Wayne M. Morrison, Specialist in Asian Trade and
lifting restrictions on direct trade, transportation, and postal
Finance
links. He further proposed an Economic Cooperation
Framework Agreement (ECFA) with China, described as a
IF10256
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U.S.-Taiwan Trade Relations


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https://crsreports.congress.gov | IF10256 · VERSION 10 · UPDATED

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