A New Partnership for Old Friends

By Thomas T.S. Cheng, Director-General, Taipei Economic and Cultural Office in Chicago, which is Taiwan's representative office in the Mid-west. 

Thanks mainly to technological developments the world has inevitably turned into a global village. With the goal of strengthening mutual economic interactions, more and more countries have signed either regional or bilateral free trade agreements (FTAs) since the 1990s. The many free trade arrangements now taking shape will profoundly change the global economy in ways we can barely imagine today, and the regional and bilateral liberalization thus accomplished will open new paths for cooperation.

Taiwan and the United States enjoy one of the world's most important economic and strategic relationships. The US is now Taiwan's second largest source of imports, and Taiwan is America's eighth largest trading partner overall. In 2002, Taiwan was the 6th largest export market for the American agricultural sector, and total US exports to Taiwan reached $18.4 billion, an amount greater than US exports to most of the EU member states. In fact, that year the consumption of US goods in Taiwan averaged out to every Taiwanese man, woman, and child purchasing $850 worth of American products (while the average Chinese bought only $18). 

Currently Taiwan is the ninth largest US export market, purchasing more American merchandise than either Singapore or Chile, both partners in recently concluded FTAs with the US. Taiwan also purchases more American goods than Australia, Brazil or South Africa, some of the countries where the US is currently pursuing bilateral or regional FTAs. According to a US International Trade Commission report, if a US-Taiwan Free Trade Agreement can be reached, it could result in an expansion of American exports to Taiwan by $3.4 billion. Increased shipments to Taiwan's market would benefit significant American industries, including machinery and equipment, motor vehicles and parts, and foodstuffs.

An equally important factor is the profusion of economic ties between Taiwan and the US as reflected in the high level of mutual investment. In 2002, American firms invested about $600 million in Taiwan, while Taiwanese companies invested about $578 million in this country. Streamlined and improved foreign investment procedures developed through a free trade agreement would encourage American and Taiwanese companies to increase these two-way investment flows. This, in turn, would create new business opportunities and jobs, stimulating growth in both countries' economies.

In the past 50 years, industrial cooperation between Taiwan and the US has evolved from American businesses seeking primarily to secure sources of low-cost inputs and labor, to partnerships based on innovation-driven cooperative ventures. The relationships between American and Taiwanese IT manufacturers are nearly as close as family. Many leading American companies, such as Intel, IBM, HP and Dell, have maintained long-standing partnerships with major Taiwanese producers of computers and their components. These relationships have further evolved with the creation of R&D centers in Taiwan or cross-licensing arrangements with Taiwanese partners. This symbiotic model has not only kept the American IT industry continuously ahead in a fast-changing environment, but has also elevated Taiwan's design and R&D capabilities to a higher level of expertise, encouraging even further cooperation with their American partners.

That said, a bilateral free trade agreement between Taiwan and the US would further stimulate joint development of advanced technology and new high-tech applications, and promote more new cooperative ventures, such as mutual recognition agreements on electronic and electrical equipment and other areas of emerging technology.

For American businesspeople, moreover, a free trade agreement would take advantage of Taiwan's role as a gateway to Asia. Taiwan's unique culture, economy, geographical location, and human resources make it particularly well suited to serve as a springboard for US economic expansion in the Asia-Pacific region. The increased efficiencies made possible through the free trade agreement principles would boost the returns American businesses can expect to receive on their investments.

Many studies from both American and Taiwanese institutions have shown that a free trade agreement between the US and Taiwan holds significant benefits for US businesses, farmers, and workers. The picture cannot be more clear. The earlier an agreement is reached, the faster the mutual benefits can begin.