A Taiwan – EU Economic Cooperation Agreement would unlock dynamic gains

by N. Peter Kramer

A study by the Brussels based European Institute for Asian Studies (EIAS) shows that an Economic Cooperation Agreement (ECA) between the EU and Taiwan would generate significantly more opportunities for EU industry and business, and would also see an increase in the flow of foreign direct investment (FDI) from two sides. In May 2011 the European Parliament adopted a resolution supporting an EU-Taiwan ECA but the European Commission is blocking it.

Taiwan’s economic and trade performance has bounced back dramatically since the 2008 global financial crisis. But according to the statistics, Taiwan trade has surpassed its pre-crisis level! Global trade volume in 2010 amounted to €362 billion, an increase of 41.3% compared to 2009. Taiwan’s total exports during 2010 accounted to €189 billion, a growth of 37% and its total imports reached €173 billion expanding 47% compared to 2009. GDP growth in 2010 was 10% year-on-year. The EU is Taiwan’s 4th largest trading partner accounting for nearly 11 % of total trade and the largest source of FDI. Import of goods from Taiwan by the EU stood at €24 billion, while exports to Taiwan amounted to €15 billion.

European business collectively constitutes the largest group of foreign investors in Taiwan witch a cumulative value of €22billion. The joint venture model many European firms have adopted has very successfully combined European expertise with Taiwan’s local knowledge and talent.

Taiwan is not only a knowledge- and innovation-based economy; it is also one of the few liberal democracies in East Asia. Its policies regarding human rights, democracy, labour and environmental standards are based on the same values as in the EU, in contrast to the situations prevailing in many other Asian countries.

An ECA with Taiwan would further enhance opportunities for EU industries in a critical growth market. According to studies conducted by the Chung-Hua Institution for Economic Research, a leading Taiwanese research center, a Taiwan-EU ECA would boost Taiwan’s real GDP by nearly €1 billion and the EU’s real GDP by €2 billion annually. These impressive figures would be bolstered by the trade synergy created by ECA and the Economic Cooperation Framework Agreement (ECFA) signed in 2010 by Taiwan and mainland China! Signing of an ECA will allow EU investors to build on expanding cross-strait trade and regional ties. The ECFA provides the basis for a stable environment for expanding the EU’s commercial presence across Taiwan, mainland China and the Asia-Pacific. The ECFA will also allow EU companies in Taiwan to safely extend their reach into mainland China. European companies face increasing difficulties in doing business in mainland China in terms of protecting proprietary information, experiencing standards discrimination and accessing services markets. Furthermore, European businesses in mainland China often encounter cultural and administrative barriers. In contrast, Taiwan, that shares a common culture with mainland China, has already achieved a large degree of business success there. With nearly seamless access to mainland China under the ECFA, Taiwan can serve as a bridge for EU companies.

The European Chamber of Commerce in Taipei (ECCT) wrote in September 2010, after the signing of the ECFA: ‘A trade deal of Taiwan with the EU – Not how, but when is the question!’. Also the influential Brussels based European Centre for International Political Economy (ECIPE) said at the same time, that the agreement between mainland China and Taiwan could pave the way for a similar deal with the EU. And Taiwan’s envoy to the EU, David Y. L. Lin, a former Deputy Minister of Foreign Affairs, has even gone so far to say that signing a trade agreement with the EU is of great importance and called for substantive discussions to begin by looking at some key sectors first to get talks moving. It is waiting for the European Commission which recently has planned to initiate negations with Singapore, Vietnam, Malaysia and India…