Taiwan to Become the Seventh Biggest Economy in Asia Pacific in 2013
In the first half of 2013, Taiwan has taken several definitive, concrete steps towards creating a role for itself as an important trade hub in South East Asia. Facing competition from the Association of South East Asian Nations (ASEAN) that already operate a free trade agreement (FTA) amongst themselves and are in the process of establishing an EU-style economic bloc, Taiwan is taking unprecedented measures to liberalise trade and boost economic growth. Real output growth slowed in 2012 to 1.3% from 4.1% in 2011 and 10.8% in 2010, thanks to depressed demand from Japan, its largest trading partner and the rest of the developed world. However, Euromonitor International is forecasting real growth in Taiwan to accelerate to 3.0% and 3.9% in 2013 and 2014 respectively as the government seeks to extend Taiwan’s role in global trade.
Forecast to be the seventh biggest economy in Asia Pacific in 2013 in US$ terms, Taiwan is in a difficult position as it is not formally recognised as a self-governing state by every country in the world, as China claims sovereignty over the country. As such, the fact that Taiwan managed to agree a FTA with New Zealand in July 2013 is a huge step for the island nation, both economically and politically. In terms of winners and losers, in 2012, Taiwan’s exports to New Zealand accounted for about 0.1% of total Taiwanese exports, while imports from New Zealand to Taiwan were worth about 0.3% of total Taiwanese exports. As such, there is scope for greater trade and economic co-operation between the two but it will be New Zealand’s agricultural exporters of products such as milk and lamb who will really benefit in economic terms.
Similarly, Taiwan is looking to agree a FTA with Singapore before the end of 2013. This will be a key agreement for Taiwan, if it goes through, as Singapore is a founding member of ASEAN and one of the most important and mature economies in Asia Pacific. Taiwan’s political wrangling with China has traditionally kept the country out of economic agreements with other countries who fear offending China, so in forging a relationship with Singapore, Taiwan is opening up the potential for further trade deals with other ASEAN members, or perhaps even ASEAN membership eventually. As with any free trade agreement, the likelihood is that trade between Taiwan and Singapore and Taiwan and New Zealand will increase substantially, reducing the amount of goods imported from other countries. However, as Singapore and New Zealand collectively only represented about 3.2% of total imports to Taiwan in 2012, there is no imminent risk for Taiwan’s
biggest importer, which was Japan in 2012.
Taiwan has also expressed an interest in joining the Trans-Pacific Partnership (TPP), a multilateral free trade agreement involving 11 of the world’s largest emerging and developed economies such as the USA, Mexico and Australia. Japan is also in negotiations to join the TPP, which is seen by many as a would-be counter-balance for China’s economic power globally. Ultimately, Taiwan’s FTA plans are more important politically than economically, at present. However, in the medium to long term the economic benefits will become clearer, and the real winners will be Taiwanese businesses and consumers as the country becomes more integrated with the global economy.