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Talking Points on AEI Meeting- “Taiwan’s Economic Future”

Talking Points on AEI Meeting- “Taiwan’s Economic Future”. June 17, 2008. Chaw-Hsia Tu Deputy Executive Director Taiwan WTO Center Chung-Hua Institution for Economic Research. 1. Economic Policies to Reinvigorate Taiwan’s Economy :.

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Talking Points on AEI Meeting- “Taiwan’s Economic Future”

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  1. Talking Points on AEI Meeting- “Taiwan’s Economic Future” June17, 2008 Chaw-Hsia Tu Deputy Executive Director Taiwan WTO Center Chung-Hua Institution for Economic Research 1

  2. Economic Policies to Reinvigorate Taiwan’s Economy : • Recreate the prosperity of middle class by reviving the economy • Deregulate oil and electricity price • Reevaluate Nuclear power electricity • Strengthen infrastructure construction projects. • Improve economic ties and relations with China • Increase government efficiency & integrity • Enhance social welfare, provide allowance for working parents and negative income tax to lower income class. • Improve education and cultural construction. 2

  3. Reached Agreement at the First Formal Talks with China in June 13. • Launch weekend cross-strait charter flights by July 4th. • Approve Chinese tourists to Taiwan, 3,000 per day. A step toward restoring transport links severed 59 years ago. 3

  4. Other Issues to Deal with Later: • Sign an agreement for avoiding double taxation • Set dispute settlement mechanism for trade and investment issues • Relief two way restrictions on investment • Set offices in each other’s territories • Approve Chinese Business-men & professionals to Taiwan • Enhance cooperation with each other on energy, fishery, labor services and financial business. 4

  5. Further Purposes of Improving Relationship with China • Pragmatically improve economic ties with neighboring trade partners to avoid trade diversion effect. • Join in the regional economic integration in Asia Pacific area. • Attract more FDI flow into Taiwan for continuing economic growth and upgrading technology. • Enhance Taiwan’s position in the global production network. 5

  6. Taiwan’s Position in the Supply-Chain • Taiwan and US have very close economic relationship since 1950s. • In the flying geese pattern of investment and technology transferring led by US & Japanese MNC, Taiwan is the center of this supply chain. • Competition & globalization restructure the supply chain to global production network by deepening the stage of division of labor in manufacturing, distribution and innovation process. • Taiwan play as the role of catalyzer in the global production network. 6

  7. Taiwan’s Semi-Conductor Industry: Major Supplier of Some IC Key Component • Foundry capacity accounts for 68% of world production in 2005. • IC design, IC packaging, IC testing account for 23.5%, 51.2% & 63% of world production in 2005. • Taiwan’s FDI in China ranked in the 6th place, but it would be the 2nd if indirect investment through tax heavens was included. 7

  8. US-Taiwan-China Triangle • Foreign-owned companies accounted for 57.6% of China’s exports and in some categories, such as IT products, the proportion was even higher. • In 2005, for example, 10 Taiwanese subsidiaries in China were ranked among the top-20 China exporters. 8

  9. Triangle Trade • If indirect exports through China were accounted as Taiwanese exports, US share in Taiwan’s export market would be close to 50%. 9

  10. Taiwan as a Stepping Stone to China • Although China has become the most important FDI destination for US, China is recognized as being in the period of transition. • Taiwan shared the value judgetment with US. • Taiwan can be a procurement control center to coordinate or monitor production in China. • Taiwan can be a product development center to develop products and conduct pilot runs. 10

  11. Taiwan as a Stepping Stone to China • Taiwan can be a technical support center to support marketing and after-sales service in China. • Taiwanese top and middle-level managers have been the key persons of US multinational operations in China. 11

  12. Prospects and Benefits for US-Taiwan FTA • Win-Win game for both sides. • Trade creation effect caused by eliminating trade barriers. • Bridge the world market of China closer to the US. • Benefit US MNCs in their global production network if they have more cooperation with Taiwanese firms. 12

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  14. FTA Strengthens the Stepping-Stone Role of Taiwan • Because un-hindered flows of human resources btw US and Taiwan, and btw Taiwan and China (brain circulation). • Taiwan as a training ground for managerial and technical personnel in China. • Taiwan as an R&D center to support multinational/Taiwan factories in China. • Taiwan as a logistic center to transship goods between US and China. 14

  15. VI. Conclusions • Taiwan is ready for normalizing trade with China and building the transport links. • Taiwan-US FTA should facilitate both goods and service trade and investment btw the two sides. • Taiwan-US FTA should strengthen vertical integration of the manufacturing industry, particularly in the high-tech sector. • FTA should facilitate the flows of human resources and capital between the two sides. 15

  16. Thank You! 16

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