Study Looks At Increased Potential For EU-Taiwan FTA

In the first update of its 2008 report which was compiled before the economic crisis that year, the European Chamber of Commerce Taipei (ECCT) has issued a further study on the implications of the potential trade treaty between Taiwan and the European Union (EU).

While European exports to Asia, including Taiwan, are increasing at a faster pace than before the crisis, the ECCT notes changes over the intervening period. For example, the lack of multilateral trade liberalisation caused by the halt in the Doha Round would mean more room now for bilateral trade tariff reduction than had been expected in 2008,

In addition, the conclusion of the EU-South Korea free trade agreement, which was effective in July last year, has already begun to exert an impact on trade flows, with EU-Taiwan trade being diverted away towards one of Taiwan’s main trading competitors.

The ECCT also points out that the policy environment is also changing in that, since 2008, the political and economic climate between Taiwan and Mainland China has improved. In particular, the signing of the Economic Cooperation Framework Agreement between the two sides includes practical steps towards the removal of tariffs on trade and restrictions on investment, and is expected to improve the conditions for using Taiwan as a stepping stone into the Mainland Chinese market.

Furthermore, Taiwan has also been actively pursuing trade and investment agreements with other nations, including the United States and Japan, and the EU “could find itself one step behind its main trading partners with respect to gaining access to the Taiwanese market, and thereby making it more difficult for European firms to explore the potential for growth in Taiwan and the potential for using Taiwan as a gateway to Mainland China.”

The ECCT concludes that the changes in the trade environment increase the economic rationale for EU-Taiwan trade enhancement measures, and there is now a stronger argument for a trade agreement between the EU and Taiwan than when it made its initial assessment. “With the bleak outlook for the domestic European economy,” it adds, “the need for an EU-Taiwan agreement is more urgent now than in 2008.”

The EU’s exports of goods to Taiwan have already increased by more than 40% between 2008 and 2011, and services exports increased by 50% between 2008 and 2010. That makes Taiwan a bigger export destination for the EU than in 2008, but, it is said, trade levels would doubtlessly have been higher if a trade treaty had been in place.

According to the ECCT, European businesses are also the largest foreign investors in Taiwan with over USD30bn in foreign direct investments (FDI). However, between 2000 and 2008, EU FDI in Taiwan only rose by 57%, while more than doubling in Singapore and South Korea and even tripling to almost USD70bn in Hong Kong.

September 25, 2012

Source: Tax News