Taiwan is a valuable and trustworthy partner for the EU

  • 2024-03-13
  • Ambassador Andrew H.C. Lee, Representative of Taipei Mission in the Republic of Latvia

Taiwan holds an important position in the global economy. It is a top player in the world’s information and communications technology industry as well as a major supplier of goods across the industrial spectrum. 

In 2023, Taiwan’s international trade value amounted to US$ 784.35 billion, with surplus soaring 56.9% to hit an all-time high of US$80.56 billion. This reflects the success of the government’s various policies and initiatives on investment promotion, enhancing local supply chain resilience and boosting the overall economy.  Despite uncertainties such as the ongoing Russia-Ukraine war and persistently high inflation, the expansion of artificial intelligence, cloud computing and telematics continues to sustain Taiwan’s exports in the first quarter of 2024.

Taiwan’s Strength and Resilience as A Trading Power

Taiwan was one of the few countries to be able to maintain strong economic performance during the global spread of the Covid-19 pandemic in 2020 and 2021. Taiwan’s economic growth even strengthened from an average of 2.8% per year in 2016-2018 to 4.5% in 2019-2021. It was supported by the sharp rise in production and exports in the manufacturing sector, by accommodative monetary and fiscal policies, and by the continued increase in the investment rate. The Island’s high-tech industry has benefited greatly from its rising global demand and strengthened its leading position in the production of highly sophisticated microchips.

According to the World Trade Organization, Taiwan was the 17th largest exporter and importer of merchandise in 2022. It was the 21st largest economy and one of the largest holders of foreign exchange reserves hitting a new record high of US$ 570.6 billion in December 2023. 

Based on the statistics released by the International Monetary Fund, Taiwan’s 2023 GDP was US$756 billion and it had GDP per capita of US$32,358. In terms of nominal GDP, Taiwan ranks close to Poland and Switzerland, while its GDP per capita expressed as purchasing power parity was the 13th in the world in 2022, similar to that of South Korea. 

Economic Freedom and Innovation Power

Annual surveys of the world’s economies, including those conducted by the Swiss business school International Institute for Management Development (IMD) and U.S.-based Business Environment Risk Intelligence (BERI) have ranked Taiwan among the top nations year after year with respect to national competitiveness, long-term growth and technological development.

Taiwan was ranked fourth out of 184 countries in the “2024 Index of Economic Freedom” released in late February by the U.S. think tank The Heritage Foundation, while being placed fourth among 50 major economies globally in the latest “Profit Opportunity Recommendation” report issued by BERI, trailing Switzerland, Norway and Singapore.  In the “IMD World Competitiveness Yearbook 2023”, Taiwan ranked 6th among the 64 economies assessed, and the 9th most digitally competitive country in the world. 

According to the London-based Economist Intelligence Unit (EIU), Taiwan remains top in Asia and 10th globally among the 167 countries and territories ranked in the “Democracy Index 2023.” For personal freedom and economic freedom, it ranked 12th among 165 jurisdictions around the world and first in Asia in the “2023 Human Freedom Index”, compiled by the U.S.-based Cato Institute and Canada-based Frasier Institute. 

The top ranking enjoyed by Taiwan in multiple international surveys on personal freedom, economic freedom, competitiveness and innovation perfectly explains why it can be a thriving hub for international trade, a critical global supply chain partner, as well as a popular destination for foreign direct investment (FDI), especially from EU, the U.S. and Japan. Foreign firms have invested more than US$77.36 billion in Taiwan since 2016, while the government’s three major homebound investment promotion initiatives have brought in US$65.63 billion since then. 

Taiwan’s Critical Role in Global Supply Chains

Taiwan also plays a crucial role in supplying the world with advanced semiconductor chips. These microchips are the lifeblood of the modern economy, and used in every electronic device and system from iPhones and computers to cars, medical gadgets and military equipment. They are also vital in the rapidly growing arena of artificial intelligence, providing the computing ‘brainpower’ for data processing and mathematical calculations.

Taiwan produces almost two-thirds of the world’s semiconductors annually, and over 90 percent of the most advanced ones. Taiwan Semiconductor Manufacturing Company (TSMC) is the largest operator and manufacturer of these foundries in the world.  It is the world’s primary source of advanced semiconductors used by companies including Apple, AMD, Nvidia, and Qualcomm. If the flow of chips from Taiwan was disrupted, it would have far-reaching consequences for the global economy.

Taiwan’s economic performance and dominance in semiconductor industry chiefly supported by the foundation of its industrial strengths, including skill-based talents, proactive policies, innovation ecosystem, and friendly industrial cluster.  This enables Taiwan to quickly respond to market changes and challenges and provide the world with innovative high-quality products.

Trade Accords with Like-minded Partners

In July 2013, Taiwan signed an economic cooperation agreement with New Zealsnd, its first with a member of the Organization for Economic Cooperation and Development.  An economic partnership accord was also inked with Singapore in November the same year, making Taiwan’s first such pact with a trading partner in Southeast Asia.  Both agreements exceed WTO commitments. 

Taiwan and the U.S. held the third Taiwan-U.S. Economic Prosperity Partnership Dialogue in November 2022 and signed the first agreement under Taiwan-U.S. Initiative on 21st-Century Trade in June 2023.  Taiwan has also signed economic cooperation agreements with Paraguay, the Kingdom is Eswatini and Belize in 2017, 2018, and 2020 respectively.  These agreements are aimed at strengthening economic, investment, technological and trade ties while enhancing friendship with counterpart countries. 

Flagship Development Approaches

In 2016, the Taiwan government launched a new industrial development policy to expedite transformation and upgrades. This policy was the “Five Plus Two Industrial Innovation Plan “and became the key factor in driving industrial growth in next-generation smart machinery, Asian Silicon Valley, biotech & pharmaceuticals, green energy, national defense, new agriculture and circular economy.

In 2020, building on previous policies, “Six Core Strategic Industries” were identified to link the “Investing in Taiwan’s Three Major Plans” of 2019, namely information and digital, cybersecurity, precision health, national defense and strategy, green and renewable energy, and strategic stockpile industries.  These flagship policies have greatly enhanced Taiwan’s overall industrial capacity and resilience, and create an internationally friendly investment environment for sector transformation and upgrades.

The government is also promoting the “Forward-looking Infrastructure Development Program” to meet national infrastructure needs over the next 30 years.  This program contains eight key elements, including railway system, digital infrastructure, aquatic environment, food safety, green energy, urban-rural development, boosting birthrate and childcare facilities, and nurturing talent and employment.  As it works to advance innovative industries, the government is committed to protecting the environment.  With this in mind, the new economic model seeks to fully integrate industrial renovation, national land-use planning and regional growth strategies to foster sustainable development while promoting the use of green energy resources.

To respond to the challenges of the post-pandemic global economy, in 2023 the government passed the “Special Act for Enhancing Post-Pandemic Economic and Social Resilience and National Sharing Economy Achievement” with a budget of US$125 billion, which will help reduce financial burden, stabilize consumer prices, restructure the industrial sector and boost economic momentum.

Under this approach, the government aims to raise wage levels and enhance regional development while mitigating the economic impact of the COVID-19 pandemic and the prolonged U.S.-China trade war.  Measures are expected to improve industrial competitiveness and further bolster Taiwan’s economy. 

Taiwan-EU Partnership

The EU is Taiwan’s fourth largest trading partner and the largest source of foreign direct investment in Taiwan, while Taiwan being the EU’s 14th biggest trading partner, with total trade reaching US$ 83.7 billion in 2023. At the same time, cumulative direct investment from EU firms in Taiwan have exceeded US$57 billion as of 2023.

Taiwan-EU bilateral trade relations is vital to the green and digital transition, as Taiwan is a leading producer of high-tech goods, in particular semiconductors and electronic products.  Taiwanese high-tech companies are also making major inroads into Europe.  One of the most noticeable examples is that TSMC approved a joint venture of investing 3.8 billion euros to build a semiconductor fab in Dresden, Germany in August 2023.  TSMC's presence in Germany will not only enable the company to cultivate closer relationships with its European customers, it will also help build an advanced semiconductor industry cluster and strengthen the supply chain connectivity in Europe.  Taiwan and the Czech Republic have also fostered further opportunities for cooperation in the auto industry, precision machinery, and high-end laser equipment.

The Taiwan Strait is home to the busiest shipping lane in the world, densely filled with cargo ships and cruisers. With over 40 percent of its trade passing through the Taiwan Strait, in September 2021 the EU anchored Taiwan at the heart of its strategy for the Indo-Pacific.  In the past three years, European Parliament’s resolutions, and statements by the European Commission, the Council and the EU High Representative continue to reveal, the EU institutions see Taiwan as a vibrant democracy, reliable partner, and a critical player in global supply chains.  The path to supply chain resilience and reduced dependencies proclaimed by the EU can only be achieved by working with like-minded democracies, and Taiwan is an essential building block of this strategy. 

In December 2023, the European Parliament unanimously passed a resolution on EU-Taiwan trade and investment relations during a plenary session.  The resolution emphasizes that Taiwan is crucial for the EU and global supply chains and sees opportunities for cooperation against economic coercion and for economic security.  It calls on the EU to sign formal bilateral economic and trade agreements with Taiwan, such as a resilient supply chain agreement and a bilateral investment agreement, and calls for enhanced cooperation on digital trade and cyber resolutions. 

Huge Potential for Cooperation between Taiwan and EU

Against the backdrop of the geopolitical confrontation between the United States and China, the continued enhancement in areas of economic cooperation, trade and investment, high-tech industries, and supply chains alliance between Taiwan and the EU has become even more important and urgent.  In addition to Taiwan-EU growing partnership in renewable energy, major international firms including ASML, Merck, and Air Liquide have all continued to invest in Taiwan. These investments represent significant milestones in the growth of Taiwan-EU bilateral trade and they reflect Europe's increasing recognition of Taiwan's key position in an increasingly dynamic geopolitical landscape and international supply chains.

Taiwan and Europe are sharing a commitment to building more resilient supply chains capable of withstanding uncertainties and disruptions.

The COVID-19 pandemic, Russia's invasion of Ukraine, and climate change are reminders of how crucial international cooperation is to the maintenance of stability in the global value chains as well as in the broader economy.  Taiwan has a critical role to play, a responsibility to shoulder in the international efforts and ongoing fights against the authoritarian regimes’ aggressive stance and ambitious expansion.

Home to a well-established semiconductor ecosystem and a robust tech powerhouse, Taiwan is where over half of the world's semiconductors, and nearly all of the most advanced ones, are produced.  AI, 5G, green technology, and high-performance computing – all areas addressed in the EU's Digital Decade policy – require stable chip supply.  With the European Chips Act, the EU has taken a meaningful step toward supply security and enhanced resilience in this sector. 

As a reliable and trustworthy partner with a proven track record, sharing the values of freedom, democracy, respect for human rights and the rule of law, Taiwan is fully committed to working with the EU and its member states to enhance cooperation in strategic sectors including digital economy, green energy, post-pandemic economic recovery, supply chain restructuring, and reconstruction of Ukraine.