Taiwan brief

Overview

Australian Government policy towards Taiwan is based on the Joint Communiqué with the People's Republic of China (PRC) of 21 December 1972. Australia has a one-China policy. We recognise the Government of the PRC as the sole legal government of China. All Australian governments since 1972 have adhered to this policy.

Although Australia and Taiwan do not have diplomatic relations, the Australian Government strongly supports the development, on an unofficial basis, of two-way economic and cultural contacts. Australia supports Taiwan's participation in international organisations and conferences where appropriate and where a consensus on such participation can be achieved. The Government encourages Australian business to pursue trade and investment opportunities involving Taiwan and supports the development of people-to-people contacts.

Political overview

System of government

Liberalisation has transformed Taiwan's political landscape since the end of martial law in 1987. The first democratic elections for the Legislative Yuan (legislature) were held in 1992, with democratic elections for the Presidency following in 1996.

The central government consists of the Office of the President and five branches — the Executive Yuan, Legislative Yuan, Judicial Yuan, Examination Yuan and Control Yuan. The President, as Head of State, has command of the armed forces and the authority to promulgate laws under the "Constitution of the Republic of China (Taiwan)".

The Executive Yuan, the main policymaking arm of government, consists of the Premier, Vice Premier, Ministry and Commission Chairs, and Ministers without Portfolio. Its members are presidential appointees in the American style rather than elected representatives.

The 2008 Legislative Yuan elections were held under a new system that saw the number of parliamentary seats halved from 225 to 113. Members serve four-year terms.

Political developments

Presidential and parliamentary elections in Taiwan were held together on Saturday 14 January 2012. This was the fifth time Taiwan has held a popular presidential election since the first in 1996 (four year terms) and the lifting of martial law under the Kuomintang (KMT) in 1987.

Dr Ma Ying-jeou of the Kuomintang (KMT) won the presidential election with 51.6 per cent of the vote. Challengers Dr Tsai Ing-wen of the Democratic Progressive Party (DPP) received 45.6 per cent and James Soong of the People First Party (PFP) 2.8 per cent. The six per cent margin between Ma and Tsai was not as close as most analysts and polls had suggested. Soong’s result was below expectations, and his inability to draw votes way from Ma is one reason the result may not have been as close as predicted. While Ma’s vote may have been higher than predicted, it was still considerably less than the landslide 58 per cent he received to win the 2008 election.

In the parliamentary (Legislative Yuan) election, the KMT retained a majority winning 64 of the 113 seats, but it has been reduced from the 72 seats it holds in the current legislature, which will be dissolved at the end of this month. The DPP won 40 seats, up from the current 32. Three seats were secured by Soong’s PFP, the Taiwan Solidarity Union also won three, and the Non-Partisan Solidarity Union won two. The remaining seat was taken by an independent candidate.

Ma’s re-election promises a continuation of the cross-strait rapprochement seen during his first term. Speaking to international media shortly after claiming victory, Ma said that economic issues remained Taiwan’s priority in its relations with China, and it was in no rush to begin dialogue on political issues. Ma restated his Taiwan-China policy, which puts "pressing matters before less pressing ones, easily resolved issues before difficult ones and economics before politics."

The Cross-Strait issue

The Government of the PRC in Beijing claims sovereignty over Taiwan. PRC policy statements advocate peaceful reunification while refusing to rule out the use of military force if this cannot be achieved. The PRC codified its position on 14 March 2005 when it enacted its Anti-Secession Law.

On the Taiwan side, Ma Ying-jeou has undertaken to maintain the status quo in the Taiwan Strait, under the principle of "no unification, no independence and no use of force" (commonly referred to as the "three no's") and within the framework of the Republic of China (Taiwan) Constitution. Cross-Strait economic and political relations have improved considerably on Ma's watch.

Relations across the Strait have been managed via "semi-official" agencies: Taiwan's Straits Exchange Foundation (SEF) and China's Association for Relations across the Taiwan Strait (ARATS). The SEF and ARATS have concluded fifteen agreements designed to ease economic restrictions since Ma came to power. Many impediments to cross-strait trade and investment have been removed - including the establishment of direct transport and tourism links and cooperation on a range of communications, financial, judiciary and agricultural trade concerns. The Economic Cooperation Framework Agreement (ECFA) came into effect in September 2010 and promises significant progress in liberalising services and financial sectors. Articles in the ECFA cover intellectual property rights protection, trade facilitation, industrial cooperation and trade relief measures and the establishment of a Cross-Strait Economic Cooperation Committee to handle follow-up negotiations, monitor implementation and serve as a mechanism to resolve disputes arising out of the implementation and interpretation of the ECFA.

China has become Taiwan's most significant economic partner. Taiwanese export data for 2010 show two-way merchandise trade between Taiwan and China totalled US$108.6 billion (equivalent to 21.1 per cent of Taiwan's total merchandise trade). Taiwan's merchandise exports to China were US$72.6 billion (27.7 per cent of Taiwan's exports - though much of this is re-processed for export to other markets such as the United States and Europe) and imports were US$35.9 billion (14.3 per cent of Taiwan's imports). Taiwan firms invested US$14.6 billion on the mainland, amounting to 83.8 per cent of Taiwan's outward investment in 2010. Since July 2009, Taiwan has opened its economy to mainland Chinese investment including more recently some high-tech industries such as LED, semiconductor and LCD flat-panel display.

International recognition

Most governments recognise the PRC as the sole legal government of China and do not recognise Taiwan. Currently 23 states recognise Taiwan as the Republic of China (ROC)

1. Belize
2. Burkina Faso
3. Dominican Republic
4. El Salvador
5. Gambia
6. Guatemala
7. Haiti
8. Holy See
9. Honduras
10. Kiribati
11. Marshall Islands
12. Nauru
13. Nicaragua
14. Palau
15. Panama
16. Paraguay
17. Sao Tome and Principe
18. Solomon Islands
19. St Lucia
20. St Kitts and Nevis
21. St Vincent and the Grenadines
22. Swaziland
23. Tuvalu

Taiwan maintains extensive unofficial ties with countries that do not recognise it, focusing on trade, investment, culture and cooperation in non-political areas. Taiwan has more than 90 representative offices in over 50 countries, including four offices in Australia (Canberra, Brisbane, Melbourne and Sydney), which have the title "Taipei Economic and Cultural Office" (TECO).

Since 1971, when the PRC replaced the ROC in the United Nations as China, Taiwan has not been a member of any UN bodies, for which statehood is a requirement. Since 2009, Taiwan has been invited to attend the World Health Assembly as an observer.

Through a policy of "pragmatic diplomacy", Taiwan participates in a range of international and regional organisations, often under nomenclature such as "Chinese Taipei". It acceded to the World Trade Organization (WTO) as the "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" with effect from 1 January 2002. Since its admission to the Asia Pacific Economic Cooperation (APEC) in November 1991 as "Chinese Taipei", Taiwan has played a positive and constructive role in APEC activities (China and Hong Kong were also admitted at the 1991 APEC meeting).

Economic overview

Until the mid-1960s Taiwan's economy was dominated by agriculture, especially rice and sugar production. One of Asia's 'Four Tigers', the development of export-oriented manufacturing transformed Taiwan's economy and labour force into one defined by urban and industrial production. By the 1980s Taiwan began exporting its low-technology manufacturing offshore, especially to China. More recently there has been a trend for some of Taiwan's more advanced, high-tech industries to follow suit. Today Taiwan is also increasingly a tertiary economy, with services accounting for almost 70 per cent of national output and over half of all employment. Taiwan's GDP for 2011 is estimated to be US$504.6 billion in current prices, with a population of 23.2 million and estimated per capita GDP of US$21,592.

Taiwan's economy has performed well in 2011, especially following the global financial downturn of the past few years. Taiwan GDP is predicted to grow 5.2 percent in 2011, although it is likely to slow in 2012 as the global economy continues to fluctuate. Demand for Taiwan-made components for smart phones is expected to be stable in the coming months, but demand for other electrical products including televisions and computers is expected to fall. This will continue to put pressure on the Taiwanese economy, which is heavily reliant on exports (about 70 percent of GDP).

Agriculture receives government assistance including import protection and domestic support. Import protection involves high tariff rates, tariff-rate quotas and special safeguard measures. Taiwan's average tariff on agricultural products is 17.4 per cent (WTO definition). Australia has continued to engage Taiwan on issues relating to its WTO country specific quota for rice exports. Domestic support in Taiwan includes price stabilisation measures, subsidised loans and inputs, and income support for senior farmers. Government intervention continues to focus on rice.

Taiwan is relatively open to foreign investment. Foreign Direct Investment (FDI) in Taiwan totalled US$3.8 billion in 2010. The largest foreign investors in Taiwan are the United States, European Union and Japan. Taiwan has relatively few restrictions, although foreign businesses periodically raise concerns about red tape and the slow progress of deregulation in a number of sectors, including telecommunications and financial services. For the most part, foreign investment application and approval processes are straight-forward. (Taiwan ranked 33rd out of 183 economies in the World Bank's Ease of Doing Business Index 2011.)

Bilateral economic and trade relationship

Overview

Taiwan is Australia's 10th largest merchandise trading partner, accounting for 2.8 percent of Australia's total merchandise trade ($12.7 billion in 2010-11). Taiwan was Australia's 5th largest merchandise export market and 14th-largest source of merchandise imports. Australia's exports to Taiwan grew 33.0 per cent in 2010-11 to A$9.1 billion. Major exports were coal, iron ore and concentrates, aluminium, and copper. Imports from Taiwan were worth A$3.6 billion in 2010-11, a 5.8 per cent increase on the previous year. Key imports include telecommunications, refined petroleum, motorcycles and cycles, and computers. Australia's prominence in the supply of resources and primary products to Taiwan, and the significant value of Taiwan's high-technology exports to Australia, underpin the complementary nature of the trading relationship between the two economies.

Australia was Taiwan's 4th largest agriculture supplier in 2010 (after the US, Brazil and Japan) with 6.2 per cent of the total agriculture imports valued at US$815 million (A$888 million). Australia is Taiwan's second largest supplier for frozen beef (33.8 per cent of Taiwan imports) and a key supplier for sugar (raw and refined, 34.7 per cent), wheat (26.6 per cent), and dairy products (18.3 per cent).

Two-way services trade was A$797 million in 2010 (A$549 million in Australian exports to Taiwan and A$248 million in imports from Taiwan). Taiwan is a major tourism and education market for Australia. In 2010 over 87,000 Taiwanese visited Australia and there were over 8,400 Taiwanese enrolments in Australian educational institutions. Taiwan and Australia have a mutual working holiday maker arrangement, and in 2009-10 there were over 10,000 Taiwanese participants in the Working Holiday Maker program.

Australian investment in Taiwan is concentrated in services. Despite the strong trade ties between Australia and Taiwan, two-way foreign investment remains relatively low. The largest Australian investors in Taiwan are the Macquarie Group and ANZ. Macquarie has a stake in one of Taiwan's leading cable and digital TV operators - Taiwan Broadband Communications, and also has investments in wind farms and container terminals. ANZ has been in Taiwan since 1980 and is expanding its presence following its acquisition of the Royal Bank of Scotland's network in Taiwan in August 2009.

Australian trade and investment strategies

Australia holds annual Bilateral Economic Consultations (BEC) with Taiwan. The consultations cover a wide range of issues, including market access, investment, agriculture and clean energy. Both sides also hold annual Joint Energy and Minerals Trade, Investment Cooperation Consultations and an Agricultural Working Group meeting to support trade and investment in these sectors. The Australian Government supports the work of the Australia-Taiwan Business Council (ATBC) and encourages trade and investment in Taiwan. Arrangements with Taiwan to facilitate trade cover issues such as quarantine and double taxation.

For more information on export opportunities and export assistance in Taiwan, visit Austrade's Taiwan country page.

Updated January 2012