Australia has a substantial relationship with Taiwan including trade and investment, education, tourism and people-to-people ties.
In 1949, following a period of civil war and conflict with Japan in WWII, the Chinese Communist Party (CCP) established the People’s Republic of China (PRC), with Beijing as its capital. The Nationalist forces under Chiang Kai-shek retreated to Taiwan, relocating the capital of the Republic of China (ROC) to Taipei. Under the Constitution of the ROC, the authorities in Taipei still claim to be the legitimate government of the whole of China. The Australian Government continued to recognise Taipei until the establishment of diplomatic relations with the PRC in 1972. Australia’s Joint Communiqué with the PRC recognised the Government of the PRC as China’s sole legal government, and acknowledged the position of the PRC that Taiwan was a province of the PRC.
The terms of our Joint Communiqué dictate the fundamental basis of Australia’s one China policy – the Australian Government does not recognise the ROC as a sovereign state and does not regard the authorities in Taiwan as having the status of a national government. Dealings between Australian government officials and Taiwan, therefore, take place unofficially. For example, Australia’s representative office in Taiwan does not have diplomatic status nor do Taiwan’s representative offices in Australia, which have the title “Taipei Economic and Cultural Office” (TECO).
The Australian Government strongly supports the development, on an unofficial basis, of two-way economic and cultural contacts. Two-way visits of a range of government officials take place each year. Australia supports Taiwan’s participation in international organisations and conferences where appropriate. The Government encourages Australian business as well as state, territory and city governments, to pursue trade and investment opportunities involving Taiwan and supports the development of people-to-people contacts.
Education and Tourism
Taiwan and Australia share a wide range of people-to-people links developed through business and tourism-related travel, academic exchanges, and Australia’s Working Holiday Maker Scheme. Annually, more than 20,000 young people from Taiwan come to Australia under the Working Holidaymaker Scheme – the fifth highest number among others.
Tourism, business, and study-related travel are increasingly important to Australia. There were 202,800 short-term visitor arrivals from Taiwan in 2018, up from 179,946 in 2017. In 2018, 18,745 students from Taiwan enrolled to study in Australia, up from 16,673 enrolments in 2017.
Australia’s New Colombo Plan is an initiative to encourage young Australians to study and undertake work-based experiences across the Indo-Pacific region. Since 2015, the program has funded more than 450 Australian undergraduate students to study and undertake internships in Taiwan. The 2019 New Colombo Plan Mobility Project provided 167 students with opportunities for study and work-based experiences in Taiwan. The New Colombo Plan 2019 Scholarships have awarded seven scholars longer-term study and internships in Taiwan. These experiences will develop the next generation’s academic, business and cultural links between Australia and Taiwan.
Cultural and creative engagement with Taiwan is an important aspect of our shared people-to-people links. In 2019, the theme ‘Sharing Our Treasures, Creating Our Future’ underpinned cultural engagement with Taiwan and Australia. Two major exhibitions framed this theme: ‘Heaven and Earth’- the first National Palace Museum Exhibition to be staged at the Art Gallery of NSW from February to May 2019, and the National Museum of Australia’s ‘Old Masters’ exhibition, on display at the National Taiwan Museum, Taipei from October 2019 to February 2020.
Since 1996, University of Melbourne Asialink Arts Creative Exchanges have facilitated exchanges of Taiwanese and Australian artists. A number of Australian performers and artists have also toured Taiwan, including Australian Indigenous band B2M in November 2017 and the Sydney Dance Company in November 2018.
Trade and investment
Taiwan was Australia's sixth-largest merchandise export market and 16th-largest source of merchandise imports in 2018. Australia's merchandise exports to Taiwan in 2018 were worth A$10.6 billion, up by 19 per cent year-on-year. Major exports were coal, iron ore, natural gas and copper. Australia continued to be a major exporter of agricultural products to Taiwan, the most important items being meat, wheat and dairy. Australian food and lifestyle products are increasingly popular with health supplements, food and beverages performing well with health conscious consumers in Taiwan. Merchandise imports from Taiwan were worth A$5 billion in 2018. Key imports include telecommunication equipment and parts, refined petroleum, computers, and motorcycles and bicycles. 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.
In 2018, two-way services trade totalled A$1.98 billion (A$1.563 billion in Australian exports to Taiwan and A$417 million in imports from Taiwan). Taiwan is a major tourism and education market for Australia, and Taiwan and Australia have a popular mutual working holidaymaker arrangement.
Two-way foreign investment is showing signs of growth, albeit from a low base. In 2018, Taiwan investment in Australia was A$9.6 billion. There have been a number of significant announcements of Taiwanese investments, including in Australian resources projects and the banking sector. Taiwan’s Taishin Bank opened its branch in Brisbane in November 2017, followed by the government-affiliated Bank of Taiwan opening its branch in Sydney in February 2018. In April 2019, Australia’s Fortescue Metals Group-led Iron Bridge project (in which Formosa Steel has made Taiwan’s largest single investment in Australia worth A$1.2 billion) gained final investment decision from project partners. In 2018, Australian investment in Taiwan stood at A$10.2 billion. In December 2018, Macquarie realised Australia’s largest investment into Taiwan beginning development of Taiwan’s first two offshore wind projects.
Australia holds annual Bilateral Economic Consultations with Taiwan. The government-led consultations cover a wide range of issues, including market access, investment and agriculture. Both sides also hold Joint Energy and Minerals, Trade and Investment Cooperation Consultations (JEMTIC) 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, which meets annually, and encourages trade and investment in Taiwan. Arrangements with Taiwan to facilitate trade cover issues such as quarantine and double taxation.
Domestic Political Overview
There are two main political parties in Taiwan. The modern Kuomintang (KMT) evolved from the former military government Nationalist Party. The KMT’s support base is in northern Taiwan, where the Nationalist government and its supporters from the mainland established their new capital, Taipei. The KMT generally supports a conservative free-market agenda, although it maintains support for some state intervention in important sectors of the economy through a number of large state-owned enterprises established under its leadership. The KMT was in power most recently from 2008-2016 under Ma Ying-jeou, securing a number of cross-Strait agreements, including the overarching Economic Cooperation Framework Agreement (ECFA).
The pro-democracy movement of the 1970s and 80s gave rise to the Democratic Progressive Party (DPP). The DPP’s support base is in southern Taiwan, particularly among the “Taiwanese” communities established prior to the arrival of the “mainlanders” in 1949 some within the DPP support Taiwan’s de jure independence from China. The DPP held power from 2000 to 2008 under President Chen Shui-bian, whose leanings towards independence heightened tensions with China. The DPP’s broader policy agenda is generally socially progressive, focusing on issues such as income inequality, the environment, and economic and trade diversification.
Negotiation of a trade in services agreement with China proved controversial with many, particularly younger voters apprehensive that Taiwan was becoming too economically dependent on the mainland. In March 2014, students and NGOs led large street demonstrations, dubbed the Sunflower Movement, and occupied the chamber of the Legislative Yuan for 23 days. The social activism inspired by the Sunflower Movement led to the establishment of a number of new political parties, such as the New Power Party.
Parliamentary (Legislative Yuan) and presidential elections were held together on 16 January 2016. After eight years of KMT rule, Dr Tsai Ing-wen of the DPP was elected as Taiwan’s first female president and the DPP secured a majority in the Legislative Yuan for the first time.
On 11 January 2020, Dr Tsai Ing-wen was re-elected securing 57.13 per cent of the popular vote. Her opponents from the KMT, Kaohsiung Mayor Han Kuo-yu, and People’s First Party (PFP) leader, James Soong, secured 38.9 per cent and 4 per cent of the vote respectively. Although the DPP lost seven, it will continue to hold a majority (61 seats) in the 113 seat legislature.
Cross-Strait Relations and International Recognition
Hostilities between the Nationalists (who fled to Taipei) and the Communists (who remained on the mainland) never formally ended. As a result, relations between the two sides of the Taiwan Strait have never been established on an official basis. Nevertheless, strong economic connections across the Strait have gradually been forged, including through a range of agreements in recent decades. Taiwan business investment played an important role in China’s opening up, and direct transport and tourism links have been established.
Relations across the Strait are principally managed via semi-official agencies: Taiwan's Straits Exchange Foundation (SEF) and China's Association for Relations across the Taiwan Strait (ARATS). A meeting of both sides in 1992 took place on the understanding that each side could verbally state its opinion of “one China”; for Taiwan, this meant the Republic of China, and for China, this meant the People’s Republic of China. This understanding was later referred to as the ‘1992 Consensus’.
Cross-Strait relations have become more difficult since the elections in January 2016. Beijing has criticised Tsai Ing-wen for failing to endorse the ‘1992 Consensus’ and has suspended official and semi-official channels of communication.
For Taiwan, international recognition remains important. The United Nations and most countries recognise the PRC in Beijing as the sole legal government of China (as opposed to the ROC in Taipei). Currently fifteen states recognise Taiwan as the ROC (and thus do not have official relations with Beijing): Belize, Guatemala, Haiti, Holy See, Honduras, Marshall Islands, Nauru, Nicaragua, Palau, Paraguay, St Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Swaziland and Tuvalu.
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 into one defined by urban and industrial production. By the 1980s, Taiwan began relocating 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 over 60 per cent of GDP. Taiwan's GDP rose 2.6 per cent in 2019 to US$601.4 billion. Its current population is 23.6 million.
Agriculture receives government assistance including import protection and domestic support. Import protection involves high tariff rates, tariff-rate quotas and special safeguard measures. In 2018, Taiwan’s average tariff on agricultural products was 15.9 per cent, as defined by WTO. 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) stock in Taiwan totalled US$100.9 billion in 2018. The largest foreign investors in Taiwan are the Netherlands, Japan, territories in the Caribbean and Germany. 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 straightforward. Taiwan ranked 13th out of 190 economies in the World Bank's Ease of Doing Business Index 2019.
Following the 2016 election of the DPP, Taiwan has sought to boost economic growth and diversification through its New Southbound Policy. The Policy aims to deepen ties with ASEAN and South Asian nations, as well as Australia and New Zealand, through strengthening economic and trade cooperation, and enhancing institutional, professional and academic interaction.