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Taiwan

Australia-Taiwan relationship

Overview

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 economic and cultural relations with Taiwan including a range of two-way visits, state, territory and local government contacts, trade and investment opportunities and people to people links. Australia supports Taiwan’s participation in international organisations and conferences where appropriate.

Australia and Taiwan share an interest in a rules-based, open, inclusive and stable Indo-Pacific region. Australia participates in the Global Cooperation and Training Framework, which serves as a platform to share expertise with partners around the world. Australia is a long-term, reliable supplier of energy, resources, food and services to Taiwan. Our interests intersect across areas including education, energy innovation and investment, biotechnology, smart cities and multilateral affairs. Australia and Taiwan have growing people-to-people contacts including in the arts, education, science, tourism and sport.

Trade and investment

Taiwan was Australia's 12th largest trading partner in 2020, worth $16.1 billion. Taiwan was Australia’s ninth largest merchandise export market in 2020, worth $10 billion. Major goods exports were coal, iron ore, natural gas, aluminium and copper. Australia remains an important exporter of agricultural and forestry products to Taiwan. Australian supplements, and high quality food and beverages are increasingly popular with health conscious consumers in Taiwan. Merchandise imports from Taiwan were worth $5.1 billion in 2020, led by refined petroleum, telecommunication equipment and parts, motorcycles and bicycles and computers. Australia's export of resources and primary products to Taiwan and imports of Taiwan's high-technology products feed a virtuous cycleunderpinned by our economies’ complementarity.

In 2020, two-way services trade totalled $959 million with Australia exporting $725 million to Taiwan and importing $234 million worth of services. COVID notwithstanding, Taiwan remains a major tourism and education market for Australia. Taiwan and Australia also share a popular mutual working holidaymaker arrangement.

Two-way foreign investment is growing, albeit from a low base. In 2020, Taiwan investment in Australia was $15.6 billion up 50.9 per cent year-on-year. There have been a number of significant announcements of Taiwanese investments, including in Australian resources projects and the banking sector. Nine Taiwanese banks now operate in Australia, more than from any other economy. 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 2020, Australian investment in Taiwan stood at $15.6 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. We also hold Joint Energy and Minerals, Trade and Investment Cooperation (JEMTIC) Consultations and an Agricultural Working Group (AWG) meeting to support trade and investment in these sectors. The Australian Government supports the work of the Australia-Taiwan Business Council and the Australia New Zealand Chamber of Commerce (ANZChamp Taipei). Arrangements with Taiwan to facilitate trade cover issues such as quarantine and double taxation.

Doing business in Taiwan

Austrade's export services are available to Australian companies looking to grow their business in Taiwan. Austrade also works to promote the Australian education sector within Taiwan and attract productive foreign direct investment into Australia.

People-to-people links

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. Prior to the imposition of restrictions on international travel, an average of more than 20,000 young people from Taiwan were granted a visa to come to Australia under the Working Holidaymaker program each year. Taiwan ranks fifth among source economies for grants of this visa.

Tourism, business, and study-related travel are increasingly important to Australia. Prior to the imposition of restrictions on international travel, in 2019 there were 194,610 short-term visitor arrivals from Taiwan and 18,513 students from Taiwan enrolled to study in Australia.

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 2014, the New Colombo Plan has awarded 37 scholarships and 1115 mobility grants for Australian undergraduates to undertake study and work-based experiences in Taiwan. In the 2021 funding round, the New Colombo Plan has awarded 9 scholarships and 108 mobility grants for Australian undergraduates to undertake study and work-based experiences in Taiwan. These experiences will develop the next generation’s academic, business and cultural links between Australia and Taiwan.

The arts

Cultural and creative engagement with Taiwan is an important aspect of our shared people-to-people links. Over many years, Australia and Taiwan have supported exchanges and collaboration in visual arts, performing arts, Indigenous culture, and publishing. Recent significant cultural engagements include ‘Heaven and Earth’- the first National Palace Museum Exhibition to be staged at the Art Gallery of NSW (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.

Domestic overview

People

Taiwan’s Indigenous peoples have inhabited the island for many millennia, and there are currently 16 officially recognised Indigenous tribes. In the early 17th century, Dutch and Spanish settlers established bases on the island. Successive waves of Chinese immigrants of different backgrounds arrived from the 17th century. In 1895, in the First Sino-Japanese War the Qing Government ceded Taiwan to Japan, who ruled the island until the end of World War II.

In 1949, the Nationalist forces under Chiang Kai-shek, who were fighting a civil war with the Chinese Communists, relocated to Taiwan, followed by 1.2 million people from China. More recently, more than 510,000 new immigrants, mostly from China and Southeast Asia, moved to Taiwan. Taiwan’s main languages are Taiwanese Hokkien, Hakka and Mandarin, as well as several Indigenous languages.

Political parties

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.

On 11 January 2020, Dr Tsai Ing-wen of the DPP was elected for a second consecutive four-year presidential term, securing over 57 per cent of the popular vote.

Cross-Strait relations and international recognition

Hostilities between the Nationalists (who fled to Taiwan) 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 – including Australia – 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.

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 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.

With a population of almost 24 million, Taiwan has the 21st largest economy in the world, with a gross domestic product (GDP) of US$1.3 trillion PPP. In 2020, it sits just outside the world’s top twenty economies – and is a member of the World Trade Organization (WTO) and Asia Pacific Economic Cooperation (APEC) – as Chinese Taipei. Taiwan is a trade-based economy with strengths in ICT manufacturing (particularly semi-conductors), petrochemical refining and plastics, metal refining and consumer products manufacturing. Services account for over 60 per cent of Taiwan’s GDP.

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 billion in 2019. The largest investors in Taiwan are from China, the Netherlands, territories in the Caribbean 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 straightforward. Taiwan ranked 15th out of 190 economies in the World Bank's Ease of Doing Business Index 2020.

Since the DPP came to power in 2016, 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.

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