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Taiwan is aiming to start negotiations for a new deal with a major trading partner, the European Union. The bloc of countries that did about $62 billion in trade with Taiwan last year decided in 2015 to explore “launching negotiations on investment with Taiwan,” and earlier this month an EU trade official said the deal was still being considered.
Taiwan’s efforts at reaching free trade agreements with major trading partners such as the EU had been stymied under the weight of China’s growing economic might. China discourages other countries from making deals because it considers Taiwan part of its territory, not a state with rights to foreign diplomacy. Meanwhile, companies from Taiwan’s export-reliant peers, such as Japan and South Korea, fare better in foreign markets because their governments have trade deals with many of the world’s biggest economies, meaning low or no import tariffs.
Based on existing Taiwan-EU trade patterns, the island’s top consumer electronics firms including Acer and MSI would gain from a new agreement, as would its chief bicycle builder Giant Manufacturing and many of its financial service providers.
“I believe Taiwan’s enterprises, like enterprises in other places, all want diversification, so you can say the higher the connectivity, the more they expect,” says Liang Kuo-yuan, president of Polaris Research Institute, a Taipei-based think tank.
Big names that would gain from a deal with the EU
The European Commission states on its website that an agreement would be “particularly vital” for tie-ups in green energy. Wind power would be one example, says Joffrey Simonet, an economist with FocusEconomics in Spain.
Data from Taiwan’s Investment Commission show that 89% of approved deals in Europe last year went to financial firms, including buyers of investment assets. In December, for example, Fubon Life Insurance, which has $111 billion in assets, bought a landmark commercial property in Frankfurt for $659 million. A month earlier, Taiwan Life Insurance said it would place $56.6 million of its $48.6 billion in investment assets in a European infrastructure fund.
Manufacturing came in at 6.6% of Taiwanese investments in Europe last year. A lot of that was furniture, motor vehicles and consumer electronics. PC vendors MSI, Acer and Asustek Computer all have operations in France, which is also a market for Giant bikes. Fellow bike vendor Merida, Taiwan Semiconductor Manufacturing Co. (TSMC) and Pegatron have business units in the Netherlands, the Investment Commission’s data shows.
“The tech sector in general, and the semiconductor industry specifically, are poised to reap gains from an EU investment deal,” Simonet says. “The automotive industry is a particularly juicy market as the drive towards autonomous and electric vehicles will require more and more electronic equipment on board.”
European officials eying an enhanced investment deal
An investment deal between governments normally simplifies business permits and strengthens legal guarantees for money invested on one side by the other. It may relax shipping rights and property ownership, as well.
The deal with Taiwan would take a “comprehensive approach with respect to market access,” the European Commission said on its website in 2016. Market access conjures up the idea of liberalization, which could mean lower tariffs and other fees paid by Taiwan’s chief exporters.
A deal might make it easier to open sales channels and do marketing, Liang adds. All components of a deal would “create a chain effect” for investors, he says.
The foreign and economic affairs ministries in Taipei are “working hard” to sign this deal, foreign ministry spokesman Andrew Lee told a news conference on February 21. Despite a 4-year lag since it first floated the idea, the EU said in a 2017 trade policy report it was preparing for talks with Taiwan.
Neither Taiwan nor the EU rules out interference from China, but both say that factor won’t kill a deal. A European Commission member responsible for trade with East Asia said this month a deal could still happen even though the EU recognizes China diplomatically over Taiwan. Taiwan is accustomed to China’s opposition of such agreements.
“China’s pressure is always there any time we try to promote international projects,” Lee says. “We have ample understanding of this, so we will find ways to try to eliminate these obstacles.”
February 28, 2019 at 06:54PM
Forbes – Entrepreneurs