Taiwan is aiming to start negotiations for a new deal withÂ a major trading partner, the European Union. The bloc of countries that did about $62 billion in trade with Taiwan last yearÂ decided in 2015Â to explore âlaunching negotiations on investment with Taiwan,â and earlier this month an EU trade official said the deal wasÂ still being considered.
Taiwan’s efforts at reaching free trade agreements withÂ major trading partners such as the EUÂ hadÂ 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 Taiwanâs export-reliant peers, such as Japan and South Korea, fare better in foreign markets because their governments have trade deals with many of the worldâs biggest economies, meaning low or no import tariffs.
Based on existing Taiwan-EU trade patterns, the islandâs 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.
âI believe Taiwanâs enterprises, like enterprises in other places, all want diversification, so you can say the higher the connectivity, the more they expect,â says Liang Kuo-yuan, president ofÂ 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 âparticularly vitalâ for tie-ups in green energy. Wind power would be one example,Â says Joffrey Simonet, an economist with FocusEconomics in Spain.
Data from Taiwanâs Investment CommissionÂ 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 aÂ European infrastructure fund.
Manufacturing came in at 6.6% of Taiwanese investmentsÂ 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.Â (TSMC) and PegatronÂ have business units in the Netherlands, the Investment Commission’s data shows.
âThe tech sector in general, and the semiconductor industry specifically, are poised to reap gains from an EU investment deal,â Simonet says. âThe automotive industry is a particularly juicy market as the drive towards autonomous and electric vehicles will require more and more electronic equipment on board.â
European officials eying an enhanced investment deal
An investment deal between governments normally simplifiesÂ business permits andÂ strengthensÂ 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,â 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 byÂ Taiwanâs chief exporters.
A deal might make it easier to open sales channels and do marketing, Liang adds. All components of a deal would âcreate a chain effectâ for investors, he says.
The foreign and economic affairs ministries in Taipei are âworking hardâ to sign this deal, foreign ministry spokesman Andrew Lee told a news conference on February 21. DespiteÂ a 4-year lag since it first floated the idea, the EU said in a 2017 trade policy report it was preparingÂ for talks with Taiwan.
Neither Taiwan nor the EU rules out interference from China, but both say that factor won’t kill a deal. AÂ European Commission member responsible for trade with East Asia said this month aÂ deal could still happen even though the EU recognizes China diplomatically over Taiwan. Taiwan is accustomed toÂ China’s opposition of such agreements.
âChinaâs pressure is always there any time we try to promote international projects,â Lee says. âWe have ample understanding of this, so we will find ways to try to eliminate these obstacles.â