Taiwan has a critical role in Asia’s supply chains and its trade with China is expanding rapidly, enhancing the possibility of triangular trade with Europe. This makes the island an important, albeit diplomatically complicated, partner for the EU, with strong potential to develop bilateral trade.
Taiwan’s status as international partner
Considered by China a “renegade” province, and denied UN membership, Taiwan is not recognised as a sovereign state by its main trading partners, including the EU. Despite this, Taiwan has official diplomatic relations with two dozen countries (mainly Pacific, Latin American and African states) and is a member of 32 international organisations. Most notably, it joined the World Trade Organisation in 2002 as Chinese Taipei. In July 2013, Taiwan signed its first full free trade agreement (FTA) with a country with which it has no formal diplomatic ties (New Zealand), paving the way, it hopes, for similar agreements with the EU and US.
Framework for EU-Taiwan relations
The EU has no diplomatic or formal political relations with Taiwan, in line with its “one China” policy (recognition of the government of the People’s Republic of China as the sole legal government of China). However the EU recognises Taiwan as an economic and commercial entity. It has a structured dialogue on commercial issues of common interest, organised in four working groups meeting on a biannual basis, and dealing with issues related to intellectual property rights, technical barriers to trade, pharmaceutical, and sanitary and phytosanitary rules. The European Commission opened a European Economic and Trade Office in Taipei in 2003. For now, it has no plans for FTA negotiations, invoking Taiwan’s unique political status as well as ongoing negotiations with other Asian countries taking up resources.
Since 2008, Taiwan’s relations with China have continued to improve, building on strong asymmetric commercial interdependency between the two; China is Taiwan’s first export market. In 2008, China adopted a new policy for Taiwan, including the mainland government’s willingness to allow Taiwan “reasonable participation in global organisations”, while reaffirming the “one China” principle. In 2010, China and Taiwan signed an Economic and Cooperation Agreement (ECFA), paving the way for a comprehensive bilateral free trade agreement and other commercial pacts, including on intellectual property rights (2010), investment protection (2012), and services (2013). The importance of those agreements for Taiwan goes beyond commercial benefits estimated at 4.5% of GDP by 2020. The normalisation of trade relations with China opens the prospect of trade liberalisation agreements with other major partners.
The potential of an FTA with the EU
The strengthening of EU-Taiwan trade relations, in particular through an FTA, could turn the island, at the heart of Asian supply chains, into an important regional and global export platform, and a production location for EU firms. The complementary benefits of manufactured goods exports and increased trade in services, in which the EU maintains its surplus, would be boosted by an agreement addressing trade and investment barriers (for example certain high tariffs, country-specific standards and testing procedures). Last but not least, increasing economic integration with mainland China, in the framework of the ECFA, would offer preferential access to the Chinese market to EU producers in Taiwan. This could be seen as an alternative to a direct EU FTA with China, which is not seen as a likely prospect in the short or medium term.
The International Trade (INTA) Committee’s motion for a resolution on EU-Taiwan trade relations, to be debated at the October plenary, calls for an upgrade in EU-Taiwan commercial relations, by opening negotiations on bilateral agreements on investment and market access.