Download Does freer trade between Taiwan and developing countries worsen

Does Freer Trade between Taiwan and Developing Countries
Worsen Wage Inequality in Taiwan?
Chen-yuan Tung
School of Advanced International Studies
Johns Hopkins University
1308, N. Taft St. #8, Arlington, VA 22201, USA
E-mail: [email protected]
Tel: 703-5224051
Paper for delivery at the 2000 Taipei International Conference on Industrial Economics,
sponsored by the Institute of Economics, Academia Sinica (IEAS) from June 15-17,
2000.
Introduction
From the 1950s through the 1970s, Taiwan was a developing country exporting
unskilled-labor-intensive goods and raw material to developed countries while importing
capital-intensive goods from them. Since the mid-1980s, Taiwan has become a relatively
developed country1 and exported mainly capital-intensive goods. Between 1985 and
1998, the share of exports of heavy-chemical products to total exports increased from
36.5% to 64.4%. In the same period, the share of technological products to total exports
increased from 27% to 49.8%. According to World Bank classifications, the share of
intermediate products, machinery, and transportation equipment to Taiwan's total exports
increased from 48.4 % to 83.9 % between 1987 to 1998. By contrast, the share of
consumer goods decreased from 45.2 % to 14.2 % over the same period.
In addition, since the mid-1980s, Taiwan has shifted some of its imports from
developed countries to the Southeast Asian countries and to China. In 1986, 67.4 % of
Taiwan's imports came from developed countries (OECD-7)2. By contrast, only 5.5 % of
Taiwan's imports came from developing countries (ASEAN-43 and China4) in 1986. In
1997, 59 % of Taiwan's imports came from the OECD-7 while 11.9 % came from the
ASEAN-4 and China.
Coincidentally, China adopted its opening-up policy in the late 1970s and soon
became a very active exporter in the international market. China's total two-way trade
1
2
3
4
In 1997, Taiwan’s per capita GNP was $13,198.
The OECD-7 includes the US, Canada, Japan, Germany, United Kingdom, France, and Netherlands.
The ASEAN-4 includes Malaysia, Indonesia, Thailand, and Philippines. In 1997, Malaysia’s per capita
GNP was $4,283, Indonesia’s $979, Thailand’s $2,463, and the Philippine’s $1,166, all much less than
Taiwan’s.
The China excludes Hong Kong. China’s per capita GNP in 1997 was $738, much less than Taiwan’s.
1
increased from $14.8 billion in 1978 to $325.1 billion in 1997. China's exports grew
especially fast, rising from $7.2 billion in 1978 to $182.9 billion in 1997, far exceeding
Taiwan’s 1997 exports of $122.1 billion.
In the late 1980s, Taiwan began to allow indirect trade across the Taiwan Strait.5
Taiwan's exports to China increased rapidly from $0.2 billion in 1988 to $22.5 billion in
1997. However, Taiwan's imports from China increased only slightly from $0.5 billion in
1988 to $3.9 billion in 1997. From an economic perspective, Taiwan unilaterally restrains
imports from China mainly to protect domestic industries and prevent wage inequality.6
Therefore, there is a potential for a huge increase in Taiwanese imports from China
if Taiwan adopts a freer trade policy, especially after both Taiwan and China join the
WTO, which could occur by late 2000. It is important for Taiwan to examine whether or
not freer trade between Taiwan and developing countries (especially China) will worsen
wage inequality in Taiwan.
Literature Review
Almost all of the economic literature7 on the relationship between trade and wage
inequality has been prompted by the experience of wage inequality in the developed
countries. Lawrence and Slaughter (1993) correlate changes in import prices with the
5
6
7
Since the early 1980s, the majority of trade between Taiwan and China has been conducted through Hong
Kong.
Xiangkai Lin, Tufa Wang, Bozhi Chen, Taiwan yu Zhongguo Jingmao Guanxi Baipishu [White Paper on
the Economic Relations Between Taiwan and China] (Taipei: The Nation-Building Union of Taiwan,
1998), pp. 7-22.
Cline has given a comprehensive review of the literature on this issue. See Table 2.3 in his book for
alternative estimates of the impact of trade on rising US wage inequality. William R. Cline, Trade and
Income Distribution (Washington, D.C.: Institute for International Economics, 1997), pp. 35-150.
2
share of production workers across industries, where production workers are assumed to
be less skilled than non-production workers. They dismiss trade as a major contributor to
relative wage changes in the 1980s, since international prices moved in the wrong
direction from those predicted by the Stolper-Samuelson (SS) theorem for the observed
changes in relative wages. Indeed, both import and export prices indicate that the relative
price of labor-intensive products actually increased slightly during the decade. In
addition, they find that a pervasive shift in U.S. manufacturing toward the increased use
of non-production labor despite the rise in its relative wage. They argue that "this shift
suggests that technological change (biased toward non-production labor) has been the
more important pressure on wages for production workers."8
Wood (1994) argues that the growth of manufacturing exports from the South can
explain not only the rise in earnings inequality in the US but also the trend toward higher
joblessness in Europe. Wood argues that standard factor content analyses understate the
effect of trade on employment. The net impact of North-South trade on manufacturing
employment and the skill intensity of manufacturing employment in the North is roughly
ten times what the conventional estimates imply. Once the proper corrections are made,
he argues, "up to 1990 the changes in trade with the South had reduced the demand for
unskilled relative to skilled labour in the North as a whole by something like 20%."9
Wood recognizes that biased technological change can account for many of the same
phenomena he attributes to North-South trade. Nevertheless, he asserts that the time
pattern, the general magnitude, and the pattern of cross-country variation of increased
inequality and joblessness favors the trade explanation.
8
9
Robert Z. Lawrence and Matthew J. Slaughter, "International Trade and American Wages in the 1980s:
Giant Sucking Sound or Small Hiccup?," Brookings Papers on Economic Activity, no. 2 (1993), p. 209.
Adrian Wood, North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven
World (Oxford: Clarendon Press, 1994), p.11.
3
Using the same methodology, Wood (1995) suggests that "trade is the main cause of
the problems of unskilled workers" and that "conventional factor content results
understate the extent to which trade shifts relative demand against unskilled workers." He
argues that as of 1990 "trade [between developed countries and developing countries]
lowered the economy-wide relative demand for unskilled labor by about 20% [in
developed countries]." In addition, he contends that unskilled workers in developed
countries will not be hurt much by major new entrants (e.g., China and India) into the
world market for low-skill-intensive manufactures, simply "because these goods are no
longer produced in developed countries."10
However, Burtless (1995) is skeptical of Wood's conclusion. He points out that there
is an apparent shrinkage in demand for less-skilled U.S. workers across a range of
industries, including those that do not produce goods and services that are traded
internationally. Firms which do not produce internationally traded goods and services
should take advantage of the declining price of less-skilled workers by hiring more of
them. The fact that they instead adopt techniques that use skilled labor relatively more
intensively suggests that biased technical change or some other development has reduced
their demand for less-skilled workers. He argues that "international trade cannot explain
the reduced appetite for less-skilled workers in these industries."11 Burtless (1996) also
concludes in a later article that "international trade, it seems, has not been the decisive
factor in the trend toward greater earnings inequality." He believes that "the leading
10
11
Adrian Wood, "How Trade Hurt Unskilled Workers," Journal of Economic Perspectives, vol. 9, no. 3
(Summer 1995), pp. 57-80.
Gary Burtless, "International Trade and the Rise in Earnings Inequality," Journal of Economic
Literature, vol. 33, no. 2, June 1995, p. 813.
4
explanation for increased wage inequality is changes in the technology of production."12
In addition, Burtless, Lawrence, Litan, and Shapiro (1998) reach the same
conclusion by examining the data from 1969 to 1995. They argue that "the wages of
less-skilled workers have suffered both relative and absolute declines primarily because
employers throughout the economy have shown an increased preference for hiring
workers with more advanced skills. It appears that immigration has played an important
contributory role in depressing the earnings of the less skilled, and thus in aggravating
income inequality, but trade and outward foreign investment have been much less
important factors in these developments."13
Wood (1998) adjusts the conclusion in his recent paper. He believes that "most
(between two-thirds and three-quarters) of the rise in the relative demand for skilled
labor during the past two decades was caused by ..... skill-biased technical changes
(emphasis added), loosely defined to include factoral and sectoral biases in production
methods, product innovation and shifts in the composition of final demand. At the same
time, ..... most of the acceleration in the growth rate of the relative demand for skilled
labor in the past two decades above its trend of the previous few decades, and hence the
rise in labour market inequalities, was caused by globalization (emphasis added)."14
Freeman (1995) discusses the immiseration of low-skill workers in the U.S. and
Europe. He emphasizes that both the rise in joblessness in Europe and the rise in earnings
12
13
14
Gary Burtless, "Worsening American Income Inequality: Is World Trade to Blame?," Brookings Review,
vol. 14, no. 2 (Spring 1996), p. 31.
Gary Burtless, et. al., Globaphobia: Confronting Fears about Open Trade (Washington, D.C.:
Brookings Institution, 1998), chapter 4, p. 88.
Adrian Wood, "Globalization and the Rise in Labour Market Inequalities," The Economic Journal, no.
108 (September 1998), p. 1465.
5
inequality in the U.S. reflect the same phenomenon -- a relative decline in the demand for
less skilled workers. He concludes that trade does matter, but "other factors have been
more important than trade in the well-being of the less skilled,"15 including technological
changes.
Lawrence and Evans (1996) use both a net factor content analysis and a small
simulation model to explore the impact on the U.S. labor market of a fivefold increase in
imports of manufactured goods from developing countries. They find that "while trade
could effect major shifts in the structure of U.S. production, its impact on the wage
structure is unlikely to be large. The basic reason for this small impact is that
manufacturing in general, and those sectors potentially vulnerable to developing country
competition in particular, comprise a relatively small share of total employment. Once
the US economy is driven to specialize fully in skill-intensive products, trade no longer
widens the relative wage gap."16
Baldwin and Cain (1997) investigate three suspects to account for the observed
shifts in U.S. relative wages of less educated compared to more educated workers from
1967 to 1992: increased import competition, changes in the relative supplies of labor of
different education levels, and changes in technology. For the period from 1980 to 1993,
they conclude that "increased import competition cannot account for the rise in wage
inequality among the major education groups, although it could have contributed to the
decline in the wages of the least educated workers. Instead, support is found for technical
progress that is reducing demand for less-educated labor and is more rapid in some
15
16
Richard B. Freeman, "Are your Wages Set in Beijing?," Journal of Economic Perspectives, vol. 9, no. 3
(Summer 1995), p.31.
Robert Z. Lawrence and Carolyn L. Evans, "Trade and Wages: Insights from the Crystal Ball," National
Bureau of Economic Research, Working Paper No. 5633, June 1996, pp. 2-3.
6
manufacturing sectors intensively using highly educated labor as the dominant force in
widening the wage gaps...."17
Using the aggregate factor proportions approach18, Borjas, Freeman, and Katz (1997)
conclude that the impact of increased trade with less-developed countries on the labor
market does not explain much of the increase in the overall wage inequality in the United
States. According to their estimate, U.S. immigration and trade with less-developed
countries accounts for no more than 10% of the rise in wage inequality between skilled
labor and unskilled labor from 1980 to 1995. Moreover, they find that immigration has a
larger impact on less educated workers than does trade.19
Harrigan (1998) creates a flexible and empirical general equilibrium model of wage
determination by analyzing data on prices and quantities of imports, output, and factor
supplies from 1967 to 1995. He concludes that wage inequality has been partly driven by
changes in relative factor supplies and relative final goods prices. In contrast, imports
have played a negligible direct role. In other words, he argues, "the causes of increased
wage inequality are mainly domestic rather than foreign."20
Haskel and Slaughter (1999) estimate the effects of trade and technology on U.K.
wage inequality. They find that "changes in prices were the major force behind the rise in
inequality in the 1980s." However, they find "only a weak link between domestic price
17
18
19
20
Robert E. Baldwin and Glen G. Cain, "Shifts in U.S. Relative Wages: The Role of Trade, Technology
and Factor Endowments," National Bureau of Economic Research, Working Paper No. 5934, February
1997, abstract.
George Borjas, Richard Freeman, and Lawrence Katz, "How Much Do Immigration and Trade Affect
Labor Market Outcomes?," Brookings Papers on Economic Activity, no. 1 (1997), pp. 39-41.
Ibid, pp. 62-3.
James Harrigan, "International Trade and American Wages in General Equilibrium, 1967-1995,"
National Bureau of Economic Research, Working Paper No. 6609, June 1998, p. 16.
7
changes and international price changes."21
The most commonly invoked theory to explain the link between trade and wage
inequality is the Heckscher-Ohlin (H-O) model. The Stolper-Samuelson (SS) theorem
asserts that if there are constant returns to scale and if both goods continue to be
produced, a relative increase in the domestic price of a commodity will raise the real
return to the factor of production that is used intensively in producing that commodity
and reduce the real return to the other factor. The SS framework suggests that rising wage
inequality is caused by a trade-induced rise in the price of skilled-labor-intensive
products relative to unskilled-labor-intensive products.
Slaughter (1998) questions some critical assumptions of the SS Theorem from both
inside and outside the model, such as price-taking assumption, short-run frictions, factor
endowment change, and within-group inequality. First, he points out the most important
limitation to research within the basic H-O model is the lack of understanding about how
the various exogenous forces attributable to international trade affected actual product
price, such as technological progress, trade barriers, tastes, and endowment. Second, he
contends that the H-O Model is a long-run theory and price shocks might not generate
H-O wage effects over the same time horizon. Third, he asserts that national endowment
changes do appear to affect factor prices. Fourth, in additional to "between-group" wage
inequality in the H-O model, he emphasizes the importance of "within-group" wage
inequality, i.e., inequality among observationally equivalent workers, which accounts for
about half of the overall rise in U.S. wage inequality.22
21
22
Jonathan Haskel and Matthew J. Slaughter, "Trade, Technology and U.K. Wage Inequality," National
Bureau of Economic Research, Working Paper No. 6978, p. 32.
Matthew J. Slaughter, "International Trade and Labour-Market Outcomes: Results, Questions, and
Policy Options," The Economic Journal, no. 108 (September 1998), pp.1456-1460.
8
Overall, despite unresolved methodological differences, Slaughter concludes that
"the balance of evidence from both the SS studies and the factor-content studies reaches
the same conclusion that trade has contributed relatively little to rising U.S. skill
premia."23 Based on a balanced reading of the existing literature, Cline concludes that
international influences contributed about 20% of U.S. wage inequality in the 1980s.24
Based on her edited volume, Collins concludes that globalization (including trade and
immigration) may explain 1 to 2 percentage points of the 18 percentage point overall
change in wages for high school-educated workers relative to those who are college
educated.25
Theoretical Analysis
Generally speaking, there are two models based on the H-O assumptions to explain
explicitly
the
relationship
between
trade
Heckscher-Olin-Samuelson-Richardson
and
(HOSR)
wage
inequality:
model
the
and
Heckscher-Olin-Leamer-Wood (HOLW) model.
The major assumptions of the H-O model are: First, there are two countries, two
goods, and two factors. Second, markets are perfectly competitive and production is
characterized by constant returns to scale. Third, both countries possess identical tastes
and share the same technological opportunities. Fourth, factors are perfectly mobile
23
24
25
Matthew J. Slaughter, “International Trade,” p. 1456.
William R. Cline, Trade and Income Distribution (Washington, D.C.: Institute for International
Economics, 1997), p. 144.
Susan M. Collins, "Economic Integration and the American Worker: An Overview", in Susan M. Collins
(ed.), Imports, Exports, and the American Worker (Washington, D.C.: Brookings Institution Press,
1998), chapter 1, pp. 34-35.
9
between sectors but completely immobile internationally.
The Heckscher-Olin-Samuelson-Richardson (HOSR) Model
Based on the H-O model and SS Theorem, Richardson (1995) proposes a basic
long-run, general-equilibrium model of trade, technology and wages. In the HOSR model,
Richardson points out that five local factors might increase the volume of trade,
including an opening of the economy, natural (endogenous) growth of the economy, any
extra exogenous growth in the capital stock, exogenous sectoral technological change,
and a shift in tastes (or demands). He argues that only an opening of the economy and
exogenous sectoral technical change could increase wage inequality. The other three
factors would have no effect on relative wages, though all affect the production mix, the
volume of trade, and other variables. That is, relative factor prices under free trade are
dictated solely by relative sectoral total factor productivity and relative goods prices.
A graphical version of the HOSR model is presented in Figure 1. 26 The curved lines
PPF0, PPF1c, and PPF1 depict production possibilities for a relatively developed
economy like Taiwan between investment goods and other (or consumption) goods. The
preexisting stock of capital, human, and technological capital is indicated by the lower
extension of the diagram to an origin 00. Rays from that origin include all points where
the ratio of capital stock to consumption is constant.
Without trade, the original production possibility frontier is PPF0 and the original
capital-consumption ratio is described by the ray going through c0. Richardson assumes
26
J. David Richardson, "Income Inequality and Trade: How to Think, What to Conclude," Journal of
Economic Perspectives, vol. 9, no. 3, Summer 1995, pp. 36-44.
10
that the economy's production of (broad) investment goods exceeds the depreciation of
its initial stock of (broad) capital, and the total capital stock grows. Then the production
possibility frontier will shift out in the next period, and with the same
investment-consumption ratio, this "closed" economy will be able to produce and spend
at a point like c1 and PPF1c. In this model, the line through c0 and c1 in fact is the
economy's expansion path -- its growth trajectory -- with no trade.
Now consider the same with trade. Since the diagram is depicting a relatively
advanced economy, like Taiwan, assume that its comparative advantage is in the
investment goods sector, which is relatively capital intensive. The sector for other goods,
consumption goods, will be assumed to depend more on unskilled labor.
In the first time period, the economy starts on PPF0. With trade, the economy will
produce at point b0, exporting its excess production of investment goods and importing
its excess demand for consumption goods. The slope of the line b0a0 represents world
relative prices for the two goods. As a result of trade, this economy is now at a0 rather
than at c0 in first-period expenditure (acquisition): it has both more investment and more
consumption. Thus, in the next period, the production possibility frontier will be shifted
out further than in the previous example. On the new frontier, labeled PPF1, the country
can produce at point b1 and trade at world market prices to enjoy the "acquisition point"
a1 in the next period. This economy's reliance on trade increases both its consumption
possibilities and its growth.
The line through a0 and a1 represents the ratio between what the economy ends up
consuming and investing in that time interval. The line through b0 and b1 (not shown in
11
the diagram) represents the growth trajectory of this economy with trade, in terms of
what it produces.
In the HOSR model, there are five local reasons why the volume of trade might
increase. One is an opening of the economy, along a given production frontier; for
example, the shift from c0 to b0. Second is the natural (endogenous) growth of the
economy; for example, the shift from b0 to b1. A third reason is any extra exogenous
growth in the capital stock relative to the labor force, say because of capital-augmenting
technological change, which will tug PPF1 even further in the vertical direction. Fourth
is exogenous sectoral technological change that is more rapid for investment goods than
for other goods (that is, relatively faster total factor productivity growth in investment
goods), which will also tug PPF1 vertically. Fifth is a shift of tastes (or demands) away
from investment goods that will shift the a0a1 line in a southeast direction. Only two of
these five local reasons for increased trade would shift relative wages in a way that would
produce greater inequality -- the first and the fourth. The other three would have no effect
on relative wages.
An opening of the economy shifts relative product prices and thus changes the real
return to labor. The old product prices would be represented by the tangent through c0,
while the new relative prices would be shown by the line from b0 to a0. Increased
openness to trade reduces the internal relative price of other goods and the unskilled
labor they employ, shifting factors to the investment-goods sector. These insights are the
roots of the SS theorem.
12
A graphic version of the SS theorem is shown in Figure 2.27 The dual of the
production function for investment goods (I), PI (w, r), determines the isoprice curve
labeled "PI = PI0", which indicates the combinations of the wage rate of unskilled labor, w,
and the rental rate of capital, r, which are consistent with zero profits in producing I,
given price PI0. The dual of the production function for consumption goods (C), PC (w, r),
determines the isoprice curve labeled "PC = PC0," which indicates the combinations of the
wage rate of unskilled labor, w, and the rental rate of capital, r, which are consistent with
zero profits in producing C, given price PC0.
The point of the intersection for the two isoprice curves, A, determines the wage rate,
w0, and the rental rate, r0, which are consistent with the production of both commodities
at the given output prices, PI0 and PC0.
If the economy opens up to trade, the relative price of I will increase and the
economy will export goods I and import goods C. An increase in the relative price of I is
indicated by a shift of the isoprice curve for I from PI = PI0 to PI = PI1. This moves the
point of the intersection between the two isoprice curves from A to B. The wage rate
consistent with the combination of both commodities falls from w0 to w1, and the rental
rate rises from r0 to r1. Since PI has risen and PC remains constant, it is clear that the
wage rate has fallen relative to the prices of both commodities. Furthermore, since the
rental rate associated with point J is the rental rate which is consistent with a constant
ratio of r to PI, it is clear that the rental rate rises relative to the prices of both
commodities. Therefore, an increase in the price of the capital-intensive commodity
27
Michael Mussa, "The Two-Sector Model in Terms of Its Dual: A Geometric Exposition", in Jagdish N.
Bhagwati (ed.), International Trade: Selected Readings, second edition (Cambridge, Mass.: The MIT
Press, 1987), pp. 55-60.
13
increases the return to capital in terms of both commodities and reduces the return to
labor in terms of both commodities.
To determine the effects of an increase in the relative price of the labor-intensive
commodity, consider the move from B back to A. As a result, the wage rate rises in terms
of both commodities, and the rental rate falls in terms of both commodities.
Thus, as described in the SS Theorem, a relative increase in the domestic price of a
commodity will raise the real return to the factor of production that is used intensively in
producing that commodity and reduce the real return of the other factor. The SS
framework (H-O model) suggests that rising wage inequality in Taiwan might be caused
by a trade-induced rise in the price of skilled-labor-intensive products relative to
unskilled-labor-intensive products after opening up trade with developing countries.
Exogenous sectoral technological change will change the wage-rental ratio. The
effects of exogenous technological change can also be shown in Figure 2. 28 In terms of
the dual of the production function, technological advance means an outward shift of the
isoprice curve; at any given output price, a firm can afford to pay more for its factor
inputs and still maintain zero profits. The effect of a Hicks-neutral technological advance
in the I (investment goods) industry is illustrated by the outward shift of the PI curve
from PI = PI0 to PI = PI1 in Figure 2. It is necessary to reinterpret the P I = PI1 curve as the
isoprice curve corresponding to a higher level of technical efficiency in I, rather than to a
higher price of I. Therefore, any technological advance in I results in a generally
non-homogeneous outward shift of the PI curve, and hence reduces the wage rate and
28
Ibid, pp. 60-61.
14
increases the rental rate. In contrast, any technological advance in C increases the wage
rate and reduces the rental rate. As a result, if Taiwan experiences a technological
advance in the investment goods sector, the wage-to-rental ratio will fall.
Assume that Taiwan is a small country, therefore the international price ratio of
investment goods to consumption goods is given. Natural (and endogenous) growth of
the economy will not change the wage-rental ratio. In the broad growth of the economy
from one production possibility frontier with free trade to another frontier with free trade
-- that is, from b0 to b1 in Figure 1 -- there is no change in the relative prices of the two
goods, which are set on the world market. Therefore, the relative factor rewards are
constant. It’s the same for extra exogenous growth in the capital stock and a shift in tastes
(or demand) away from investment goods. Because the international price ratio is given,
there is no change in the rewards for the factors.
To sum up, according to the HOSR model, relative factor prices under free trade are
dictated solely by relative sector total factor productivity and relative goods prices, two
of the five local reasons for increased trade. In the long-run equilibrium the other three
reasons for increased trade would have no impact on relative wages. Therefore, increased
trade between the developed and developing countries would not necessarily lead to
wage inequality.
The Heckersher-Ohlin-Leamer-Wood (HOLW) Model
The theoretical discussion of the HOLW model is also based on fairly standard H-O
15
assumptions.29 In the H-O model, trade and wages are linked solely through changes in
product prices. This linkage, known as the SS theorem, exists because the H-O theory
assumes technology (that is, the production function for each good) to be given. Using
the H-O model, with given technology (and tastes), Wood (1995) argues that there are
two possibilities for changing domestic producer prices. One is a reduction of barriers to
trade. A reduction in barriers, and the resulting expansion of trade, would thus lower the
relative price of consumption goods in the developed country. The second force is a
change in relative world supplies of skilled and unskilled labor. An increase of unskilled
workers would raise the output and exports of consumption goods, and thus drives down
the relative price of consumption goods on the world market and in the developed
countries.
The Simplest HOLW Model
To explain the effect more precisely, consider a simple model with two countries
(developed and developing), two factors (skilled and unskilled labor), and two goods
(skill-intensive and labor-intensive goods). In Figure 330, the vertical axis measures the
unskilled wage relative to the skilled wage, while the horizontal axis measures the
number of unskilled workers relative to the number of skilled workers.
Case 1: Autarky. The downward-sloping line dd is the relative demand curve for
unskilled labor in a country where high barriers prevent trade. Wages are determined by
29
30
Adrian Wood, North-South Trade, pp. 41-2.
This type of supply and demand curve diagram was invented by Edward E. Leamer and adapted by
Adrian Wood. Adrian Wood, "How Trade Hurt," pp. 59-62. Edward E. Leamer, "In Search of
Stolper-Samuelson Linkages between International Trade and Lower Wages," in Susan M. Collins (ed.),
Imports, Exports, and the American Worker (Washington, D.C.: Brookings Institution Press, 1998),
chapter 4, pp. 150-164.
16
the intersection of this demand curve with a supply curve, whose position depends on the
country's endowments of skilled and unskilled labor. For example, with supply S1, as in
Taiwan with few unskilled workers, the relative wage of unskilled labor would be at the
high level, w0.
Case 2: Diversified trade.
The demand curve in a country completely open to
trade is the line DD. It crosses the line dd at B on the horizontal axis: if it had this skill
supply ratio, even an open country would not trade. The developed country must lie to
the left of B because it has a relatively large supply of skilled labor. The line DD has two
downward-sloping segments separated by a flat segment in the middle. This flat
(infinitely elastic) segment covers the range of factor endowments in which a trading
country would be "diversified" in the sense of producing both of the two traded goods. At
this stage, the relative wage of unskilled labor in these two countries should be equal to
w1 according to the factor-price equalization theorem with free trade.31 With a skill
supply ratio S1, the relative wage of unskilled labor would fall from w0 to w1.
After the initial reduction in wage rates, in this range of flat segment, changes in
domestic labor supply, unless they are big enough to affect world prices, do not change
wages. However, if a change in world labor supplies or a fall in trade barriers abroad
were to lower the import price of consumption goods, the flat segment of the demand
curve would shift down, as shown by the dashed line in the figure, and thus reduce
further the relative wage of unskilled workers from w1 to w2. This is based on the SS
theorem, which states that a relative decrease in the domestic price of consumption goods
will reduce the real return to the unskilled labor, which is used intensively in producing
31
Because the HOLW model is based on the H-O theory, the factor-price equalization should apply to the
free-trade situation with identical technologies and the same relative price for their outputs.
17
consumption goods.
Case 3: Specialized trade.32
A trading country with few unskilled workers, as at
S2, will produce no consumption goods and specialize in machinery plus the non-trade
service. Since the machinery plus the non-traded service are skilled-intensive, the
demand for the unskilled/skilled workers will fall. In this stage, the new demand curve
DD is below the original curve dd. With a skill supply ratio S2, the relative wage of
unskilled labor would fall from w3 to w4 after the opening up of trade.
In a specialized country on a downward-sloping segment of the demand curve DD,
changes in domestic labor supply do affect relative wages. For example, if the skill ratio
S2 shifts to the skill ratio S1, the wage ratio will shift down from w4 to w1. By contrast, a
fall in the world price of imported consumption goods would not affect the relative wage,
w4, which is decided by the intersection of the demand curve, DD, with the supply curve,
S2.
To summarize, in a relatively developed country (such as Taiwan), with relatively
few unskilled workers by world standards (that is, to the left of point B in Figure 3),
opening trade with developing countries (to the right of point B) causes the relative wage
of unskilled workers to be lower than it would be without trade, whether the outcome is
diversified or specialized. In both cases, this happens because of a fall in the relative
domestic price of consumption goods, which in both cases is reflected by a shift of the
demand curve against unskilled labor. Finally, if the outcome is specialized, a fall in
32
Wood argues that the reduction of trade barriers has shifted developed countries from “manufacturing
autarky” to specialization in the production of skill-intensive manufactures and reliance on imports
from developing countries to supply their needs for labor-intensive manufactures.
18
world price of imported consumption goods would not affect the relative wage.
The HOLW Model with More Goods, Countries, and Factors
This model can be extended to include many goods (differentiated by skill intensity)
and many countries (differentiated by skill level).33 Figure 4 is drawn on the same
principles as Figure 3, but with six rather than two goods (and at least six countries). The
open-economy demand curve, DD, instead of having one flat segment, has five, which
alternate with downward-sloping segments. Countries whose relative skill supplies put
them on a flat segment produce two goods, adjacent in skill intensity, while those on a
downward-sloping segment produce only one good. As in a fully diversified country,
small changes in labor supplies do not alter relative wages. However, larger changes in
labor supplies do alter relative wages by moving the country to a different segment of
DD.
The effects of trade on relative wages remain the same as in Figure 3. In developed
countries, to the left of B, a reduction in trade barriers shifts demand in favor of skilled
labor and widens the skill differential in wages. The impact on wages is bigger for
countries with a relative small supply of unskilled labor. For countries with intermediate
skill supplies, in the vicinity of B, trade has a smaller effect on wages.
In reality, the number of traded goods of differing skill intensity is very large. It is
thus reasonable to approximate DD by a continuous line (shown with dashes in figure 4).
This multiple-goods formulation emphasizes three important points. First, the open
33
Adrian Wood, "Openness and Wage Inequality in Developing Countries: The Latin American Challenge
to East Asian Conventional Wisdom," The World Bank Economic Review, vol. 11, no. 1, pp. 36-38.
19
economy demand curve for unskilled labor DD is more elastic than the closed economy
demand curve dd, so that changes in factor supplies have smaller effects on relative
wages. For example, if unskilled/skilled workers ratio shifts from S3 to S4 in Figure 4,
with closed economy demand curve for unskilled labor dd the wage inequality will
increase by (w2 - w0) and with open economy demand curve DD the wage inequality will
increase by (w3 - w1), where (w2 - w0) is larger than (w3 - w1). Nevertheless, changes in
factor supplies are generally likely to have some effect on relative wages.
Two, greater openness (trade) between Taiwan and developing countries will pivot
the open economy demand curve from D1D1 to D2D2 where D2D2 is more elastic than
D1D1. (See Figure 5.) This leads to further worsen wage inequality in Taiwan, where the
relative unskilled/skilled wage rate falls from w1 to w2.
Three, the further reduction of goods price would not worsen wage inequality in
Taiwan if the open economy curve DD is a straight line and thus Taiwan will completely
specialized in the relative skilled-intensive goods. The elasticity of the open economy
demand curve totally depends on the volume of trade instead of the price.34
Empirically, Wood uses the approach of the factor content35 of trade to calculate the
amounts of skilled and unskilled labor used to produce a country's exports and compare
these with the amounts of skilled and unskilled labor that would be required to produce
domestically the goods that the country imports. If the ratio of skilled to unskilled labor
34
35
In his empirical study, Wood argues that the time pattern of relative price changes in the US does not
match that of relative wage changes, particularly in the 1970s. In Europe, moreover, there was no
general fall in the relative producer prices of labor-intensive goods, either in the 1970s or in the 1980s.
Adrian Wood, “Globalization,” p. 1472.
Adrian Wood, "How Trade Hurt,” pp. 64-72. Adrian Wood, "Openness and wage Inequality,” pp.38-40.
Adrian Wood, “Globalization,” pp. 1469-1471.
20
is higher for exports than for imports (e.g., Taiwan), then increased openness to trade
should raise the relative demand for, and so the relative wages of, skilled workers.
To sum up, the HOLW model suggests that greater openness to trade (increased
trade) between Taiwan (a relative developed country) and developing countries tends to
reduce the demand for unskilled, relative to skilled, labor and thus to worsen wage
inequality. By contrast, the HOSR model argues that increased trade would not
necessarily lead to greater wage inequality. In the HOLW model, wage inequality will
increase by greater volume of trade; but in the HOSR model, wage inequality will hinge
on biased sector total productivity and export-import price ratio.
Empirical Study
The HOSR model predicts that two factors will worsen wage inequality: both biased
technological progress and increase in export-import price ratio will worsen wage
inequality. However, in the case of Taiwan, its wage inequality did not worsen from 1987
to 1996.36 (See Table 1.) In 1987, the average monthly earnings of employees with
below college education was NT$12,755. College graduates earned an average of
NT$23,503
per
month.
37
The
ratio
of
wage
inequality
was
0.84
[(23,503-12,755)/12,755]. Thereafter, the wage inequality lessened significantly through
1995. In 1995, the average monthly earnings of non-college graduates was NT$28,730
and that for college graduates was NT$44,770. The ratio of the wage inequality was 0.56.
36
37
Also, the unemployment rates in Taiwan did not increase after the mid-1980s, either. The unemployment
rate was 2.9% in 1985 and 2.7% in 1986. After 1986, the rate fell significantly. It was 2% in 1987 and
1.7% in 1988. The average unemployment rate from 1988 to 1995 was 1.6%, although the
unemployment rate increased to 2.6% in 1996 and 2.7% in 1997.
Richardson and some other economists suggest differentiating those workers with, and those without, at
least 12 years of education. J. David Richardson, “Income Inequality,” p. 44.
21
Nevertheless, in 1996, the wage inequality ratio worsened slightly to 0.62.
Regarding the relative export-import price ratio, if we use a general index for all
exports and imports we can derive the change in the export-import price ratio for all
exports and imports (hereafter called the "general export-import price ratio"). (See Table
2.) In 1986, the general export-import price ratio increased by 12.4%. In 1997, it
increased by 3.5%. Overall, the general export-import price ratio increased from 1986 to
1997, although the changes in 1988, 1994, and 1995 were negative.
However, the general export-import price ratio cannot reflect the real situation of
Taiwan’s trade with developing countries. Generally speaking, Taiwan’s exports mainly
consisted
of
intermediate
and
capital
goods,
which
are
capital-
and
technology-intensive.38 For example, in 1998 the three biggest categories of Taiwan’s
exports to Southeast Asian countries were electrical machinery and equipment,
machinery and mechanical appliances, and knitted or crocheted fabrics. The three biggest
categories of Taiwan's imports in 1998 from Southeast Asian countries were electrical
machinery and equipment, machinery and mechanical appliance, and mineral fuels.39
The three biggest categories of Taiwan’s exports to China in 1998 were electrical
machinery and equipment, machinery and mechanical appliance, and plastics and articles.
The three biggest categories of Taiwan’s imports from China in 1998 were electrical
machinery and equipment, iron and steel, and machinery and mechanical appliance.40
It’s thus very difficult to figure out changes in the export-import price ratio for
38
39
40
Chen-yuan Tung, “General Analysis of the Economic Relations between Taiwan and China -- the
Tradeoff between Economics and Security”, paper presented to the 14 th annual conference of the
Association of Chinese Political Studies in Washington, D.C., on November 6-7, 1999, p. 69.
Board of Foreign Trade, Ministry of Economic Affairs, Republic of China, The Analysis on
International Trade Situation, September 1998, p. 1-37.
Ministry of Economic Affairs, Republic of China, The Analysis on Mainland Economic Situation (1998),
June 1999, pp. 50-51.
22
intra-industrial trade.
Since Taiwan’s exports consisted mainly of capital- and technology-intensive goods,
it's plausible to say that Taiwan exported machinery and transport equipment to
developing countries (China and Southeast Asian countries) and imported basic
manufactures from them. 41 Therefore, the result of the change of the relative
export-import price ratio between machinery and transport equipment and basic
manufactures (hereafter called the "specific export-import price ratio") was quite
different from those of the general export-import price ratio. (See Table 2.) In 1986, the
export-import price ratio increase by 1.8%. In 1997, the ratio increased by 4.5%. The
export-import price ratio still increased overall from 1986 to 1997, although the changes
in 1990, 1991, 1992, 1993, and 1996 were negative.
No matter which price ratio we use, the change of export-import price ratio cannot
explain the trend of lessening wage inequality in Taiwan between 1987 to 1996. The
increase of the export-import price ratio should predict worsening wage inequality, but
the result was the opposite, or at least not consistent with the predicted pattern. (See
Chart 1.)
As for Richardson’s second candidate, biased technological change, Bernard and
Jensen (1997) suggest three variables to measure technological change: computer
investment, ratio of research and development (R&D) spending to sale, and number of
41
For example, with the more detailed HS 6 digit code, the five biggest categories of Taiwan's exports to
China in 1998 were parts and accessories for automatic data processing machines and units, monolithic
integrated circuits, textile fabrics nesoi, woven fabrics of synthetic filament, and
acrylonitrile-butadiene-styrene (Abs) copolymers. The five biggest categories of Taiwan's 1998 imports
from China were rectifiers and rectifying apparatus, power supplies, metallurgical bituminous coal,
semifinished products of iron or nonalloy steel, electrical connectors, and zinc.
23
distinct technologies adopted.42 Mincer (1991) proposes the use of R&D spending per
worker to measure skilled-biased technical change because relatively more educated
workers are employed in those manufacturing sectors with newer capital equipment and
more intensive spending on R&D.43
Due to the limitations of the available data, this paper uses three indicators, per
capita R&D expenditure, R&D manpower, and patents granted, to measure the biased
technological change in Taiwan's investment goods sector. (See Table 3.) In 1985, Taiwan
spent NT$ 1.03 million/researcher on R&D, had 24,600 researchers, and granted 8,619
patents. In 1997, these figures had risen to NT$ 2.04 million/researcher, 76,588
researchers, and 29,356 patents. These figures simply show how quickly the investment
goods sector experienced technological advance from 1985 to 1997. According to
Richardson, this fact should predict worsened wage inequality in Taiwan in this period.
However, wage inequality lessened over this period.
The HOLW model predicts that increased imports from developing countries will
lead to worsening wage inequality in Taiwan. From 1986 to 1997, Taiwan did increase its
imports from both Southeast Asian countries and China while reducing its imports from
developed countries. In 1986, the OECD-7 share of Taiwan’s total imports was 67.4%
while the ASEAN-4 and China together supplied just 5.5% of Taiwan’s imports. In 1997,
the OECD-7 share shrank to 59% and the ASEAN-4 plus China share increased to 11.9%.
(See Table 4.) In terms of value, Taiwan imported $2.14 billion from the ASEAN-4 and
China in 1988 and $13.6 billion in 1997. The absolute value of Taiwan’s imports from
42
43
Andrew B. Bernard and J. Bradford Jensen, "Exporters, Skill Upgrading, and the Wage Gap," Journal of
International Economics, vol. 42, no. 1/2, February 1997, pp. 20-27.
William R. Cline, Trade and Income Distribution (Washington, D.C.: Institute for International
Economics, 1997), pp. 54-6.
24
the ASEAN-4 and China increased by 6.4 times in a decade. (See Table 5.) But the
predictions of the HOLW model still contradict the trend of Taiwan’s wage inequality.
The imports from developing countries increased, but the wage inequality improved.
Conclusions
From the standpoint of the HOSR model, if wage inequality in Taiwan did worsen,
biased technological progress seems the more plausible explanation for the worsening
wage inequality. The scale of biased technological advance increased two fold in terms of
per capita R&D expenditure and 2.8 times in terms of R&D manpower and patents
granted. The change of the export-import price ratio was trivial in terms of both the
change of the general export-import price ratio and that of the specific export-import
price ratio.
From the standpoint of the HOLW model, increased imports from developing
countries should contribute significantly to wage inequality in Taiwan. Taiwan’s imports
from developing countries (both the ASEAN-4 and China) increased by $11.5 billion and
their share of Taiwan’s total imports increased by 6.4%. However, Taiwan’s wage
inequality did not worsen, but rather improved, in the last decade.
Therefore, these two models cannot explain the trend of lessening wage inequality
in Taiwan. There are several possible reasons to explain this situation. First, wage
inequality may have been determined by the non-trade sector. In 1986, 51.1% of
employment in Taiwan was in the manufacturing industry and primary industry (trade
sector). In 1997, only 37.6 % of employment was in the trade sector. Therefore, the wage
25
of employees was largely determined by the non-trade sector.
Second, Taiwan’s imports are mainly from the OECD-7 and the NICs-344, which
accounted for 71.8% of imports in 1986 and 67.9% in 1997. Therefore, the influence of
the imports from developed countries should outweigh that from developing countries in
determining the trend of wage inequality in Taiwan. Since developed countries have
higher skilled/unskilled labor ratio than Taiwan, the imports from them should reduce the
export-import price ratio for Taiwan and thus improve the wage inequality.
Third, trade between Taiwan and developing countries consists mainly of
intra-industrial trade based on different qualities of goods within sector. In the H-O
model, trade is inter-industrial trade based on different product prices between sectors.
Therefore, based on the H-O model, both the HOSR model and the HOLW model cannot
explain the lessening wage inequality in Taiwan.
Fourth, the share of unskilled-labor in the labor force in Taiwan has fallen sharply
since 1986. In 1986, the share of employees with a below-college education was 87.1%.
In 1997, the share of employees with a below-college education was 76.2%, a drop of
11% over the last decade. Based on the HOLW model, the decreased supply of
unskilled-labor may have contributed to the lessening wage inequality.
In conclusion, both the HOSR model and the HOLW model cannot explain the trend
of wage inequality in Taiwan. Surprisingly, Taiwan’s wage ratio did not worsen as
44
The NICs-3 refers to Singapore, South Korea, and Hong Kong. In 1997, Singapore’s per capita GNP
was $26,452, Korea’s $9,509, and Hong Kong’s $26,499. Therefore, Taiwan’s imports from the NICs-3,
as well as the OECD-7, would not suppose to worsen its wage inequality.
26
Taiwan imported more from the ASEAN-4 and China and experienced a very rapid
technological progress in the investment sector. Even if Taiwan’s wage inequality had
worsened in the last decade, biased technological change would have been the dominant
factor rather than an increase of imports from developing countries. Therefore, freer trade
between Taiwan and developing countries will not necessarily worsen wage inequality in
Taiwan. At the very least, freer trade does not seem to play a crucial role in determining
wage inequality trends in Taiwan.
Finally, one policy concern is apparent in the process of expanded trade with
developing countries: problems faced by unskilled workers displaced from their jobs.
Even analysts who conclude that freer trade (globalization) is to blame for wage
inequality still emphasize that trade (protection) policies are poor tools to use in assisting
displaced workers. Instead, most economists suggest Taiwan should focus on programs to
assist displaced workers directly, such as unemployment insurance, education, training
programs, and even subsidies to the unskilled. Such solutions would also be appropriate
for helping less-skilled workers cope with declining real earnings in situations where
less-skilled wages are indeed negatively affected by freer trade.45
45
Susan M. Collins, "Economic Integration," pp. 9, 36-41. Adrian Wood, North-South Trade, pp. 22-24.
Adrian Wood, "Globalization," p. 1479. J. David Richardson, "Income Inequality," pp. 51-53.
27
Appendix:
Figure 1
b1
(Broad)
investment
goods
PPFc1
a1
b0
c1
c0
a0
PPF1
PPF0
0
Other (consumption) goods
(Broad) capital stock
00
28
Figure 2
r
r1
B
A
r0
J
PI = PI1
PI = PI0
Pc = Pc0
w
w2
w
1
Figure 3
unskilled/skilled wage
d
D
w3
w4
w0
w1
w2
D
S2
S1 B
d
unkilled/skilled workers
The dd line: closed economy demand for unskilled/skilled labor
The DD line: open economy demand for unskilled/skilled labor
29
Figure 4
unskilled/skilled wage
d
w2
D
w3
w0
w1
D
d
S4
S3
B
unkilled/skilled workers
The dd line: closed economy demand for unskilled/skilled labor
The DD line: open economy demand for unskilled/skilled labor
30
Figure 5
unskilled/skilled wage
d
D1
w0
D2
w1
w2
D2
D1
S5
d
B
unkilled/skilled workers
The dd line: closed economy demand for unskilled/skilled labor
The D1D1 line: partial open economy demand for unskilled/skilled labor
The D2D2 line: increased open economy demand for unskilled/skilled labor
Table 1
Average Monthly Earnings of Employees by Educational Attainment
unit: NT $
1987
12755
23503
0.84
1988
14218
24815
0.75
1989
16481
28360
0.72
1990
18699
31253
0.67
1992
23249
37514
0.61
1993
25470
41570
0.63
1994
27501
43665
0.59
1995
28730
44770
0.56
Below college (A)
College graduate (B)
Ratio of wage inequality (C)
Note: C=(B-A)/A
Below college includes illiterate, self-educated, primary school, junior and senior high school, senior vocational school.
College graduate includes junior college, college, and graduate school.
Source: Council of Labor Affairs, Republic of China, Yearbook of Labor Statistics , 1987--1996.
31
1996
29292
47324
0.62
Table 2
Change in Relative Export Price to Import Price
Index: 1991=100
Index for export price (A)
Index for import price (B)
1985
116.74
133.13
1993
1994
99.53 100.09
97.41 102.39
1995 1995a
106.99 98.35
112.78 102.55
1986
111.81
115.79
1987
103.57
107.28
1988
100.82
106.22
1989
97.07
100.52
1990
99.46
102.89
1991
100
100
1992
94.62
93.08
12.41
0.27
-1.69
1.95
0.02
3.43
1.54
0.58
-4.42
-3.49
120.52
114.72
103.23
101.22
97.32
100.55
100
94.03
98.94
96.37
98.32
114.4
110.37
104.59
112.67
109.1
104.95
100
91.2
93.33
96.72
1.77
5.71
10.09
0.33
-7.38
-4.4
-2.83
-2.78
5.96
1996a 1997a
100 102.05
100
98.6
General Index
change in relative export
price to import price (C)
Specific
Index of export price for
Machinery and transport
equipments (A)
Index of import price for
basic manufactures (B)
Indexchange in relative export
price of machinery and
transport equipments to
import price of basic
manufactures (C)
110.07 104.22
Note: a: 1996=100
b: C=yearly change in A - yearly change in B
Source: Directorate-general of Budget, Accounting and Statistics, Republic of China, Statistical Yearbook of the Republic of China , 1996 & 1998.
32
98.82
11.4
4.2
3.45
100
98.06
100 102.57
-5.4
4.51
Chart 1
Wage Inequality and Export-Import Price Ratio
15
0.7
0.6
10
0.5
5
Change of general index of exportimport price ratio (left axis)
0.4
%
Change of specific index of exportimport price ratio (left axis)
0.3
0
1987
1988
1989
1990
1992
1993
1994
1995
1996
0.2
-5
0.1
-10
0
year
33
Ratio of wage inequality (right axis)
Table 3
R&D Expenditure Indicators
R&D expenditure
(NT $ 100 million)
Per capita R&D
expenditure
(NT$ million/
researcher)
R&D
manpower
(researcher)
Patents
Granted
99
106
164
169
192
224
254
287
368
438
548
715
818
948
1036
1147
1250
1380
1563
1.19
0.78
1.05
0.92
1.03
1.00
1.03
1.03
1.12
1.24
1.38
1.55
1.77
1.96
1.89
1.97
1.88
1.93
2.04
8345
13656
15633
18386
18580
22354
24600
27747
32863
35437
39742
46071
46173
48356
54905
58156
66478
71611
76588
3686
6633
6265
7462
7096
8592
8619
10332
10615
12355
19265
22601
27281
21264
22317
19032
29707
29469
29356
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Source: Council for Economic Planning and Development, Republic of China, Taiwan Statistical
Data Book , 1988 & 1998.
34
Table 4
Import Penetration in Taiwan
unit: %
Period
Total
OECD-7
NICs-3
Oil-exporting
countries
ASEAN-4
China
1952
100.0
83.3
9.7
0.0
0.5
n.a.
6.5
1955
100.0
83.9
3.2
0.0
2.1
n.a.
10.8
1960
100.0
81.3
2.1
4.7
2.6
n.a.
9.3
1965
100.0
78.4
1.9
0.0
4.4
n.a.
15.3
1970
100.0
74.7
3.1
3.2
6.7
n.a.
12.3
1972
100.0
70.6
3.7
6.9
6.7
n.a.
12.1
1974
100.0
67.7
3.4
10.4
7.0
n.a.
11.5
1976
100.0
65.0
2.9
14.4
5.7
n.a.
12.0
1981
100.0
57.7
3.8
19.1
5.4
0.4
13.7
1982
100.0
59.2
3.6
17.2
4.9
0.4
14.7
1983
100.0
59.9
3.1
15.1
4.9
0.4
16.6
1984
100.0
61.1
4.0
12.3
5.6
0.6
16.4
1985
100.0
60.9
3.9
10.1
5.7
0.6
18.8
1986
100.0
67.4
4.4
5.6
4.9
0.6
17.1
1987
100.0
67.1
5.2
5.2
4.8
0.8
16.9
1988
100.0
67.5
7.2
3.5
4.3
1.0
16.5
1989
100.0
65.2
8.3
3.4
4.3
1.1
17.7
1990
100.0
64.1
7.8
3.5
4.7
1.4
18.5
1991
100.0
63.7
8.2
2.8
5.5
1.8
18.0
1992
100.0
64.1
8.1
2.3
6.0
1.6
18.0
1993
100.0
63.2
7.9
2.3
6.4
1.4
18.8
1994
100.0
62.0
8.1
1.9
7.0
2.2
18.8
1995
100.0
60.9
8.9
2.1
7.0
3.0
18.1
1996
100.0
59.8
8.5
2.2
7.7
3.0
18.8
1997
100.0
59.0
8.9
2.2
8.5
3.4
18.0
Others
Note:
OECD-7: Japan, the USA, Germany, United Kingdom, France, Canada, and Netherlands
NICs-3: Republic of Korea, Singapore, and Hong Kong
Oil-exporting countries: Saudi Arabia and Kuwait
ASEAN-4: Malaysia, Indonesia, Thailand, and Philippines.
Source: Council for Economic Planning and Development, Republic of China, Taiwan Statistical Data Book , 1999.
Taiwan Economic Research Institute, Cross-Strait Economic Statistics Monthly (Taipei: Mainland Affairs Council,
Executive Yuan, ROC, November, 1998).
35
Table 5
Taiwan's Imports from ASEAN-4 and China
unit: $million
Philippines
ASEAN-4
Thailand
Malaysia
Indonesia
Total
China
Total
1988
242.3
341.9
943.4
613.4
2141
n.a.
2141
1989
238.5
390.2
887.5
706.2
2222.4
586.9
2809.3
1990
236.3
448
1003
921.6
2608.9
765.4
3374.3
1991
235.3
586.1
1409.4
1234.3
3465.1
1125.9
4591
1992
305.2
824.6
1829.2
1407.3
4366.3
1119
5485.3
1993
364.8
973
1938.9
1624
4900.7
1103.6
6004.3
1994
460.7
1108.8
2326.9
2114.4
6010.8
1858.7
7869.5
1995
632.2
1485.3
2953.7
2150.4
7221.6
3091.4
10313
1996
840.3
1671.7
3565.2
1184.5
7261.7
3059.8
10321.5
1997
1374.6
1926.9
4228.3
2184.7
9714.5
3915.4
13629.9
Source: Department of Statistics, Ministry of Finance, Republic of China, Monthly Statistics of Exports
and Imports, January 1998.
Taiwan Economic Research Institute, Cross-Strait Economic Statistics Monthly (Taipei: Mainland
Affairs Council, Executive Yuan, ROC, November 1998).
36