Download Taiwan-EU Economic Cooperation Agreement A Partnership for

January 2011
Taiwan-EU Economic Cooperation Agreement
A Partnership for Growth and Prosperity
DCACTIVE-14318909.1
Taiwan-EU Economic Cooperation Agreement
A Partnership for Growth and Prosperity
INTRODUCTION
Europe has identified Asia as a region vital to the future success of its pro-growth trade and
investment strategies. Previously, under the 2006 “Global Europe” strategy and more recently
under the 2010 “Europe 2020” initiative, the European Commission has outlined the critical roles
that trade and investment play in revitalizing Europe’s economy. A top priority in EU trade policy
now is to gain better access to Asia, home to the largest and fastest growing economies in the
world, through ambitious trade agreements.
FTAs have proliferated across Asia recently. The ASEAN-China (ASEAN+1) free trade area was
established on 1 January 2010, and an ASEAN-China, Japan and Korea (ASEAN+3) FTA may soon be
concluded. Discussions on the Trans-Pacific Partnership (TPP) and the Free Trade Area of the
Asia-Pacific (FTAAP) are also underway. Without question, the trend of Asian regional economic
integration will continue in the future. For Taiwan, the Economic Cooperation Framework
Agreement (ECFA) with mainland China, which entered into force on 12 September 2010,
represents an ambitious trade deal which dramatically strengthens Taiwan’s strategic position in
East Asia.
As the world’s 18th largest trading economy, eighth most competitive economy1, and fourth
best investment environment,2 Taiwan’s dynamic role in the global economy speaks for itself.
Taiwan now stands out for having the highest value-added exports and highest degree of
specialization among all Asian nations. Taiwan also adheres to the same policies regarding human
rights, democracy, labour and environmental standards, and climate change as the EU. As the
Commission stressed in its discussion paper, “Trade, Growth and World Affairs of November 2010,”
ambitious free trade agreements will benefit the EU’s economic growth. Building on Taiwan’s
strong economic fundamentals, an Economic Cooperation Agreement (ECA) between the European
Union and Taiwan would boost European growth and prosperity. As the EU focuses on ensuring
strong and sustained economic recovery, now is the time to evaluate and redefine the role that
Taiwan can play in the EU’s trade policy towards East Asia.
FIVE REASONS FOR THE TAIWAN-EU ECONOMIC COOPERATION AGREEMENT
1
Strong Macroeconomic Fundamentals:
Taiwan’s growth prospects and market potential meet the EU’s ”Global Europe” criteria
for FTA partners.
Taiwan’s economic and trade performance has bounced back dramatically since the 2008
global financial crisis. According to the latest statistics, Taiwan’s trade has surpassed its pre-crisis
1
Taiwan’s rankings in the World Competitiveness Yearbook, published by the International Institute for Management
Development (IMD), Lausanne, Switzerland, leaped from 23rd place in 2009 to 8th place in 2010—the largest
improvement among the countries of the world.
2 Based on the third quarter of 2010 “Investment Environment Risk Assessment Report,” by Business Environment
Risk Intelligence (BERI).
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level. Global trade volume in 2010 amounted to €362 billion, an increase of 41.3% compared to the
same period in 2009. Taiwan’s total exports during 2010 accounted for €189 billion, growing 37%
from the previous year; and its total imports reached €173 billion, expanding 47% compared to
2009. 2010 GDP growth is expected to reach 9.98% year-on-year.
Indeed, besides the economy’s return to growth, Taiwan continues
to enhance its internal business environment to better support foreign
partners in the market. According to the Business Environment Risk
Intelligence’s 2010 “Investment Environment Risk Assessment Report,”
Taiwan offers the fourth-best investment environment in the world. In
June 2010, the Taiwan government strengthened the investment climate
by passing the Statute for Industrial Innovation and the Income Tax Act,
by offering tax incentives for R&D activities and lowering the business
income tax rate from 25% to 17%. Moreover, Taiwan has adopted a
series of other reforms to encourage foreign investment opportunities,
including measures eliminating the minimum capital requirement for
starting a new business and the minimum limit for allocation of capital by
foreign companies for business use in Taiwan. Direct flights to Shanghai’s
Hongqiao Airport and Tokyo’s Haneda Airport have also been launched
from Taipei’s Songshan Airport, and flights to Seoul’s Gimpo Airport are
expected to follow soon. These flights will enable business travelers to
visit these four cities in one day. These developments are enhancing
Taiwan’s role as a hub for business operations in the Asia-Pacific region.
Bilateral trade
relations between
Taiwan and the EU in
2010
Total Trade volume:
€33 billion
Taiwan’s exports to
the EU: €19 billion
(29% increasing over
2009)
Taiwan was the EU's
19th largest trading
partner and its 7th
largest trading
partner in Asia in
2009.
An ECA with Taiwan would further enhance opportunities for EU
industries in a critical growth market. According to studies conducted by
the Chung-Hua Institution for Economic Research (CIER, a leading research center in Taiwan), a
Taiwan-EU ECA would boost Taiwan's real GDP by €934.7 million (an increase of 0.49%) and the
EU's real GDP by €2.41 billion. Assuming that the Taiwan-EU agreement comprehensively opens up
trade in services, Taiwan’s exports to the EU and the EU’s exports to Taiwan would grow by nearly
€2 billion annually. These impressive figures would be bolstered by the trade synergy created by
both the ECFA and ECA, while fortifying Taiwan-EU trade relations. Clearly, Taiwan’s economic
promise compares favorably with those Asian countries which the EU has concluded or is
negotiating free trade agreements, e.g., South Korea, India, Singapore, Malaysia, Vietnam, etc.
2
Ideal Manufacturing and Innovation Partnership:
Strengthening synergies between Taiwan and EU economies and leveraging Taiwan’s
regional supply chains and R&D leadership will position EU industries for long-term
growth and competitiveness.
European business collectively constitutes the largest group of foreign investors in Taiwan
with a cumulative value of €22 billion. The joint venture model many European firms have adopted
has very successfully combined European expertise with Taiwan’s local knowledge and talent. Yet,
there is still a great deal of potential for more cooperation between European and Taiwanese firms.
2
Taiwan’s government has targeted ten services industries 3 , six
emerging industries4, and four smart industries5 for developmental
support. Many of these represent areas in which European firms
lead the world and are also compatible with the EU’s vision of a
green-conscious society.
In the global information and communication technology (ICT)
production chains, Taiwan is a central component with 19 firms on
the OECD’s list of the world’s top 250 ICT firms, compared to 9
firms from Korea and 39 from the EU member states. In electronics,
Taiwan has achieved its global leadership position by taking
advantage of a unique vertical integration structure and holistic
industrial clusters. Its semiconductor manufacturing is unparalleled
in the world, particularly for IC foundry, packaging, and testing
operations. In the LED industry, forecasts indicate that Taiwan’s
production value will top €2 billion in 2010, accounting for 25% of
the global market share and making Taiwan the world’s 2nd largest
producer.
At a Glance
Excellent opportunities for
cooperation between firms
from Taiwan and the EU:
Taiwan has targeted the
medical devices, medicine
and health care, green
energy, intelligent green
building, invention patent
industrialization, high-end
agriculture, and culture and
creativity industries for
developmental support.
（For more formation please see
http://www.cepd.gov.tw/enconte
nt/m1.aspx?sNo=0013678)
Expansion into the “greater
China” market and
enhancement of supply chain
networks throughout East
Asia:
Although it is well-known that mainland China has emerged as
the world’s factory, a large portion of “Made in China” products are
actually produced by Taiwanese firms operating in mainland China:
Taiwan can help boost some
e.g., nearly two-thirds of Chinese ICT exports are produced by such
of Europe’s most competitive
firms, and 10-20% of China’s exports to the EU originate from
sectors such as ICT,
Taiwanese-owned firms and subsidiaries. While production is done
automobiles, pharmaceutical
in mainland China, the core value of the product, including the
products, and
telecommunication, financial,
intellectual property, remains in Taiwan. Taiwan itself is a
business, transport and
progressively higher-value hub for global ICT production. This
environmental services. EU
presents opportunities for EU exporters and foreign investors to
companies can rely on Taiwan
allocate production more efficiently in East Asia and better serve the regional
market.
as a stable,
high-value hub.
Closer integration of Taiwan and EU ICT industries would allow EU firms to better access
existing Taiwan networks to produce niche products that would be too costly to manufacture at
home due to insufficient gains from scale. Moreover, since hardly any production of key Taiwanese
products (e.g. laptops, wifi-routers, PDAs and finalized LCD monitors) actually takes place in
Europe, this integration would not have any significant impact on employment in the EU, and EU
firms and consumers would benefit without incurring the political or economic costs.
As for Europe’s 2020 vision, Taiwan is an ideal partner to help the EU achieve its “Innovation
Union” goals while expanding investment in R&D activities. Foreign businesses have long been
attracted to set up R&D centers in Taiwan. As of 2009, 42 foreign companies maintained R&D
operations in Taiwan. Encouraged by the signing of the ECFA and regional integration, a record 12
3
4
5
International healthcare, international logistics, music and digital content, MICE, internationalized
Taiwanese Cuisine, urban renewal, WiMAX, e-commerce in Chinese, education, and finance.
Biotechnology, tourism, green energy, health care, high-end agriculture, and the cultural creative
industry.
Cloud computing, intelligent automotive vehicles, smart buildings, and patent commercialization.
3
more foreign companies have applied to set up R&D centers in Taiwan as of the end of 2010.
These multinational enterprises cover a wide variety of innovative EU industries, such as machine
tools, green energy, cloud computing, and ICT, among others. In addition, Taiwan is an innovation
center, with 268 holders of U.S.-issued patents per million people, the highest figure in the world,
exceeding even that of the U.S. and Japan. All in all, with an ECA in place, European enterprises
could develop or process products to better fit Asia’s demand by taking advantage of Taiwan’s
R&D and manufacturing capabilities.
3
Commitment to Deep Reform:
Efforts to tackle “beyond the border” non-tariff barriers and regulatory issues will foster
conditions for comprehensive market access and growth.
Taiwan's development
and enforcement of IPR
protection
Taiwan’s IPR legal framework
has been fully consistent with
the TRIPS Agreement since its
accession to the WTO.
Amendments to Taiwan’s
Copyright Act include new
measures relating to P2P and
liability of internet service
providers.
The IP Court and the IP
Prosecutors Office of
the Taiwan High Prosecutors
Office were established in July
2008.
The piracy rate in Taiwan was
the third lowest in Asia for
2008 and 2009, following
Japan and Singapore.
The greatest gains from liberalization of trade in goods under an ECA
would come from the elimination of non-tariff barriers (NTBs).
Non-tariff restrictions on services in Taiwan amount to an overall
tariff equivalent of 37.31%, twice the level of EU services protection
(17.26%), though below that of Korea’s (46.41%).6 Recently, the EU
has planned to initiate negotiations on FTAs with Singapore, Vietnam,
India, Malaysia and Canada that cover services, government
procurement, and IPR. These FTAs reflect the EU’s focus on issues
relating to services and investment market access, GPA, IPR,
restrictions on the export of raw materials, and regulatory barriers
that would bring greater economic and trade benefits.
According to the 2010-2011 position papers released by the
European Chamber of Commerce Taipei (ECCT), European businesses
are concerned about non-tariff barrier issues including testing
requirements and standards for electronic products, automobiles,
and pharmaceuticals. Moreover, in the services sector, with
regulatory hurdles hindering the development of financial and utility
services, Taiwan launched an initiative to facilitate regulatory reform
in July 2008. Since then, 571 various improvements have been made,
including streamlining administrative procedures, boosting
government efficiency and effectiveness, and eliminating obstacles
to business investment.
Regarding testing requirements and standards issues, the Taiwan government has taken
significant steps toward resolving them, e.g., Taiwan has accepted the Evolution Coefficient to
calculate the Conformity of Production (COP) emission test results for Euro 5 compliant vehicles;
decided that Molded-Case Circuit Breakers (MCCBs) that have already been tested and are being
sold in the market will not require re-testing following new CNS14816-2 standard regulations; and
is addressing outstanding issues which have been raised by the ECCT.
6
The European Centre for International Political Economy, “Beyond Geopolitics – The Case For A Free Trade Accord
Between Europe And Taiwan,” p. 41.
4
However, despite these improvements, many obstacles to Taiwan’s market remain unresolved
for European businesses. A Taiwan-EU ECA could eliminate some barriers and would make the
market more accessible for European products through adoption of international standards for
financial services, acceptance of EC and ECE certificates and implementation of the General Product
Safety Act to enhance market surveillance. A Taiwan-EU ECA would provide a vehicle to advance
structural reform of Taiwan’s regulatory environment in a number of critical sectors, as well as
lower “beyond the border” non-tariff barriers and accelerate regulatory harmonization, facilitating
lasting market access opportunities for key EU products.
4
Unprecedented Access to “Greater China”:
The conclusion of ECFA will allow EU companies in Taiwan to safely expand into
mainland China.
Now that Taiwan and mainland China have signed the
landmark Economic Cooperation Framework Agreement (ECFA),
and will initiate negotiations for agreements on trade in goods,
services, investment and dispute settlement in 2011, Taiwan can
truly become both a regional and global export and innovation hub
for EU members across priority industries. The ECFA will allow
Taiwan’s distinctive niche downstream products to develop a
significant following in the world’s largest consumer market.
Moreover, the convenience of the “three links,” 7 the lowered
business income tax rate, and other aspects of our improved
investment climate will enable Taiwanese industries to make
existing cross-strait supply chains even more comprehensive. This
will mark the next phase of dynamic cross-strait market expansion
by creating unprecedented opportunities for Taiwan’s economy and
core trading partners like the EU, which have a presence in both
Taiwan and mainland China.
Mainland China opened eleven services sectors to Taiwan in
ECFA’s Early Harvest process. In financial services, it has committed
to allowing Taiwanese banks handle ordinary RMB-denominated
business two years earlier than other foreign banks. Taiwanese
banks will also be able to underwrite RMB business by
Taiwanese-invested companies three years ahead of other foreign
banks. By the end of 2010, the First Bank, Cathay United Bank,
Chang Hwa Commercial Bank and Taiwan Cooperative Bank had
opened branches in Shanghai, Kunshan, and Suzhou.
Benefits of Early Harvest
Economic model (estimates):
 60,000 job opportunities.
 0.4% growth of GDP.
 Zero tariff rates for 806
items worth €12.5 billion.
Taiwan’s machinery and
textile producers to be
positioned more
competitively against
Japanese and Korean
companies in the mainland
China market.
New opportunities in various
services sectors to be
created, e.g. Taiwan’s
investors enjoy preferential
treatment of sole
proprietorship while foreign
investors are limited to joint
ventures.
(For complete Early Harvest
List, please see
http://www.ecfa.org.tw/Rel
atedDoc.aspx）
The ECFA will also allow EU companies in Taiwan to safely extend their reach into mainland
China. European companies face increasing difficulties in doing business in mainland China in
terms of protecting proprietary information, experiencing standards discrimination, and
accessing services markets. Furthermore, European businesses in mainland China often
7
The three links include direct postal, transportation (especially airline), and trade links between mainland China and
Taiwan.
5
encounter cultural and administrative barriers. In contrast, Taiwan, which shares a common
culture with mainland China, has already achieved a large degree of business success there. With
nearly seamless access to mainland China under the ECFA, Taiwan can serve as a bridge for EU
companies by minimizing risks with its stable business environment based on a strong rule of law
and protection of IPR. Compared to mainland China, Taiwan has significantly stronger
technological capabilities, efficiency, and a more stable legal and regulatory environment.
Most recently, Taiwan and mainland China have
signed a Cross-strait Cooperation Agreement on
Medicine and Public Health Affairs that will enhance
The
EU-based
RT
Mart
cooperation in four main areas: (1) the prevention and
International provides one example
control of infectious diseases, (2) the safety
of a foreign company that has
achieved success in mainland China
management and the research and development of
by cooperating with Taiwan’s
medicinal products, (3) the researches and exchanges
businesses. Since establishing its
in traditional Chinese medicine and the administration
first mainland store in 1998, RT
Mart has gone on to establish 130
of the safety in traditional Chinese medicinal
stores, and it is estimated that by
materials, and (4) emergency assistance for medical
2011 it will break the 200 mark. Its
treatments. Taiwan can serve as a suitable platform
market share has already surpassed
for testing healthcare markets in the Asia-Pacific, as
that of Carrefour and Wal-Mart.
(For more success stories, please see
well as function as a hub for collaboration with the EU
http://investtaiwan.nat.gov.tw/library/
in integrating clinical data to produce pharmaceuticals
main_eng_general.jsp)
and establish cooperation with health providers in
mainland China. Thus, a Taiwan-EU ECA would provide
a vehicle to smoothen and strengthen the cooperation on medicine and public health issues.
Success Story
5
Stable Geopolitical Environment:
The steady development of cross-strait trade creates a stable environment for expanding
EU presence across Taiwan, mainland China and the Asia-Pacific.
The thawing of cross-strait relations in the past two years
is shifting the geopolitical calculus. The ECFA provides a
framework to deepen trade and investment liberalization, and
will make it easier for Taiwan to negotiate FTAs with partners in
East Asia and beyond. The ECFA is Taiwan’s stepping stone to
stronger links with other trading partners and facilitates the
next phase of its integration with East Asia, thus allowing
Taiwanese businesses to compete more fairly against
competitors in other countries.
Taiwan is a separate customs territory, and a full member
of the WTO, APEC and the ADB. It has bilateral investment
treaties (BITs) with several Asian countries, avoidance of double
taxation and intellectual property agreements with various EU
member states, an Open Skies agreement with the U.S., an air
services agreement with the United Kingdom, and bilateral
treaties on cooperation on intellectual property rights with
6
At a glance
A List of EU Members with
Avoidance of Double Taxation with
Taiwan:
Netherlands
2001
UK
2002
Sweden
2004
Belgium
2005
Denmark
2005
Hungary
2010
France
201
twenty countries, some of which are members of the European Union. Hence, a Taiwan-EU ECA
would be a natural extension of the important EU-Taiwan economic partnership, in line with the
Europe 2020 plan.
Taiwan is not only a knowledge- and innovation-based economy; it is also one of the few
liberal democracies in East Asia. Taiwan’s policies regarding human rights, democracy, labour and
environmental standards, and climate change policies are based on the same values as in the EU,
in contrast to the situations prevailing in some other Asian countries. Foreign investors in Taiwan
can have full confidence that they will enjoy a very promising business environment while also
securing sustainable benefits derived from shared values and perspectives.
The signing of an ECA will allow EU investors to build on expanding cross-strait trade and
regional ties. The ECFA provides the basis for a stable environment for expanding the EU’s
commercial presence across Taiwan, mainland China and the Asia-Pacific. The ECFA also solidifies
Taiwan’s position as a future participant in regional economic integration efforts. For example, not
long after the signing of the ECFA, both Taiwan and Singapore announced in August 2010 that they
had agreed to explore the feasibility of an “Agreement between Singapore and the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership” (ASTEP).
Negotiations on this agreement will begin early this year. The evolving Free Trade Area of the
Asia-Pacific (FTAAP) provides a region-wide framework in which Taiwan will participate. Signing an
ECA with Taiwan will open these same opportunities to EU firms.
While such regional economic integration continues, existing commercial opportunities
remain significant and vibrant. Taiwanese businesses have already become key investors
throughout Southeast Asia. Taiwan is Vietnam’s top FDI source, Thailand’s third leading FDI
source (after Japan and the US), Malaysia’s fifth, the Philippines’ seventh, and Indonesia’s eighth.
Taiwan’s companies already have well established and tightly woven supply chain networks in
mainland China. With the addition of the ECFA and ECA, the EU, Chinese and Southeast Asian
networks will be linked together more effectively than ever, placing EU companies at the center
of a new and powerful Asia-Pacific product manufacturing and innovation chain.
CONCLUSION
As Taiwan and the EU focus on economic recovery and job creation, both sides face a
compelling opportunity to position our economies to reap benefits for decades to come. By
building on Taiwan’s strong economic fundamentals, integration with the “greater China” region
and the Asia-Pacific, world-class manufacturing and R&D capabilities, commitment to
comprehensive “beyond the border” reforms, and stabilization of the cross-strait environment, a
Taiwan-EU Economic Cooperation Agreement (ECA) would manifest these five clear rationales to
revitalize European growth and prosperity in alignment with the Europe 2020 plan.
A Taiwan-EU ECA has the potential to unlock dynamic gains from triangular
(EU-China-Taiwan) trade and investment, as developments in ICT supply chains have amply
demonstrated. An ECA would eliminate tariffs on goods, reduce non-tariff barriers in industrial
sectors, and include comprehensive commitments in services and investment. Already one of the
EU’s fastest growing export and foreign investment markets, Taiwan, under the ECFA, can
7
become a true regional and global export and innovation hub for EU members across priority
industries. By offering a safe environment for European investors and their intellectual property,
and an open door to business with mainland China, Taiwan stands a better chance of garnering
business and political support in the EU for a bilateral ECA. Taking into account the impact of the
ECFA and ongoing Asia-Pacific regional economic integration, we believe that now is the
appropriate time for the EU to re-evaluate the central role Taiwan can play in its East Asian trade
policy. Accordingly, it is time to ensure that Taiwan, as a regional trade, investment and
innovation center in the Asia-Pacific, can both complement and reinforce the vision for the EU’s
global trade strategy.
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