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Taiwan - Direction
of Trade
In tune with the KMT's external economic policy of diversification,
Taiwan's trade has been shifting away from its traditional markets
of the US and Japan towards the newer markets of Europe, Asia and
the Pacific region. The diversification of Taiwan's trade can be
attributed to the following factors: a way of internationalising
more the Taiwan economy - thereby playing a role in the KMT's flexible
diplomacy; and other 'strategic' reasons - especially as a means
of ensuring a steady flow of oil. Keenly aware of Taiwan's dependence
on raw materials for its economic survival, the government has been
actively diversifying its sources of imports.
Since 1976, Taiwan has significantly reduced its dependence on
oil from the Middle East. In 1976, imports from the Middle East
constituted 15.7% of Taiwan's total imports. Aware of past experiences
where political instability in the Middle East has threatened its
oil supply, by 1989, Taiwan had reduced its dependence on Middle
East imports to 5.4% of total imports for that year.
Graph 5 reflects even further the decline of the US in Taiwan's
export markets, and the switch to the European market. While Taiwan's
exports to the US declined 12.58 percentage points from 1984 to
1989, exports to Europe actually rose by 6.46 points. As for Australia,
it seems unlikely it will greatly increase its presence in the Taiwan
export market over the next few decades, and probably will remain
around the 2% to 3 % mark.
Graph 5
Proportion of Taiwan's
Exports to Various Destinations (1976-1989)
Note: All values are expressed in percentages of Taiwan's total
exports for the calendar year. Source: ADB, Key Indicators of Developing
Countries, 1990.
An examination of patterns of Taiwan's imports - especially from
the US and Japan - highlights even further reasons behind Taiwan's
market diversification strategy. Taiwan's favourable balance of
trade to the tune of $US 12 billion in 1989 with its traditional
trading partner - the US - has been the major element behind increasing
pressure to appreciate its currency, remove import restrictions
and lower tariffs. The US has even gone as far to suggest removing
Taiwan's 'Most Favoured Nation' status in its foreign trade.
Graph 6
Proportion of Taiwan's
Imports from Various Destinations (1976-1989)
Note: All values are expressed in percentages of Taiwan's total
imports for the calendar year. Source: ADB, Key Indicators of Developing
Countries, 1990.
Two more factors in Taiwan's market diversification strategy therefore
become evident. US pressure on Taiwan has forced it into searching
for newer export markets, in preference to relying so much on the
export of its commodities to the US and aggravating further its
displeasure at Taiwan's enormous trade surplus. During the next
decade, it can be expected that Taiwan will increasingly turn to
other trading partners - such as Eastern Europe, the (ex) Soviet
Union, Australia and Southeast Asia - to maintain the quantity of
its overseas exports. This in turn will reduce pressure for structural
reform in the Taiwan economy.
In contrast to Taiwan's favourable balance of trade with the US,
it suffers a huge trade deficit with Japan amounting to some $US
7 billion in 1989. It also can be expected that Taiwan will try
to reduce this deficit by turning to other countries for imports.
In summary, the KMT's diplomatic initiatives in combination with
the genuine economic need to mix Taiwan's trade markets indicate
that for some time, Taiwan will continue diversification of its
import and export markets. Although Europe probably will be the
main beneficiary of such reform, other smaller countries such as
Australia also will find there are ample opportunities to enter
the Taiwan arena.
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