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International Trade
Exports
Since the 1950s, Taiwan's average growth rate of exports has out-stripped
its growth of GDP. This has been the main impetus behind Taiwan's
startling economic growth. Recently, this trend has slowed as the
gap between the growth of GDP and the growth of exports has narrowed.
Exports that formed the greatest percentage of Taiwan's GDP until
a peak of 52.7% in 1987 will fall to a predicted 35.9% in 1992.
From this, it can be assumed that while the phenomenal economic
growth Taiwan has experienced since the 1950s is slowing down, the
Taiwanese economy will not sink into stagnation. In 1985 only Singapore
and Hong Kong surpassed Taiwan's dependence on exports.
Concerning the composition of Taiwan's exports, Graph 3 shows that
Taiwan's exports are now almost completely dominated by manufactured
industrial products, as compared to the dominance of agricultural
products in its export trade during the 1960s.
Graph 3
Taiwan's Commodity
Composition of Exports (1952-1988)
Note: Figures are calculated as a percent of GDP
Source: Adapted and modified from Healey D.T., Taiwan's Economic
Future: Some Thoughts From a 1990 Vantage Point.
The rapid extinction of agriculture from the export scene in Taiwan
is a true testimonial to the successful industrialisation of and
structural change in the Taiwanese economy since the 1950s. The
emphasis of Taiwan's exports is now on manufactured articles, standing
at 98.3% in 1988. Taiwan's concentration on manufactured exports
is higher than in any of the other Asian countries listed. Most
of the major industries in Taiwan today are either export oriented,
or suppliers to export industries. The major emphasis is on capital
intensive, high-tech industries such as the sunrise industries.
Until recently the textile and footwear industries - which started
off as import substitution industries - were Taiwan's largest industries.
Today, these industries are regarded as 'sunset industries', and
rather than being based in Taiwan, they are either moving offshore
to the PRC or Southeast Asia, or becoming highly automated. Taiwan
will find it increasingly desirable to relocate much of its production
off-shore as the NT$ rises and labour becomes more expensive in
Taiwan.
As Taiwan becomes increasingly modern and industrially sophisticated,
its production will shift even more toward the high-tech industries.
The increasing importance of high-tech products in Taiwan's export
mix and the growth of science-based industrial parks such as the
one located in Hsinchu county will be at the vanguard of such developments.
Although the proportion of high-tech exports is not yet large in
comparison with other exports, they will inevitably assume increasing
importance.
Imports
In contrast to Taiwan's exports, Taiwan's imports are expected
to maintain their percentage of GDP at over 30%, while still maintaining
stronger growth than exports. As political and economic pressure
due to Taiwan's high trade and current account surpluses increase,
there is no reason to suggest that Taiwan's imports will fall in
the future. If GDP continues to expand at approximately 6% per year
therefore - a very conservative estimate - it can be calculated
that Taiwan's imports will grow to approximately US$ 94.5 billion
by the year 2000. This figure alone represents more than the total
imports for all Newly Industrialised Economies (NIEs) in 1985.
The main reasons for the increase in Taiwan's imports are: a higher
standard of living; huge foreign exchange reserves; reductions in
tariff barriers; appreciation of the NT$; and a more sophisticated
market demanding a wider range of goods from which to choose. Also,
increased democracy in Taiwan has stimulated domestic demand for
foreign goods as increases in freedom have increased citizens' needs,
desires and ability to buy abroad.
Graph 4 shows that agricultural products and industrial raw materials
are the dominant imports, and this trend should continue into the
1990s. The only likelihood that this make-up of imports will change
will be when tariff reductions and increases in personal incomes
lead to an increase in demand for consumption goods and manufactured
items.
Graph 4
Taiwan's Commodity
Composition of Imports (1952-1988)
Note: Figures are calculated as a percent of GDP
Source: Calculated from Healey D.T., Taiwan's Economic Future: Some
Thoughts From a 1990 Vantage Point.
The high value of Taiwan's total trade and the large percentage
of raw materials imported aptly displays Taiwan's economic base.
Of Taiwan's top ten imports in 1988, electronic manufactures was
the only non-primary commodity, standing at 17.5%. Of this 17.5%,
a large proportion is used in Taiwan's own manufacturing industries
and re-exported as finished products to third countries - for example,
computers. Extremely poor in natural resources, Taiwan must process
raw materials - either primary or secondary - by employing its efficient
and relatively low-paid labour force. Taiwan's dependence on food
and raw materials was second only to Hong Kong in 1988, and stood
at 62.8% of Taiwan's total imports for that year.
While Taiwan's energy imports constituted a minor 9.1% of total
imports - compared with other Asian countries, it was almost totally
dependent on these imports to sustain its economy. Only Singapore
- a city-state- and Hong Kong - a British colony - surpassed Taiwan's
90.9% dependence on foreign energy imports.
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