the Taiwanese model
4. Practical conclusions for Europe
Taiwan’s economy offers various opportunities to European firms, however, there are limitations in several areas, which basically can be traced back to the non-conventional implementation of trade and investment policy measures which by and large attempt to limit foreign participation and influence in different markets. In this area, it is evident that European investments do not pose any risks to the nation’s economic security hence redressing policies regarding European investments would improve and strengthen economic ties between Taiwan and the EU.
19 It is mercantilist because economic growth is based on the dynamism of exports, whereas the sectors producing non-tradable goods and services are protected.
Csaba Moldicz Differences in East-Asian Economic Institutions and Consequences for European Countries or the Squaring of the Circle 67
The unsolved political questions have heavily affected Taiwan’s trade relations. To add to the problems, after early and profound successes in the implementation of the Economic Cooperation Framework Agreement signed between China and Taiwan, further advances have been limited by a growing sense of economic security, and economic independence in Taiwan.
From a European perspective, there are clear benefits from the cooperation to gain (see Table 3). The reason for this optimistic assessment is that Taiwanese firms’ capital and technology (e.g. ICT, solar panels) offer chances for firms in EU member states, especially in Central European countries, which still can be featured by suffering from capital scarcity and by the need for technology imports. Relatively low wages in Central European manufacturing firms could be incentives for Taiwan-FDI in the region as well, especially in Hungary, where the re-industrialization process of the economy has been supported by the government since 2010. Since the backbone of the Taiwanese economy consists of SMEs, specialised in ICT and other high-tech related areas, there are excellent opportunities for European SMEs as well.
However, these are limited by trade barriers that could be loosened by signing a comprehensive trade and investment agreement.
Table 3. Advantage and disadvantages of Taiwan – the European view
Area Advantages Disadvantages
Industrial policies
1. Innovation to buy (ICT, solar panels) 2. Cluster development – broad industrial 3. Smaller firms with cooperation base
opportunities
4. Smaller firms less vulnerable to external financing shocks
5. Net borrowing position is stronger than those of the competitors, consequently capital export to EU in form of FDI accessible
1. Smaller firms with small capital 2. Relative weakness in building global
brands
3. Lack of natural resources
Trade
1. The trade agreement with China (ECFA) gives plenty of opportunity for European firms to enter the Chinese market via Taiwan
2. Infrastructure, border efficiency and operating environment belong to the best in the world.
1. Excluding trade with China, most of the Taiwanese trade is regulated by the WTO, which can be assessed as a disadvantage compared to regional trade agreements
2. Market access, both domestic and foreign, is significantly lower than world average
Finances 1. High saving rates
2. Reduced exposure to global financial shocks
1. Limited access to financing for European firms in Taiwan
Monetary issues
1. Stability of financial markets
2. Sound government finances 1. Restrictions on foreign investments in bond markets
2. Limited access to the domestic banking market
3. Registration process for FDI
Csaba Moldicz
68 Differences in East-Asian Economic Institutions and Consequences for European Countries or the Squaring of the Circle
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