Borderlex’s Iana Dreyer spoke to Taiwan’s Deputy Minister for Economic Affairs C.C. Chen during his recent visit to Brussels. The conversation covered Taiwan’s pandemic-era trade strategy, the new global trend towards establishing ‘dialogues’ and ‘partnerships’ in trade – and the EU in all this.
How has Taiwan’s trade and investment fared in the China-US confrontation and during the pandemic?
Taiwan is a mid-sized economy. We depend very much on trade. Trade is our survival line. We must trade. When COVID-19 hit and US-China started, we were worried. In 2018 people thought we would be severely affected.
The government undertook some measures, including facilitating our companies that had invested in mainland China to invest in Taiwan or help them venture into South East Asia or India.
Taiwan ended up benefiting from this trade confrontation. Companies shifted their most advanced manufacturing capacity back to Taiwan.
We did not ask them to divest or withdraw from China. But we asked them to invest in Taiwan as a risk hedging measure. Since then, Taiwanese firms pledged US $ 57.7 billion in investments and created more than 130000 jobs at home. That was very helpful to the economy.
We increased our trade with 18 countries that are part of our New Southbound Policy in South and South East Asia – and with the United States.
With the European Union there has not been much growth. So we are hopeful that we can also increase our trade and investment with Europe.
The EU has launched a Trade and Technology Council with the US and a digital partnership with Japan. The US launched an Indo-Pacific Economic Framework. Taiwan was not included in any of these initiatives. How do you see this?
I tend to ask: What is the end-goal of these initiatives?
They stem from the fact that having trade rules is not enough. We have created so many rules for trade in the past decades, in the World Trade Organization, in free trade agreements. People found out that we need something pragmatic, down-to-earth, to create jobs. My observation is that this is the origin of these initiatives.
These dialogues create the political willingness to talk, to exchange ideas and to find ways to collaborate. They compensate where trade liberalisation has proven inadequate.
From Taiwan’s perspective: We are experienced in meeting challenges at multilateral level. When we want to join a group there is always a challenge. But we never give up, we keep trying. And we are always pragmatic.
We work with the US, we work with Japan, we work with southern and south-east Asian countries individually, bilaterally or as a group on a project-basis. Trust us, we are very creative, very accommodative and pragmatic.
In its new its Indo-Pacific strategy, the EU has identified Taiwan as a partner to tackle a range of challenges such as supply chain security. What are your hopes from a formal dialogue with the European Union?
We need a government-to-government dialogue to raise the relationship’s profile and increase attention of the business community to each others’ markets.
We need to have a dedicated platform to address some targeted policies, such as supply chain cooperation, digital trade, people-to-people exchanges, science and technology collaborations and regulatory cooperation. One of the most important areas I would say is standardisation.
We need to make an inventory – I don’t want to prejudge what will be the subject matters of discussion. We can pick from the basket of topics we work on with the United States as part of our new EPPD dialogue with Washington or those discussed by the EU with the United States [in the TTC].
The European Commission agrees that we are like-minded partners, that we need to have more collaboration. We need to set goals and work towards those goals.
The European Union is trying to attract investment in semiconductor manufacturing via notably its European Chips Act. Why have Taiwanese firms – who are leaders in this field – not made a major fab investment in Europe?
This is partly because of market forces. The European industrial structure is strongly shaped by its automotive sector.
With respect to chips, the automotive sector requires a more mature fabrication process. The chips have more value when you put them in a cell-phone than when you integrate them into a car. We supply automotive chips, but this happens through many intermediary layers and suppliers. We don’t have an end-customer in the EU.
But in fact our companies are interested in investing in Europe. The most recent case is the attempt by the Taiwanese firm GlobalWafers to merge with Germany’s Siltronics. The deal did not go through. If it had, these companies would have been the second largest company in this sector.
Our companies need to learn how to invest in Europe. Both sides have a learning curve.
Taiwanese companies are also starting to (re-)discover Central and Eastern European markets.
The situation in Lithuania – the economic coercion – is not something we want to see. We had to come out and support Lithuania. The silver lining is that we were made to come to Lithuania. Our business people discovered its strengths in basic research. We found a lot of complementarities. We discovered a very industrious workforce and a civilisation of intellectual property protection.
We also have Taiwanese companies that are already invested in Central Europe and making good profits.
This is something we could develop further.