After Cross-Strait Rapprochement: A Conceptual Analysis of Potential Gains to Europe from China-Taiwan Economic Cooperation

Is it time for the European Union to revisit its trade policy strategy towards Taiwan? This paper takes a closer look at the potential effects on EU trade and investment that are likely to emerge as a consequence of deepened commercial relations between Taiwan and Mainland China. Although Taiwan is not one of Europe’s top trading partners, it is an important trading partner and it plays a critical role in the Asia Pacific region, especially through its dense production networks that have spearheaded the explosion in intra-regional supply-chain trade. It is an export intensive economy with stable GDP growth – and now also with rapidly expanding trade relations with Mainland China. Taiwan also has a triangular trade relation with Europe and China as Taiwan has been a leading investor in assembly factories in China that export to Europe. Its close cultural ties with, and increasing economic presence in, Mainland China create interesting opportunities for European business to integrate with the larger Chinese market via Taiwan. Taiwan is increasingly also an innovation hub in other electronics, where it has a strong profile, and other sectors that are of interest to Europe. EU-Taiwan trade and investment relations have grown in the recent past. However, the growth potential remains significant and there are still barriers to trade and investment that prevent both sides from exploiting that potential.