Mutually Beneficial: Trade between the U.S. and Taiwan is at its highest level in decades
When we think of Taiwan, vast, modern cityscapes, soaring mountain peaks and beautiful beaches instantly come to mind. Those with experience in world economics may also know that Taiwan maintains a reputation for democratic and economic freedom on the Asian continent. But what lies beyond a gorgeous travel destination and a contemporary democratic economy is a huge trans-Pacific financial driver, and moreover, one of the United States’ most important trade allies.
Trans-Pacific Trade by the Numbers
According to the U.N., Taiwan has the 57th largest population in the world in 2021 on an island about 11% the size of California. This makes it even more impressive that Taiwan is the United States’ 9th largest trading partner. Bilateral trade – the importing and exporting of goods, services, and materials – is larger (and more equal) than many more vast regions on the globe.
Among other surprising facts about U.S.-Taiwan trade:
- Taiwan is the 8th largest export market for U.S. agricultural products, including the 5th largest for fruits and vegetables, 4th for poultry and 6th for U.S. beef.
- Taiwan is the 4th largest U.S. Pacific trade market, after China, Japan and South Korea.
- Taiwan-affiliated companies support over 373,000 well-paying U.S.-based jobs.
Aside from substantial amounts of agricultural trade, Taiwan is the 3rd largest destination for U.S. energy exports. Beginning last year, Taiwan was slated to purchase over $35.8 billion worth of liquid natural gas (LNG) over the next 25 years.
In addition, Taiwan accounted for 30% of U.S. semiconductor exports, making it the largest semiconductor market in the world.
While exports from the U.S. are numerous, the trade flow functions in both directions. One major export from Taiwan is jobs – thousands of U.S. jobs are firmly tied to the Taiwanese market. Taiwanese companies are also increasing their output of high-tech goods, specifically chipsets for the increasing market of automobiles that use advanced technology (e.g., electric or hybrid vehicles).
Finally, Taiwan has made enormous investments in stateside economies beyond job creation, investing in infrastructure, development, and other facets of trade. Many of these investments involve newer, tech-heavy sectors like medicine, information technology and innovative and renewable materials, such as smarter plastics. All said, Taiwan spent $47 billion in economic infrastructure in 2019 alone.
Going forward, Taiwan is slated to invest even more. In 2020, Taiwanese company TSMC announced plans to build a semiconductor fabrication plant in the American Southwest. The investment will create over 1,600 jobs immediately in Arizona, with many more ancillary roles being created through a further need to support the factory and its surrounding infrastructure.
Underscoring the importance of U.S.-Taiwan trade is Taiwan’s participation in the SelectUSA Investment Summit, where they have led the largest delegation for two years in a row (from 2018-19). So important is trade between the two countries that Taiwan will continue to be a major voice at this year’s Summit, which is being held virtually for the first time.
SelectUSA, overseen by the U.S. Department of Commerce, holds its summit yearly to promote bilateral trade with foreign companies, from established multinationals to startups. While hundreds of nations participate, Taiwan’s influence on the event comes from its position as a non-competitive trade partner. Taiwan and the U.S.’ industries and imports/exports trend towards being complementary, creating a robust flow of goods, materials and services both east and west.
SelectUSA, as both a cheerleader and a spotlight operator for participant nations, give a huge amount of visibility to countries like Taiwan that share in the goals of U.S. international economic development. The Summit, which begins today (after not occurring last year due to the global pandemic), will pair investors, business owners and national representatives all with similar goals: increasing commerce, trade opportunities, and smart, mutual growth.
Roots of the Partnership
Why Taiwan and the U.S., exactly? This impressive trade balance is created from several factors. Historically, Taiwan has been able to shift its economy from an agrarian-based, aid-receiving country in the 1960s to one of the world’s leaders in high-tech development and manufacture in an incredibly short amount of time, all while casting off any need for help and becoming an economic powerhouse and aid donor itself. With a firm focus on education, free-market practices and infrastructure development, Taiwan will regain the lead in chipmaking technology, debuting the next-generation 3 nanometer chip in 2022, according to a recent CNBC report.
The geographic location of the two countries also allows for simpler intermodal trade. Taiwan lies in the direct path of the Indo-Pacific sea trade, closer to critical U.S. ports – like the Ports of Los Angeles and Long Beach – than many on mainland Asia.
In addition, Taiwan has been ranked as one of the most “economically free” nations in the world according to the Heritage Foundation’s 2021 Index of Economic Freedom, besting close U.S. allies such as Germany and South Korea by offering less barriers to free trade. Self-described as a “beacon of democracy,” Taiwan offers like-minded business operations and similar democratic ideals to American companies.
Furthermore, Taiwan’s role in trade moves beyond private business and into the U.S. State Department’s larger Indo-Pacific Strategy. The set of directives, which sets the stage for a contemporary set of ideals for trans-Pacific relations and cooperation, offers a pivotal role for countries like Taiwan that support free and open markets and trade, while ensuring safety and peace of mind for those who travel the critical routes that deliver our next-generation technologies to our doorsteps.
To learn more about Taiwan and U.S. trade, please visit en.mofa.gov.tw.