Taiwan Inc.: A home for global business

Article Highlights

  • Taiwan has an opportunity to pursue expanded, speedier economic liberalization.

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  • Having signed the ECFA with China in 2010, Taiwan is attempting to expand its external trade.

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  • Taiwan enjoys an improved relationship with China, but faces a largely inert American policy toward itself.

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Executive Summary

Taiwan, Inc.: A home for global business

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With the signing of its economic cooperation framework agreement (ECFA) with China in the rearview mirror, Taiwan now has an opportunity to pursue expanded, speedier economic liberalization. First and foremost, this will enrich Taiwan and benefit its people. Second, a more open economy will naturally draw increased investment from American and other multinational companies that, in turn, will lead their respective governments to take a greater interest in Taiwan’s security and prosperity.

Taiwan should undertake a set of local economic reforms to reduce government interference with business and to strengthen the island’s comparative advantages. In other words, Taiwan’s general policy should be to make itself more attractive as a commercial hub.

Based on interviews with executives at multinational companies operating in Taiwan, as well as with a few key policy advisers, this paper suggests measures designed to make Taiwan a commercial hub. We identify Taiwan’s critical strengths and weaknesses and indicate the improvements that will make the island a commercial center. Our interviews and investigations point to six often connected areas where improvement is critical and where purely domestic actions are most valuable:

1. Traditional government policy involving regulation and taxes;
2. Financial policies (both monetary and regarding financial market reform);
3. Education and the labor force;
4. Targeting areas of comparative advantage;
5. Leveraging ECFA; and
6. Marketing Taiwan internationally.

In pursuing our outlined course, Taiwan could improve the welfare of its people. It could also increase its international space without long and uncertain multilateral diplomatic negotiations. With Taiwan as a commercial hub, more people would recognize the island’s importance, more expatriates would live there, and more people in the United States and around the world would have a stake in its success. This would help enhance Taiwan’s security, make it less likely that China would underestimate the international community’s interest in the island’s future, and, in turn, Taiwan could become an even more attractive destination for international business.

Dan Blumenthal is the director of Asian Studies at AEI where Gary J. Schmitt is codirector of the Marilyn Ware Center for Security Studies and Michael Mazza is a research fellow in Foreign and Defense Policy Studies. Derek Scissors is a senior research fellow for economics at The Heritage Foundation’s Asian Studies Center, and Rupert Hammond-Chambers is the managing director for Taiwan at Bower Group Asia. 

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About the Author

 

Dan
Blumenthal
  • Dan Blumenthal is the director of Asian Studies at the American Enterprise Institute, where he focuses on East Asian security issues and Sino-American relations.  Mr. Blumenthal has both served in and advised the U.S. government on China issues for over a decade.  From 2001 to 2004, he served as senior director for China, Taiwan, and Mongolia at the Department of Defense.  Additionally, he served as a commissioner on the congressionally-mandated U.S.-China Economic and Security Review Commission since 2006-2012, and held the position of vice chairman in 2007.  He has also served on the Academic Advisory Board of the congressional U.S.-China Working Group. Mr. Blumenthal is the co-author of "An Awkward Embrace: The United States and China in the 21st Century" (AEI Press, November 2012).

  • Phone: 202.862.5861
    Email: dblumenthal@aei.org
  • Assistant Info

    Name: Shannon Mann
    Phone: 202-862-5911
    Email: Shannon.Mann@aei.org

 

Gary J.
Schmitt

 

Michael
Mazza
  • Currently the program manager for AEI's annual Executive Program on National Security Policy and Strategy, Michael Mazza has studied and lived in China. At AEI, Mr. Mazza studies defense policy in the Asia-Pacific, as well as Chinese military modernization, cross-Strait relations, and security on the Korean peninsula. He also writes regularly for AEI's Center for Defense Studies blog. In his previous capacity as a research assistant in AEI's Foreign and Defense Policy Studies department, Mr. Mazza contributed to studies on American strategy in Asia and on Taiwanese defense strategy. He is a 2010-2011 Foreign Policy Initiative Future Leader.
  • Phone: 202-828-6027
    Email: michael.mazza@aei.org

 

Derek M.
Scissors
  • Derek M. Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends. In particular, he focuses on the Chinese and Indian economies and US economic relations with China and India. Scissors is also an adjunct professor at George Washington University, where he teaches a course on the Chinese economy.

    Before joining AEI, Scissors was a senior research fellow in the Asian Studies Center at the Heritage Foundation. He has also worked in London for Intelligence Research Ltd., taught economics at Lingnan University in Hong Kong, and served as an action officer in international economics and energy for the US Department of Defense.

    Scissors has a bachelor’s degree in economics from the University of Michigan, a master’s degree in economics from the University of Chicago, and a doctorate in international political economy from Stanford University.

  • Phone: 202.862.7168
    Email: derek.scissors@aei.org
  • Assistant Info

    Name: Alex Coblin
    Phone: 202.419.5215
    Email: alex.coblin@aei.org

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