Taiwan Finds New Position amid New US-China-Taiwan Relations

By Liu Chia-yu

Looking ahead to 2021, Taiwan Research Institute (TRI) President Wu Tsai-yi said, by citing surveys by major research institutions, that according to the International Monetary Fund (IMF), the global economy would gradually recover to its original level of about 3.5% by 2025 following a rebound in 2021, butthat the decline would be greater in advanced countries than in emerging markets and developing countries. In terms of global trade volumes, the World Trade Organization (WTO) forecast that world merchandise trade would fall by 9.2% in 2020 and rebound by 7.2% in 2021, tilting towards a weak recovery scenario, with a large degree of uncertainty about future trade trajectories depending on national policy measures and the severity of the pandemic.

The US-China Relationship Affects the Subsequent Global Economy and Trade

In the global economic outlook, the outbreak of COVID-19 and changes in US-China relations will continue to be two critical influences, with the US-China ties being subject to uncertainties on the part of the US government.
The US-China tensions were heating up from 2018,with the trade and tech disputes between the two countries escalating all the way to January 2021 when former US President Donald Trump, before stepping down, has signed an executive order prohibiting transactions with eight Chinese apps, including Ant Group's Alipay, Tencent's QQ Wallet, Tencent QQ and WeChat Pay on the grounds of cybersecurity threats.
However, the installation of Democratic President-elect Joe Biden on January 20, 2021 will usher in a new era with respect to the strained relations between the two sides.
The Biden administration's new approach to US-China relations has attracted global attention. In this regard, the Chung-Hua Institution for Economic Research (CIER) analyzed that the Biden administration's advocacy of international cooperation and multilateralism will shift its policy away from Trump's radical "America First" line, but the pattern of confrontation between the US and China is not expected to change, as Biden will still see China as a rival, but will tend to have a competitive and cooperative relationship with Beijing,with the confrontation projected to ease. In addition, as the US will return to the international community and prioritize the full restoration of alliances and partnerships, a ''new cold war'' can be averted by cementing ties with allies.
At CIER's "Post-US-Election US-China-Taiwan Economic and Trade Interaction Outlook and Implications" seminar, Roy Lee,deputy director of the CIER Taiwan World Trade Organization and Regional Trade Agreements Center, made a specific point that in recent years, public opinion in America has been rising against China, i.e. the so-called "New Washington Consensus," so even if Biden takes power, the fact that American society regards China as a threatening competitor will not change. Therefore,the US and China will remain confrontational in the upcoming years, but the situation will be more moderate.
"The US-China conflict was like a 'boxing match' during the Trump administration, but it will switch to 'tai chi' under Biden, a relationship of competition and coexistence." Roy Lee, citing incoming US national security adviser Jake Sullivan's views on US-China relations, said that future US-China relations would be "like the Cold War but not the Cold War," and that bilateral trade between the two countries would continue, but the tariff measures imposed in the trade war would probably persist,as would the tech dispute, although the extent to which both sides would strike would remain to be seen.

The Taiwanese Government will Adopt Five Strategies to Maintain Close Ties with the US

In the light of the new US-China relationship, what will happen to Taiwan-US-China relations will influence the subsequent foreign economic and trade policies of the Taiwanese government, as well as the global presence strategies of Taiwanese companies.
The Ministry of Economic Affairs' Bureau of Foreign Trade has pointed out that Taiwan and the US have been interacting closely and cooperating with each other, and recently launched a high-level "Taiwan-US Economic Prosperity Partnership (EPP) Dialogue" and signed a five-year memorandum of understanding (MOU) that can be extended for another five years, covering various economic cooperation issues, such as global health security, science and technology, 5G and telecommunications security, supply chains, women's economic empowerment, infrastructure cooperation, investment screening, etc. In terms of infrastructure cooperation, Taiwan and the US will work together to promote investment in infrastructure in the countries in the Indo-Pacific region and covered by the New Southbound Policy. On the other hand,US President-elect Joe Biden's concern for the domestic economy in the midst of the global pandemic has rendered the recently concluded EPP Dialogue even more important.
The governments of both sides wish to step up dialogue and collaboration in the high-tech supply chain including 5G, and other major technological and economic strategies, which are issues of concern to the US regardless of political affiliations and are mutually beneficial cooperation mechanisms for the two countries.
Taiwan-US relations have been warming up for some time, CIER said, demonstrated by the recent inaugural EPP Dialogue, a significant milestone in economic relations between the two countries, which not only symbolizes a win-win situation for both sides, but also highlights that Taiwan and the US will be able to combine their strengths and engage with each other in a way that is closer and more comprehensive under the global economic strategic partnership.
In his keynote speech at the "Post-US-Election USChina-Taiwan Economic and Trade Interaction Outlook and Implications" seminar, Minister Without Portfolio John Deng presented five responses to the new US-China situation: First,Taiwan should seize the opportunity to restructure its supply chain and build trusting partnerships with partner countries,as exemplified by Taiwan Semiconductor Manufacturing Co's (TSMC) move to the US to set up a factory; second, strive to join global regional economic integration; third, strengthen cooperation with traditional allies; fourth, continue to promote its New Southbound Policy; and fifth, deepen country-tocountry industrial cooperation with the US, Europe and Japan.
It is true that the new global industry supply chain arising from the new US-China situation is a key concern for Taiwanese companies in their presence establishment worldwide. Roy Lee opined that the US attitude towards Taiwan will remain unchanged after Biden takes office, but it is expected that the number of visits by high-ranking officials to Taiwan will be reduced going forward. It is worth noting that the Biden administration's review report, which is expected to be released within 100 days of taking office, clearly states that the US will continue to push the supply chain of semiconductor and other industries back home, and that Taiwan's technology sector must make corresponding supply chain adjustment efforts in response.

The Electronics Industry Continues to Drive Taiwan's GDP Growth of over 3% in 2021

In addition to the new situation involving the US, China and Taiwan, the economic trends of Taiwan in 2021 are also a matter of concern to manufacturers. According to the TRI report, industrial production in Taiwan has been polarized since 2020, with the production index of the electronic components industry, which accounts for the highest proportion of production, being 147.56 in October, maintaining double-digit growth so far this year, the second highest for a single month ever recorded over the years. Among them, the production index of the integrated circuit (IC) industry reached 167.38, with a cumulative annual growth of 30% from January to October 2020. However, as the pandemic is taking its toll on consumer demand and the supply chain is suffering from shortages of materials and production cuts, though the decline in the traditional sector is gradually diminishing, the cumulative growth from January through October was still mostly negative.
Taiwan's electronics and technology sectors will continue to excel and drive the country's economic growth into 2021. Wu Tsai-yi said that the impact of private consumption would shrink in the second half of 2020, investment activities would continue,external demand would gradually pick up, and the domestic economy would emerge from the shadow of the pandemic.
With the global rebound and reduced uncertainties surrounding the pandemic in 2021, the economy is expected to grow at a rate of 3.53% for the year.
On the whole, Taiwan-US relations are expected to continue to warm up in 2021 amid strains in the trade relations between Washington and Beijing, and with the pandemic likely to be alleviated, Taiwan's economy can still make a strong showing while the electronics and technology industries will be heading for a prosperous future. At this point in time, Taiwan's technology industry can keep abreast of the top 10 technology trends in 2021 and should keep innovating the most advanced technologies, the best products and solutions on key issues in a bid to gain a firm foothold in the global market. .