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CIER event on the new global economic order


The ECCT arranged a special lunch featuring speaker Dr Roy Lee (Chun), Senior Deputy Executive Director, Taiwan WTO & RTA Center at the Chung-Hua Institution for Economic Research (CIER). According to Lee, while the global economic order is undergoing some seismic shifts, no one can predict with certainty what the new order will eventually look like. For example, it is still being debated whether or not China will emerge as the new dominant power globally, if there will be a bifurcated system, or one that is even more fractured.


What is clear is that Taiwan has been a major beneficiary of the existing order. It is one of only two countries (besides South Korea) that has managed to escape the so-called middle income trap, thanks to its participation in and integration with global supply chains and its contract manufacturing model. This model, whereby manufacturers develop high level technical expertise, which enables them to produce cutting-edge goods and components for global customers at competitive prices, has allowed Taiwan to develop into a global powerhouse of electronic contract manufacturing (ECM). And, while South Korea has also developed similar expertise, Taiwan’s unique advantage is that it does not compete with its customers, unlike Korean tech giants like Samsung, which sometimes has difficulty in following a business model of producing and promoting its own brand of products while at the same time trying to solicit orders from rival brands.  


The economy is still doing well despite signs of headwinds globally. Taiwan has experienced 27 consecutive months of export growth and inflation in August moderated to just over 2.6% on an annual basis, down from over 3% in previous months. This compares to much higher inflation rates elsewhere in the world, particularly in Europe and North America.


The US and the EU have shifted their views on China in recent years and now refer to China as a strategic competitor or strategic rival. Economic policies have shifted to resilience, security and green development.


The US’s economic security and autonomy agenda is characterised by lowering reliance on China (through so-called friend-shoring), lowering reliance on imports (through reshoring) and reenforcing economic weakness by investing in R&D and cultivating talent. The US is now considered to be engaging in “economic statecraft” (the use of economic means to pursue foreign policy goals). While this has some positive effects, such as the benefits of the Indo-Pacific Economic Framework, and funding via legislation such as the Chips Act and the Inflation Act, there are also negative effects such as export controls, investment reviews and technology de-coupling. By engaging in economic statecraft, the US is actually doing what China has done. The pernicious side-effect is that it undermines the global rules-based economic order that was created by the US. For example, the latest US acts listed above, aimed at accelerating reshoring and local manufacturing, maintaining leadership, diluting China’s role and creating local jobs, are good examples of economic statecraft that are not consistent with WTO rules. 


According to Lee, the new reality means that Taiwanese corporations can no longer make decisions purely on their business merits. They also have to consider geopolitical issues, such as US moves to isolate China from new supply chains. This is making doing business more difficult for them. On the other hand, in this new era, it also makes sense for Taiwanese firms to diversify some of their investments. After all, in the semiconductor and ECM industries, Taiwan’s interests are aligned with US interests (since the largest customers of Taiwanese firms are American. Moreover, it is a good thing for market leaders to have some geographical diversification while a separate world with less Chinese dominance is a good thing for Taiwan. However, uncertainty and security risks are rising. Economic statecraft measures (by great powers) that deviate from existing rules, create uncertainties and Taiwanese ECMs’ significant presence in China is a major risk factor (from both China and the US).


As to how EU-Taiwan relations will develop, Lee admitted that he had more questions than answers on the subject. Questions remain about the EU’s open and strategic autonomy, its Indo-Pacific strategy and how it will manage competition and rivalry with China. Most crucially, can, and if so, how will the EU pursue relations based on shared values and further the block’s commercial interests at the same time?

For the presentation, please refer to this link: