ABSTRACT
Bilateral trade across the Taiwan Strait began in 1979 when China started economic reform that year. However, bilateral trade really picked up in late 1980s after a huge number of Taiwanese firms began investing in China. When Taiwanese subsidiaries there began large-scale exports to the world, they also imported great quantities of parts and semi-finished products from Taiwan. It turns out that China becomes the number one trade partner and the largest source of trade surplus for Taiwan. Now a tight production chain and intra-industry trade are the keys for the economic relations across the Strait.
During President Ma’s administration, Taiwan had good relations with China under the 1992 Consensus, and 23 agreements were signed across the Strait in that period, including a tourist agreement, direct flight agreement and ECFA. Unfortunately, owing to some political reasons, subsequent agreements under ECFA could not be completed. Taiwan is a small and open economy with a high trade dependency ratio, and it is crucial for Taiwan to sign FTAs with other countries and to participate in multilateral FTAs, such as CPTPP and RCEP. It is clear that Taiwan also has to keep good relations with China and to continue to negotiate ECFA in the future.
