Given the shifting winds of the global trade and economic landscape, it would be a win-win situation for Taiwan and Canada to take their already strong economic and cultural ties to an even higher level, and for both countries to work together to meet the new imperative for greater diversification in trade and investment.
While the North American Free Trade Agreement was being renegotiated and reshaped into the U.S. Mexico Canada Agreement, Canada has made an effort to blaze a more vigorous trail toward trade diversification.
Prime Minister Justin Trudeau is acutely aware of the need to diversify Canada’s trade relationships, and has emphasized this many times.
Taiwan’s President Tsai Ing-wen is on the same page in terms of prioritizing new strategies to meet the new challenges. In her national day speech this year, she affirmed her commitment to strengthen “value-based diplomacy with like-minded partners,” and to “staunchly defend freedom, democracy and the market economy.”
With both countries taking steps to diversify trade and investment, it is the perfect time to forge even stronger ties.
Foundations for stronger partnerships
In pursuing values-based diplomacy and a like-minded approach to trade and business, Taiwan and Canada would be building on a foundation of mutual trust, shared values, economic co-operation and people-to-people connections that has characterized the relationship over the years.
Like Canada, Taiwan is a full-fledged democracy that respects the rule of law, intellectual property and human rights.
Currently, Canada is home to 200,000 people of Taiwanese origin, while 60,000 Canadians live in Taiwan, creating a valuable network of interpersonal connections that can be tapped to the advantage of both countries.
Two-way trade between the two countries in 2017 reached $7.7 billion Cdn, a 9-per cent increase from 2016. Taiwan is currently Canada’s 5th largest trading partner in Asia and 12th largest in the world. Foreign direct investment from Taiwan in Canada was $59 million in 2017, while Canadian direct investment in Taiwan was $64 million.
New policies offer more opportunity
Two of my government’s new policies — the 5+2 Industrial Innovation Initiative and the New Southbound Policy — can not only help open the door for increased opportunities for Canadian businesses in Taiwan, but also help gain access to other Asian markets.
This initiative aims to strengthen Taiwan’s entire industrial base and is expected to boost my country’s competitiveness in global markets. The 5+2 industries refer to seven development projects proposed by the government to shift Taiwan’s industrial base away from its traditional concentration on contract manufacturing and gear it towards high-value-added, service- and solutions-oriented business models.
Among them is a project to turn Taiwan into an Asian Silicon Valley, along with others in fields such as biomedical, green energy, smart machinery, defence and high-value agriculture.
The initiative promises to link Taiwanese industries to global markets and corporations — and through its emphasis on innovation — to future technological and market developments.
Geared to meeting Taiwan’s national development needs for the next 30 years and offering incentives for international companies, it affords many opportunities for Canadian entrepreneurs. For example, it would be an ideal time for the Montreal-based Bombardier company to expand its operations in Taiwan and to provide advanced railway infrastructure to support the country’s projected growth in areas targeted by the 5+2 initiative.
A leading example of the opportunity offered to Canadian businesses, because of Taiwan’s renewed emphasis on green energy, are the offshore windmill projects, namely the Hai Long II and Hai Long III, which are partnership projects between Toronto’s Northland Power and Singapore’s Yushan Energy. These projects could represent Canadian investment of up to $8 billion, the single largest new investment from Canada in Taiwan.
This is a highly significant venture and has raised the profile of Taiwan’s business opportunities available to Canadian companies.
The 5+2 initiative, with its commitment to boosting innovation-based growth, is reinforced by another signature policy of my government — the New Southbound Policy, a key strategy to deepen Taiwan’s co-operation in areas such as agriculture, business, trade, culture and education with the 10 members of ASEAN, six South Asian countries (including India) as well as Australia and New Zealand. This policy has continued to interest international experts and policymakers, and both Japan and the U.S. have expressed support for it.
Taiwan’s southbound policy presents another great opportunity for a natural Taiwan-Canada partnership. The master plan of this policy encompasses fields as diverse as public health, agriculture, technology and security and seeks to produce mutually beneficial co-operation and a sense of economic community between Taiwan and Southeast Asia, South Asia, Australia and New Zealand. The policy has already proven successful. Trade between Taiwan and the 18 targeted countries increased by 5.5 per cent between January and June 2018 compared to the previous year.
Taiwan is one of the biggest investors in ASEAN countries and can play a key role as a springboard in helping Canadian businesses gain further access to these lucrative markets where Taiwan’s economic and soft-power strength can be leveraged.
Toward a FIPA and the CPTPP
The increased opportunities for two-way trade and investment can move forward at an accelerated pace if two other elements come to fruition.
With the above incentives for investment, it would make sense for Taiwan and Canada to begin negotiations for a Foreign Investment Promotion and Protection Agreement (FIPA) as soon as possible.
Because of the complementary nature of both countries’ trade needs, this will unlock more potential investment opportunities. Canada has already signed FIPA agreements with more than 40 countries and is in negotiations with several other trading partners. Taiwan is probably the only major trading partner that does not yet have a FIPA agreement with Canada. The Taiwan-Canada avoidance of double taxation agreement, which came into effect on Jan. 1, 2017, has already laid a strong foundation for a FIPA agreement.
The other factor is the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). By signing and ratifying the CPTPP, Canada has sent a strong message of support for rule-based, ethical free trade. Taiwan is seeking Canada’s support to join this partnership when it becomes open to additional members.
Taiwan’s CPTPP participation is important for several reasons. Among 11 countries, Taiwan’s GDP is higher than seven of them, and only smaller than that of Japan, Canada, Australia and Mexico. In addition, Taiwan has been a member economy of APEC (Asia-Pacific Economic Co-operation) since 1991 and membership in CPTPP is open to all APEC members. Canada and Taiwan already have strong co-operation in APEC and the World Trade Organization. In these platforms, both sides hold similar views on free trade and economic liberalization.
Finally, Taiwan maintains close economic and trade ties with Japan and Southeast Asian countries such as Vietnam, Singapore and Malaysia. All are CPTPP members. Taiwan also plays a critical role in the Asia-Pacific supply chains. It would work to the benefit of all members, including Canada, if Taiwan were included in CPTPP.
With so many incentives to move forward towards greater economic co-operation, neither Taiwan nor Canada can afford to lose the new opportunities on the horizon.
Winston Wen-yi Chen is the representative at the Taipei Economic and Cultural Office in Canada.
