The rapid advancement of generative AI—spanning large language models, smart customer service, and automated content generation—has given AI services a highly cross-border character. However, a unified global framework for AI governance and international trade rules has yet to emerge. With different countries adopting divergent regulatory models on issues such as cross-border data flows, algorithmic transparency, data sovereignty, and liability, AI governance is rapidly becoming a new frontier in international trade.
Meng-Chun Chen, a Contract Research Fellow of the Center for International Trade Policy at the Chung-Hua Institution for Economic Research (CIER), noted that these divergent regulatory standards will impose higher compliance costs on companies providing cross-border AI services. For instance, the European Union prioritizes personal privacy and the oversight of high-risk AI, while the United States leans toward fostering innovation. China, meanwhile, emphasizes digital sovereignty, national security, and content control. If nations further advance data localization, algorithmic audits, or market access restrictions, it could fracture the global AI market and potentially turn AI regulations into novel trade barriers.
In recent years, governments worldwide have initiated discussions on AI governance cooperation to mitigate the impact of institutional disparities on the global digital economy. However, Chen argues that the lack of finalized international rules actually provides latecomer nations with a critical window to adjust policies and strategically position their industries. If a uniform global standard is established prematurely, the institutional design would likely be dominated by a handful of tech superpowers. In such a scenario, developing economies and smaller nations might be forced into passive compliance, potentially eroding their competitiveness if they cannot meet those high-threshold requirements.
For Taiwan, this represents a critical window for strategic positioning. While the island boasts a global edge in the AI hardware supply chain, its AI services sector remains in its infancy—leaving ample room for growth. Chen advises the government to capitalize on this regulatory vacuum by accelerating AI talent development. By leveraging existing manufacturing strengths, Taiwan should advance applications across smart manufacturing, digital healthcare, financial technology, and smart cities. The focus should be on developing industry-specific AI solutions rather than competing head-on with global tech giants in the general-purpose AI model space.
Moreover, as Taiwan drafts its AI regulatory frameworks and sovereign AI policies, it must balance risk management with the need for global industry expansion. While safeguarding data security and national interests is vital, overly restricting market access could hinder domestic AI service providers from expanding overseas. Such protectionism would also undermine Taiwan’s leverage when negotiating for international market access down the line.
Chen noted that future milestones—whether World Trade Organization (WTO) e-commerce negotiations, digital economy agreements, or various international AI governance mechanisms—will dictate the trajectory of the global AI industry. Beyond strengthening its industrial and AI service capabilities, Taiwan must actively participate in drafting international rules. Capitalizing on this formative phase will be essential to elevating Taiwan’s standing and influence in the future global AI race.
Author: CIER Editorial Team
Date: July 6, 2026