This paper investigates the bilateral trade relations between the ROC and the European Economic Community (EEC). The main method employed is a bilateral trade model, in which the ROC’s exports to the EEC, as well as the ROC’s imports from the EEC, are considered. Our basic data are taken from SITC 1-digit groups. In addition, some special commodities, like mushrooms and textiles, are taken into consideration.
The major empirical findings are listed below:
*Extremely bad conditions have surrounded the exports of the ROC’s agricultural products to the EEC. These conditions include a) negative activity elasticity, b) very low own-price elasticity, and c) high competitive-price elasticity.
*Other products exported to the EEC have been influenced greatly by the specific import policy of the community. Thus a liberalization of imports by the EEC would set off a great increase of imports from the ROC, whereas a tightening of import policy would cause a great reduction.
*On the contrary, the effect of the ROC’s import policy on exports from the EEC has been quite moderate.
* Competitive-price elasticities reveal that the ROC’s products in the EEC market have been subject to the keen competition of products from other countries. This has not happened to the EEC’s products in Taiwan’s market, however. The one exception to this finding is the SITC 7 group — Machinery and Transportation Equipment.
* The ROC’s exports of SITC 7 products to the EEC have been largely complementary to products from other countries. On the contrary, the EEC’s imports of SITC 7 products have faced tough competition in the ROC market.
