Taiwan and Australia both belong to the capitalistic free market economic
system. There are wide discrepancies in their endowments of factors of production. Taiwan is characterized by its small land area and scarce natural resources, but abundance in human resources, whilst Australia has vast amounts of land, rich natural resources, but a shortage of technicians and skilled labour. There is clearly a complementary nature in a mutual relationship between these two countries. Anyone with a basic knowledge of economics should be able to foresee that two economies with complementary factor endowments can benefit significantly from gains in trade and investment. The strengthening of economic ties would not only promote the economic growth rate of both parties, but would also provide a solid foundation for cultural exchange and political cooperation. Thus, the economic relationship between Taiwan and Australia should be a topic of interest for anyone concerned with the prospects of economic development of these two countries.
The final chapter elaborates on the bilateral economic relation-ship between Taiwan and Australia in terms of foreign trade and direct investment. Real growth of bilateral trade and intensity indices are calculated to reveal the relative importance of Taiwan as a trade partner to Australia and vice versa. Some simple econometric analysis is made to estimate the import functions and the structure of trade between these two countries seems to conform to the factor proportion theorem of international trade theory. The discussion on trade incorporates a prediction of the high potential exportable categories.
The section on bilateral investments introduces the major Australian agencies responsible for promoting direct investment and recent measures taken by the Australian Government to attract foreign equity capital. In particular, the significance of the Foreign Corporations Bill 1989 has been discussed in detail. The enactment of this Act should eliminate the handicaps of official capital from Taiwan and encourage Taiwanese government enterprises to embark on joint ventures in Australia in the attempt to secure a steady supply of industrial raw materials or energy sources. In view of the trend in trade liberalization and investment promoting policies, as well as the mutual complementary nature of the macroeconomic structure of the two economies, we can look forward to a further strengthening of the economic relationship between Taiwan and Australia in the next few decades.
