The EU enlargement will cause significant changes in European political and economic arena. In terms of population or economic scale, EU has become one of the most important regional groupings in the world. With improved market access for ten Central and Eastern European countries, the production structures will be remodeled in the new as well as incumbent states. As foreign direct investment (FDI) increases in the new member states, the economic growth rates in these countries will increase and the competitiveness of their industries will improve so as to put pressure on their competitors in international trade, such as Taiwan.
The purpose of this project is to inquire into the possible impacts of EU enlargement on Taiwan and the suitable responses of Taiwan. We found that, in terms of trade, the new members of EU present a challenge to Taiwan’s exports of telecommunication equipment, electrical machinery, electronics parts, among others. But the new members themselves also present new market opportunities for Taiwanese products. In terms of FDI, the advantage of lower production costs in the ten new member states will attract foreign capital, including that from Taiwan. This gives Taiwanese firms a springboard to Western EU markets, which they used to serve from their Asian production bases. The increasing congregation of manufacturing industries in newly affiliated member states makes the production in Eastern EU even more competitive. We recommend that Taiwanese firms take a closer look at the investment and trading opportunities in new member states and think about localizing production in Europe to improve competitiveness at the beginning of this new era.