This project attempts to provide a detailed analysis of the current state of global economic integration, and to forecast how the process of integration will proceed in the future. The study also establishes a system for analyzing regional and bilateral economic integration between the countries of East Asia, the US and the European Union and for appraising the likely impact of tariff reductions on Taiwan’s exports. Six integration scenarios are modeled, including the much-talked-about “ASEAN+1”, ASEAN+3” and “ASEAN+6”, to examine how each of these scenarios would affect Taiwan.
Modeling of the six scenarios showed that “ASEAN+3” and “ASEAN+6” would have the most severe negative impact on Taiwan. In particular, the operations of Japanese and South Korean companies in China would create a pronounced export substitution effect with respect to Taiwanese exports. By contrast, a free trade agreement between the US and the European Union (EU) or between the US and South Korea would have only a limited impact on Taiwan. The Chinese market is of great importance to Taiwan; the establishment of a more favorable cross-strait trading environment between Taiwan and China would eliminate most of the negative impact of global economic integration that is currently being felt by Taiwan. As regards the situation with individual product categories and sectors, the areas in which East Asian economic integration would have the most pronounced impact on Taiwanese exports include precision machinery manufacturing, the petrochemical industry, iron and steel, and the plastics industry.
Despite the fact that Taiwan ranks among the 20 largest economies in the world, it has experienced great difficulty in securing free trade agreements with other countries. The fundamental problem is Taiwan’s diplomatic isolation, which has hamstrung efforts to negotiate agreements. There is a clear need for closer cooperation between the government and Taiwanese industry to overcome this prob