Taiwan as a Destination for U.S. Trade and Investment

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Taiwan has been a leading overseas market for U.S. companies for years. Prepared in tandem with our alliance partners the Brain Trust Law Firm in Taipei, this update should be of interest to companies looking at opportunities in this well-established destination for U.S. trade and investment.

Leading Overseas Market for U.S. Companies 

With a population of 23.6 million, Taiwan has a democratic political system and a vibrant market economy.  In 2019, Taiwan’s GDP grew by 2.71 percent.

U.S.-Taiwan Trade

The United States and Taiwan have a long-standing trade relationship.  In 2019, the United States and Taiwan transacted $104.7 billion of trade in goods and services, composed of $42.3 billion in exports and $62.4 billion in imports.

The United States is Taiwan’s second largest trading partner, accounting for 13.2 percent of total trade and 12.2 percent of Taiwan imports.  China is Taiwan’s largest trading partner, accounting for 24.3 percent of total trade and 20.1 percent of Taiwan’s imports in 2019.  In terms of total trade, other major Taiwan trading partners include Japan (10.9 percent), the European Union (9.7 percent), and Hong Kong (6.7 percent).

U.S. Goods Trade

In 2019, Taiwan was the United States’ 10th largest goods trading partner, outranking markets such as the Netherlands and Italy, with $85.5 billion in two-way goods trade.

Taiwan was the United States’ 14th largest goods export market at $31.2 billion in 2019, an increase of 2.1 percent over 2018, and accounting for 1.9 percent of U.S. goods exports.  Top U.S. goods exports included machinery ($5.6 billion), electrical machinery ($4.5 billion), mineral fuels ($4.4 billion), aircraft ($2.7 billion), and optical and medical instruments ($2.2 billion).

Taiwan was the United States’ seventh-largest agricultural export market in 2019, with exports totaling $3.6 billion, a 10 percent decrease over 2018 ($4 billion).  Top U.S. agricultural exports included soybeans ($676 million), beef and beef products ($567 million), wheat ($324 million), fresh fruit ($255 million), and corn ($227 million).

According to the USDOC Country Commercial Guide, leading export opportunities include: 

Aerospace and Defense

Education

Machinery and Machine Tools

Electric Power Equipment(ELP) and Energy

Information and Telecommunications Technology

Medical Devices

Agricultural Sectors, including beef, cheeses and fresh fruits

U.S. Services Trade

In 2019, two-way trade in services with Taiwan was roughly of $18.5 billion.  U.S. exports of services to Taiwan were of about $10.5 billion, a 1.04 percent increase over 2018.  Top U.S. services exports included intellectual property (industrial processes), transport, and travel.

Investment

Taiwan’s total stock of FDI in the United States was $14.1 billion in 2018, up 24.7 percent from 2016.  This investment supported 14,100 U.S. jobs.  Taiwan’s foreign direct investment in the U.S. is led by electronic components, business machines, communications, software and IT services, semiconductors, and transportation.

In 2018, the total stock of U.S. foreign direct investment (FDI) in Taiwan was $17.53 billion, a 2.9 percent increase over 2017.  United States’ direct investment in Taiwan is led by manufacturing, wholesale trade, and finance and insurance.

U.S. investors can invest in almost all sectors of the Taiwanese economy, except for a limited number of sensitive areas for national security or other reasons. These are set forth on a negative list available here.  Taiwan has a well-developed system of legal protection for foreign investment, including a strengthened set of intellectual property laws and laws affording national treatment to foreign investors.  According to the U.S. Chamber of Commerce’s International IP Index, Taiwan now ranks 20th best in intellectual property environment in the world. As a result of the progress in Taiwan’s intellectual property rights legal regime and enforcement, Taiwan has been removed from the Special 301 Watch List by the Office of the U.S. Trade Representative in 2019.

Taiwan also offers various tax and other incentives, including for R&D activities and for multinational companies that establish regional operations there. Taiwan’s target industries for investment are the internet of things (IoT), biotechnology, green energy, smart machinery, etc. Investors can receive tax incentives for investing in free trade zones, industrial zones, export process zones, and science parks.

The Doing Business 2013 report from the World Bank and International Finance Corporation (IFC) saw Taiwan move nine places in rank to 16th in the world for ease of doing business. Taiwan’s regulatory system is generally regarded as transparent and consistent with international norms. 

Taiwan is a potential hub location for businesses looking to establish a presence in developing markets in the Indo-Pacific region. As the global economic centre moves from west to east, Taiwan has become a gateway between Europe, America, Japan and the economies of Australasia and a choice for multi-national company headquarters.

According to the 2020 Investment Climate Statements drafted by the U.S. Department of States, “Taiwan is a key link in global supply chains, a central hub for shipments and trans shipments in East Asia, and a major center for advanced research and development (R&D).” Especially with the tension of regional trade rising between China and other countries, Taiwan has been deemed as a strategic alternative when facing potential supply chain disruptions.

Taiwan’s capital market is mature. By the end of 2020, 948 companies are listed on the Taiwan Stock Exchange (TWSE), and foreign portfolio investors are welcomed to invest in the TWSE. The drop of the turnover ratio in the TWSE indicates that the investors are willing to hold a longer position, possibly due to the confidence toward Taiwan’s capital market.


As a member of international organizations such as the World Trade Organisation (WTO) and the Asia Pacific Economic Cooperation (APEC), Taiwan has benefited from a free trade and investment environment. Foreign trade has been the engine of Taiwan’s rapid growth during the past 40 years. This rapid expansion has led to its ranking with Singapore, Hong Kong and South Korea as one of the ‘Four Asian Tigers’.

U.S. exporters and investors should find Taiwan to be a relatively easy market in which to do business. Nevertheless, it is imperative for would-be exporters and investors to understand Taiwanese business culture and practices and to bear in mind key differences between the U.S and Taiwanese legal systems. Taiwan has a civil law system similar to those in continental Europe. This can have a bearing on commercial transactions especially in the drafting of distribution and other types of agreements. 

As always it is important for would-be investors and would-be investors to obtain advice in advance of doing business in this lucrative market for U.S. goods, technology and services.  

For more information contact Patrick Fazzone at pfazzone@washglobal-law.com.