Office of the President Republic of China(Taiwan)

To continue tracking recent international economic and trade dynamics, including the US-China trade disputes, and how the various agencies in the Taiwan government have responded, President Tsai Ing-wen convened the sixth meeting on international economic and trade strategy at noon on August 7. The president heard briefings from the Executive Yuan Office of Trade Negotiations and the National Security Council (NSC) on the latest international economic and trade situations, and there were broad-ranging discussions on the possible international and domestic impact of the US-China trade dispute, and the response strategies adopted in Taiwan and elsewhere.

After the meeting, which lasted about 120 minutes, President Tsai issued the following directives:

Since the US-China trade dispute intensified this past March, the Taiwan government attaches great importance to the possible broad and far-reaching impact of these new circumstances. The NSC and the executive branch have been watching the latest developments carefully, assessed possible repercussions, and adopted the necessary response measures.

The US-China trade dispute appears set to intensify over time, and could be protracted. As Taiwan has extensive trade relations and close economic ties with both economies, it is inevitable that escalation of the US-China trade dispute will affect Taiwan's domestic economy to a certain degree. Taiwan must therefore attempt to anticipate how the situation might change, and prepare related response measures and adjustments to turn external challenges into opportunities to transform and upgrade Taiwan's economy.

To respond to rapidly changing circumstances, the NSC and the executive branch must cooperate closely to carry out the following tasks at different phases of the US-China trade dispute:

First, enhance situational monitoring, analysis, and decision-making, including the US-China trade dispute and changing international circumstances; the domestic financial markets and macroeconomic situation; and mainland China's political and economic circumstances, and changes in cross-strait relations.

Second, accurately inventory and assess the economic, financial, and industrial effects of the US-China trade dispute, especially for domestic industries and Taiwanese companies on both sides of the Taiwan Strait. If the dispute intensifies, expand the breadth, depth, and frequency of inventory efforts, and be sure to have a comprehensive grasp of changing circumstances for domestic industries and Taiwanese companies with operations in mainland China.

Third, stabilize the domestic financial and economic situation. The government must, in advance, evaluate all possible contingencies, inventory viable policy tools and draft response plans to be fully prepared and respond quickly to external changes to stabilize Taiwan's domestic financial and economic situations.

Fourth, provide better assistance to Taiwan businesses with operations in China:

• Help Taiwanese firms in mainland China return to Taiwan and invest here or transfer production bases to our New Southbound countries, or to other countries or regions; draft concrete and feasible assistance plans to systematically encourage Taiwanese firms in mainland China to return to Taiwan and invest here, or transfer production bases elsewhere.

• Provide necessary assistance to domestic industries and individual enterprises severely affected by the trade dispute. If the United States and China impose broad tariffs or engage in tit-for-tat retaliation, as soon as domestic industries or individual enterprises are severely affected, the government should provide timely assistance to help them transform or adapt. The proper government agencies should increase budgetary allowances to deal with unexpected needs, and when necessary, may set up fund mechanisms of adequate size to ensure effective implementation of the related tasks.

Fifth, accelerate implementation of plans to expand domestic demand. Expanding domestic demand is the most effective way to offset the impact of the US-China trade dispute. Government agencies should individually evaluate and accelerate the implementation of domestic demand projects—including the Forward-looking Infrastructure Development Program, green energy, urban renewal, social housing, and the Long-term Care 2.0 Plan—to maintain domestic demand momentum and minimize the impact of a trade war on Taiwan's domestic economy. 

Sixth, maintain trade order:

• The relevant government agencies should closely monitor the possible impact of protectionist and trade restriction measures adopted by various countries as a result of the US-China trade dispute and US tariff measures, and based on World Trade Organization regulations, adopt necessary defensive measures in a timely manner.

• To prevent the trade war from triggering illegal transshipments that make Taiwan a target for retaliation, government trade authorities should strengthen monitoring mechanisms and improve import and export management to maintain proper trade order.

Seventh, accelerate implementation of the New Southbound Policy and seek admission to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

• Accelerate deployment to New Southbound countries to diversify export markets and production bases to minimize adverse impacts of the US-China trade dispute. To address the latest developments, we need to redouble our efforts and accelerate implementation of tasks associated with the new phase of our New Southbound Policy. 

• To build up industry chains in the New Southbound countries, Taiwan will set up new assessment and start-up mechanisms, as well as an "international industrial investment corporation" and an "agricultural investment corporation." For public infrastructure projects, we will expand the Overseas Investment & Development Corp. These three corporations are critical to accelerating New Southbound Policy implementation, so the relevant ministries and government agencies must complete organizational structures on schedule and commence operations as soon as possible.

• An NSC report proposed the following three very important recommendations: consult with targeted countries to discuss implementation of integrated economic cooperation projects; organize a New Southbound youth corps; actively help small and medium-sized businesses deploy in New Southbound Policy markets. The NSC, the Office of Trade Negotiations, and other responsible agencies must complete action plans as soon as possible to implement them after approval by the Executive Yuan.

In the mid to long term, continued escalation and expansion of the US-China trade dispute would have a broad and far-reaching impact on global trade, and fundamentally change the structure and development model of the Asian, Asia-Pacific, and global economies. The export-driven economic growth model that Taiwan has pursued over the past several decades, the global presence of Taiwan-invested firms, and cross-strait economic and trade ties would all be severely tested. This situation is a major challenge that requires the comprehensive adjustment and transformation of Taiwan's economy and industrial structure, and will impact Taiwan's economic competitiveness and national strength for decades to come.

The NSC and the executive branch must cooperate closely, and propose a plan for adjusting Taiwan's mid- to long-term national economic strategy as soon as possible. Once a plan has been discussed and finalized, the executive branch should draft an implementation plan, and enhance communication with the public and build a powerful national consensus to promote transformation, upgrading, and sustainable growth in the Taiwan economy.

Responding to the short, medium, and long-term effects of the US-China trade dispute is a major project that can inspire citizens to trust and have confidence in the government. We must spare no effort, and fulfill the hopes of all Taiwanese.