The government has adopted a “five plus two” policy for developing innovative sectors — the “Asian Silicon Valley” project, biomedicine, “green” energy technology, “smart” machinery and defense, plus new agriculture and a circular economy.
The government also has its “new southbound policy” to encourage trade and other interactions with Southeast Asia.
These policies were formulated before US President Donald Trump won election last year, but now the government should think about how to take advantage of Trump’s policies, producing a win-win situation for Taiwan and the US.
Trump calls for putting “America first,” principally because the US faces two major economic problems that have caused its real per-capita gross national income to lag behind other countries, dropping to No. 10 in the world last year.
The first problem is that foreign direct investment in the US is much lower than US investment abroad, which has led to rising unemployment.
The second problem is that the total value of US exports is much lower than that of imports, hence the US has a serious trade deficit.
The US has trade deficits in all manufacturing categories, except for aerospace, plastics and medical equipment. In 2015, the overall US commodity trade deficit reached US$7.99 billion, of which China accounted for the largest share at about 40 percent.
In his State of the Union address to the US Congress on Feb. 28, Trump announced a number of responses to these problems:
First, to cut taxes to attract businesses back to the US and encourage foreign business investment, thus creating more jobs and cutting imports.
Second, to invest US$1 trillion in infrastructure, which would make the US more competitive and increase exports.
Third, to cut the US’ trade deficit by promoting equality and mutual benefits in foreign trade and negotiating with those countries that have big trade surpluses.
Japan has responded quickly to these policies.
While visiting the US last month, Japanese Prime Minister Shinzo Abe proposed a “US-Japan Growth and Employment Initiative,” offering to invest in US infrastructure projects, such as high-speed rail, explore global infrastructure demand and cooperate on research and development (R&D) in areas like robotics, artificial intelligence, networks and aerospace.
Abe said that this plan could generate 700,000 jobs for the US and create new markets worth about US$450 billion over the next 10 years.
Taiwan has close trade ties with the US and Japan, and the US’ R&D and innovation capabilities are the best in the world. Taiwan should grasp the opportunities offered by these new policies to cooperate more closely with the US and make Taiwanese manufacturing more competitive. This goal could be approached in four ways:
First, the government should provide economic and trade information to help Taiwanese businesses participate in US infrastructure projects, invest in the US and set up factories there.
The government should provide Taiwanese businesses interested in the US with information on trade, investment, environmental protection, legal matters and public sentiment. Given Trump’s new policies, other countries are sure to head to the US to invest and establish manufacturing supply chains.
The government should act quickly by helping Taiwanese businesses play their strengths and make early entries into US domestic manufacturing, R&D and marketing, enabling them to effectively cooperate with leading US manufacturers and stimulate Taiwan’s industrial transformation and upgrade.