Taiwan country brief

Australia-Taiwan relationship

Overview

Australia has a substantial relationship with Taiwan including trade and investment, education, tourism and people-to-people ties.

In 1949, following a period of civil war and conflict with Japan in WWII, the Chinese Communist Party (CCP) established the People’s Republic of China (PRC), with Beijing as its capital. The Nationalist forces under Chiang Kai-shek retreated to Taiwan, relocating the capital of the Republic of China (ROC) to Taipei. Under the Constitution of the ROC, the authorities in Taipei still claim to be the legitimate government of the whole of China. The Australian Government continued to recognise Taipei until the establishment of diplomatic relations with the PRC in 1972. Australia’s Joint Communiqué with the PRC recognised the Government of the PRC as China’s sole legal government, and acknowledged the position of the PRC that Taiwan was a province of the PRC. 

The terms of our Joint Communiqué dictate the fundamental basis of Australia’s one China policy - the Australian Government does not recognise the ROC as a sovereign state and does not regard the authorities in Taiwan as having the status of a national government. Dealings between Australian government officials and Taiwan, therefore, take place unofficially.  For example, Australia’s representative office in Taiwan does not have diplomatic status nor do Taiwan’s representative offices in Australia, which have the title “Taipei Economic and Cultural Office” (TECO).

The Australian Government strongly supports the development, on an unofficial, basis of two-way economic and cultural contacts. Two-way visits of a range of government officials take place each year. Australia supports Taiwan’s participation in international organisations and conferences where appropriate. The Government encourages Australian business as well as state, territory and city governments, to pursue trade and investment opportunities involving Taiwan and supports the development of people-to-people contacts.

People-to-people links

Taiwan and Australia share a wide range of people-to-people links developed through business and tourism-related travel, academic exchanges, and Australia’s working holidaymaker scheme. Annually, more than 20,000 young people from Taiwan come to Australia under the working holidaymaker scheme ― the second highest number after the United Kingdom.

Tourism, business, and study-related travel are increasingly important to Australia. There were 164,600 short-term visitor arrivals from Taiwan in 2016, up from 130,200 in 2015. Additionally, 11,200 students from Taiwan studied in Australia in 2016, up from 9,600 in 2015.

Australia’s New Colombo Plan is an initiative to encourage young Australians to study and undertake work-place experiences across the Indo-Pacific region. The program has funded more than 300 Australian undergraduate students to study and undertake internships in Taiwan since 2015. In 2017, 118 students from 12 Australian universities will study and undertake work-based experiences across 14 projects in Taiwan through mobility grants.

Three prestigious New Colombo Plan Scholarships have also been awarded for longer term study and internships in Taiwan. These experiences will develop the next generation’s academic, business and cultural links between Australia and Taiwan.

Through its annual competitive grants program, the Australia-China Council supports projects across Australia, China, Hong Kong, Macau, and Taiwan to broaden and strengthen relations in education, business, culture and the arts.

Trade and investment

Taiwan was Australia's ninth-largest merchandise export market and 15th-largest source of merchandise imports in 2016. Australia's merchandise exports to Taiwan in 2016 were worth A$7.6 billion. Major exports were coal, iron ore, copper and aluminium. Australia continued as a major exporter of agricultural products to Taiwan, the most important items being meat, wheat and dairy. Australian food and lifestyle products are increasingly popular with health-conscious consumers in Taiwan, with health supplements, food and beverages performing well. Merchandise imports from Taiwan were worth A$4.4 billion in 2016. Key imports include refined petroleum, telecommunications equipment and computers. Australia's prominence in the supply of resources and primary products to Taiwan, and the significant value of Taiwan's high-technology exports to Australia, underpin the complementary nature of the trading relationship between the two economies.

Two-way services trade totalled A$1.3 billion in 2016 (A$1.1 billion in Australian exports to Taiwan and A$224 million in imports from Taiwan). Taiwan is a major tourism and education market for Australia, and Taiwan and Australia have a popular mutual working holiday maker arrangement.

Two-way foreign investment is showing signs of growth, albeit from a low base. Taiwan investment in Australia was A$12.4 billion in 2016. There have been a number of significant announcements of Taiwanese investments, including in Australian resources projects. In 2012, Taiwan’s CPC Corporation announced it would take a 5 per cent equity stake in Shell’s Prelude floating LNG project in the Browse Basin, with the deal finalised in February 2013. Taiwan’s largest private company, Formosa Plastics Groups, is also a significant investor in Australia’s resource sector, having committed to invest A$1.26 billion into the Pilbara region with Fortescue Metals Group in August 2013. Australian investment in Taiwan in 2016 stood at A$6.2 billion. The largest Australian investors are ANZ and the Macquarie Group. In 2016, Macquarie announced a $1 billion investment over five years in offshore wind power.

Australia holds annual Bilateral Economic Consultations with Taiwan. The government-led consultations cover a wide range of issues, including market access, investment and agriculture. Both sides also hold Joint Energy and Minerals, Trade and Investment Cooperation Consultations (JEMTIC) and an Agricultural Working Group meeting to support trade and investment in these sectors. The Australian Government supports the work of the Australia-Taiwan Business Council and encourages trade and investment in Taiwan. Arrangements with Taiwan to facilitate trade cover issues such as quarantine and double taxation.

Information on doing business and opportunities in Taiwan

Domestic Political Overview

System of Government

Since the end of martial law in 1987, Taiwan has transformed itself into a vibrant democracy. The first democratic elections for Taiwan’s Legislative Yuan (parliament) were held in 1992, with democratic elections for the Presidency following in 1996. Presidents and members of the Legislative Yuan are elected for terms of four years; presidents are limited to a maximum of two terms. The central government consists of the Office of the President and five branches – the Executive Yuan, Legislative Yuan, Judicial Yuan, Examination Yuan and Control Yuan. The President, as Head of State, has command of the armed forces and the authority to promulgate laws under the Constitution of the Republic of China.

The Executive Yuan, Taiwan’s Cabinet, is the main policymaking arm of government, and consists of the Premier, Vice Premier, Ministry and Commission Chairs, and Ministers without Portfolio. Its members are presidential appointees rather than elected representatives. Currently, there are 12 ministries and 20 other agencies under the Executive Yuan.
The Legislative Yuan is Taiwan’s law-making body, or parliament. It comprises 113 legislators from a mixture of single-member electorates and proportional representation seats. In addition to making laws, the Legislative Yuan’s functions include questioning government officials and ministers on policies; reviewing budgetary bills and audit reports, and confirming presidential nominations to top government posts. It also has the power to impeach the president or vice president.

Political Parties

There are two main political parties in Taiwan. The modern Kuomintang (KMT) evolved from the former military government Nationalist Party. The KMT’s support base is in northern Taiwan, where the Nationalist government and its supporters from the mainland established their new capital, Taipei. The KMT generally supports a conservative free-market agenda, although it maintains support for some state intervention in important sectors of the economy through a number of large state-owned enterprises that had been established under its leadership. The KMT was in power most recently from 2008-2016 under Ma Ying-jeou, securing a number of cross-Strait agreements, including the overarching Economic Cooperation Framework Agreement (ECFA).

The pro-democracy movement of the 1970s and 80s gave rise to the Democratic Progressive Party (DPP). The DPP’s support base is in southern Taiwan, particularly among the “Taiwanese” communities established prior to the arrival of the “mainlanders” in 1949. As a result, some elements within the DPP support Taiwan’s de jure independence from China. The DPP held power from 2000 to 2008 under President Chen Shui-bian, whose leanings towards independence heightened tensions with China. The DPP’s broader policy agenda is generally socially progressive, focusing on issues such as social inequality, the environment, and economic and trade diversification.

Negotiation of a trade in services agreement proved controversial, with many, particularly younger, voters apprehensive that Taiwan was becoming too economically dependent on the mainland. In March 2014, students and NGOs led large street demonstrations, dubbed the Sunflower Movement, and occupied the chamber of the Legislative Yuan for 23 days. The social activism inspired by the Sunflower Movement led to the establishment of a number of new political parties, such as the New Power Party.

Parliamentary (Legislative Yuan) and presidential elections were held together on 16 January 2016. After eight years of KMT rule, Dr Tsai Ing-wen of the DPP, was elected Taiwan’s first woman president and the DPP secured a majority in the Legislative Yuan for the first time.

Cross-Strait relations and International Recognition

Hostilities between the Nationalists (who fled to Taipei) and the Communists (who remained on the mainland) never formally ended. As a result, relations between the two sides of the Taiwan Strait have never been established on an official basis. Nevertheless, strong economic connections across the Strait have gradually been forged, including through a range of agreements in recent decades. Taiwan business investment played an important role in China’s opening up, and direct transport and tourism have opened.

Relations across the Strait are principally managed via semi-official agencies: Taiwan's Straits Exchange Foundation (SEF) and China's Association for Relations across the Taiwan Strait (ARATS). A meeting of both sides in 1992 took place on the understanding that each side could verbally state its opinion of “one China”; for Taiwan, this meant the Republic of China, and for China, this meant the People’s Republic of China. This understanding was later referred to as the ‘1992 Consensus’.

Cross-Strait relations have become more difficult since the election in January 2016 of the DPP to the Presidency and parliamentary majority.  Beijing has criticised Tsai for failing to deliver an unambiguous statement affirming both sides of the Strait belong to ‘one China’ by accepting the ‘1992 Consensus’ and has suspended official and semi-official channels of communication.

For Taiwan, international recognition remains important. The United Nations and most countries recognise the PRC in Beijing as the sole legal government of China (as opposed to the ROC in Taipei). Currently twenty states recognise Taiwan as the ROC (and thus do not have official relations with Beijing): Belize, Burkina Faso, Dominican Republic, El Salvador, Guatemala, Haiti, Holy See, Honduras, Kiribati, Marshall Islands, Nauru, Nicaragua, Palau, Paraguay, Solomon Islands, St Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Swaziland and Tuvalu.

Economic Overview

Until the mid-1960s Taiwan's economy was dominated by agriculture, especially rice and sugar production. One of Asia's “Four Tigers”, the development of export-oriented manufacturing transformed Taiwan's economy and labour force into one defined by urban and industrial production. By the 1980s Taiwan began relocating its low-technology manufacturing offshore, especially to China. More recently there has been a trend for some of Taiwan's more advanced, high-tech industries to follow suit. Today Taiwan is also increasingly a tertiary economy, with services accounting for over 60 per cent of GDP. Taiwan's GDP rose 1.4 per cent in 2016 to US$529 billion, and is forecast to grow a further 1.7 per cent in 2017. Its current population is 23.5 million.

Agriculture receives government assistance including import protection and domestic support. Import protection involves high tariff rates, tariff-rate quotas and special safeguard measures. Taiwan’s average tariff on agricultural products is 22.1 per cent, as defined by WTO. Domestic support in Taiwan includes price stabilisation measures, subsidised loans and inputs, and income support for senior farmers. Government intervention continues to focus on rice.

Taiwan is relatively open to foreign investment. Foreign Direct Investment (FDI) in Taiwan totalled US$75 billion in 2016. The largest foreign investors in Taiwan are territories in the Caribbean, the United States, the Netherlands and Japan. Taiwan has relatively few restrictions, although foreign businesses periodically raise concerns about red tape and the slow progress of deregulation in a number of sectors, including telecommunications and financial services. For the most part, foreign investment application and approval processes are straight-forward (Taiwan ranked 11th out of 190 economies in the World Bank's Ease of Doing Business Index as at June 2016).

Following the election of the DPP, Taiwan has sought to boost economic growth and diversification through its New Southbound Policy. The Policy aims to deepen ties with ASEAN and South Asian nations through strengthening economic and trade cooperation, and enhancing institutional, professional and academic interaction.

Last Updated: 15 February 2017