Since the signing of the Regional Comprehensive Economic Partnership (RCEP)—the Asia-Pacific’s largest free trade agreement (FTA)—in November 2020, Beijing has repeatedly expressed its determination to play a gatekeeper role in deciding whether Taiwan is admitted. Chinese officials have stated explicitly that Taiwan’s acceptance of Beijing’s “One-China Principle” (一個中國原則) is a prerequisite for its participation in regional economic cooperation. Informed observers suspect that Beijing will also require Taipei to make political concessions or move forward with expanding cross-Strait economic ties under the Economic Cooperation Framework Agreement (ECFA, 兩岸經濟合作架構協議) before it will acquiesce to Taiwan joining RCEP or the Comprehensive Progressive Trans-Pacific Partnership (CPTPP), the Asia-Pacific’s second largest FTA. [1]
As a member of RCEP, China has the power to block Taiwan’s admission to that regional trade agreement. However, it does not have the same direct influence over CPTPP because it, like Taiwan, remains outside the pact while awaiting consideration of its membership application. But Beijing need only persuade one current CPTPP member country to vote against Taiwan’s accession in order to deny it the benefits of participating in the Asia-Pacific’s other major trade bloc.
In contrast to Beijing’s ability and determination to keep Taiwan out of RCEP and the CPTPP, it has not prevented Taiwan from pursuing other means of deepening its economic ties with other countries.
Cross-Border E-commerce and Digital Trade
Developing Taiwan’s cross-border e-commerce and digital trade are key objectives of Taipei’s New Southbound Policy (NSP, 新南向政策), which aims to diversify Taiwan’s economic relations and “Minimize overdependence on any single market.” Taiwan’s Ministry of Economic Affairs has set targets for: 1) helping domestic businesses utilize Taiwan’s national business-to-business (B2B) platform Taiwantrade.com to increase the presence of Taiwanese products in overseas markets; 2) cultivating e-commerce talents; and 3) building e-commerce shipping warehouses in partner countries.
In line with the NSP and the rapid growth of e-commerce globally, Taiwanese companies have greatly expanded their cross-border e-commerce business in recent years. PChome, one of Taiwan’s largest business-to-consumer (B2C) and consumer-to-consumer (C2C) e-commerce companies, formed a joint venture with US e-commerce giant eBay as early as 2006. The company renewed its focus on overseas alliances nearly a decade later, establishing PChome Thai, “the largest Taiwanese product website in Thailand,” with Thai company Cal-Comp Electronics in 2015. After this foray into Southeast Asia, PChome turned to Northeast Asia, forging strategic alliances with leading Japanese and South Korean e-commerce companies in 2019. Continuing its expansion throughout Asia, PChome announced yet another major cross-border project in September 2020: the PChomeSEA cross-border e-commerce service for Southeast Asian (SEA) markets, which it formed through its existing operations in Thailand and through new alliances with local e-commerce platforms in Vietnam, Singapore, Indonesia, and Malaysia.
According to PChome’s 2020 annual report, PChomeSEA benefits the company and its partners through various synergies in sales, marketing, payments, and logistics. And, it claims, the new alliance will assist “nearly one million SMEs [small and medium enterprises] in Taiwan in going overseas [and] enhancing the international visibility of Taiwanese products,” and will create “a new niche for cross-border sales, and [build] a mutually beneficial and win-win Southeast Asian cross-border e-commerce sales ecology.”
Taiwan’s second-largest telecommunications company, Taiwan Mobile, and its subsidiary Momo—an online retailing brand consisting of internet, television, and catalog shopping channels—are also looking for opportunities to expand their business in Asia. In August 2021, Taiwan Mobile invested USD $20 million in Vietnam’s largest e-commerce company, Tiki Corporation. Indicating that the small investment was a sign of greater things to come, Taiwan Mobile President Jamie Lin (林之晨) proclaimed that the alliance will “allow Taiwan Mobile and its subsidiary Momo to discover potential partners, break into the Southeast Asia market and create a new growth engine for Taiwan Mobile in the search for new development opportunities outside Taiwan, propelling it to move toward its goal of becoming a GSEA [Greater Southeast Asia] internet company.”
With e-commerce sales in the Asia-Pacific expected to nearly double between 2021 and 2025 to USD $2 trillion, [2] Taiwan-based companies are constructing major logistics facilities to accommodate the movement of goods at home and around the region. In accordance with Taipei’s mission to build e-commerce shipping warehouses in NSP countries, Ally Logistics Property (ALP), Taiwan’s largest logistics property developer, announced in November 2021 that it will invest a total of USD $1 billion in Malaysia to build smart warehousing solutions. It has already started work on a USD $180 million logistics park with a smart warehousing facility in Bukit Raja, in the state of Selangor. In January, ALP’s co-founder and CEO Charlie Chang told Asian tech media outlet KrAsia that his company plans to invest in Thailand, Vietnam, and the Philippines in coming years. Additionally, he stated that ALP intends to announce its Vietnam expansion plans later this year.
Public-Private Alignment
The Taiwan private sector’s e-commerce alliances and logistics investments appear to be driven by business calculations that happen to align with Taipei’s NSP. For example, ALP was founded in 2014 and was already involved in developing major e-commerce logistics facilities years before the introduction of the NSP. However, Taipei has taken a number of steps to foster the growth of Taiwan’s cross-border e-commerce; and, in some cases, it has enlisted the help of local e-commerce companies in its promotional and diplomatic initiatives.
In July 2016, Taiwan President Tsai Ing-wen (蔡英文) appointed PChome Online Founder and Chairman Jan Hung-tze (詹宏志) as one of Taiwan’s delegates to the APEC Business Advisory Council (ABAC). President Tsai reappointed the business leader to the ABAC as an ambassador-at-large in 2018 due to his successful work in promoting Taiwan’s vision of expanding e-commerce and digital trade among Southeast Asian countries.
PChome has also responded to the Ministry of Foreign Affairs’ call last year for the Taiwan public and business community to support Lithuanian products amidst Lithuania’s high-profile dispute with China. During an October 2021 business conference focusing on the promotion of cooperation between Taiwan and Lithuanian businesses, Jan Hung-tze announced that his company would launch a special gallery on its website for the promotion of Lithuanian products. A nonprofit marketing agency run by Lithuania’s Ministry of Economy and Innovation later introduced an initiative to help Lithuanian businesses sell their products in Taiwan through the PChome platform. This effort to provide Lithuania with economic assistance via e-commerce comes as China exerts diplomatic and economic pressure on the Baltic state for its support of Taiwan.
Cross-border e-commerce and digital trade have become important agenda items for Taipei and its partners. After coming to power, the Tsai Administration continued to convene the Taiwan-US Digital Economy Forum, which was launched in December 2015 and was co-organized by Taiwan’s National Development Council and the American Institute in Taiwan. More recently, Taiwan and the US have made “promoting the digital economy” a key topic of discussion during their annual US-Taiwan Economic Prosperity Partnership Dialogue (EPPD), the first meeting of which was convened in November 2020. The Tsai Administration has pursued a similar dialogue related to digital trade with the European Union, and has engaged private sector partners in countries such as Japan and Kenya to promote e-commerce and digital trade with Taiwan.
Thus far, however, Taipei’s most expansive international project to advance Taiwan’s e-commerce interests has been to join dozens of other governments in pushing for the World Trade Organization to start negotiations on e-commerce-related trade.
Both Taiwan’s government and private sector are actively involved in training programs to help local companies take advantage of e-commerce opportunities. In January 2020, the Importers and Exporters Association of Taipei (台北市進出口商業同業公會) opened Taiwan’s first international e-commerce incubation center in Taipei for the purpose of bringing qualified teachers and e-commerce business talent together. Over the last few years, Taipei has offered numerous training courses to local e-commerce professionals as well as overseas professionals, primarily in NSP countries.
Conclusion
The importance of cross-border e-commerce and digital trade to Taiwan’s economy should not be overstated. Other industries like the country’s semiconductor industry remain far more significant. Moreover, even if Taiwan is able to take advantage of e-commerce trends in coming years, it alone will not ensure the island-nation’s successful integration into Asia-Pacific or global economies. Taipei and outside analysts generally agree that Taiwan needs to do far more to become more innovative. Additionally, many experts believe that if Taiwan fails to join a major existing or future trade bloc, it will eventually become uncompetitive in the global economy.
Nevertheless, cross-border e-commerce and digital trade represent avenues to economic growth and deeper trade ties for Taiwan that Beijing cannot prohibit. In January, PChomeSEA reported that its 2021 sales were approximately five times higher than in 2020, evidence that market diversification is already paying dividends for one of Taiwan’s largest e-commerce companies.
At present, Beijing is determined to prevent Taiwan from joining new FTAs. Chinese officials claim that they object to any country allowing Taiwan to participate in a new FTA, as such an action would represent a violation of Beijing’s “One-China Principle.” However, China tolerated Taiwan’s accession to the World Trade Organization in 2002. More recently, when cross-Strait economic ties were deepening significantly under the Ma Ying-jeou (馬英九) Administration, Beijing turned a blind eye as Taiwan signed economic cooperation agreements with New Zealand and Singapore. In fact, China now objects to Taiwan joining new FTAs because it wants to force Taipei to choose “cross-Strait integrated development” (兩岸融合發展) as its path to economic integration with the Asia-Pacific and the world at large.
China is also sensitive to any perceived attempt to restrict cross-Strait economic ties. In 2020, Beijing accused Taiwan’s Democratic Progressive Party-led government of pursuing cross-Strait “decoupling” (脫鉤) after Taiwanese regulators moved to block Chinese over-the-top service provider iQiyi from operating in the Taiwan. Beijing lodged similar complaints after Taiwanese regulators ordered Alibaba’s subsidiary e-commerce site Taobao Taiwan to either register as a Chinese company or leave.
Historically, Beijing has accepted that other countries will maintain unofficial economic and cultural relations with Taiwan. Even as it has sought to preempt efforts to include Taiwan in new FTAs, Beijing has not concerned itself with policing every business alliance, trade promotion activity, or overseas logistics facility in which a Taiwanese company is involved. To do so would be impractical, and such a heavy-handed approach could cause harm to China’s image at a time when many countries are already reexamining the costs and benefits of their economic ties with China.
The main point: The expansion of Taiwan’s cross-border e-commerce and digital trade in recent years is encouraging. It could potentially serve as a model for how Taiwan can use low-profile initiatives that align government priorities and private business interests to diversify the country’s economic ties as it searches for a viable path to regional and global economic integration.
[1] For insights into Beijing’s desire for political concessions see: Richard C. Bush, Difficult Choices: Taiwan’s Quest for Security and the Good Life (Washington: Brookings Institution Press, 2021), 64.
[2] In Southeast Asia alone, the internet economy is expected to grow from approximately USD $170 billion in gross merchandise volume (GMV) in 2021 to USD $360 billion by 2025, eventually reaching USD $1 trillion in GMV by 2030, according to a recent report by Google, Singapore state investor Temasek Holdings, and global business consultants Bain & Company, https://www.bain.com/insights/e-conomy-sea-2021/.
