Trade between Taiwan and the United States would increase if a free trade arrangement were to be established between the two economies, reports the U.S. International Trade Commission (ITC) in its publication U.S.-Taiwan FTA: Likely Economic Impact of a Free Trade Agreement Between the United States and Taiwan.

The ITC, an independent, nonpartisan, factfinding federal agency, recently completed the report for the U.S. Senate Committee on Finance. Following are highlights of the report:

• The Taiwan economy is only about 3 percent of the size of the U.S. economy, but has experienced strong, steady growth of about 8.2 percent annually since 1961. The driver of Taiwan's economic growth is manufacturing, which was valued at $259 billion in 1999 and provided 98.6 percent of its exports in 2000.

• The bulk of the bilateral trade between Taiwan and the United States consists of manufactured products. Additionally, the United States is a net exporter of agricultural products to Taiwan, and in 2001, Taiwan was the fifth largest market for these U.S. products.

• Taiwan's average nominal tariff is currently 7.1 percent, while that of the United States stands at 2.8 percent. Both economies maintain a number of tariff-rate quotas, especially in the agricultural sector.

• In gaining accession to the WTO, Taiwan improved its regulatory regime, but important nontariff barriers remain. Insufficient intellectual property rights protection also remains a problem. U.S. trade remedy laws are among the concerns most frequently raised by Taiwan exporters.

• It is estimated that both economies would likely experience relatively small economywide effects from an FTA. However, some sectoral trade flows would increase substantially. In motor vehicles, rice, fish, and other foods sectors, U.S. exports to Taiwan would increase by more than 100 percent. Similarly, U.S. imports from Taiwan for dairy, textiles, wearing apparel, leather, and certain crop commodities would also rise by more than 100 percent. In dollar terms, these changes are significantly smaller because in many of the sectors, current trade is small or near zero, so the percent change is being applied to a small base.

• The removal of certain nontariff measures would have additional effects on services. For example, U.S. asset management firms and banks could expect to increase sales in Taiwan if certain nontariff barriers were removed under a FTA. The removal of these barriers might also affect U.S.-Taiwan trade or investment in textiles and apparel, vehicles, and education.

U.S.-Taiwan FTA: Likely Economic Impact of a Free Trade Agreement Between the United States and Taiwan (Inv. No. 332-438, USITC Publication 3548, October 2002) will be available on the ITC's Internet server at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may be faxed to 202-205-2104.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.