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Impact of Closer Cooperation with China on Taiwan’s Economic Development 191
The American Chamber of Commerce in Taipei is
convinced that direct transportation across the strait
would induce “thousands” its members to relocate their
regional headquarters back to Taiwan from China. 4
IV. Impact of Closer Cooperation with
China on Taiwan’s Economic Development
Chen, et al (2008) developed the FTAP model by
applying and expanding the GTAP model of Dee and
Hanslow (2001). The Chen model simulates the
impact on various economies in Asia and the Pacific.
The model is used to evaluate the impact of normalization
of economic and trade relations for closer cooperation
between Taiwan and China.
The Chen model shows if Taiwan, China and
Hong Kong develop a free trade zone, their exports will
increase by 13.99 percent, 11.25 percent, and 5.92 percent,
respectively. Their imports will rise by 22.79 percent,
13.35 percent, and 6.94 percent, respectively.
On the other hand, their respective GDP will increase
by 3.31 percent, 1.68 percent, and 0.99 percent, respectively.
They will each gain US$14.13 billion, US$11.46
billion, and US$3.87 billion in social welfare, respectively.
from Japan and exports to Korea, but there is no adverse
effect on the growth of GDP for all. Negative
influence is also apparent in the social welfare gains for
the United States, Korea, and ASEAN areas. Still, the
total social welfare gains increase when the Taiwan-China-Hong
Kong free trade zone is formed. The
net global social welfare gains rise.
China will increase imports, exports, real GDP and
social welfare gains a great deal, if it succeeds in forming
the East Asian Free Trade Zone. That shows China
benefit from closer cooperation with Taiwan. On the
other hand, Taiwan will benefit more at the beginning
of closer economic cooperation with China. In the end,
Japan, the United States and the ASEAN are going to
benefit gradually from economic integration in Asia
and the Pacific.
If cooperation is expanded to involve the emerging
East Asian Free Trade Zone (ASEAN+5), Taiwan,
China, and Hong Kong will increase exports by 18.28
percent, 41.03 percent, and 6.37 percent, respectively.
Their imports will rise by 27.66 percent, 52.88 percent,
and 7.64 percent, while their respective GDP will go up
by 3.26 percent, 2.65 percent, and 1.02 percent. Their
social welfare gains will increase by US$12.98 billion,
US$17.95 billion, and US$3.56 billion. (See Table 4.)
To sum up, establishment of a Taiwan-China-
Hong Kong free trade zone will benefit both sides of
the strait. It will be more advantageous for Taiwan.
Negative influence may be observed on imports
4 See http://www.haixiainfo.com.tw/16128.html.