Taiwan relies heavily on exports to drive economic growth. The latest trade data show its outbound shipments have dropped steadily for four consecutive months.
With a 4.7 percent decline in overall exports for the first half of the year, Taiwan lagged far behind its major Asian neighbors in economic performance.
The trade woe not only reflects a worse-than-expected global economic slowdown but may even herald an outbreak of domestic economic crisis.
Exports and export-induced investments and consumption tend to contribute 60 to 70 percent to the country's economic growth. Continued export decline could make it harder to achieve a 2 percent GDP growth this year.
More worrisome is that the downward streak embodies erosion of our trade competitiveness. In other words, we would be unable to regain some export orders even when the current global recession bottoms out.
Trade competition is getting ever more ferocious. South Korea is marauding our export markets one after another while China is also squeezing Taiwan out of certain lower-end export outlets.
Shrinking exports is a long-term trend that has become increasingly evident after the 2008-2009 global financial crunch. According to an IMD report, Taiwan's 12.26 percent export growth in 2011 fell far below of an average 21.65 percent increase of other 58 economies assessed by the Swiss research institute.
To reverse a slump in our exports and boost overall economic well-being, we must change our core economic development models.
First, the export-led growth model should be adjusted by increasing domestic demand and "local" elements.
Second, the practice of relying on cheap labor in China to provide OEM/ODM manufacturing services for major brand-name foreign corporations should be modified through branding and technological innovations.
Third, our export model that emphasizes manufacturing goods for sales to the U.S. and European markets should be revised, too.
In the future, more emphasis should be given to emerging markets as developed markets may remain stagnant for a long time. Priority should also be extended to service exports to avoid keen competition with emerging countries for limited merchandise market. (Editorial abstract -- July 18, 2012).
(By Sofia Wu)