Background Notes: Taiwan, October 1998
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State

Name: Taiwan

PROFILE

Geography

Area: 14,000 sq. mi.; about the size of West Virginia.
Cities (1997): Capital -- Taipei (pop. 2.6 million). Other cities 
-- (Kaohsiung 1.4 million), Taichung (910,000).
Terrain: Largely mountainous.
Climate: Maritime subtropical.

People

Population (mid-1998): 21.8 million.
Annual growth rate (1998): 0.7%.
Languages: Mandarin Chinese (official), Taiwanese, Hakka.
Education: Years compulsory -- 9. Attendance (1997) -- 99.9%. 
Literacy (1997) -- 93%.
Health: Infant mortality rate (1996) -- 0.6%. Life expectancy 
(1997) -- male 72 yrs.; female 78 yrs.
Work force (June 1997): 9.5 million.

Political Establishment

Type: Multi-party democracy. With the direct presidential 
election in 1996, Taiwan completed its transition from a one-
party, authoritarian system to an open, vigorous democracy with 
three major parties and a total of more than 70 registered 
parties.
Constitution: December 25, 1947; last amended 1997.
Branches (Yuan): Executive, Legislative, Judicial, Control, 
Examination.
Major administrative subdivisions: Taiwan Province, Fujian 
Province (for Kinmen and Matsu and nearby smaller islands), 
Taipei and Kaohsiung Special Municipalities.
Major political parties: Kuomintang (KMT--Nationalist Party); 
Democratic Progressive Party (DPP); Chinese New Party (CNP).
Suffrage: Universal over 20 years of age.
Central budget proposed (FY 1998): U.S. $44.38 billion.
Defense (1998): 24% of entire budget.
Flag: Red field with white sun in blue rectangle in upper left 
corner.

Economy

GDP (1997): $284.8 billion.
Annual growth rate (1997): 5.3%; (1991-97 average 6.5%).
Per capita GDP (1997): $13,130.
Natural resources: Small deposits of coal, natural gas, 
limestone, marble and asbestos.
Agriculture (2.7% of GDP): Major products -- pork, rice, betel 
nuts, sugar cane, poultry, shrimp, eel.
Industry (34.9% of GDP): Major sectors -- electronics and 
computer products, chemicals and petrochemicals, basic metals, 
textiles, transport equipment, plastics, machinery.
Trade (1997): Exports -- $122.1 billion: electronics and computer 
products, textile products, basic metals, plastic and rubber 
products. Major markets -- U.S. $29.6 billion, Hong Kong 
(including indirect trade with the P.R.C.) $28.7 billion, Japan 
$11.7 billion. Imports -- $114.4 billion: electronics and 
computer products, machinery and electrical products, chemicals, 
iron and steel, transport equipment, crude oil. Major suppliers 
(1997) -- Japan $29.0 billion, U.S. $23.2 billion, Europe $21.6 
billion.
Official exchange rate --
     January 1996: NT $32.8 to U.S. $1
     January 1997: NT $27.4 to U.S. $1
     January 1998: NT $32.7 to U.S. $1
Fiscal year: July 1 to June 30.

PEOPLE

Taiwan has a population of 21.5 million. More than 18 million, 
the "native" Taiwanese are descendants of Chinese who migrated 
from Fujian and Guangdong Provinces on the mainland, primarily in 
the 18th and 19th centuries. The "mainlanders," who arrived on 
Taiwan after 1945, came from all parts of mainland China. About 
370,000 aborigines inhabit the mountainous central and eastern 
parts of the island and are believed to be of Malayo-Polynesian 
origin.

Education

A 9-year public educational system has been in effect since 1979. 
Six years of elementary school and three years of junior high are 
compulsory for all children. About 90.7% of junior high graduates 
continued their studies in either a senior high or vocational 
school. Reflecting a strong commitment to education, in FY 1997 
15% of Taiwan's budget was allocated for education.

Taiwan has an extensive higher education system with over 100 
institutions of higher learning. Each year over 100,000 students 
take the joint college entrance exam, about 61.9% of the 
candidates are admitted to a college or university. Opportunities 
for graduate education are expanding in Taiwan, but many students 
travel abroad for advanced education, including 13,000 who study 
in the United States annually.

Languages

A large majority of people on Taiwan speak Mandarin Chinese, 
which has been the medium of instruction in the schools for more 
than four decades. Native Taiwanese and many others also speak  
one of the Southern Fujianese dialects, Min-nan, also known as 
Taiwanese. Recently there has been a growing use of Taiwanese in 
the broadcast media. The Hakka who are concentrated in several 
counties throughout Taiwan have their own distinct dialect. As a 
result of the half century of Japanese rule, many people over age 
60 can also speak Japanese. The method of Chinese romanization 
most commonly used in Taiwan is the Wade-Giles system.

Religions

According to Taiwan's Interior Ministry figures, there are 
approximately 11.2 million religious believers in Taiwan, with 
over 75% identifying themselves as Buddhists or Taoists. At the 
same time there is a strong belief in Chinese folk religion 
throughout the island. These are not mutually exclusive, and many 
people practice a combination of the three. Confucianism is also 
an honored school of thought and ethical code.

Christian churches have been active on Taiwan for many years, and 
today the island has more than 600,000 Christians, a majority of 
whom are Protestant.

Culture

Taiwan's culture is a blend of its distinctive Chinese heritage 
and Western influences. Fine arts, folk traditions, and popular 
culture embody traditional and modern, Asian and Western motifs.

One of Taiwan's greatest attractions is the Palace Museum, which 
houses over 650,000 pieces of Chinese bronze, jade, calligraphy, 
painting, and porcelain. This collection was moved from the 
mainland in 1949 when Chiang Kai-shek's Nationalist Party (KMT) 
fled to Taiwan. The collection is so extensive that only 1% is on 
display at any one time.

HISTORY

Taiwan's aboriginal peoples, who originated in Austronesia and 
southern China, have lived on Taiwan for 12,000 to 15,000 years. 
Significant migration to Taiwan from the Chinese mainland began 
as early as A.D. 500. Dutch traders first claimed the island in 
1624 as a base for Dutch commerce with Japan and the China coast. 
Two years later, the Spanish established a settlement on the 
northwest coast of Taiwan which they occupied until 1642 when 
they were driven out by the Dutch. Dutch colonists administered 
the island and its predominantly aboriginal population until 
1661. The first major influx of migrants from the Chinese 
mainland came during the Dutch period, sparked by the political 
and economic chaos on the China coast during the Manchu invasion 
and the end of the Ming Dynasty.

In 1664, a Chinese fleet led by the Ming loyalist Cheng Ch'eng-
kung (Zheng Chenggong, known in the West as Koxinga) retreated 
from the mainland and occupied Taiwan. Cheng expelled the Dutch  
and established Taiwan as a base in his attempt to restore the  
Ming Dynasty. He died shortly thereafter, and in 1683 his 
successors submitted to Manchu (Qing Dynasty) control. From 1680 
the Qing Dynasty ruled Taiwan as a prefecture and in 1875 divided 
the island into two prefectures, north and south. In 1887 the 
island was made into a separate Chinese province.

During the 18th and 19th centuries, migration from Fujian and 
Guangdong provinces steadily increased, and Chinese supplanted 
aborigines as the dominant population group. In 1895, a weakened 
Imperial China ceded Taiwan to Japan in the Treaty of Shimonoseki 
following the first Sino-Japanese war.

During its 50 years (1895-1945) of colonial rule, Japan expended 
considerable effort in developing Taiwan's economy. At the same 
time, Japanese rule led to the "Japanization" of the island 
including compulsory Japanese education and forcing residents of 
Taiwan to adopt Japanese names.

At the end of World War II in 1945, Taiwan reverted to Chinese 
rule. During the immediate postwar period, the Nationalist 
Chinese (KMT) administration on Taiwan was repressive and 
corrupt, leading to local discontent. Anti-mainlander violence 
flared on February 28, 1947, prompted by an incident in which a 
cigarette seller was injured and a passerby was shot to death by 
Nationalist authorities. The island-wide rioting was brutally put 
down by Nationalist Chinese troops, who killed thousands of 
people. Until recently, accounts of this episode in Taiwan 
history had been suppressed by the KMT. As a result of the 
February 28 Incident the native Taiwanese felt a deep-seated 
bitterness to the Mainlanders. In 1995 a monument was dedicated 
to the victims of the "2-28 Incident," and for the first time 
Taiwan's leader, President Lee Teng-hui, publicly apologized for 
the Nationalists' brutality.

From the 1930s onward a civil war was underway on the mainland 
between Chiang Kai-shek's KMT government and the Chinese 
Communist Party led by Mao Zedong. When the civil war ended in 
1949, two million refugees, predominately from the Nationalist 
government, military, and business community, fled to Taiwan. In 
October 1949 the People's Republic of China (P.R.C.) was founded 
on the mainland by the victorious communists, several months 
before Chiang Kai-shek had established in December 1949 a 
"provisional" KMT capital in Taipei.

During the 1950s, the KMT authorities implemented a far-reaching 
and highly successful land reform program on Taiwan. They 
redistributed land among small farmers and compensated large 
landowners with commodities certificates and stock in state-owned 
industries. Although this left some large landowners 
impoverished, others turned their compensation into capital and 
started commercial and industrial enterprises. These 
entrepreneurs were to become Taiwan's first industrial 
capitalists. Together with refugee businessmen from the mainland, 
they managed Taiwan's transition from an agricultural to a 
commercial, industrial economy.

Taiwan has developed steadily into a major international trading 
power with more than $218 billion in two-way trade. Tremendous 
prosperity on the island was accompanied by economic and social 
stability. Chiang Kai-shek's successor, his son Chiang Ching-kuo, 
began to liberalize Taiwan's political system, a process that has 
continued since President Lee Teng-hui took office in 1988.

ADMINISTRATION

The authorities in Taipei exercise control over Taiwan, Kinmen, 
Matsu, and the Penghus (Pescadores), and several of the smaller 
islands. Taiwan's two major cities, Taipei and Kaohsiung, are 
centrally administered municipalities. The rest of Taiwan and the 
Penghu Islands are administered together as the Province of 
Taiwan. Kinmen, Matsu, and smaller nearby islands are 
administered by the Taiwan authorities as counties of Fujian 
Province.

From 1949 until 1991, the authorities on Taiwan claimed to be the 
sole legitimate government of all of China, including the 
mainland. In keeping with that claim, when the Nationalists moved 
to Taiwan in 1949, they re-established the full array of central 
political bodies, which had existed on the mainland. While much 
of this structure remains in place, the authorities on Taiwan in 
1991 have abandoned their claim of governing mainland China, 
stating that they do not "dispute the fact that the P.R.C. 
controls mainland China."

The first National Assembly, elected on the mainland in 1947 to 
carry out the duties of choosing the President and amending the 
constitution, was re-established on Taiwan when the KMT moved. 
Because it was impossible to hold subsequent elections to 
represent constituencies on the mainland, representatives elected 
in 1947-48 held these seats "indefinitely." In June l990, 
however, the Council of Grand Justices mandated the retirement, 
effective December, 1991, of all remaining "indefinitely" elected 
members of the National Assembly and other bodies.

The second National Assembly, elected in 1991, was composed of 
325  members. The majority was elected directly; 100 were chosen 
from party slates in proportion to the popular vote. This 
National Assembly amended the constitution in 1994, paving the 
way for the direct election of the President and Vice President 
that was held in March 1996. The third National Assembly, also 
elected in March 1996, comprises 334 members serving 4-year 
terms. The National Assembly's powers now are to amend the 
constitution, recall or impeach the President and the Vice 
President, and ratify certain senior-level presidential 
appointments.

The President is both leader of Taiwan and commander-in-chief of 
its armed forces. The President has authority over the five 
administrative branches (Yuan): Executive, Legislative, Control, 
Judicial, and Examination. The President appoints the Premier, 
the head of the  Executive Yuan. The Executive Yuan comprises the 
Premier and the cabinet members who are responsible for policy 
and administration.

The main lawmaking body, the Legislative Yuan (LY), was 
originally elected in the late 1940s in parallel with the 
National Assembly. The first LY had 773 seats and was viewed as a 
"rubber stamp" institution. The second LY was elected in 1992. 
The third LY, elected in 1995, has 157 members serving three-year 
terms. The LY has greatly enhanced its standing in relation to 
the Executive Yuan and has established itself as an important 
player on the central level. This growing influence can be seen 
in the expected expansion of this institution predicted for the 
end of 1998. Along with increasing strength and size this body is 
beginning to reflect the recently liberalized political system. 
In the 1992 and 1995 elections, the main opposition party -- the 
Democratic Progressive Party (DPP) -- challenged the KMT 
dominance on control of the Legislature. In both elections the 
DPP won a significant share of the LY seats, and the KMT now 
holds only half the seats in the LY.

As the National Assembly took action in 1994 to allow for the 
popular election of the President, the LY in 1994 passed 
legislation to allow for the direct election of the governor of 
Taiwan Province and the mayors of Taipei and Kaohsiung 
Municipalities. These elections were held in December 1994, with 
the KMT winning the governor and Kaohsiung mayor posts, and the 
DPP winning the Taipei mayor's position. In a move to streamline 
the administration, the position of elected governor and many 
other elements of the Taiwan Provincial Government are being 
eliminated at the end of 1998. In November 1997 local elections, 
the DPP won 12 of the 23 county magistrate and city mayor 
contests to the KMT's 8, outpolling the KMT for the first time in 
a major election.

The Control Yuan (CY) monitors the efficiency of public service 
and investigates instances of corruption. The 29 Control Yuan 
members are appointed by the President and approved by the 
National Assembly; they serve 6-year terms. In recent years, the 
Control Yuan has become more activist, and it has conducted 
several major investigations and impeachments.

The Judicial Yuan (JY) administers Taiwan's court system. It 
includes a 16-member Council of Grand Justices (COGJ) that 
interprets the constitution. Grand Justices are appointed by the 
President, with the consent of the National Assembly, to nine-
year terms.

The Examination Yuan (ExY) functions as a civil service 
commission and includes two ministries: the Ministry of 
Examination, which recruits officials through competitive 
examination, and the Ministry of Personnel, which manages the 
civil service. The President appoints the Examination Yuan's 
head.

Principal Leaders

President -- Lee Teng-hui
Vice President -- Lien Chan
Premier -- Vincent Siew (Hsiao Wan-chang)
Vice-Premier -- Liu Chao-shiuan

POLITICAL CONDITIONS

Lee Teng-hui succeeded Chiang Ching-kuo as President when Chiang 
died on January 13, 1988. Lee was elected by the National 
Assembly to a 6-year term in 1990, marking the final time a 
President was elected by the National Assembly. In 1996 Lee Teng-
hui was elected President and Lien Chan Vice-President in the 
first direct election by Taiwan's voters.

This change in the political process is the result of the 
liberalizing trend that began in the 1980s under President  
Chiang Ching-kuo. In 1987, he lifted the emergency decree, which 
had been in place since 1948 and which had granted virtually 
unlimited powers to the President for use in the anti-Communist 
campaign. This decree provided the basis for nearly four decades 
of martial law under which individuals and groups expressing 
dissenting views were dealt with harshly. Expressing views 
contrary to the authorities' claim to represent all of China or 
supporting independent legal status for Taiwan was treated as 
sedition.

Since ending martial law, Taiwan has taken dramatic steps to 
improve respect for human rights and create a democratic 
political system. Most restrictions on the press have ended, 
restrictions on personal freedoms have been relaxed, and the 
prohibition against organizing new political parties has been 
lifted.

Until 1986, Taiwan's political system was effectively controlled 
by one party, the KMT, the chairman of which has also been 
Taiwan's President. Many top political officials are members of 
the party's Central Standing Committee, which is the most 
influential organ within the party. The KMT claims 2.1 million 
members, about two-thirds of whom are of Taiwanese origin. The 
party's net assets are reputed to total more than NT $61.2 
billion, and profits from KMT-operated businesses help fund party 
organizations and operations. As the ruling party, the KMT was 
able to fill appointed positions with its members and maintain 
political control of the island.

Since 1986 the KMT's hold on power has been challenged by the 
emergence of competing political parties. Before 1986, candidates 
opposing the KMT ran in elections as independents or 
"nonpartisans."  Before the 1986 island-wide elections many 
"nonpartisans" grouped together to create Taiwan's first new 
political party, the Democratic Progressive Party (DPP). Despite 
the official ban on forming new political parties, Taiwan 
authorities did not prohibit the DPP from operating, and in the 
1986 Island-wide elections DPP and independent candidates 
captured more than 20% of the vote.

The Civic Organizations Law passed in 1989 allowed for the 
formation of new political parties, thereby legalizing the DPP, 
and its support and influence increased. Currently it has 
approximately 90,000 members. In the 1992 Legislative Yuan 
elections, the DPP won 51 seats in the 161-seat body. While this 
was only half the number of KMT seats, it made the DPP's voice an 
important factor in legislative decisions. Winning the Taipei 
mayor's position in December, 1994, significantly enhanced the 
DPP's image. The DPP continued its strong showing in the 1995 LY 
race winning 45 of the 157 seats to the KMT's 81. The DPP for the 
first time succeeded in outpolling the KMT in the November 1997 
local elections, gaining 12 of the 23 magistrate and mayoral 
seats as opposed to the KMT's 8 and winning 43% of the vote 
versus the KMT's 41%.

The DPP membership is made up largely of native Taiwanese. Its 
platform includes outspoken positions on some of the most 
sensitive issues in Taiwan politics. For example, the DPP 
maintains that Taiwan is an entity separate from mainland China, 
in contrast to the KMT position that Taiwan and the mainland, 
though currently divided, are both part of "one China." In sharp 
contrast to the tenets of both KMT and P.R.C. policy, a number of 
ranking DPP officials openly advocate independence for Taiwan. 
The recent downplaying of Taiwan independence by the DPP as a 
party, however, led to the formation by hard-line advocates of a 
new political party called the Taiwan Independence Party in 
December 1996.

The second major opposition party, the Chinese New Party (CNP), 
was formed in August 1993, by a group made up largely of second-
generation mainlander KMT members who were unhappy both with 
corruption in the KMT and with what they saw as the 
"Taiwanization" of KMT ideology and leadership. The CNP 
emphasizes "clean government" and the original KMT focus on 
reunification with the mainland. CNP influence remains modest; it 
won 21 of the 164 LY seats in the 1995 elections. The CNP claimed 
72,000 members in 1996.

Although some friction between mainlanders and native Taiwanese 
still exists, it has abated with time and the gradual melding of 
the two communities. In 1972, then Premier Chiang Ching-kuo began 
a concentrated effort to bring Taiwanese into more senior 
position in the central administration and the KMT. Since his 
accession to the Presidency in January 1988, Lee Teng-hui, who is 
native Taiwanese, has continued this process. Recent steps by the 
authorities to redress past wrongs such as setting up a memorial 
to the victims of the February 28 Incident have contributed to 
this process.

ECONOMY

Through nearly five decades of hard work and sound economic 
management, Taiwan has transformed itself from an underdeveloped, 
agricultural island to an economic power that is a leading 
producer of high-technology goods. Taiwan is now a creditor 
economy, holding one of the world's largest foreign exchange 
reserves of more than $80 billion in 1998. Despite the Asian 
financial crisis, the economy continues to expand at about 5% per 
year, with virtually full employment and low inflation. The 
population also enjoys an annual average income equal to U.S. 
$13,130 (1997).

In the 1960s, foreign investment in Taiwan helped introduce 
modern, labor-intensive technology to the island, and Taiwan  
became a major exporter of labor-intensive products. In the 
1980s, focus shifted toward increasingly sophisticated, capital-
intensive and technology-intensive products for export and toward  
developing the service sector. At the same time, the appreciation 
of the New Taiwan Dollar (NT$), rising labor costs, and 
increasing environmental consciousness in Taiwan caused many 
labor-intensive industries, such as shoe manufacturing, to move 
to the Chinese mainland and Southeast Asia.

Taiwan has transformed itself from a recipient of U.S. aid in the 
1950s and early 1960s to an aid donor and major foreign investor, 
especially in Asia. Private Taiwan investment in the P.R.C. is 
estimated to total more than $30 billion, and Taiwan has invested 
a comparable amount in Southeast Asia.

Foreign Trade

Foreign trade has been the engine of Taiwan's rapid growth during 
the past 40 years. Taiwan's economy remains export-oriented, so 
it depends on an open world trade regime and remains vulnerable 
to downturns in the world economy. The total value of trade 
increased more than five-fold in the 1960s, nearly ten-fold in 
the 1970s, and doubled again in the 1980s. The 1990s has seen a  
more modest, slightly less than two-fold, growth. Export 
composition has changed from predominantly agricultural 
commodities to industrial goods (now 98%). The electronics sector 
is Taiwan's most important industrial export sector and is the 
largest recipient of U.S. investment. Taiwan is the world's 
largest supplier of computer monitors and is a leading PC 
manufacturer. Textile production, though of declining importance 
as Taiwan loses its competitive advantage in labor-intensive 
markets, is another major industrial export sector. Imports are 
dominated by raw materials and capital goods, which account for 
more than 86% of the total. Taiwan imports most of its energy 
needs.

The United States is Taiwan's largest trading partner, taking 24% 
of Taiwan's exports and supplying 20% of its imports. Taiwan is 
the U.S.'s seventh-largest trading partner and seventh-largest 
export market. In 1997, Taiwan's two-way trade with the U.S. 
amounted to U.S. $53.0 billion. Imports from the U.S. consist 
mostly of agricultural and industrial raw materials. Exports to 
the U.S. are mainly electronics and consumer goods.

The United States, Hong Kong (including indirect trade with the 
P.R.C.), and Japan account for 60% of Taiwan's exports, and the 
U.S. and Japan provide over half of Taiwan's imports. As Taiwan's 
per capita income level has risen, demand for imported, high-
quality consumer goods has increased. This trend has driven 
imports to rise faster than exports and has cut into Taiwan's 
global trade surplus. Another important factor in the substantial 
increase in Taiwan's imports has been industrial upgrading, which 
has pushed up imports of capital goods, raw materials, parts, and 
components. Taiwan's l997 trade surplus with the United States 
was $12.2 billion, a significant amount, but a decline from a 
high of $17 billion in 1987.

The lack of formal diplomatic relations with all but 27 of its 
trading partners appears not to have seriously hindered Taiwan's 
rapidly expanding commerce, and Taiwan is currently the world's 
14th-largest trading economy. Taiwan maintains trade offices in 
more than 58 countries with which it does not have official 
relations. Taiwan is a member of the Asian Development Bank, and 
it is engaged in negotiations to join the World Trade 
Organization (WTO) as a special customs territory. In 1991 
Taiwan, under the name "Chinese Taipei," became a member of the 
Asia-Pacific Economic Cooperation (APEC) forum. These 
developments reflect Taiwan's economic importance and its desire 
to become further integrated into the global economy.

Agriculture

Taiwan's agricultural sector is extremely productive. Although 
only about one-quarter of its land area is arable, virtually all 
farmland is intensely cultivated, with some areas suitable for 
two and even three crops a year. However, increases in 
agricultural production have been much slower than industrial 
growth. Agriculture only comprises approximately 2.7% of Taiwan's 
GDP. Taiwan's main crops are rice, betel nuts, sugar cane, and 
corn.

Although self-sufficient in rice production, Taiwan imports large 
amounts of wheat, mostly from the United States. Meat production  
and consumption are rising sharply, reflecting a rising standard 
of living. Taiwan has exported large amounts of frozen pork, 
although this was affected by an outbreak of hoof and mouth 
disease in 1997. Other agricultural exports include fish, 
aquaculture and sea products, canned and frozen vegetables, and 
grain products. Imports of agriculture products are expected to 
increase due to the approaching WTO accession, which will open 
previously protected agricultural markets.

Economic Outlook

Taiwan now faces many of the same economic issues as other 
developed economies. With the prospect of continued relocation of 
labor-intensive industries to countries with cheaper work forces, 
Taiwan's future development will have to rely on further 
transformation to a high technology and service-oriented economy. 
In recent years, Taiwan has successfully diversified its trade 
markets, cutting its share of exports to the U.S. from 49% in 
1984 to 24% in l997. Taiwan's dependence on the U.S. market 
should continue to decrease as its exports to Southeast Asia and 
the P.R.C. grow and its efforts to develop European markets 
produce results. Taiwan's bid to join the WTO and its desire to 
become an Asia-Pacific "regional operations center" are spurring 
further economic liberalization.

DEFENSE

Taiwan maintains a large military establishment, which will 
absorb about 2.86% of the GNP and accounted for 21.0% of the 
central budget in FY99. The military's foremost mission is the 
defense of Taiwan, a defense primarily against the P.R.C., which 
is seen as the predominant threat and which has not renounced the 
use of force against Taiwan. Taiwan's armed forces number 
approximately 430,000, and reserves reportedly total 3,870,000. 
Taiwan has implemented a force reduction program to scale down 
its military to a level of 400,000 by FY 2001. Conscription 
remains universal for qualified males reaching age 18.

Taiwan's armed forces are equipped with weapons obtained 
primarily from the United States. In recent years, however, 
Taiwan has also procured some weapons from other Western nations 
and has stressed military "self-reliance," which has resulted in 
the growth of indigenous military production in certain fields. 
Taiwan adheres to the principles of the Nuclear Nonproliferation 
Treaty and has stated that it does not intend to produce nuclear 
weapons.

FOREIGN RELATIONS

The People's Republic of China replaced Taiwan at the United 
Nations in 1971, and Taiwan's diplomatic position eroded, as many 
countries changed their official recognition from Taipei to 
Beijing. In mid-l998, Taiwan had formal diplomatic ties with 27 
countries.

At the same time, Taiwan has cultivated informal ties with most 
countries to offset its diplomatic isolation and to expand its 
economic relations. A number of nations have set up unofficial 
organizations to carry out commercial and other relations with 
Taiwan. Between its official overseas missions and its unofficial 
representative and/or trade offices, Taiwan is represented in 149 
countries. Recently, Taiwan has lobbied strongly for admission 
into international organizations such as the UN. The P.R.C. 
opposes Taiwan's membership in such organizations, most of which 
require statehood for membership, because Beijing considers 
Taiwan to be a province of China, not a separate sovereign state.

THE U.S. AND TAIWAN

On January 1, 1979, the United States changed its diplomatic 
recognition from Taipei to Beijing. In the U.S.-P.R.C. Joint 
CommuniquŽ that announced the change, the United States 
recognized the Government of the People's Republic of China as 
the sole legal government of China and acknowledged the Chinese 
position that there is but one China and Taiwan is part of China. 
The Joint CommuniquŽ also stated that within this context the 
people of the United States will maintain cultural, commercial, 
and other unofficial relations with the people on Taiwan.

On April 10, 1979, President Carter signed into law the Taiwan 
Relations Act (TRA), which created domestic legal authority for 
the conduct of unofficial relations with Taiwan. U.S. commercial, 
cultural, and other interaction with the people on Taiwan is 
facilitated through the American Institute in Taiwan (AIT), a 
private non-profit corporation. The Institute has its 
headquarters in the Washington, DC area and has offices in Taipei 
and Kaohsiung. It is authorized to issue visas, accept passport 
applications, and provide assistance to U.S. citizens in Taiwan. 
A counterpart organization, the Taipei Economic and Cultural 
Representative Office in the United States (TECRO), has been 
established by the Taiwan authorities. It has its headquarters in 
Taipei, the representative branch office in Washington, DC, and 
11 other Taipei Economic and Cultural Offices (TECO) in the 
continental U.S. and Guam.

Following derecognition, the United States terminated its Mutual 
Defense Treaty with Taiwan. However, the United States has 
continued the sale of appropriate defensive military equipment to 
Taiwan in accordance with the Taiwan Relations Act which provides 
for such sales and which declares that peace and stability in the 
area are in U.S. interests. Sales of defensive military equipment 
is also consistent with the 1982 U.S.-P.R.C. Joint CommuniquŽ. In 
this communiquŽ, the United States stated that "it does not seek 
to carry out a long-term policy of arms sales to Taiwan" and that 
U.S. arms sales would "not exceed, either in qualitative or in 
quantitative terms, the level of those supplied in recent years," 
and that the U.S. intends "gradually to reduce its sale of arms 
to Taiwan."  The P.R.C., in the 1982 communiquŽ, stated that its 
policy was to strive for a peaceful resolution of the Taiwan 
question.

U.S. commercial ties with Taiwan have been maintained and have 
expanded since 1979. Taiwan continues to enjoy Export-Import Bank 
financing, Overseas Private Investment Corporation guarantees, 
normal trade relations (NTR) status, and ready access to U.S. 
markets.

In recent years, U.S. Government economic dealings with Taiwan 
have focused on expanding market access for American goods and 
services. AIT has been engaged in a series of trade negotiations 
which have focused on protection of intellectual property rights, 
and issues relating to Taiwan's accession to the WTO. In February 
1998, the U.S. completed a bilateral market access agreement with 
Taiwan, an important step forward in Taiwan's WTO accession 
process.

Maintaining diplomatic relations with the P.R.C. has been 
recognized to be in the long-term interest of the United States 
by six consecutive administrations; however, maintaining strong, 
unofficial relations with Taiwan is also in the U.S. interest. 
The United States is committed to these efforts because they are 
important for America's global position and for peace and 
stability in Asia. In keeping with its one-China policy, the U.S. 
does not support "two Chinas," "one China, one Taiwan," or Taiwan 
independence. Nor does the United States support Taiwan's efforts 
to become a member of the UN or other organizations in which 
membership is limited to states. The U.S. does support Taiwan's 
membership in other appropriate international organizations, such 
as the APEC forum and the Asian Development Bank, in which 
statehood is not a requirement for membership. In addition, the 
U.S. supports opportunities for Taiwan's voice to be heard in 
organizations where statehood is not a requirement.

Trade and Investment

Over five decades, Taiwan transformed itself from an 
underdeveloped, agricultural island to an economic power that is 
a leading producer of high-technology goods. Taiwan has moved 
from being a recipient of U.S. aid in the 1950s and early 1960s 
to an aid donor and major foreign investor, especially in Asia.

U.S. commercial ties with Taiwan have expanded since 
derecognition. Taiwan continues to enjoy Export-Import Bank 
financing, Overseas Private Investment Corporation guarantees, 
most-favored nation (MFN) status, and ready access to U.S. 
markets.

In recent years, U.S. economic dealings with Taiwan have focused 
on expanded market access for American goods and services. AIT 
has been engaged in a series of trade negotiations which have 
focused on protection of intellectual property rights and issues 
relating to Taiwan's accession to the WTO, as well as other 
market access issues. Taiwan's bid to join the WTO and its desire 
to become an Asia-Pacific regional operations center are spurring 
economic liberalization. As noted, Taiwan is a member of APEC, to 
which the U.S. also belongs.

The United States is Taiwan's largest trading partner, absorbing 
23% of Taiwan's exports and supplying 20% of its imports. Taiwan 
was the eighth-largest trading partner of the U.S. and seventh-
largest export market. In 1996, Taiwan's two-way trade with the 
U.S. was about $48 billion. Imports from the U.S. consisted 
mostly of agricultural and industrial raw materials. Exports to 
the U.S. were mainly electronics and consumer goods. Electronics 
is Taiwan's most important industrial export sector and is the 
largest recipient of U.S. investment.

As Taiwan's income level has risen, demand for imported, high-
quality consumer goods has increased. In recent years, Taiwan has 
successfully diversified its trade markets, cutting its share of 
exports to the U.S. from 49% in 1984 to 23% in 1996. Taiwan's 
1996 total trade surplus with the United States was $11.5 
billion, down from a high of $17 billion in 1987. The U.S. trade 
deficit with Taiwan expanded during early 1997 compared to the 
corresponding period in 1996. Taiwan's dependence on the U.S. 
market should continue to decrease as its exports to the P.R.C. 
and elsewhere in Asia grow and its efforts to develop markets in 
Europe and other areas produce results. Due to the Asian regional 
economic situation, Taiwan's economic indicators have seen a 
gradual decline in recent months. Exports to Southeast Asia have 
also decreased in 1998.

TAIWAN AND THE MAINLAND

Despite the differences between Taiwan and the P.R.C., contact 
between the two sides of the Taiwan Strait has grown 
significantly over the past decade. Taiwan has continued to relax 
restrictions on unofficial contacts with the P.R.C., and cross-
Strait interaction has mushroomed. Since 1987, when the ban on 
travel to the P.R.C. was lifted, Taiwan residents have made more 
than 10 million trips to the mainland. Taiwan's Board of Foreign 
Trade estimates that indirect trade between Taiwan and the 
P.R.C., including Hong Kong, reached about $26.1 billion in 1996. 
This indirect trade runs heavily in Taiwan's favor, providing 
another outlet for the island's booming economy. In an attempt to 
facilitate trade, in 1995 the Executive Yuan approved the 
construction of an offshore transshipment center at the port of 
Kaohsiung through which direct shipping with the P.R.C. would be 
permitted. In April 1997 the first sanctioned direct cross-Strait 
shipping began between selected P.R.C. ports and Kaohsiung for 
cargo being transshipped through Taiwan.

The Taiwan authorities have indicated they hope that the message 
of Taiwan's political and economic success will influence the 
pace and character of change in the P.R.C., and thus hasten the 
day when the reunification of China will take place on terms 
acceptable to Taiwan.

Beijing has expressed a mixed view of these developments. P.R.C. 
leaders are pleased at the development of economic ties and 
exchanges, which they believe helps their cause of reunification. 
However, the increase in contacts, combined with domestic 
political liberalization on Taiwan, has also resulted in more 
open discussion in Taiwan of the future of Taiwan, including the 
option of independence, to which Beijing is strongly opposed.

The trend in cross-Strait interaction is one of steady growth 
with, so far, only temporary setbacks due to political factors 
such as Lee Teng-hui's private visit to the U.S. in 1995. Taiwan 
business representatives have concerns about issues such as 
safety, corruption, and contract disputes, which have led to 
increased caution and a search for alternative investment venues, 
but not to pulling out from the mainland altogether. President 
Lee has called for a "no haste, be patient" policy regarding 
Taiwan mainland investment to prevent over dependence on the 
P.R.C. As a result of this policy Taiwan has placed restrictions 
on large-scale infrastructure investments on the mainland in 
1997, although billions of dollars has been invested by smaller 
firms.

The development of semi-official cross-Strait relations has been 
incremental. Prior to April 1993, when talks were held in 
Singapore between the heads of two private intermediary 
organizations, Taiwan's Straits Exchange Foundation (SEF) and the 
P.R.C.'s Association for Relations Across the Taiwan Strait 
(ARATS) there had been some lower-level exchanges between the two 
side of the Strait. The April 1993 SEF-ARATS talks primarily 
addressed  technical issues relating to cross-Strait 
interactions. Lower-level talks continued on a fairly regular 
basis until they were suspended by Beijing in 1995 after 
President Lee's U.S. visit. Unofficial exchanges resumed in 1997 
through informal meetings between personnel of the two sides' 
unofficial representative organizations. Direct SEF-ARATS 
contacts resumed in April 1998 and the SEF Chairman visited the 
Mainland in October 1998.

The U.S. has welcomed and encouraged the cross-Strait dialogue as 
a process which contributes to a reduction of tension and to an 
environment conducive to the eventual peaceful resolution of the 
outstanding differences between the two sides. The United States 
believes that differences between Taipei and Beijing should be 
resolved by the Chinese people on both sides of the Strait 
themselves. The U.S. has consistently stated that its abiding 
interest is that the process be peaceful.

REPRESENTATIVE OFFICES

United States Representative Offices

American Institute in Taiwan, Washington Headquarters
Suite 1700, 1700 North Moore Street, Arlington, VA 22209
Tel: 703-525-8474; fax 703-841-1385.

American Institute in Taiwan, Taipei Office
No. 7, Lane 134, Hsin Yi Road, Section 3, Taipei, Taiwan
Tel: 011-886-2-2709-2000; fax 011-886-2-2702-7675

American Institute in Taiwan, Kaohsiung Office
5F, No. 2, Chung Cheng 3rd Road; Kaohsiung, Taiwan 800
Tel: 011-886-7-224-0154; fax 011-886-7-223-8237

Taiwan Representative Office

Taipei Economic and Cultural Representative Office (TECRO)
4201 Wisconsin Ave. NW, Washington, DC 20016-2137
Tel: 202-895-1800; fax 202-363-0999.

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program 
provides Travel Warnings and Consular Information Sheets. Travel 
Warnings are issued when the State Department recommends that 
Americans avoid travel to a certain country. Consular Information 
Sheets exist for all countries and include information on 
immigration practices, currency regulations, health conditions, 
areas of instability, crime and security, political disturbances, 
and the addresses of the U.S. posts in the country. Public 
Announcements are issued as a means to disseminate information 
quickly about terrorist threats and other relatively short-term 
conditions overseas which pose significant risks to the security 
of American travelers. Free copies of this information are 
available by calling the Bureau of Consular Affairs at 202-647-
5225 or via the fax-on-demand system: 202-647-3000. Travel 
Warnings and Consular Information Sheets also are available on 
the Consular Affairs Internet home page: http://travel.state.gov 
and the Consular Affairs Bulletin Board (CABB). To access CABB, 
dial the modem number: 301-946-4400 (it will accommodate up to 
33,600 bps), set terminal communications program to N-8-1(no 
parity, 8 bits, 1 stop bit); and terminal emulation to VT100. The 
login is travel and the password is info. (Note: Lower case is 
required). The CABB also carries international security 
information from the Overseas Security Advisory Council and 
Department's Bureau of Diplomatic Security. Consular Affairs 
Trips for Travelers publication series, which contain information 
on obtaining passports and planning a safe trip abroad, can be 
purchased from the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954; 
telephone: 202-512-1800; fax 202-512-2250.

Emergency information concerning Americans traveling abroad may 
be obtained from the Office of Overseas Citizens Services at 
(202) 647-5225. For after-hours emergencies, Sundays and 
holidays, call 202-647-4000.

Passport Services information can be obtained by calling the 24-
hour, 7-day a week automated system ($.35 per minute) or live 
operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per 
minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). 
Major credit card users (for a flat rate of $4.95) may call 1-
888-362-8668 (TDD: 1-888-498-3648).

Travelers can check the latest health information with the U.S. 
Centers for Disease Control and Prevention in Atlanta, Georgia. A 
hotline at (404) 332-4559 gives the most recent health 
advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and 
countries. A booklet entitled Health Information for 
International Travel (HHS publication number CDC-95-8280) is 
available from the U.S. Government Printing Office, Washington, 
DC 20402, tel. (202) 512-1800.

Information on travel conditions, visa requirements, currency and 
customs regulations, legal holidays, and other items of interest 
to travelers also may be obtained before your departure from the 
U.S. (see "Representative Offices" listing in this publication).

U.S. citizens who are long-term visitors or traveling in 
dangerous areas are encouraged to register at U.S. offices upon 
arrival overseas (see "Representative Offices" listing in this 
publication). This may help family members contact you in case of 
an emergency.

Further Electronic Information

Department of State Foreign Affairs Network. Available on the 
Internet, DOSFAN provides timely, global access to official U.S. 
foreign policy information. Updated daily, DOSFAN includes 
Background Notes; Dispatch, the official magazine of U.S. foreign 
policy; daily press briefings; Country Commercial Guides; 
directories of key officers of foreign service posts; etc. 
DOSFAN's World Wide Web site is at http://www.state.gov.

U.S. Foreign Affairs on CD-ROM (USFAC). Published on an annual 
basis by the U.S. Department of State, USFAC archives information 
on the Department of State Foreign Affairs Network, and includes 
an array of official foreign policy information from 1990 to the 
present. Contact the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To 
order, call (202) 512-1800 or fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S. Department 
of Commerce, the NTDB contains a wealth of trade-related 
information. It is available on the Internet (www.stat-usa.gov) 
and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more 
information.

SPECIFIC NOTES ON TRAVEL TO TAIWAN

Immigration: For a stay of less than 14 days, no visa is required 
for U.S. citizens; for a longer stay, a visitor visa, valid for a 
stay of 2 months and extendible twice for a total of 6 months, is 
required. Persons coming from or passing through disease-infected 
areas should have inoculations as appropriate. Since health 
requirements often change, travelers should check the latest 
information by calling the TECRO/TECO office nearest to them.

Climate and clothing: Taiwan is hot and humid in summer and 
chilly and damp in winter. The climate in the northern half of 
the island resembles that of the south-central U.S.; the southern 
part is similar to Florida. In winter, raincoats, light jackets 
and sweaters are recommended; in summer, lightweight garments are 
essential. An umbrella is useful year round, but essential in the 
winter and early spring.

Health: Major epidemics and serious diseases are infrequent in 
Taiwan, although in 1998 an outbreak of enterovirus occurred  
which has resulted in a number of deaths of infants and children. 
High pollen counts and air pollution can cause discomfort to 
people who suffer from allergies or asthma. Care must be taken 
with drinking water, as hepatitis is a major problem.

Telecommunications: Telephone and telegraph services are modern 
and efficient. Bilingual assistance is available through most 
hotel switchboards. Taipei is 13 hours ahead of U.S. Eastern 
Standard Time.

Transportation: Car rentals are available in Taiwan. Taipei has 
an extensive bus system and an expanding metro network, but many 
foreign visitors rely on the inexpensive taxis for 
transportation. For domestic travel, trains and planes are both 
convenient.

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