Taiwan and the Transformation of Asia-USA Economic Relationship : From the Triangular Trading Bloc to the Four-Corner Structure

Abstract

During the 1970s and 1980s, when the US and Japanese firms strongly competed on the international market, Taiwan not only became the business battle field but its production was also extensively interlinked with these foreign firms. As both American and Japanese firms aimed at exporting final goods to the US market, the increased Japanese components requests led to a trade imbalance between Taiwan, the US and Japan. The triangular economic relationship therefore took shape. After the 1990s, the considerable Taiwanese investment in China created a new division of labour across the Strait and formed a "four-corner" trade relationship between Taiwan, China, Japan and the US. In fact, the original economic relationship between the US and Asia does not change. China has only followed the same export-led economic growth and inserted itself into the regional production network. However, the enlarged production network is accompanied by the increasing US trade deficit problem and that implied the unavoidable decline of the US dominant position