Taiwan: Innovating & Evolving

The early textile and apparel industry in the Republic of China — conventionally referred to as
Taiwan — relied on imported raw materials for its textile production and exported most of the
finished product overseas. As the industry evolved, it began utilizing petrochemical-derived
materials and importing raw cotton yarn and man-made-fiber staple yarn. In time, it became
vertically integrated throughout the supply chain, from man-made-fiber manufacturing, to yarn
spinning, to weaving and knitting, to dyeing and finishing.

Because the Taiwanese textile and apparel industry has continually invested in new machinery
and developed new products, it has built a comprehensive production system that has enabled it to
become a major global supplier of textile products. According to the Taiwan Textile Federation
(TTF), Taiwan is the sixth-largest textile exporter globally. The textile and apparel industry also
is a significant contributor to Taiwan’s economy and is the region’s fourth-largest foreign
exchange earner.

Taiwan’s textile and apparel production in 2012 totaled approximately US$15.54 billion, of
which textiles accounted for US$14.74 billion; and apparel, US$796.7 million, TTF reports. As of
2012, the industry comprised 4,375 manufacturers — 3,206 operating in the textile sector and 1,169
in the apparel sector; and its workforce totaled 144,977 — 113,837 employed in the textile sector
and 31,140 in the apparel sector.


Exports And Imports

The Taiwanese textile and apparel industry is highly export-oriented: According to TTF, it
exported more than 77 percent of its total production from 2001 to 2012. Textile and apparel
exports in 2012 totaled US$11.82 billion and accounted for 3.9 percent of Taiwan’s total exports,
representing a 7.6-percent decline from 2011 exports, which totaled US$12.72 billion. Fabric
represented the largest share of the industry’s exports in 2012, at 61.3 percent, followed by yarn,
18.9 percent; fiber, 10.0 percent; apparel, 6.4 percent; and miscellaneous, 3.4 percent.

The Taiwanese textile and apparel industry’s biggest export market is Mainland China, which
in 2012 accounted for US$2.53 billion, or 21.4 percent of total export volume; followed by Vietnam,
US$1.77 billion, or 15.0 percent; Hong Kong, US$1.18 billion, or 10.0 percent; the United States,
US$942 million, or 8.0 percent; and Indonesia, US$596 million, or 5.1 percent.

TTF reports that textile and apparel imports in 2012 totaled US$3.32 billion, representing a
7-percent decline from 2011 imports totaling US$3.57 billion. Apparel represented the largest share
of the industry’s imports in 2012, at 45.8 percent, followed by fiber, 19.3 percent; fabric, 14.7
percent; yarn, 12.3 percent; and miscellaneous, 7.8 percent.

Taiwan imports most of its textiles and apparel from Mainland China, which in 2012 accounted
for US$1.20 billion, or 36 percent of its total imports, followed by Vietnam, US$297 million, or
8.9 percent; the U.S., US$257 million, or 7.7 percent; Japan, US$249 million, or 7.5 percent; and
Indonesia, US$161 million, or 4.8 percent. Taiwan imports mainly apparel and made-up items from
China, Vietnam, and Indonesia; cotton from the United States; and fabric from Japan.


Impact Of Trade Agreements

Taiwan and South Korea have for a long time been in competition over international trade
markets. Because they produce similar textile products, they have been vying for a greater share of
the U.S. and European Union (EU) markets. South Korea has signed free trade agreements (FTAs) with
both markets — the EU-South Korea FTA in July 2011, followed by the US-South Korea FTA (KORUS) in
March 2012 — giving its textile exports preferential access and therefore an advantage over

The U.S. is Taiwan’s second-largest trading partner, and following the passage of KORUS, the
Taiwan Industrial Development Bureau estimated that the region’s textile and apparel industry was
at risk to lose more than US$60 million in business to South Korea as a result of KORUS. And, the
Taiwan External Trade Development Council reported that Taiwan’s textile and apparel exports to the
EU, its fourth-largest trading partner, have decreased following the implementation of the EU-South
Korea FTA.

Though Taiwan and the U.S. signed a trade and investment framework agreement (TIFA) in 1994
as a framework for dialogue on trade-related issues in the absence of diplomatic ties, talks were
just resumed in March 2013 after being stalled for six years. Taiwan currently is lobbying for an
economic cooperation agreement with the EU to facilitate trade.

An Economic Cooperation Framework Agreement (ECFA) between Taiwan and Mainland China went
into force in September 2010. The ECFA removed tariffs on imports of certain Taiwanese textile and
clothing products and was expected to enable Taiwanese textile manufacturers to significantly
increase their share in the Chinese textile market. It also was intended to help Taiwan in
negotiating FTAs with other countries and to help the region become more economically significant,
thereby reducing the risk of trade diversion.

Taiwan is in the final stages of negotiating bilateral trade pacts with New Zealand and
Singapore. Though its trade volume with the two prospective FTA partners isn’t large, the
developments suggest that the Taiwanese government under President Ma Ying-jeou is making headway
in improving Taiwan’s regulatory environment to promote trade liberalization and pave the way
toward entry into the Trans-Pacific Partnership (TPP) — which the government has indicated it plans
to join no later than 2020. Taiwan could use the FTAs with New Zealand and Singapore as building
blocks to join TPP, as those two countries are both TPP members. According to Taiwan’s Bureau of
Foreign Trade, the region’s exports could increase by approximately US$10.6 billion annually if it
joined TPP, with its textiles sector benefiting heavily. However, if it doesn’t join the pact, its
competitiveness with existing TPP countries could be compromised.


Research, Development And Innovation

Like many major textile-manufacturing countries, Taiwan has been impacted by the uncertainty
in the world markets following the global financial crisis. Increasing labor costs have caused it
to lose some of its competitive advantage and have driven many of its manufacturers to relocate
production to nearby low-labor-cost countries. To stay competitive, the Taiwanese textile and
apparel industry is differentiating itself by continually investing in R&D and developing
innovative, high-value-added products.

The Taiwan Textile Research Institute has developed products including an LED yarn that
offers a glowing effect to outdoor apparel; and Aquatimo fiber, which is produced from modified
hydrophilic nylon and gives apparel a cool and comfortable effect. The Taiwan Industrial Technology
Research Institute has developed a “smart” disposable nonwoven diaper for use in hospitals and
other healthcare environments. The technology senses when a patient’s diaper is dirty and sends a
wireless signal indicating that it needs to be changed.

In addition, Taiwanese textile and apparel manufacturers have seen increasing consumer
awareness of the importance of environmental stewardship, and are focusing more on incorporating
eco-friendly materials and processes into the functional textiles they develop. Everest Textile Co.
Ltd. has introduced Ever C4, a water-repellent fabric treatment for outdoor apparel and sportswear
that uses an eco-friendly C4 water-repellent agent manufactured by United States-based 3M. Singtex
Industrial Co. Ltd. has developed S.Cafe, a fabric that comprises polyester or nylon fibers blended
with recycled coffee grounds to offer odor-control, ultraviolet-resistance and fast-drying
properties. Eclat Textile Co. has developed Body Care® functional fabrics, which incorporate
eco-friendly materials such as recycled polyester, organic cotton, bamboo, coconut and seaweed, and
offer antibacterial, moisture-wicking, quick-drying, ultraviolet-resistance and other properties to
sports and leisurewear. And Kingwhale has developed the Low Impact Technology™ (L.I.T.™) dyeing
technology that leads to significantly reduced use of energy, water and dyestuffs in its dyeing and
manufacturing processes.

Made In Taiwan

The Taiwanese government plays a big role in supporting the region’s textile and apparel
industry. Most recently, it implemented the Textile Export Promotion Project (TEPP) in an effort to
increase the industry’s competitiveness in the global textile market. The four-year project,
initiated in 2008 and carried out by the TTF, assisted select textile and apparel companies in
developing functional textile products for new applications, and helped promote their products
around the world under the Made in Taiwan (MIT) label. The government was hopeful that in adopting
the MIT label, Taiwanese textile and apparel products would improve their image internationally and
become renowned for quality, innovative design and enhanced value addition.

The project to revitalize Taiwan’s textile and apparel industry proved successful:
Government statistics show that the first and second stages of the project increased the industry’s
output value from US$14.89 billion in 2008 to US$16.69 billion in 2011, and attracted US$2.09
billion in textile industry investments between 2009 and 2012; the third phase of the project
attracted US$9.3 million in direct investments and US$26.7 million in related investments; and the
fourth phase helped 20 textile manufacturers generate approximately US$51 million in sales in 2012.
In addition, the TEPP has created 600 employment opportunities and revived 342 textile producers in
the country, TTF reports.

The Taiwanese government now is aiming to increase Taiwan’s textile production value to more
than US$18 billion in 2015 and more than US$23 billion in 2020.

July/August/September 2013