Question

Map 6.1 shows that 61.4 percent of Taiwan’s exports go to only five countries/territories. Which trade theories may help to explain this concentration and why?

Map 6.1 Taiwan and Its Major Export Markets China 27.1% Japan 63% United States 10.3% Taiwan Hong Singapor Taipei Couney City Taiwan

Answer 1

In the map it is seen that Taiwan's exports go mainly to American territories.Agricultural products in the United States are capital intensive.Taiwan exports its labour intensive products to the United states in which it has comparative advantage and imports capital intensive products from the United states.So in the Taiwan -US trade relation the theory of comparative advantage is adopted . Taiwan has limited land and capital.So imports of agricultural products from America is important to Taiwan.Exports of large quantities of labour intensive products by Taiwan suggests that its technology is still underdeveloped.In order to compete with United States ,Taiwan depends on labour advantage.So Taiwan-US trade relation suggest that both the countries make use of their comparative advantage and as a result enjoys the benefit of gains of trade,as is evident in the traditional trade theory.