Trade Advantages: France, Bolivia, And Taiwan's Comparative Strengths

The theory of comparative advantage, devised by David Ricardo, states that a country should produce and export goods with a low opportunity cost and import goods from other countries. This improves the allocation of resources and increases global trade. Comparative advantage is linked to price and quality differences, which can be influenced by government policies.

Taiwan, Bolivia, and France have different comparative advantages due to variations in their geography, climate, skills, and education levels. Taiwan, for instance, is the world's leading manufacturer of semiconductors, while Bolivia has the second-largest natural gas reserves in South America and is the world's third-largest cultivator of coca. France, on the other hand, has a strong agricultural sector, with a variety of crops and livestock.

Comparative advantages can also shift over time as countries develop new capabilities or face changes in their economic landscape. This evolution of comparative advantages has implications for international trade and can influence the flow of goods and services between nations.

France's defence exports to Taiwan

The French government has been advocating a united approach to containing China's rise, but since the AUKUS betrayal, Paris has realised it cannot trust the Biden administration. France has started investing in regions where US influence is receding and building its own alliances.

France's defence exports are largely dependent on US approval, as many of their weapons systems, including the Rafale fighter jet, have components originating in the US. This has complicated France's defence exports, with the US halting the transfer of Rafale jets to Egypt in 2018 due to a refusal to export a cruise missile component.

Taiwan's defence industry, on the other hand, has been steadily increasing and focuses on supplying weapons and platforms to the Republic of China Armed Forces, with few major weapons systems exported abroad. Taiwan has produced fighter aircraft, missile systems, surface ships, radars, rocket artillery, armoured vehicles, and small arms.

Taiwan's defence budget in 2019 amounted to $11.21 billion, approximately 2.16% of its GDP, with a year-on-year growth of 5.6%. The US has been a significant defence partner for Taiwan, with the country's air force composed mostly of US-made fighter jets. In 2019, the US approved the sale of 66 F-16 Block 70 fighter jets to Taiwan for an estimated total of $8 billion.

Taiwan has also been pursuing defence self-sufficiency by developing its indigenous defence industry, including missile systems, rocket artillery, surface ships, fighter aircraft, armoured vehicles, and unmanned aerial vehicles (UAVs). Taiwan is also working on creating its first indigenous submarine fleet.

While France and Taiwan both have defence industries and exports, there is no current indication of France's defence exports to Taiwan, given the political complexities and the focus of both countries on other regions for their defence exports and imports.

Taiwan's exports to France

Taiwan's exports reflect its highly developed, free-market economy, which has rapidly transformed from an agriculture-based society to a high-income, industrialised, and technologically advanced economy. This transformation has been described as the "Taiwan Miracle". Taiwan's economy is now the 8th largest in Asia and 20th largest in the world by purchasing power parity.

France's exports to Bolivia

France is a significant exporter to Bolivia, although it is not among the country's primary trading partners. In 2022, Bolivia imported goods and services from France worth an estimated total of $389 million, making France one of Bolivia's top trading partners outside of South America. This amount represented a decrease from previous years, as exports from France to Bolivia had an annualized rate of 10.6% between 2017 and 2022.

The main products that France exported to Bolivia in 2022 included raw tin, coconuts, Brazil nuts, cashews, and buckwheat. Raw tin alone accounted for $171 million of the total exports, while the remaining products each contributed smaller amounts to the total. France is a significant exporter of raw materials and agricultural products to Bolivia.

In addition to the goods mentioned above, France also exports a range of other products to Bolivia, including machinery, transportation equipment, and chemical products. France's exports to Bolivia are part of a broader trade relationship between the two countries, which also includes French imports of Bolivian goods such as minerals, agricultural products, and textiles.

The trade relationship between France and Bolivia is important for both countries. For France, Bolivia represents a market for its raw materials and agricultural products, as well as a source of imports such as minerals and textiles. For Bolivia, France is a source of high-quality goods and technology, as well as a potential market for its own exports.

Overall, France's exports to Bolivia are diverse and play a significant role in the economic relationship between the two countries. While Bolivia's imports from France have decreased in recent years, the trade relationship remains important for both nations and is likely to continue evolving in the future.

Bolivia's exports to France

France and Bolivia have maintained diplomatic relations since 1831. The trade relationship between the two countries is nominal, with the total value of trade fluctuating between €119 million and €187 million between 2015 and 2019. In 2022, Bolivia exported $19.2 million worth of goods to France, a decrease from $81.7 million in 2017. The main products exported from Bolivia to France in 2022 were shaped wood ($6.61 million), coconuts, Brazil nuts, and cashews ($3.93 million), and buckwheat ($3.73 million).

Despite the decrease in exports, Bolivia and France have been working to strengthen their economic relationship. In November 2022, the two countries launched a high-level economic dialogue during the visit of the former Vice Minister of Foreign Trade and Integration of Bolivia, Benjamín Blanco, to France. A second session of this dialogue was held in Bolivia in July 2024, where the two countries signed a bilateral roadmap to enhance cooperation in areas such as sustainable mobility, health, and strategic resources, particularly lithium.

Taiwan's defence imports from France

Taiwan's defence industry is a strategically important sector and a significant employer. It has seen significant growth in recent years. The country has been working to bolster its resilience in the face of geostrategic threats, particularly from across the Taiwan Strait, and has been investing in its military capabilities. This has led to international interest in military procurement and commercial sales opportunities in Taiwan, with the country's defence market steadily increasing.

Historically, Taiwan's military and civil aerospace markets have been heavily oriented towards US technology and products. The country's air force, for example, is composed mostly of US-made fighter jets. However, France has also supplied Taiwan with top-tier military equipment in the past, including Mirage 2000-5 fighter jets and La Fayette-class frigates.

In recent years, Taiwan has been aggressively pursuing defence self-sufficiency by developing its indigenous defence industry. The country has successfully developed its missile systems, rocket artillery, surface ships, fighter aircraft, armoured vehicles, and unmanned aerial vehicles (UAVs). Taiwan is also moving towards more advanced weapons platforms, including plans to create its first indigenous submarine fleet.

The signing of the Science and Technology Cooperation Convention (STC) between Taiwan and France in 2023 marked a substantial breakthrough in bilateral government relations. The agreement, jointly formulated by Taiwan's National Science and Technology Council (NSTC) and France's Ministry of Higher Education, Research and Innovation, outlined plans for enhanced collaboration in several key areas, including semiconductors and quantum technology, healthcare, marine technology, cybersecurity, AI, green industries, energy, and space technology.

While the STC agreement between Taiwan and France focuses on scientific and technological cooperation rather than direct defence imports, it indicates a strengthening of relations between the two countries and a potential for future collaboration in the defence sector. With France's renowned military industry and Taiwan's growing defence capabilities, there may be opportunities for further defence-related cooperation and exchanges between the two countries.

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