This record is a partial extract of the original cable. The full text of the original cable is not available.

170055Z Feb 06

UNCLAS SECTION 01 OF 03 TAIPEI 000514 
 
SIPDIS 
 
 
STATE PLEASE PASS AIT/W AND USTR 
 
STATE FOR EAP/RSP/TC, EAP/EP 
 
USTR FOR WINTER AND WINELAND 
 
USDOC FOR 4420/USFCS/OCEA/EAP/LDROKER 
USDOC FOR 3132/USFCS/OIO/EAP/ADAVENPORT 
TREASURY FOR OASIA/LMOGHTADER 
TREASURY PLEASE PASS TO OCC/AMCMAHON 
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF 
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ECON PINR TW
SUBJECT:  Export Boom Continues in January 2006 
 
 
SUMMARY 
------- 
 
¶1.  In January 2006, Taiwan began using new UN guidelines to 
compile its trade statistics and to revise its trade data 
for past years.  Seasonally adjusted, Taiwan continued to 
enjoy an export boom in January 2006, particularly in its 
electrical and electronics industries.  Greater China 
(mainland China and Hong Kong), Japan, the United States, 
and ASEAN were Taiwan's four major trading partners, taking 
three-quarters of the island's total exports and supplying 
nearly 60% of Taiwan's imports.  The Lunar New Year holiday 
continues to distort January and February trade data, 
requiring adjustment.  END SUMMARY. 
 
New UN Trade Statistics 
----------------------- 
 
¶2.  In January 2006, Taiwan began using the 2004 version of 
the "UN International Merchandise Trade Statistics Compilers 
Manual" for its current trade statistics and to recompile 
past trade data.  The major change is that exports now 
include re-exports, and imports now include re-imports.  Re- 
exports cover returns (to foreign suppliers), transshipments 
without processing, and transshipments after simple 
processing (defined as less than 35% value added and which 
account for about 80-90% of Taiwan's total re-exports). 
Taiwan's promotion of simple processing in recent years has 
contributed to a steady increase in re-exports from less 
than 2% of total exports prior to 2000 to about 5% in 2005. 
Re-imports refer to returns to local suppliers, which 
account for only 0.5% of total imports. 
 
Lies, Damn Lies, and Statistics 
------------------------------- 
 
¶3.  The irregular timing of the weeklong Lunar New Year 
holiday is a seasonal factor that distorts Taiwan's trade 
statistics in January and February.  This holiday occurred 
totally in February in 2005, but lasted from January 28 to 
February 2 in 2006.  The holiday reduced by three the number 
of working days in January 2006, 13.6% fewer days than in 
January 2005.  Unadjusted shipments to and from Taiwan ports 
in January 2006 were less than in January 2005.  This 
distortion can be corrected through comparisons between the 
daily averages for January 2005 and January 2006. 
 
Adjusted Data Shows Export Boom 
------------------------------- 
 
¶5.  The adjusted data show that the y-o-y export growth in 
January 2006 set a 12-month high of 21%.  The steady rise in 
export growth from a single-digit rate in early 2005 to 
14.2% in Q4 of 2005 and 21% in January 2006 reflects a 
sustained export boom.  According to the adjusted data, 
Taiwan's imports posted a y-o-y growth of 7.7%, rather than 
a decline of 7% as shown by unadjusted data.  Taiwan's 
unadjusted February 2006 trade, will likely show double- 
digit y-o-y growth in both exports and in imports.  Due in 
part to the additional workdays in February 2006, unadjusted 
export growth may exceed 30%.  Export growth, together with 
an import decline, contributed to a sharp increase in 
Taiwan's trade surplus in January 2006 to US$2.33 billion, 
4.6 times the US$0.5 billion of a year ago. 
 
Booming Electrical and Electronic Industries 
-------------------------------------------- 
 
¶6.  The export boom was concentrated in high-tech 
industries, particularly electric and electronic goods 
(E/E).  According to unadjusted data, E/E exports in January 
2006 rose 24.5% or US$1.4 billion from a year ago to US$7 
billion. (The gaudy figures in 2006 are due, in part, to 
poor performance in 2005)  The increase in E/E exports was 
nearly double the overall export increase.  E/E accounted 
for 41.4% of Taiwan's total exports in January 2006, up from 
34.8% a year earlier.  E/E is mainly composed of electronic 
components (including semiconductors), optical products 
(including flat panels displays), electrical machinery, and 
electrical household appliances. 
 
Higher Oil Prices 
----------------- 
 
¶7.  Reflecting higher international oil prices, imports of 
petroleum in January surged 64% from a year ago to US$1.8 
billion.  Petroleum accounted for 12.3% of total imports in 
January 2006, up from 7% a year ago.  The sharp increase in 
petroleum imports has contributed to growth in imports from 
oil producing nations, up 11% for Kuwait, up 35.5% for the 
United Arab Emirates, and up 92% for Saudi Arabia. 
 
Drop in Imports of Capital Goods 
-------------------------------- 
 
¶8.  However, the increase of US$0.7 billion in petroleum 
imports in January 2006 was more than offset by a drop of 
30% (US$1.0 billion) in capital goods imports, due mainly to 
three factors:  First, Japan last year finished delivery of 
rail cars for Taiwan's high-speed rail system.  Second, 
Boeing's delivery of passenger aircraft to China Airlines 
and EVA Airways reached a peak early last year.  Taiwan's 
imports of transport equipment in January 2006 contracted 
41%.  Third, machinery imports in January 2006 dropped 35% 
due to excess capacity built in early 2005 and Taiwan 
manufacturing firms relocating production overseas.  These 
factors caused Taiwan's imports from the United States and 
Japan to drop 23.7% and 20.8%, respectively. 
 
Taiwan's Major Trading Partners 
------------------------------- 
 
¶9.  Greater China, Japan, the United States, and ASEAN are 
Taiwan's four major trading partners.  Shipments to these 
four markets in January 2006 rose 3.1% from a year ago to 
US$12.5 billion, three-quarters of Taiwan's total exports. 
Exports to the United States increased from 14.4% of 
Taiwan's total exports in January 2005 to 15.6% in January 
2006, while the export shares to Greater China and Japan 
declined from 39.3% to 37.7% and from 8.15% to 7.4%, 
respectively.  The ratio for ASEAN during the one-year 
period remained unchanged at 13.4%. 
 
¶10.  Imports from major suppliers Greater China, Japan, the 
Untied States, and ASEAN dropped 13.8% to US$8.2 billion. 
Imports from Greater China increased while imports from the 
United States and Japan shrank from 12.8% to 10.5% and from 
25.4% to 21.6%, respectively. 
 
KEEGAN