1.Introduction

From the early 1960s，the US was one of Taiwan’s most important trade partners. In 1984 the US alone accounted for 48.8 per cent of Taiwan’s exports and 23 per cent of the imports. While the proportion of imports from the US remained fairly stable at 20 to 23 per cent，the proportion of exports dropped slightly in 1987 and declined drastically thereafter. The percentage was only 24.2 in 1997，similar to the 23.5 per cent for Hong Kong.

As for trade balance，Taiwan has enjoyed a trade surplus since 1969. The trade surplus rose drastically in the 1970s andmid 1980s，reaching a peak in 1987 of 16 billion US dollars. Thereafter it gradually declined to 5.6 billion dollars in 1995，though rebounded to 6.9 and 6.3 billion dollars in 1996 and 1997，and 9.7 billion in 1998. Over the same period，the US trade deficit increased from 197 billion dollars in 1997 to 248 billion in 1998. The sharp increase in the trade deficit attracted the attention of US industry and Congress and caused the US government to invoke Section 301 to investigate the major trade partners. The outcome of this investigation will certainly have a great impact on Taiwan’s exports and economic growth，especially after China’s and Taiwan’s entry into the WTO. Both believe that after entering the WTO，they will be immune to the threats of Section 301. Whether one or both can enter WTO before the end of this year remains to be seen.

This paper has two goals. The first is to examine the factors explaining the different dynamics of exports and imports between the US and Taiwan. The second is to evaluate，using the Computable General Equilibrium Model，the possible impacts of Taiwan and China entering the WTO.

2.Trade between Taiwan and the US

Taiwan’s total exports，imports，and