Multinationals Pressure Taiwan Managers On Direct
Trade With China
Multinationals are putting strong pressure on their Taiwan
managers to predict if there will be direct trade ties
with China by year-end. If not, they plan to decrease
the size of their operations and investments in Taiwan.
The US and European chambers of commerce in Taiwan have
been vocal supporters of direct trade links between China
and Taiwan for years. Currently, all the trade has to
be routed through Hong Kong or other third countries because
of current Taiwan regulations. China is in favor of direct
trade links, but has said that Taiwan must negotiate the
agreement under the principle of one China, which the
administration of Chen Shui-bian refuses to do. Months
before the election, Chen said that he planned to open
direct trade links with China sometime
after the March 20 election.
But, the current mess brought about by the election has
thrown those plans into doubt. On the one hand, Chen has
to fight his re-election in the courts, and on the other
hand, he needs to keep the loyalty of his core anti-China,
pro-independence constituency which is based in southern
and central Taiwan. This core advocates a strong anti-China
stance, regardless of the effect on Taiwan's economy.
In the week following the elections, multinationals have
been quizzing their Taiwan home offices about what to
do with their investments in Taiwan. The questions they
are putting to their country managers are simple: "Should
we continue to invest in Taiwan in the hope that direct
trade will happen by year-end, or should we pull out our
investments?" Normally, the country managers are
used to responding with "On the one hand..., on the
other hand" responses, but this time, the head offices
are playing hardball, and demanding simple yes, no answers.
Since Chen promised direct links earlier in his first
term, and did not deliver, most of the responses are in
the negative. This confirms the "hollowing-out"
scenario of the Taiwan economy mentioned earlier in
this column.
Chen is caught between a rock and a hard place. When
forced to choose between being a hard-line politician
playing to the pro-independence crowd, or cozying up to
Taiwan's business community which wants direct links with
China, Chen has always opted for politics, driving Taiwan
independence as a simple and clear wedge issue which will
appeal to his core constituency. In large part, this is
because of his background as a human rights lawyer and
politician. He has not been able to build a strong economics
policy team in his first term. When his economics team
showed signs of a more pragmatic approach to trade with
China, Chen move to cut them off at the knees and disavow
their actions. For this reason, there are no hopes that
he will set aside ideology in favor of trade in his second
term.
Since Chen won by only 0.2% in the March 20 election,
he will need to use anti-China rhetoric even more to fire
up his core supporters. Chen's problem is that the aspirations
of his core pro-independence group are incompatible with
a sound and sensible economic and trade policy. So far,
his domestic policy has just been one of dragging things
out without making any clear decisions and policy.
The problem is that this position is driving Taiwan's
economic erosion more quickly, and is forcing more Taiwan
businesses to relocate to China.
Before you go, did you like this article?
If so, you can receive a free email newsletter version
each weekday. Sign up using the China Business Express
form on this page.
