AmCham white paper released

Monday, Jun 13, 2005, Page 11

Tom Johnson, AmCham president, gestures during the interview. PHOTO: GEORGE TSORNG, TAIPEI TIMES

Taipei Times: Apart from making progress on the piracy issue by encouraging the US government to remove Taiwan from the "Priority Watch List" and putting it on the less severe "Watch List" under the Special 301 Law this January, what are the major issues of concern this year? And are you optimistic about seeing any real changes this year?

Tom Johnson: We did make some good progress on the issues we were concerned about in 2003 and 2004, like the Copyright Law (著作權法) amendments that have taken effect, the Pharmaceutical Affairs Law (藥事法) amendments that granted data exclusivity for the research-based pharmaceutical industry, and the establishment of the Financial Supervisory Commission to accelerate the reform of the banking industry. These achievements lead us to believe we are going to have a good year in 2005.

Our focuses this year are on human resource regulatory reform -- ? loosening the restrictions and cutting the red tape in importing foreign and Chinese professionals. Another focus is on health care and public health -- combatting counterfeit pharmaceuticals and agro-chemicals. Then there are the institutional developments -- helping us work with the government to make faster changes in some of the critical issues we have.

And, yes, we do expect to see real progress this year. Our white paper this year focuses on real core issues and the government hopefully can help and assist us in making real changes. We are looking at how we can help them in setting up a human resources task force to free the flow of human capital back and forth, not only with mainland China but with other countries as well.

TT: Have you received any responses to your concerns from the government?

Johnson: We did receive a couple of responses from the government, which is encouraging, as they really want to listen and talk with us about the changes. We had a request from the Ministry of Education to meet with our education committee members to further discuss how to make progress on on the relaxation of regulations governing foreign universities and degrees, and study-abroad restrictions for male students who are subject to military service obligations, which were highlighted in the white paper.

We also had some feedback from the government on the human resources issue and how we can work together on making improvements. We will be meeting with Premier Frank Hsieh (謝長廷) on the white paper issues on Friday [June 10] before we leave for our "doorknock visit" to Washington on Saturday [June 11].

TT: Do you expect that Taiwan's government would like the delegation to raise particular concerns in Washington during your "doorknock visit," like the further removal of Taiwan from the "Watch List" of intellectual property rights (IPR) violators under the Special 301 Law?

Johnson: We do have an alignment with the government with the same interest in getting the issues fixed. And what we want to do is to help the government find a way to do it faster.

We made progress last year on Taiwan's removal from the Priority Watch List 301, and we thought the message from the AmCham and some visiting government officials was encouraging. But there is still a way to go on tackling this year's white paper issues, such as pharmaceutical counterfeits and agrochemical knockoffs.

TT: Will you talk about the US-Taiwan free trade agreement (FTA) with US executive agencies and Congress during this year's visit?

Johnson: The FTA surely will come up. In general, we would like to see progress on the FTA, but certain things have to happen first. The Government Procurement Agreement (GPA) is one example. Although there is the naming issue for Taiwan to accede to the agreement, we would like to see Taiwan act upon the GPA principles first.

TT: As AmCham seems more disposed to push in favor of the US-Taiwan FTA than before, how long do you expect it to take for an agreement to happen? [Johnson referred this question to AmCham's executive director Richard Vuylsteke who was also present at the interview]

Richard Vuylsteke: The actual FTA negotiations usually don't take long, as people have no time to mess around on the issue. Therefore, I don't expect it to take long to "close the game" after the negotiation starts. The real question is how to get it started. There are two parts of this situation. First are the real business considerations, which requires marketing efforts and a sales job in order to persuade the US, Taiwan and business sectors with more details, letting them know how inking the bilateral FTA gives them real, lucrative opportunities.

Second, there are usually more political reasons than economic reasons behind the FTA, like counteracting the influence of China or the countries in the region. But the real problem is that Taiwan's economic advantages are not fully implemented, due to its regulatory controls and so forth. Taiwan has long-term relations with the US, but neither side can take it for granted. Times have changed. The economic synergy in Asia as a region cannot be fully understood without China being part of it.

Taiwan has lots of advantages, including better IPR protection for research and development (R&D) and being a great place to live. However, Taiwan has to hasten its regulatory reform to make itself the first place foreign investors want to go in the region.

Then there would be a much stronger momentum towards an FTA as well. Also, some of the promises in the FTA documents are the same promises in the WTO's [World Trade Organization] that Taiwan has not fully delivered. The implementation of the WTO commitments can help Taiwan build up economic advantages, especially when the country is developing a world-class service industry, which can provide huge room for foreign investment and a wide range of job opportunities.

TT: This year's white paper appeared to put less focus on the cross-strait issues than in the past. Why the change?

Johnson: We did not drop the issue and we just tried to focus on things we can change by working with the Taiwanese authorities this year, like the human resources regulatory reform. So we decided to put these practical and achievable items at the top of our list this year. We are still optimistic about cross-strait relations and would like to see the dialogue go on.

TT: The European Chamber of Commerce Taipei (ECCT) said in April that foreign investors will choose China if they are forced to make a choice in the face of Taiwan's restrictions that toughen the investment environment. How do you see the situation Taiwan is faced with now?

Johnson: It is difficult to generalize on the issue. It mainly depend on the business area. The high-tech sectors, like flat-panel manufacturing and semiconductor manufacturing are rampantly growing here, and have drawn American investment to support the industry. Corning Inc, for example, has built a large plant here to supply glass substrates to flat-panel makers, and many other American companies have also invested here, including our Air Products and Chemicals Inc, to support the semiconductor industry.

Nevertheless, it has been difficult for foreign companies to set up service businesses here, due to a lack of the free flow of human resources that cannot make the service businesses competitive on a regional or worldwide basis.

TT: But China is currently endeavoring to develop its high-tech sector, like semiconductors, and to catch up, which could divert foreign investment from Taiwan in the future. Has the best time to open up direct links already passed? Is Taiwan being marginalized now?

Johnson: The timing is never gone, and it is still welcome to see improvements. True, China is embarking on the semiconductor industry and looking at flat panels, but Taiwan is doing well domestically and remains strongly competitive in these fields.

However, there is the concern of marginalization. Taiwan, which enjoys an ideal location and great talent, has a great hand to play, but the nation still needs further liberalization to make it the place for foreign investors to be.

Vuylsteke: Taiwan's future doesn't only hinge on China, which has no sophisticated banking system or rule of law, and is not a free society of transparency, and has numerous institutional problems to be addressed. Indeed, Taiwan is too narrow, compared with China which has a vast market and cheap labor.

However, the fear of marginalization is that Taiwan is falling behind South Korea in banking reform, as well as Hong Kong and Singapore in development of the service industry. The nation is falling behind everybody when it comes to being a place for people to build a career.

Taiwan draws foreign investors because it is a world trader, with powerful trade links. But Taiwan has to embrace internationalization when pushing for the industrial transformation, from manufacturing to the service industry, to catch up with the advanced economies -- the real competitors, like the US and Britain.

TT: AmCham's membership has fallen to some 800 members from over 1,000 over the last two years. What has caused the drop in membership, and was it the result of Taiwan's marginalization in the world economy?

Vuylsteke: The membership drop mainly came from the departure of young professionals and small companies amid the economic slump in 2002. The opening and closing of companies is common elsewhere around the globe and not unique to Taiwan. We see great potential increase in membership once Taiwan's service sector takes off, not only just for hotels and restaurants, but for those that are barely known in Taiwan but common in foreign societies.

The competition from overseas service providers will not wipe out the local service sector but expand it while raising the industrial quality and employees' income. For example, when McDonald's came to Taiwan, they did not kill Taiwan's fast food industry but instead expanded the sector and made it more attractive to consumers by upgrading the sanitary standards and creating more job opportunities.

TT: But did you see a backflow of young professionals afterwards? If not, was that because they sensed limited room for growth in Taiwan and turned to other places like Shanghai or Hong Kong?

Vuylsteke: It's true that many foreigners go to Shanghai, as it is a fast-growing place for them to check out. But another reason is that Taiwan's regulatory barriers stand directly in conflict with the government's policy.

Taiwan is developing itself into a regional training hub, but meanwhile, it requires two years of working experience for foreign young professionals to come here, against the fact that most of the trainees are fresh graduates from schools.

The other thing is that foreign companies cannot pay their interns here in Taiwan, which does not make Taiwan the first place to come for those young professionals who have a long-term interest in Asian countries, while Taiwan in fact has a better and safer environment than China. The regulatory barriers that drive away young foreign talent cannot be good for Taiwan, as people tend to form close ties with the countries and places they have exposure to.

TT: Taiwan has just completed a significant institutional reform by abolishing the National Assembly and halving the number of seats in the Legislative Yuan. What are AmCham's views about the reform?

Vuylsteke: We are upbeat about the changes and Taiwan can be congratulated for doing something so unique in democratic societies in the way it is done, especially given that foreign and local scholars have been voicing the proposal for decades to amend the Constitution, making it more functional and consistent with a democracy-based society.

We think it is a big step in the right direction and Taiwanese people should be congratulated for their insistence that the national interest not be overridden by party interests. We expect the reforms to streamline the government structure and make decision-making on economic issues more efficient and effective.