Fri, Mar 10, 2006 - Page 12 News List

Trade protectionism offers only a short-term solution

By Jessie Ho  /  STAFF REPORTER

Four years after joining the WTO, some sectors are feeling the pinch. More than 1,000 workers from the towel manufacturing industry took to the streets last week to demand the government impose safeguard measures against the inundation of cheap Chinese goods.

The Yunlin Towel Industrial Technology and Development Association said the made-in-China towels had caused the output value of local products to plunge from NT$2.5 billion (US$76.9 million) to less than NT$500 million within three years. Members of the association asked the government to increase duties on Chinese towels from the current 10.5 percent to 50 percent, and threatened to launch another demonstration.

But analysts say local towel makers must improve their competitiveness.

During a hearing last week in Taipei, in which participants from China took part, representatives from the association failed to prove that Chinese goods have directly forced local towels out of the market.

The Chinese officials, meanwhile, cited the Yunlin association's statistics to claim that Taiwan's towel manufacturing industry was in decline before Chinese products entered the market in 2002.

In applying for the safeguard measures -- which could include levying import-relief duties, setting import quotas, or both -- in a situation of fair competition, the association has indirectly admitted that the industry is losing its edge.

Should the government impose safeguard measures after reaching an agreement with the Chinese authorities, local manufacturers will only be able to hide behind the shield for between three and 12 years, analysts said.

In an era of free trade, they will have to face stiffer competition from all over the world some day, they added.

Another consequence of the safeguard measures may be trade retaliation from China, which could potentially restrict or add more duties on certain Taiwanese imports.

To an export-dependent country like Taiwan, the negative impact from retaliation would be deeper than the effect of the current towel dispute, as China is the nation's largest export destination.

According to government statistics, Taiwan exported US$6.23 billion worth of goods to China and Hong Kong last month, marking a 44.5 percent jump from January, with information technology, telecommunication and electronics products as the major products. These could all become targets of retaliation.

One sector that has weathered the impact of WTO accession well is the auto industry, said Hsiao Chen-huan (蕭振寰), deputy director of the multilateral trade affairs division under the Bureau of Foreign Trade.

By allying with major foreign carmakers, as well as investing to develop new models, the nation's major automakers were able to expand market share as weaker players were gradually weeded out, Hsiao said.

Still, analysts warned that the latest dispute serves as a warning to other traditional industries, which will face similar problems in the near future as the government gradually opens to imports from all over the world in accordance with its WTO commitments.

Taiwan has already lifted a ban on more than 8,000 of 11,000 types of goods from China. Eventually, 2,000 more sensitive items will face competition from China or other low-cost countries.

Anti-dumping measures can be taken as long as unfair trade exists. But the approach is not a cure-all. Instead, protectionism often weakens industry competitiveness.

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