China has completed its multi-lateral negotiations to enter the WTO. Taiwan expects its own negotiations to end once it has completed its talks with EU countries. Preparation for WTO entry will then come to an end for both sides of the Taiwan Strait.
Some optimists believe that China's WTO entry will help the country and its economy to integrate with the rest of the world, help make its investment environment more transparent, and encourage it to speak with other countries in the language of free trade and openness.
Reports about a China-Japan trade dispute and the resulting deadlock have been troubling, however. Even though the dispute was caused by Japan's imposition of tariffs on Chinese agricultural products this April, and despite the belief that the dispute will be resolved, it is worth noting that China did not hesitate to violate WTO rules and enter a tit-for-tat tariff war while it was still negotiating its WTO entry.
Retaliating against Japan's move, China, rather than res-
ponding with political maneuvers to protest or boycott of Japanese products, slapped 100 percent punitive tariffs on imports of Japanese motor vehicles, mobile phones and air conditioners. Sales of Japanese vehicles were cut in half. China has acted calmly during the negotiations because the bilateral balance of trade is weighted in its favor and it pre-dicts the Japanese industrial and commercial sectors will pressure their government to back down.
Taiwan should be alarmed by Japan's example -- the more dependent on the Chinese market a nation becomes, the more markedly passive its economic exchanges with China will be.
Can Taiwan gain advantage from China's entry into the WTO? The following figures give us a glimpse of the answer. Taiwan's volume of imports and exports in the first quarter of this year declined significantly in comparison with the same period last year, but its trade surplus with China has grown by 1.6 percent relative to the same period last year, reaching US$4.16 billion. Electrical appliances, steel and plastic products together accounted for 64.5 percent of the total.
China has gradually become an important source of Taiwan's trade surplus. But China's trade dependence on Taiwan has shown a downward trend. In the first quarter of this year, Taiwan was the second largest source of imports to China, but the percentage of imports from Taiwan among China's total imports decreased by 0.08 percent.
Taiwan is indeed in a difficult position as its economic advantage in China is declining. When Taiwan is invaded by a flood of cheap Chinese goods after entering the WTO, will it, like Japan, be able to put curbs on Chinese agricultural products and retaliate by levying anti-dumping penalties?
US President George W. Bush has announced plans to raise duties and impose quotas on imported steel to protect the US steel industry. Predictably, such methods will be used more often in China to expand political influence.
To become gradually dependent on China economically will not augur well for Taiwan. The US has warned about the disadvantaged position in which Taiwan will find itself after entering the WTO. The government must evaluate the warning carefully.
In the cross party Economic Advisory Council to be held shortly, cross-strait economics will be on the agenda and will spark intense debate. But the politicians and scholars, who have become intoxicated with China's vast potential and thus seek to relax the "no haste, be patient" (戒急用忍) policy, must keep Japan's precedent in mind. It has become over-dependent on the Chinese market and has almost no power to counterattack.
Chiu Li-li is a Tainan city councilor.
Translated by Francis Huang and Jackie Lin
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