Even a man as powerful and influential as Hon Hai Technology Group chairman Terry Gou (郭台銘) cannot conquer all. Gou has led the group in building about 30 overseas manufacturing sites and the group owns the world’s largest contract electronics maker, Hon Hai Precision Industry Co, which generated NT$3 trillion (US$104 billion) in revenue last year from making electronics for devices such as the iPhone and Kinect.
Still, Gou’s influence has held no sway in his legal battle against Chinese automaker and electrical component manufacturer BYD Co during five years of patent infringement lawsuits. Hon Hai’s handset manufacturing arm, Foxconn International Holdings, sued BYD for theft of trade secrets in Shenzhen and Hong Kong in 2007.
“Political factors are muscling in on this [case]. If Hon Hai cannot win this lawsuit, then why bother signing the ECFA [Economic Cooperation Famework Agreement] with China?” Gou asked shareholders last week. “How many Taiwanese companies win their cases in Chinese courts? You do the math.”
Hon Hai’s case is strong evidence of the government’s incompetence when it comes to safeguarding Taiwanese companies’ interests and intellectual property rights. Hon Hai’s lawsuits are a reminder that the ECFA does not provide a legal basis for Taiwanese companies to seek government help to resolve trade disputes in developing markets such as China’s. The problems of intellectual property right infringements, piracy and corruption are vast, but Taiwanese corporations have to fight their battles alone.
Nine months ago, Taiwan signed the ECFA with China to boost bilateral trade, even as the government put off negotiations to introduce a mechanism that would help companies resolve trade disputes. The Straits Exchange Foundation and the Association for Relations Across the Taiwan Strait were originally expected to wrap up negotiations on this issue during their sixth-round meeting last December. However, no agreement was reached on how to deal with trade disputes or how to safeguard the interests of Taiwanese companies operating in China. Nor did they reach an accord on forming an economic cooperation panel. They only came up with the terms of a guideline on forming a key body to help resolve conflicts. Negotiators agreed to a conclusion on establishing a mechanism to settle trade disputes and reduce investment risk, but no date has yet been set for such a meeting.
Between 1991 and May of last year, Taiwanese companies invested US$88.57 billion in China-bound investments, Ministry of Economic Affairs statistics show. As protectionism proliferates in China, Taiwanese business associations have been calling for solutions to the lack of government involvement in solving disputes. Local corporations can only pin their hopes on the next round of negotiations.
The government promised that the ECFA would significantly boost Taiwan’s economic growth and open up new markets, but trade figures show these promises have yet to bear fruit. Meanwhile, it is becoming increasingly apparent that Taiwanese companies need more concrete legal help in minimizing the risk that investing in China brings — a risk to which William Kao (高為邦), president of Victims of Investment in China Association has been trying for years to get Taiwan’s government to pay more attention — and a risk brought home to multinational corporations by the arrests of Stern Hu (胡士泰) and three other Rio Tinto executives, Matthew Ng (吳植輝), IHS geologist Xue Feng (薛峰) and others.
China is one of the fastest-growing markets in the world and one of the riskiest. Many of these are risks that Taiwan’s “cultural and linguistic edge” cannot outweigh.
The time of guidelines and forming panels has come and gone. Scrapping trade barriers and boosting the transparency count for little if the people and companies making the investments risk not just their money but their lives at the hands of China’s politically driven injudicious judicial system.
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