Sat, Mar 11, 2017 - Page 8 News List

The Liberty Times Editorial: Caught between two elephants

On Feb. 28, US President Donald Trump recently delivered his first speech to Congress. As always, he was very direct, but this time he followed the script and delivered his speech without improvisation, with full control over himself throughout the address. His speech, which mainly reaffirmed his policy of “America first” and buying US products, received a positive response and US stock market rose to a historic high.

On Friday last week, central bank Governor Perng Fai-nan (彭淮南) defended the New Taiwan dollar’s movements and said the bank was not manipulating the currency, so the US is unlikely to include it in its list of currency manipulators. Nonetheless, despite a bullish global market, the local bourse responded by opening high, but closing low as it struggled to reach 10,000 points.

The two incidents highlight the awkward situation Taiwan is in as a result of the competition between the US and China since Trump took power. On the one hand, China is Taiwan’s biggest overseas manufacturing base and accounts for nearly 40 percent of Taiwan’s exports. On the other hand, the US is Taiwan’s third-biggest export market and a long-term ally that has pledged to ensure Taiwan’s security.

More importantly, a major reason why Taiwan was able to transform itself economically as well as politically was the considerable help from the US during the Cold War, as the latter considered Taiwan strategically important in containing the spread of communism.

For those reasons, if there were to be a trade dispute between the US and Chinese governments, and Taiwan were to respond inappropriately, Taiwanese would have to face severe consequences. As Perng has said, when two elephants are fighting, Taiwan must be careful not to get stepped on.

There were signs that Taiwan could eventually end up in such an awkward situation and the government should have planned strategies to promote domestic change and transformation a long time ago. The mass exodus of Taiwanese manufacturing to China has undermined Taiwanese industries and created imbalances in Taiwan’s tripartite trade model.

Jobs and profits have moved to China, leaving Taiwan with the impression that it has enjoyed a massive trade surplus, when it has done nothing to help improve Taiwan’s economy. The same is true when it comes to industrial transformation and innovation, employment and wages. Even if there were no trade conflicts between the US and China, Taiwan should endeavor to change and transform this situation.

For more than a decade, we have been calling on the government and businesses to take seriously the severe consequences of allowing Taiwan to become overly dependent on trade with China. Unfortunately, businesses and past administrations were lured by the low manufacturing costs in China and were unwilling to wean themselves off the Chinese economy.

As a result, Taiwanese businesses are facing increased labor costs in China, with some being forced to move to the hinterlands or leave China altogether because of Beijing’s industrial transformation policies.

As for Taiwan’s relations with the US, when the Taiwanese economy was still growing rapidly, the nation had huge trade surpluses and became a key target of pressure from Washington.

At the time, delegations were sent to several US states to make purchases for political reasons in a bid to balance trade between the two nations. Today, China has taken over this role and the US is no longer concerned over its trade imbalance with Taiwan, but rather whether Taiwan is engaged in currency manipulation.

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