Mon, May 13, 2019 - Page 6 News List

EDITORIAL: Reducing red tape amid trade war

US President Donald Trump on Friday made good on a threat to increase tariffs on US$200 billion of Chinese goods to 25 percent from 10 percent. As trade negotiations continue, it is an open question whether Washington will impose more tariffs on Chinese imports and when it might do so.

Regardless of the outcome, the consensus is that tensions between the US and China will continue and the trade dispute will evolve into a long-term competition over global tech supremacy, as well as a political rivalry between a democracy and an authoritarian state.

Amid the intensified tensions, Taiwan is itself engaged in what could be one of the most complicated situations for its economy in decades. Foremost among concerns is its triangular trade model — in which exporters receive orders in Taiwan, but produce goods at plants in China before shipping them to the US. This would need to be adjusted to avoid high US tariffs. However, as relocating operations takes time — with land, environmental evaluations, government approvals and construction usually being lengthy processes — exporters and the nation’s economy are certain to be affected in the short term.

Foreign trade data released by the Ministry of Finance last week indicated that the US-China dispute continued to affect Taiwan, with last month’s exports contracting on an annual basis for the sixth consecutive month. Shipments to China declined 8.8 percent last month, the sixth month of annual declines, while exports to the US increased 21.5 percent, the second-highest increase since August 2011.

Even without the trade dispute, Beijing’s “Made in China 2025” initiative and localization of its supply chains pose a rising threat to Taiwanese manufacturers. The “red supply chain” will soon rival Taiwan’s, as China has been quickly rising as a major tech supplier to Chinese and global brands in some segments.

Persistent US-China tensions would mean an opportunity to transform and upgrade Taiwanese companies, as many of them are heavily invested in Chinese supply chains while operating as contract manufacturers for upstream US tech firms.

While the trade tensions might cause rush orders to be diverted from China in the short term, Taiwanese firms should establish long-term solutions by developing multiple supply chains, rather than relying too heavily on China. They must change strategies and move up the global supply chain with better technology capability and a competitive edge.

So far this year, in an effort to avoid being battered by the trade dispute, 52 Taiwanese companies with offshore operations have gained government approval to take part in a Ministry of Economic Affairs program to invest at home, with total investment exceeding NT$270 billion (US$8.72 billion), while 27,000 jobs have been created.

However, the government must understand that not all businesses can relocate out of China quickly or smoothly, especially small and medium-sized firms. As a result, while encouraging the return of overseas companies, the government should provide assistance for small and medium-sized businesses and offer support to those planning to invest in overseas markets other than China.

After all, the government must realize that investment barriers matter most to returning businesses, with ensuring a stable supply of electricity, land and workers a key issue to a revival in domestic investment regardless of how long the US-China trade issue persists.

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