Sat, Nov 04, 2000 page17

• WTO threatens small businesses

  LIBERALIZATION Entry into the World Trade Organization will bring stiff competition to small enterprises, and it could wipe many of them out

  • By Richard Dobson / STAFF REPORTER
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  China and Taiwan should find a lot of common ground after they join WTO over opposition to to the trade body's regulations that pry open markets and threaten to stamp out small enterprises, according to renowned American economist and author Hazel Henderson.

  Henderson, in Taiwan to attend a conference on future studies, told the Taipei Times yesterday in an exclusive interview that once markets in China and Taiwan are opened to foreign competition by WTO entry small business will be swamped by big companies with enormous financial clout.

  Opening the markets, "means the big companies ... and the big capital can come in and out price the smaller companies, out advertise the smaller companies and they will have the market power to do whatever they want," said Henderson.

  Small-and-medium-sized enterprises (SMEs) make up the backbone of Taiwan's economy -- accounting for 97 percent of all the nation's enterprises -- and helped the nation weather the Asian financial crisis due to their small capitalization, low debt and flexibility. Across the strait, the Chinese government is struggling to streamline state-run industries, leading to growing unemployment figures but no guarantees local companies will be able to compete under the pressure of foreign competition.

  "Both societies have a lot to lose for having stupid WTO rules," Henderson said. "Together they could really lobby the WTO very powerfully," she said.

  In a Ministry of Economics 2000 white paper on SMEs, the government admits that small companies will have to form alliances with much larger firms to survive after WTO entry, and suggests that enterprises work to improve their international marketing, which is identified as a major weakness.

  While the flaws Henderson sees in the WTO could be viewed as a boon to cross-strait ties, the organization's agreements "serve to subsidize a lowest common denominator economic playing field -- a vicious circle sliding into global warfare," she explains in a paper to be delivered at the conference starting tomorrow.

  Indeed Henderson believes that "... much of today's world trade involves irrational transportation of similar, below-full-cost goods, subsidized by tax-supported transportation and energy infrastructure." Below-full-cost pricing is where companies and governments fail to include the costs of human and environmental capital thereby distorting long-term costs, explained Henderson.

  "Once you include in the price system all of these social and environmental costs it automatically pushes you to a longer-term calculation," she said.

  "The problem with a lot of the companies in the old economy chemicals, construction, nuclear, fossil fuels ... is that they sometimes don't know the costs they have overhanging their balance sheets," Henderson said.

  The recent decision by the government to scrap the Fourth Nuclear Power Plant due to the environmental costs of storing nuclear waste and safety of future generations could be viewed as an example of full-cost pricing.

  Some also say that the future budget for an alternative power plan is below full-cost because it does not include the higher cost of fuel for the LNG plants.

  Henderson will deliver a speech entitled "Economic Transition Paths to a New Age of Light: information, energy and matter" at a conference on futurism at Tamkang University from Nov. 5 to Nov. 7.
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