Wed, Dec 26, 2001 page8

• The road to a stronger economy

  • By Nat Bellocchi 白樂崎
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  Both Washington and Taipei are struggling with the politics of a stimulus plan to address their economic recession. In Washing-ton, the obstacle is the classic ideological partisan struggle between the Republicans and the Democrats: stimulate the economy through increased government involvement (Democrats), or by less regulation (Republicans).

  In Taipei, the options are not really very different: those who want to give the private sector more room to expand economic activity (in large part through the China factor), and those who want to place greater emphasis on government involvement (infrastructure projects). Both will likely have to compromise and do a bit of both, if for no other reason than to get the necessary legislation passed.

  While the debate will take time -- and the lag between implementation and results will take even more time in both countries -- there will be opportunities for both at the end of the process. In all these very complex efforts to resolve their own economic problems, what broad objectives could be established to further the US-Taiwan economic relationship?

  There are many, but I can name three very quickly. Both countries could encourage investment in the other; both could find ways to expand their trade with each other -- and both could improve a system for protecting intellectual property rights (IPR) and high-technology.

  A respectable amount of cross-investment already exists in both Taiwan and the US despite some difficulties. In Taiwan, the difficulty has been the cumbersome and opaque rules to get government approval; in the US it is the competition for quick, short-term returns available in emerging economies, (despite the greater risk). With the expansion of China's economy, this latter development has become a problem for Taiwan -- not only for its own economy, but for attracting foreign investment as well.

  Investors in Taiwan, both indigenous and foreign, could find of great benefit the plans for research and development facilities proposed by Economic Development Advisory Conference, the government and economists, if they can materialize quickly. There is no question that Taiwan, as an open democracy with international-class economic capabilities, would be an attractive safe haven for companies with investments in China to develop new products and provide necessary services in a safer, more stable, rule-based environment.

  Business balances risks with potential return. If Taiwan's openness, legal system, and government transparency allows a company to stay ahead of its competition regardless of the uncertainties in China, its economy could flourish once again.

  But given the occasional statements made by Chinese officials that intentionally or otherwise suggest that foreign companies doing what is necessary to operate in Taiwan may not be welcome in China, some thought must be given to overcoming this problem as well.

  Such statements, dropped even as little as once every year or two, have a devastating effect on foreign companies who are planning -- or even just considering -- doing business with China through Taiwan. The hype used to promote PRC membership in the WTO, by governments and private companies, has added to this concern.

  How to overcome this problem will take some innovative thinking. Special R&D parks, or perhaps the use of different company names, joint ventures, or academic participation, are some ideas. Another idea could be the establishment of special zones for unfettered intellectual pursuits, or for the development of especially sensitive commercial projects. Of course the WTO might be used, or some other means of urging the international community to pressure China into disavowing such a policy, but this involves outside help which may not be forthcoming.

  As for strengthening the bond of commerce between the two countries through greater investment by Taiwan companies in the US, the argument is still valid that investments there, unlike the present questionable attraction of short-term moves to China, are safer and good for the long term. A national chamber of commerce made up of Taiwan companies in the US, much like the American Chamber of Commerce in Taipei, would be welcome and legitimately useful. As is the case worldwide, foreign companies are often reticent to complain directly to the host government when they have a problem or wish to encourage change, fearing their competitors will take advantage of it.

  An active chamber of commerce of Taiwanese firms in the US would be an attraction to potential investors from Taiwan, and could provide useful services to the companies while getting their concerns known to government. Bilateral trade, the second objective, was for decades the foundation of the relationship between the US and Taiwan. It still is an important element of that relationship, of course, but much has changed in more recent times, including the economies of the US, Japan and China.

  During this time, Taiwan's economy strengthened to become a significant international player in the world economy. Membership in the WTO internationally -- and APEC regionally -- are the visible proof of this ascendancy, and indicates the increasing multi-lateralization of the trade relationship between the US and Taiwan.

  But the profile of trade competition in East Asia in the meantime has also changed, bringing with it US plans for establishing free trade agreements on a bilateral basis with countries in Southeast Asia including possibly Taiwan. There are different opinions about this idea, both in the US and in the region. What comes out of the next trade talks under the WTO also could affect such plans. But as China captures an increasing amount of what once was Taiwan exports to the US, a continuing high level of bilateral trade between the US and Taiwan becomes both more difficult and more important to Taiwan.

  Two-way trade and investment are both influenced by the third objective. A closer bilateral cooperation in protecting both intellectual property and the development and production of dual-use or national security related items is in the interest of both countries. The tightening of IPR protection is of mutual interest as both countries face problems of IPR violations with trading partners. It is the subject of ongoing negotiations. Some progress has apparently been made, but much more can be done.

  On national-security-related trade matters, however, very little has been done. In Washington, when the subject of how quickly China has become a major exporter of high-tech products is brought up in discussions or in the media, it is commonly accepted that this rapid growth was in fact brought about by Taiwanese companies investing in China. Inevitably this leads to concerns about how well US developments in security-related high-technology that is traded abroad can be protected.

  Having abolished the Coordinating Committee for Multilateral Export Controls (CoCom) after the Cold Ear, the US has been going through its own re-assessment of what is needed. Given Taiwan's capabilities and its location, having a credible system of cooperation on both intellectual and security-related products should be a significant attraction for American companies with business interests in the region.

  Nat Bellocchi is the former chairman of the American Institute in Taiwan and is now a special adviser to the Liberty Times Group. The views expressed in this article are his own.
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