China recently invoked "temporary safeguards" and raised tariffs on steel products from Taiwan, Japan and South Korea to protects its steel industry. This is the second time that Beijing has raised tariff barriers on steel products from Taiwan since China joined the WTO.
In March, China's Ministry of Foreign Trade and Economic Cooperation launched an anti-dumping investigation on certain steel products from five countries, including Taiwan and South Korea. It was the first trade dispute between Taiwan and China since the two sides joined the WTO. Before launching the investigation and enacting tariffs, however, Beijing did not open talks with the Taiwanese authorities as WTO rules require it to do.
Beijing is seeking to pry open the Taiwan market and push Tai-wanese companies to invest in China. In the face of this "peaceful war" strategy, Taiwan must stand firm on bilateral talks, treating such negotiations as its Maginot Line, in resolving cross-strait trade disputes. Any issue involving dumping, market damage and market entry should be handled in accordance with WTO agreements and through bilateral negotiations. Only by so doing can the government truly protect the interests of Taiwanese firms in accordance with WTO rules.
Bizarrely, Taiwan did not lodge a serious complaint, nor express a firm position on holding bilateral negotiations. As a result, Beijing rejected Taiwan's "requests for inquiries" on the grounds that it was an "internal affair."
Nevertheless, steel companies from the two sides managed to reach an agreement after extensive talks. Under that agreement, Taiwanese steel firms would ask the government to allow the import of 125 types of steel products from China in exchange for a goodwill response from Beijing regarding the anti-dumping investigation.
The Taiwanese firms thought that the negotiations would prevent similar situations from arising in the future. So it came as a surprise when the Chinese auth-orities once again invoked "temporary safeguards" against Tai-wan's steel products at the end of last month.
WTO agreements allow mem-bers to adopt protective mechanisms -- the so-called "safeguards" -- to protect their domestic markets under special circumstances. The safeguards are put into effect by raising tariffs. The "temporary safeguards" are emergency measures that a member may adopt upon preliminary findings of clear evidence that increased imports have seriously damaged domestic industries or are likely to do so.
The difference between safeguards and anti-dumping action is that, under the WTO's Safeguards Agreement, the member adopting the safeguards need only notify the WTO's Safeguards Committee, not the exporting member, before launching an investigation. Beijing therefore did not violate WTO rules.
During the period of investigation, however, the exporting member has the right to begin bilateral talks with the state adopting safeguards.
During the negotiations, apart from discussing the standards for defining "injury to domestic industry," the exporter state may also demand appropriate compensation from the state adopting the safeguards.
This being so, demanding bilateral talks with China is the best way for Taiwan to guarantee its rights and interests in the steel trade dispute.
In recent years, with countries the world over engaged in dis-putes of this sort, businesses have invariably cooperated closely with governments. In the case of the "banana war" between the US and the EU in the 1990s and of last year's rounds of trade skirmishes between China and Japan, the cases were initially discovered by businesses before their governments negotiated with each other.
Taiwan lost an opportunity for bilateral talks during China's anti-dumping action in March. To this day, the relevant Taiwan authorities have made no comment on Beijing's safeguards measures.
China's "peaceful war" strategy demands that the Taiwan stand firm on its bottom line and insist on bilateral talks with China. If Taiwan once again renounces its right to negotiate with Beijing, this will not only harm the interests of its industries, but will also accel-erate the migration of businesses to China. The government must not overlook the potentially huge consequences of this.
Chen Chi-mai is a DPP legislator.
Translated by Francis Huang
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