Sun, Sep 30, 2018 page6

• EDITORIAL: US-China tensions call for action

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  The exodus of international companies from China amid the US-China trade dispute presents Taiwanese companies with an opportunity — and an urgent need for action.

  In what China’s Xinhua news agency called “trade bullyism practices,” the US this year has imposed three rounds of tariffs — totaling US$250 billion — on Chinese goods. Asian manufacturers have begun to feel the pinch, with some announcing that they are moving production to facilities in other countries.

  Although Taiwan’s Compal says the dispute’s effects have been minimal, the company is planning to move production to Vietnam, Mexico and Brazil, while Thailand seeks to capitalize on the tensions by attracting manufacturers there.

  Since January, China has said that it would act “resolutely” and “in kind” to US tariffs, but last month, Beijing said it would make “precise” moves — a clear softening of its rhetoric.

  “When we take measures, we try our hardest not to harm the interests of foreign businesses in China. That’s why our tariff measures are targeted to avoid affecting them as much as we can,” Reuters quoted Chinese Minister of Finance Liu Kun (劉昆) as saying.

  In July, China filed a complaint with the WTO, asking it to investigate the US for possible trade rule breaches. Economic growth is forcing China to reach out for international cooperation, unlike in July 2016, when it unilaterally rejected a ruling by the Permanent Court of Arbitration in The Hague on artificial islands in the South China Sea.

  US President Donald Trump championed tariffs as a way to stop the “unfair transfers of American technology and intellectual property to China” and to protect jobs, adding that US products would be cheaper if those from China were more expensive.

  This oversimplification overlooks many factors, such as the effects on US companies that import materials and parts from China and the revenue that US companies take in by manufacturing and selling products in China, where the goods do not cross borders and thus are not counted in trade statistics.

  US firms have filed complaints with the US Trade Representative over harm from the tariffs and the IMF has said the global economy will suffer.

  However, the US is not the only country to complain about unfair Chinese trade practices — European Chamber of Commerce in China president Mats Harborn has complained about “China’s incomplete market opening” — and Trump’s heavy-handedness has at least gotten China talking.

  How far will the US and China allow things to escalate? Taiwanese companies should act to avoid the effects.

  The government has said it is speeding up implementation of the New Southbound Policy, and has encouraged companies to work with it on building or upgrading manufacturing facilities in India and Southeast Asia, as well as training workers there.

  Taiwan conducts a significant amount of trade with China. The administration should use trade as leverage — while Beijing’s back is against the wall — to get China to back off on Taiwan’s participation in international organizations. The government could impose tariffs on Chinese goods if Beijing refuses to engage in rational discussion. Such tariffs might, at least, accelerate the departure of Taiwanese companies from China.

  China has become increasingly belligerent, and economic pressure might force its cooperation elsewhere. Even if the Chinese Communist Party does not base its legitimacy on economic growth, Beijing must have a fat wallet to continue its Belt and Road Initiative and other foreign affairs activity.

  China can retaliate through currency manipulation, but as a Taipei Times op-ed by Paola Subacchi said (“As the US ratchets up tariffs, China faces a currency catch-22,” July 22, page 7), doing so would ultimately not be in its interest.
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