Mon, Sep 24, 2001 page4

• Taiwan should face future with China: professor

  Arguing that Taiwan faces inevitable economic integration with China, Edward Chen, president of Hong Kong's Lingnan University, told `Taipei Times' staff reporter Monique Chu that Taipei should use its impending WTO entry as a means to engage in trade-related dialogue with Beijing

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  Taipei Times: What's your view on Taiwan's WTO accession, which is set for January?

  Edward Chen (陳坤耀): I am more skeptical of what actual benefits Taiwan would be able to derive from being a member given the fact that the organization itself is now having problems. After Seattle, it seems people have lost interest and momentum is gradually dissipating.

  

  People shop for fruit, vegetables and herbal medicine imported from China at a Taipei shop. Observers expect imports from China to increase steeply after the two countries enter the WTO. Edward Chen, president of Hong Kong's Lingnan University, spoke with the Taipei Times recently about how Taiwan's impending entry will affect the nation and what it should do in regard to developing direct trade with China.

  PHOTO: AFP

  In manufacturing, given the liberalization of the past decade, nothing much can be done of any benefit to Taiwan. Agriculture is an issue that will carry on forever. You can't expect the WTO to resolve it on a multilateral basis.

  The only thing that Taiwan may be able to gain would be information about all the new issues emerging within the WTO, [such as] those involving e-commerce and information and communications technology.

  We need regulations to monitor international business in e-commerce and to deal with various international tax issues. They are all are just beginning. Taiwan, being a member, hopefully, would be able to take a pro-active role in discussion of these matters. And hopefully Taiwan could exert some influence and get some benefit out of this.

  TT: Compared to some developing countries, Taiwan is -- in a way -- on the middle of the development ladder. What kind of advice can you give Taiwan in order to identify its niche and map comprehensive tactics for the WTO?

  Chen: As I said, you should not place too many expectations on the WTO. But what Taiwan needs now is to find some pillar for its economy, some driving force for its future economic development. That is the key issue.

  It's not much related to the WTO. Taiwan is having problems not because of trade restrictions by and large. It's a structural issue. Taiwan is facing an economic transformation. Taiwan transformed from a labor-intensive production base to a technology, much higher value-added product base. But now Taiwan is losing its advantage.

  But what kind of niche is Taiwan going to find? I think it's difficult as Taiwan is losing its advantage. Unlike Hong Kong, you have no historic advantage as an intermediary. You can't act as an operations center. You talk about it, but you could never make it. You cannot become a regional headquarters center, unlike Hong Kong.

  In software, India is now making headway in hardware. A lot of production is shifting to China to reduce costs. So what is left for Taiwan is a very serious question, because you don't have the choice of going into services. You don't have the sophisticated professional services of Hong Kong and Singapore. You don't have a legal system set up for international business. You don't have such a sophisticated financial sector. Your agriculture can't support your exports and therefore there has to be some kind of industrial production.

  For the time being, it seems your integration with China is inevitable. You have to see it as an opportunity. Dividing industrial labor between China and Taiwan could possibly be a way out. You have been doing it for years. But how to do it in a way that can really be a driving force for your economic development is the question.

  Taiwan has the technical capability and technical expertise, and that is something you are much better at than Hong Kong. In China, they have cheap labor, they can act as a production base; but they don't have the sort of marketing skills and research and development capability that Taiwan has.

  Maybe one way for you is to start formal negotiations with China. Because both Taiwan and China will become members of the WTO, as members you can start to talk to each other and you can try to do something consistent with the aims of the WTO.

  TT: Some critics are worried about a likely political blockade China might attempt against Taiwan in the WTO to satisfy a political agenda. What's your view on this?

  Chen: I don't think so. Once Taiwan is accepted as a member, China has to treat Taiwan as a member. I don't think that'll make life more difficult for Taiwan. On the contrary, then Taiwan can talk to China on the basis of being fellow members of the WTO, and something could be achieved. That's one way out.

  TT: Despite your argument that it's inevitable that Taiwan and China integrate in economic terms, some fear that such a development would cause Taiwan to lose political bargaining chips once both sides begin to talk about the future in political terms. What's your view about this?

  Chen: I've heard a lot about it, because it's like a hostage situation: "If you are too dependent on the mainland, the mainland will hold you hostage."

  I've heard many arguments about this and I suppose we have to be realistic. If Taiwan is going to make a contribution as well to industrial development, and if you can really come up with a complementary division of labor, it's also of economic benefit [to China], and it's also in the interest of China to maintain a cordial relationship with Taiwan.

  I am quite easy with the political situation now. I don't think China would take any drastic action toward Taiwan.

  Like it or not, if China wants to make life difficult for Taiwanese, they can do it whether you are economic hostages or not. My advice is that Taiwan's people should be relaxed, should be realistic and should put political considerations aside.

  You know the bottom line anyway. They [China] can't accept any independence of Taiwan. That's the bottom line. As long as Taiwan does not openly go the route of independence, China will want to maintain the status quo. Because China has a lot to worry about as well; not to disturb regional security, as the geopolitics are very tricky.

  Don't think that Taiwan is very small, it is an indicator for Southeast Asia as well. China will not want to be too aggressive toward Taiwan because China doesn't want to upset regional security. But there is a bottom line: You have to watch out.
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