China last week said that it was investigating what it called Taiwan’s “trade barriers,” which supposedly affect more than 2,400 Chinese imports spanning from agricultural products and textiles to minerals and petrochemicals. It is an unusual move that many in Taiwan say is politically motivated while China maintains its own bans on a range of Taiwanese goods.
If China retaliates and implements export bans on similar Taiwanese goods, it would have a limited effect on the nation’s economy, the Ministry of Economic Affairs said. Taiwan’s exports of the 2,455 products under Chinese investigation totaled US$4.43 billion last year, accounting for just 0.9 percent of the nation’s total China-bound shipments. Because the probe could last until Jan. 12 next year — one day before Taiwan’s presidential election — there are concerns that China might use the trade barriers issue for political leverage.
The investigation could also be a precursor for China terminating the Economic Cooperation Framework Agreement with Taiwan. Ending the cross-strait trade deal, introduced in 2010 to reduce tariffs and trade barriers between the two sides, would likely affect up to 10 percent of Taiwan’s exports to China, an estimate by the Taiwan Institute of Economic Research showed.
Trade barriers are restrictive measures imposed by a country on foreign goods. Any government regulations or policies that hinder international trade — such as tariffs, subsidies, quotas, and import and export licenses — could be considered trade barriers. In response, the affected party can initiate an investigation in an effort to rectify unequal trade conditions, and it should notify the affected parties of its intentions to initiate a probe.
The Ministry of Economic Affairs last week said it was not informed about the investigation before it was announced, and had only learned of it through the media, even though Taiwan and China are members of the WTO, which dictates that trade negotiations should be conducted in an equal and reciprocal manner.
Taiwan has placed import restrictions on Chinese goods determined to pose threats to national security or harm to domestic industries, based on the Regulations Governing Trade Between the Taiwan Area and the Mainland Area (台灣地區與大陸地區貿易許可辦法), which took effect in 1993.
When Taiwan and China sought access to the WTO (Taiwan joined in 2002, a year after China), the two sides did consult on the terms of trade across the Taiwan Strait, but have yet to complete such negotiations. China’s latest move to address trade restrictions two decades after they were implemented shows no constructive contribution to bilateral trade, but raises questions about Beijing’s motives.
Moreover, China appears to be changing its attitude toward trade with Taiwan as it seeks to increase exports to boost a faltering economy affected by tech tensions with the US and global macroeconomic uncertainty. Because Beijing’s suspensions of Taiwanese goods are often arbitrary and abrupt, Taiwanese businesses should consider the grave risks of maintaining China as a major export market. Meanwhile, the government should make further efforts to help Taiwanese exporters tap into other markets to avoid overreliance on one market.
As it would take time for businesses to develop new foreign markets, the government should establish a task force to address China’s trade barriers investigation and offer guidance to domestic industries. It should also develop long-term plans to help transform and upgrade affected industries to enhance their global competitiveness, as opening up to the world is an unavoidable trend.
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