The Mainland's Positive Regulation and Taiwan's Proper Response
Updated 16:32, 19-Aug-2023

Editor's note: Liu Kuangyu is an associate research fellow with the Taiwan Research Institute under the Chinese Academy of Social Sciences. The article reflects the author's views, and not necessarily those of CGTN.

After more than nine months of anti-dumping investigation, the Ministry of Commerce recently announced it will impose anti-dumping tariff on polycarbonate (PC) imported from Taiwan region, in consideration of actual damage caused to mainland enterprises. Recently, the mainland has taken a series of measures to rectify and regulate cross-Straits economic and trade exchanges, safeguard the principle of fair competition in accordance with the law, and effectively protect the interests of the common market across the Straits, which attracted great attention from public opinion across the Straits.

Anti-dumping measures are an important tool of trade protection from the West. Among the 617 WTO trade disputes so far, 1/4 involve anti-dumping, being the highest proportion. And the West will levy as many as three-digit-number ultra-high tax rates, in order to sharply increase the cost risk of foreign producers, and quickly reduce or even zero out their market share.

In contrast, according to the relevant import and export tariff and anti-dumping regulations in Chinese mainland, the maximum deposit rate can reach 50 percent. The proportion of Taiwan enterprises involved is around 17 percent, which shows that this measure has a stronger sense of warning and rectification, rather than only sanctions and punishment.

However, in the polycarbonate industry, the two sides across the Straits have a high degree asymmetry in dependence and alternativeness, which makes Taiwan producers quite anxious.

That is to say, on the one hand, the export of polycarbonate in Taiwan is deeply dependent on the mainland market. In 2022, the dependence rate was as high as 78.3 percent, and in 2023, it was still 73.6 percent, even after the DPP authorities "decentralized market" countermeasures against mainland's investigation. This means it is difficult for Taiwan enterprises to find alternative markets other than the mainland, and there is no so-called "multiple baskets to store eggs".

On the other hand, Taiwanese companies are becoming increasingly fungible to the mainland. Polycarbonate is widely used in mass consumer goods and electronic products, including automobiles, electrical appliances, mobile phones, etc., forming a massive interconnected industrial chain, while the mainland being the world's largest manufacturing base for these industries. At the same time, mainland relevant enterprises are rapidly breaking through the polycarbonate technology monopoly, whose self-sufficiency rate is reaching 50 percent, with the capacity utilization rate has the potential to double, thus can quickly fill the market gap and fulfill domestic demand. In this way, Taiwanese enterprises may face the blow of losing comparative advantages and market share in the whole industrial chain system, in and out of the mainland.

It is worth noting that the DPP and some Taiwan public opinion have been "playing a duet", speculating that this matter is directly related to the nasty "transit" to the United States by Taiwan's deputy leader Lai Ching-te. In this regard, scholars across the Straits pointed out that the mainland has issued a review announcement by the end of last year, and the corresponding practice is in line with procedural norms. The economic and trade relations between the two sides are close and the volume is huge.

Rather than short-term operations, such policies and measures are mainly based on economic considerations and aiming to take a long-term view to establish norms for a fairer and more transparent, healthy and sustainable trade order across the Straits.

However, Lai Ching-te's "transit" to the U.S. is a political provocation by the die-hard "Taiwan independence" forces to "rely on the U.S. to seek independence" and "use independence to destabilize China", and the mainland should of course take various countermeasures against it according to law. Recently, the mainland has continued to enrich the toolbox of "suppressing independence according to law", and has integrated various means to deter and punish die-hard "Taiwan independence" forces and their financial sponsors behind the scene, with obvious results. Public opinion has also noted that Taiwan Chimei Corp, who was called off by the Ministry of Commerce this time, once supported Chen Shui-bian in 2000, and later publicly declared "no engagement in Taiwan independence". The mainland's position is strong and clear: we support the development of healthy economic and trade relations across the Straits, but will never allow "green businessmen" to reap benefits in the mainland while smearing the mainland at the same time.

The key factor of this matter is that the DPP authorities do not recognize the 1992 Consensus and undermine the political foundation of the two sides across the Straits. Once there is a problem, the relevant authorities lack the conditions and channels for consultation, and the mainland has to implement "unilateral management". In recent years, the mainland has followed this example in its import control of several Taiwan originated agricultural and fishery products, as well as the investigation into trade barriers imposed by Taiwan.

Almost a decade ago, the DPP launched a campaign to block the signing and implementation of cross-Straits agreements on trade in services and goods, and attacked the cross-Straits Economic Cooperation Framework Agreement (ECFA); After coming to power, the DPP also viciously promoted the "new southbound policy", trying to decouple from the mainland, while cooperating with the US and the West for risk diversification and containment against the mainland. This not only weakens the economic and trade links across the Straits, but also makes it difficult for Taiwan to integrate into the regional economic cooperation and therefore accelerates its loss of competitiveness.

In the case of polycarbonate, mainland’s current preferential tariff is 6.5 percent, and according to the ECFA Early Harvest List, zero tariff concessions are provided to Taiwan. However, the public opinion on the island are making pessimistic forecast that ECFA, based on the mainland's "both sides of the straits are one family" goodwill, might become invalid. If the DPP authorities continue to deny One China Principle, express hostility to the mainland, then "business is business". The mainland might restore the cross-Straits economy and trade to normal market economic rules, and even expand the anti-dumping and trade barriers review to more ECFA provisions. The most pessimistic scene is: "tariff concession bonus no longer exists; ECFA Early Harvest List protection umbrella is invalid". It is also predicted that industries of petrochemical and machine tool that have benefited a lot will bear the brunt.

At the same time, the Regional Comprehensive Economic Partnership (RCEP), which came into force last year, might also become the coup de grace for Taiwan enterprises. Taiwan is not a member of the economic and trade mechanism; therefore, they cannot enjoy the tariff benefits. However, South Korea, the mainland's second largest origin of polycarbonate, enjoys a 2.5 percent tax rate under RCEP and will be reduced to zero in the future. Taiwan's petrochemical association therefore sent a warning, saying with this ebb and flow growing, Taiwan enterprises might well completely lose competitiveness and become marginalized.

The general trend and order of cross-Straits trade and economic cooperation are not subject to the will of certain individual. Even under the obstruction of the DPP authorities, the mainland has remained Taiwan's largest export market, primary investment destination and major source of trade surplus for many decades, with a trade surplus of up to $156.5 billion in 2022. Taiwan's deep dependence on the mainland, as well as mainland's huge preferential treatment for Taiwan, could be clearly seen from it. That's why, relevant Taiwan companies won’t easily give up, saying that they will strive to maintain its market share by expanding production capacity in the mainland and absorbing costs by its own.

At the same time, Taiwan's economy continued to decline due to global demand contraction and cross-Straits tensions, its exports have declined sharply for 11 consecutive months, with exports to the mainland declining particularly seriously, and it is facing acute difficulty to maintain economic growth more than 1 percent this year. Polycarbonate is only one of the 2000 plus trade barriers under investigation, which is never a problem that can be solved by the DPP encouraging the whole Taiwan to "eat pineapple and buy grouper". How to ease and improve cross-Straits relations, so that the two sides can sit down and talk, and strive for the mediation opportunity, is the right way for Taiwan to respond.

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