Island’s High Tariffs a Sticking Point : Taiwan Trade Surplus With U.S. Still Rising

During a jovial dinner, a Chinese host proposed a toast with “Taiwan Beer” and noted with pride that the island nation’s home brew is making inroads into the American market, where it is sold under a different name: “China Beer.”

It sells better under the name “China,” and a rival beer from mainland China is prevented from using the name in the United States, he explained.

What about American beer in Taiwan? U.S. brewers have been trying to sell here, said Richard P. Rice, deputy manager of the American Trade Center. But a 65% tariff, on top of a 5% customs evaluation “uplift” on the landed cost of beer, is just too steep a barrier to surmount, he said.

$11.1-Billion Trade Surplus

Such barriers, which Rice said stand in the way of most products that Americans want to sell here, helped give Taiwan an $11.1-billion trade surplus with the United States last year. While attention has focused on Japan’s U.S. trade surplus--$38.8 billion in 1984--Taiwan’s surplus has been growing faster, expanding by five times in the last four years while Japan’s tripled.

This year, it is expected to grow to as much as $12.8 billion, according to the American Institute in Taiwan, the de facto “embassy” that the United States maintains here in the absence of official diplomatic ties. With half of all of its exports going to the American market, Taiwan’s U.S. surplus is third only to Japan and Canada.

Nevertheless, said Pan Chia-sheng, deputy director of the Board of Foreign Trade, it will take time to dismantle the tariff and the non-tariff barriers that Americans complain about. The burgeoning American deficit isn’t entirely Taiwan’s fault, Chinese officials insist, and some American businessmen acknowledge this.

“In our hotels you can find lots of American businessmen who come here to buy things, and lots of Japanese businessmen who come here to sell things,” Pan said. The Nationalist Chinese government, which suffers its only significant deficit with Japan, would like to see those roles reversed, he said.

James R. Klein, president of General Instruments of Taiwan and a former president of the American Chamber of Commerce here, also said: “American businessmen must get off their duff and start exporting.”

Strong Dollar Hurts

The strong dollar also hurts, Klein said. But even if the dollar weakens, making American exports more competitive, “very few American companies engage in trade. They should. American products here are quite competitive, and there is a preference for them,” he said.

The Nationalist Chinese government, however, also will have to do more to reduce its tariffs and non-tariff barriers, Klein added.

The island’s surplus with the United States is not only embarrassing to government officials but also troublesome to the Taiwan economy itself. The national bank, which is obliged to issue new Taiwan currency for each U.S. dollar that flows in through the trade and current-accounts surplus, has started a series of new systems to allow private banks to hang on to dollars in an attempt to hold down the increase in the money supply and avoid spurring inflation.

Pan said the government has been trying to cut the surplus--”we regard it as a very serious problem”--by sending 12 procurement missions to the United States, three of them in 1984 alone. It will sponsor a massive American trade fair here later this year, he added.

“We are also asking our manufacturers to import more from the United States,” he said.

Minister of Economic Affairs Lee Ta-hai said he has been urging Taiwan firms and American joint ventures here to procure some of their critical components from the United States rather than from Japan. But he, too, said such a shift would take time.

Lee admitted that Taiwan’s tariffs are high: an average of 25%, or more than eight times stiffer than Japan’s 3% level.

Rice said, however, that when Taiwan cut tariffs on 1,161 items earlier this year, most of the duty rates on products of greatest interest to the United States went down only to 70% from 75%.

He also complained about the 5% “uplift” in customs evaluation of imports and the fact that duties are assessed not on the U.S. factory price but on the landed cost here. The series of buying missions to the United States have been largely public relations efforts, he said. Most of the import purchases announced during such missions already had been contracted before the missions left Taipei, he said.

State Trade Delegations

Nor are American complaints limited to the imbalance in trade. U.S. negotiators also have started pressing Taiwan to end its thriving book piracy and widespread counterfeit manufacturing of American products.

Klein said he saw one hopeful sign that what he called American trade inertia is beginning to break down. State governments are setting up international trade departments and are sending more and more state delegations of businessmen through Taiwan.

“It’s an interesting new form of government-business cooperation,” he said.

But the basic problem remains: Taiwan’s $56-billion market of 19 million people remains small pickings compared to the vast North American market.

Chang King-yuk, director general of the Government Information Office, said Taiwan, like South Korea and other so-called newly industrialized countries, is providing the United States with light industrial products, most of which the United States no longer makes itself.

“Therefore, we don’t believe we should curb our exports to the United States to reduce the surplus but rather we should buy more from the United States,” Chang said.

Chang said Taiwan would like to buy more military weapons from the United States--it already purchases about $750 million worth, which doesn’t show up in the trade statistics--and would also like to buy Alaskan oil, but the United States isn’t willing to sell. Lower tariffs, particularly on cars, he added, probably would only open up Taiwan’s market to more imports from the more aggressive Japanese, not from America, he said.

Becoming ‘Advanced’ Nation

Chang said the government expects Taiwan to reach a per-capita GNP of $6,000 by about 1990, at which point the country would be considered an advanced nation.

But other officials said they want Taiwan to continue its status as a developing country as long as possible--to receive favors such as lower duties on its exports to the United States under the generalized system of preferential tariffs, which the Reagan Administration has promised to continue until at least 1993.

Pan said: “Psychologically, we want to become an advanced nation for the sake of face. But for economic reasons, we want to remain a developing country.”

Asked how long he thought Taiwan would remain a developing country, he replied: “As long as possible.”