Taiwan No-Smoking Drive Has Anti-American Flavor

Early this month, Yang Shih-chiu, a young university professor, posted himself directly in front of the American Institute in Taiwan, the office that handles official U.S. business here, and burned an advertisement for Marlboro cigarettes.

As flames blackened the image of a cowboy and the scenic background of Marlboro country, Yang’s associates handed out leaflets comparing the current American efforts to sell cigarettes in Taiwan with the British sales of opium in China in the 19th Century.

“Ask not how many dollars the importing of American cigarettes can earn for you. Ask how many lung cancer patients these dollars will bring about in the Republic of China (Taiwan),” said the leaflet, which took the form of an open letter to American cigarette companies.

Yang’s protest was part of an intensive anti-smoking campaign with anti-American overtones that has developed in Taiwan in recent months. The campaign began after American tobacco companies and the U.S. government sought to break into Taiwan’s sizable cigarette market, where a government monopoly selling local brands now accounts for 99% of the sales.

The controversy provides an illustration of some of the political difficulties cropping up overseas as the United States puts pressure on other countries to open their markets to American products.

In an effort to reduce the American trade deficit, the U.S. trade representative’s office is constantly on the lookout for cases in which foreign governments limit the access of American companies to their markets. In some cases, the United States retaliates by imposing restrictions on goods from these countries.

However, foreign governments are deflecting these U.S. efforts in a number of ways. They can delay retaliation through prolonged negotiations. They can urge the United States to defer to local customs. And finally, they can encourage nationalistic sentiments to combat the exporters.

All these approaches have been tried in Taiwan, where U.S. efforts to reduce the trade deficit have touched off complaints about American “arrogance of power.”

Taiwan’s trade surplus with the United States is the third largest in the world. It was $10 billion in 1985, and it is expected to surpass $13 billion this year. Only Japan and Canada have larger trade imbalances with the United States.

The deficit the United States has with this island of 19 million people is more than twice that of either South Korea or Hong Kong. While South Korea attracts public attention by exporting cars to the United States, Taiwan produces more money-making, smaller items such as electronics, textiles, apparel, footwear and sporting goods.

“People here are extraordinarily good at cultivating a relationship with American buyers and supplying what they want,” says Robert P. Parker, an American attorney in Taipei and former head of the American Chamber of Commerce here.

“When the buyers come to Taiwan and say they want something, they get a sample within a week, and if it’s approved, the following week it’s into production. There’s no one in the world who’s better at doing that. It’s where Taiwan’s small, family-run businesses are a plus.”

Taiwan’s economy was given a further boost last year by the sharp increase in the value of the Japanese yen against other major currencies. That made Japanese products more expensive and gave Taiwan exporters an opportunity to undercut Japanese prices in the United States and Western Europe.

(Since July, Taiwan has allowed its own currency to appreciate by about 7% against the U.S. dollar--much less than the 15% to 20% revaluation that U.S. Treasury officials have urged.)

Trade makes up the dominant share of Taiwan’s economy. About half of the island’s gross national product is in the form of exports, and half of all these exports go to the United States.

The result of the success in trade with the United States has been an astonishing economic boom here. The economy is growing at an annual rate of 9%. Taiwan is swimming on a sea of money. Its foreign exchange reserves have jumped to $44 billion from $22 billion a year ago.

For more than a year now, U.S. efforts to persuade Taiwan to open its markets to American goods have focused on the restrictions placed here on three consumer products: beer, wine and cigarettes.

“There are $1 billion worth of these goods sold here. This is a large market,” asserted a trade official at the American Institute in Taiwan.

The institute, staffed by Foreign Service officers on leaves of absence, has served as the unofficial U.S. embassy here since the United States severed diplomatic relations with Taiwan in 1979 in favor of establishing them with China’s Communist government.

All domestic beer, wine and cigarettes on this island are produced by the Taiwan Tobacco and Wine Monopoly Bureau, a government agency that also handles distribution of these products in Taiwan and regulates all imports.

For decades, the monopoly bureau has barred all imported beer from the island. According to American Institute in Taiwan figures, taxes that the bureau charges on American wine are as much as 10 times as high as those on domestic wine, resulting in retail prices three to five times above those of the local product.

For cigarettes, a combination of taxes and duties ensures that foreign brands will sell for prices at least 2 1/2 times as high as Taiwanese brands.

The most popular Taiwan-produced cigarettes, which are called Long Life, sell for about 61 cents a pack. American brands cost consumers at least $1.53 a pack.

“The gap in price is enormous,” complained a spokesman for the Philip Morris Co. “All the American manufacturers want is a chance to compete here and to win smokers of local brands over to our brands.”

Last year, the U.S. government thought it had won that right. In October, 1985, at a time when protectionist legislation that would have severely curbed Taiwan textile exports to the United States was pending in Congress, Taiwan said it had decided to ease its restrictions on foreign beer, wine and tobacco.

In Washington, White House spokesman Larry Speakes termed Taiwan’s announcement “particularly gratifying.” Because of Taiwan’s apparent change in policy, the Reagan Administration put off plans to file an unfair trade complaint against Taiwan over the restrictions.

In the months after Taiwan made its concessions, Congress passed the protectionist legislation, but it was vetoed by President Reagan. Meanwhile, Taiwan’s interest in lifting restrictions on alcohol and cigarettes seemed to wane.

A series of negotiations between American and Taiwanese officials failed to reach agreement on the price at which the American products should be sold on Taiwan.

Taiwan insisted on controlling imports through its monopoly system. In addition, it refused to go along with the U.S. request that as American companies enter the Taiwan market, they be allowed to advertise their products in Taiwan, at least to the extent that they are allowed to do so in the United States.

“The monopoly of cigarettes and wine have been part of our tax system, and we have never regarded it as inappropriate,” declared the government-run Free China Review last September. “The monopoly profits have contributed significantly to our government’s revenue and the country’s economic development. Last year, for example, they made up 11% of the total government income.”

Last summer, Taiwanese officials began increasingly to raise a new objection to the American goods. “We cannot encourage sales of any products hazardous to health,” said Vincent Siew, director of Taiwan’s board of foreign trade.

An anti-smoking campaign gathered steam on Taiwan. Although the monopoly bureau’s Long Life cigarettes make up 92% of the Taiwan market and other local brands make up another 7%, the campaign was directed at foreign cigarettes.

“There really wasn’t a health issue here until the trade issue came up,” an official at the American Institute in Taiwan said recently.

A series of private Taiwanese groups, including the Consumers’ Federation, the Rotary Club, the Lions Club and the Jaycees, announced that if American cigarettes were imported into Taiwan, they would launch a drive to collect cigarettes from the public and burn them.

“We don’t want American cigarettes coming to Taiwan due to American power,” said Yang, the Xinwu College professor and Marlboro ad burner.

Yang said he was not connected to the Taiwan government or the ruling Nationalist Party. However, party and government-controlled publications gave considerable prominence to the anti-smoking campaign.

Taiwan officials argue that since no advertising of cigarettes is permitted on the island now, the American companies should not be permitted to advertise. A spokesman for Philip Morris counters that Taiwan brands have had no need to advertise because the monopoly bureau already occupies 99% of the market.

“We are asking for the opportunity to introduce our products to the consumers,” a recent American press release argued.

Some Americans in Taiwan contend that the United States made a mistake in allowing cigarettes and alcohol to become the symbolic battleground for the trade disputes between the two countries.

“It was a blunder of monumental proportions on the American side,” Parker, the American lawyer, said. “This has produced hints of anti-Americanism in one of the most pro-American places in the world.”

On Oct. 28, U.S. Trade Representative Clayton K. Yeutter announced that the United States would proceed with the trade action against Taiwan that it originally planned to file a year ago. He said President Reagan formally instructed him to propose retaliatory measures against Taiwan exports to the United States because of Taiwan’s restrictions on American beer, wine and tobacco.

“A year has passed, and Taiwan has not honored its agreement,” Yeutter said. “This Administration will not tolerate broken promises.”

Since then, Taiwan officials have urged the public not to let the anti-smoking campaign turn into an emotional or “anti-foreign” issue. They have also suggested that they might now be willing to reconsider their position and make new concessions to the American exporters.

“The trade imbalance is an alarming figure, even to us, I would say,” Vice Foreign Minister John H. Chang said in an interview in early November, two days after the Democratic Party had regained control of the U.S. Senate. “We are going to open up our market to U.S. wine and tobacco.

“With the liberals moving into the U.S. Senate, we have no doubt that protectionism will be stronger than before, so we have to take stronger actions.”