Taiwan Tensions Threaten U.S. Firms
For American companies, doing business in China is always a dicey affair. And with the Chinese launching another round of missiles off the northern coast of Taiwan and a second U.S. naval fleet steaming across the Pacific, U.S. firms in the region are justifiably fearful they will get caught in the cross-fire.
“Unfortunately,” Hong Kong lawyer Nicholas Chen advised U.S. business leaders this week, “you are a symbol not only of industry but of a country.”
To be sure, the greater China region--which includes mainland China, Taiwan and Hong Kong--is still viewed as a promising overseas market in spite of the political conflagration that has all sides talking tough and brandishing their weapons.
But the 400 U.S. executives attending this week’s Asia Pacific Business Outlook conference at USC found their immediate business prospects in China threatened by the possibility of Chinese reprisals and the danger that Congress will undercut China’s status as a trade partner.
“Business is just looking for cooler heads and some discussion to get us past this event,” said Robert Wilson, a Citibank executive and chairman of the Asia-Pacific Council of American Chambers of Commerce, who spoke at the three-day business conference.
The big question mark is Saturday’s first-ever presidential election in Taiwan, which is viewed by the Chinese as a threat to its claim that Taiwan is a province of China and not an independent nation. The Chinese missile tests, which began in July and intensified in recent weeks, are designed to undermine the Taiwanese independence movement.
The military threats have already taken a toll on the Taiwanese economy, prompting a precipitous drop in the stock market and a huge shift of capital abroad, particularly to Southern California’s Chinese banks.
For U.S. firms, many of which do business on both sides of the Taiwan Strait, this political time bomb has ramifications that extend far beyond Taiwan. Those include possible direct retaliation by China against U.S. firms, a slump in the Taiwanese economy that slows U.S. exports or congressional withdrawal of most-favored-nation trade status for China, which is up for renewal later this spring.
Earlier this week, U.S. Treasury Secretary Robert Rubin confirmed those fears when he told a group of U.S. business people in Hong Kong that China faces a tough time winning renewal of its MFN trade privileges, even with President Clinton’s support, because of the rising tensions with Taiwan and other issues.
“There is a harsh political reality in Congress,” Rubin said.
A group of prominent California firms calling themselves the Business Coalition for U.S.-China Trade is circulating a letter they hope to send to Clinton within the next few weeks urging the swift renewal of MFN trade status.
Without directly referring to the key role of California in the upcoming presidential election, the letter emphasizes that the state’s “fragile economic recovery” could be threatened by any disruption of its trade with China, which now accounts for more than $1.6 billion annually.
Human rights groups and other China critics have urged the Clinton administration not to renew China’s trade status because of human rights abuses, alleged arms control violations and unfair trade practices that have contributed to a trade surplus with the United States that is second only to Japan’s.
The fears of corporate America surfaced early at the USC business conference, which ended Wednesday, when a Boeing executive asked a panel of China experts about the seriousness of the Chinese government’s threat to link future commercial purchases to trade issues.
He was referring to recent reports that Wu Yi, China’s minister for foreign trade and economic cooperation, had offered to purchase $4 billion worth of Boeing and McDonnell Douglas jets in exchange for the Clinton administration delaying threatened sanctions in a contentious dispute over high-technology piracy.
Prominent U.S. commercial interests, particularly Boeing aircraft sales, have been used as bargaining chips by the Chinese in previous disputes with the United States.
Robert Kapp, president of the U.S.-China Business Council, which represents the top U.S. companies in China, said Chinese government officials know they stand to suffer if they harm the interests of U.S. companies, which are the most powerful advocates for a strong U.S.-China relationship. He just returned from a trip to China, where he met with top government and business officials.
But Kapp and others acknowledged that companies such as Boeing are particularly vulnerable to becoming a political hostage during times of tension.
Lawyer Chen, a partner in the Hong Kong office of the Perkins Coie law firm, advised U.S. firms to follow the example of their Asian competitors, which are forming multinational consortiums to bid on major projects in China. He said that trend is becoming increasingly popular in Asia because it leverages the strengths of the various players, spreads the risk, increases financing options and makes the group less vulnerable to political gamesmanship.
“We must stop thinking about relationships as bipolar,” he said.
Zhou Hanmin, an attorney and vice president of the Shanghai Institute of Foreign Trade, sought to reassure the audience that China would not jeopardize its long-term economic plans for short-term political gain. In the case of Boeing, he said the Chinese government needs the Seattle-based aviation giant to succeed with its plans to modernize its transportation systems and develop a domestic aerospace industry.
Zhou said friction is inevitable given the vast differences between the U.S. and Communist Chinese political systems and cultures. But he expressed confidence that the two sides could get their relationship back on track if they concentrated on the business arena, where there is a neutral body of international law to fall back on.
“You can put political differences aside and still abide by international regulations,” he said.
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