Except for 1955, Taiwan's trade with Japan has been unfavorable for three decades. In 1981, imports totaled US$5.9 billion and exports US$2.4 billion. Realistic government officials, economists and businessmen in the Republic of China do not expect balanced trade with the Japanese for a long time to come. Japan is big and productive. It makes goods that Taiwan needs: electrical machinery apparatus, other machinery, basic metals, chemicals and precision instruments and equipment. The consumer goods involved in the ban are a drop in the bucket. Exports to Japan are dominated by foodstuffs and consumer goods of low value: processed foods, wearing apparel, electrical machinery apparatus, products made of wood, bamboo and rattan, and fishery products.
C.S. Pan, the deputy director general of the Board of Foreign Trade (BOFT), and other government officials expressed hope that the consumer goods ban would serve as a warning to Japan that other countries cannot put up with an endless succession of high deficits. The truck ban will be in effect for a year, but the consumer goods prohibition could be lifted at any time.
Mr. Pan said: "We hope that the ban will help change the habits of our consumers, who have long been used to relying on Japanese products." The deficit for last year, he said, meant that favorable balances with other countries had to be spent on Japanese goods. Actually, the Japanese imports cost a good deal more than that, considering that the worldwide 1981 favorable balance was only US$1.413 billion. Mr. Pan went on to say that, "Protection is not the best way to develop industry and economy; we shouldn't rely on import controls alone to reduce this deficit. We expect local manufacturers to be more active in expanding sales to Japan and to pay more attention to the tastes of Japanese consumers.
"Most of all the ban is a warning to the Japanese. The high deficit forced us to adopt import controls, and we expect the Japanese government and businessmen to be more sincere in trying to narrow the trade gap. We also hope the Japanese will relax import controls and restrictions on Taiwan products, especially agricultural goods. Although agricultural imports from all countries are subject to Japan's strict quarantine system, the Japanese sometimes find excuses or means to put Taiwan's agricultural products under stricter restrictions."
C.T. Lin, chief of the economic department of the Association of East Asian Relations representing the Republic of China in Japan, cited the example of tariff barriers raised against Taiwan bananas, which once accounted for 85 percent of Japan's imports from the ROC. The figure is now 11 percent. Mr. Lin noted that the Japanese government limits most Taiwan banana imports to 20 (14 before last year) trading companies. This monopolization not only reduces Japanese imports of Taiwan bananas but raises the price and makes them uncompetitive with fruit from Southeast Asia.
The Japanese did not immediately show any signs of working with the Republic of China to narrow the trade gap. In a memorandum on the Japanese government's position, the Interchange Association, representing Japan in the ROC, threatened to terminate tariff "conveniences" for certain Taiwan products. Hiroshi Hitomi, director of the Interchange Association, told Chang Yen-tien, chairman of the Association of Asian Relations, that:
- Japan was surprised by the ban, which was imposed without prior notification. It is deeply regretted that this measure will have a serious unfavorable impact on Japan-Taiwan economic relations and on the economic development of the two countries.
- The question of trade surpluses and deficits cannot be considered from the viewpoint of Japan-Taiwan relations alone; a global viewpoint should be taken and the principle adopted of seeking a balance in the midst of trade expansion, and the matter handled from a medium - and long-range point of view. We have a full understanding of your proposals on the trade deficit question. We have through the Interchange Association arranged to send economic interchange promotion groups to Taiwan and are actively planning other measures of various kinds. The action of your authorities in taking these steps against Japan alone, despite the fact that your trade figures as a whole are in the black, not only ignores the various measures we have adopted but constitutes an obstacle to further efforts in the future. This is regrettable.
- We feel this action is not a matter that involves only Japan and Taiwan. From the standpoint of maintaining the free trade system, we feel this is a problem that is very serious and will be difficult to put aside or ignore. If your authorities continue enforcing this measure, we fear that we will not be able to avoid taking certain steps such as ceasing to provide customs "conveniences." We deeply fear this might become a reality.
- Over the past decade and more, there has been a continuous effort to find ways to increase Japan-Taiwan trade, and we can anticipate that its importance will become even greater in the future. But this action is a serious obstacle to Japan-Taiwan trade that could do inestimable harm to the economies of both sides. We strongly request that your authorities abolish this measure immediately.
Minister of Economic Affairs Y.T.Chao said the ROC would negotiate with the Japanese to settle the problem. He told the Legislative Yuan (the Congress) that the Japanese representations were being given careful study. Legislator K.C. Lin urged the government not to lift the ban until the Japanese show sincerity in trying to mitigate the trade imbalance. Lin called on the people of the Republic of China to support the government by not buying Japanese products. The Ministry of Finance ordered Customs officials to tighten control over consumer goods brought from Japan by Chinese tourists visiting that country. Many return with electrical appliances readily available in Taiwan, but at higher prices.
The government unofficially observed that it was prepared to retaliate if the Japanese followed through on their threat to suspend preferential tariffs, which were applied to only about a fourth of exports to Japan in 1980. As another expression of protest against Japan's attitude, the government rejected a proposal of the Taiwan Power Company to buy US$10 million worth of generating equipment from Japanese manufacturers. The Board of Foreign Trade asked Taipower to seek international bids on the equipment.
Familiarity with Japanese products goes back to the 1895-1945 occupation of Taiwan by Japan. The Japanese language is widely spoken by older Chinese, including many businessmen.
Large numbers of Chinese-owned factories depend on Japanese machinery and parts. The ROC government is aware of this and consequently concentrated on consumer goods and trucks (which are made in Taiwan, even if they are more expensive than the Japanese imports), instead of burdening manufacturers with restrictions on Japanese capital goods and raw materials.
Everyone who buys from Japan objects to the visible and invisible trade barriers erected by that country. According to Japan's Manufactured Imports Promotion Organization, there are 47 import restrictions of a quota nature and 254 non-tariff barriers such as strict import restrictions and quarantine procedures. Twenty-two agricultural and industrial categories are subject to import controls of the Japanese government.
Established in Taipei last year, the Trade Balancing Committee of the East Asian Businessmen's Conference has scheduled four meetings for this year, according to S.C. Lee, the executive secretary. Fifteen exhibitions of Taiwan goods will be held in Japan to promote exports to that country, Products will include handbags, garments, foods, sporting goods, toys, footwear, electronic goods and hand tools. Japanese businessmen will, also, be invited to 10 exhibitions in Taiwan. Displays will include toys and gifts, sporting goods, machinery, hardware and building materials, auto parts and bicycles, furniture, leather goods, electrical machinery and other apparatus. About 200 Japanese importers will be invited to each show. Japanese department stores, chain stores and supermarkets are being asked to establish Taiwan procurement offices. Information on the Japanese market is being disseminated and seminars held.
The Republic of China is trying to be fair and objective. It does not expect miracles, It understands Japanese problems but feels that Japan does not understand Taiwan's problems and is not trying very hard to learn.
The ROC ban is a step of last resort. Not, of course, that Japan cannot get along without our purchases of US$100 million a year or so extra in consumer goods. That is a drop in the bucket of Japanese sales. It is important as a precedent for the rest of the world's economic relations with Japan.
We are admirers of Japanese economic success, just as others are our admirers. Japan makes high-quality products and sells them at reasonable prices. It is a natural trading partner for this country. But the Japanese want to sell as much as they can and buy as little as possible. While upgrading their export economy, they have sought to protect inefficiencies in their domestic economy. By one means and another, they have kept out foreign goods and sought to keep the home market largely to themselves. Japan buys foreign oil because it must; it has no oil of its own. If a product can be made in Japan, it is, and the Japanese people must pay through the nose to buy it. The Japanese have been clever in concealing this. They look up innocent-eyed and say their market is "open to all." If anyone knows the Japanese market, our traders do. And almost to a man, they attest that it is nearly impossible to do business in most of the Japanese market. All the regulations favor Japanese products, no matter how inefficiently these are produced.
All of this is far from new. Our government has been appealing to the Japanese for years to give us a better chance. The Japanese smile, say they will and do nothing. Trade talks are held year after year, and then the deficit goes up again. This ban is an indication of the gravity of the problem. Taiwan can get along without Japanese consumer goods. So can the rest of the world. For that matter, all of us could also get along without Japanese capital goods, too. There are substitutes. They could be found and developed, if necessary.
If not resolved, the Republic of China's very limited ban might inspire other countries of Asia to do likewise. Now they are certainly watching and waiting. Japan has large favorable trade balances with South Korea and other countries of the region. The total may be in the neighborhood of US$15 billion a year. Some neighbors feel that Japan has substituted economic exploitation for pre-1945 military imperialism.
For the Republic of China, there is the further question of whether Japan's industrial materials are really such a great bargain, American and European suppliers to Taiwan pay import duties of US$100 or more per ton of ocean freight, and sometimes a great deal more. Japanese suppliers pay duties of only about US$35 to $45 per ton of freight costs. That is the CIF advantage, and it is one that the ROC has the power to remove in a step to equalize competition between Japan and Euro-American suppliers.
The Japanese used to say - both before and after World War II: "We are a poor island with few natural resources and we have to live." Now generally acknowledged to be No. 2 economically, after the United States, the Japanese are still talking that way, apparently hoping to maintain a "poor boy" image. This won't wash any more. The Republic of China's share in the battle is a small one - but possibly a tail that can wag the dog. Japan says it believes in free trade. No one asks the Japanese to do more than prove it - by opening their own market even as they trade themselves up to the No. 1 position that is so often forecast for them.