Taiwan should heed possible impact from trade war: ex-AIT chair

Richard Bush, former chairman of the American Institute in Taiwan (AIT).

Washington, Oct. 12 (CNA)-Richard Bush, a former chairman of the American Institute in Taiwan (AIT), said Friday that Taiwan should keep a close eye on possible impact from the deteriorating relationships between the United States and China.

Now the director of the Center for Northeast Asian Policy Studies (CNAPS) of the Brookings Institution, Bush said while U.S. Vice President Mike Pence uttered harsh rhetoric on China and gave a thumbs-up to Taiwan’s democracy, saying the U.S. will not back down from its stance against Beijing, “Taiwan might become a victim of ‘friendly fire’ in a U.S.-China trade war,” due to its close economic ties with China.

On Oct. 4, Pence condemned Beijing for threatening stability across the Taiwan Strait and accused China of resorting to economic aggression to extend its global reach. In remarks delivered at the Hudson Institute on U.S. policy toward China, Pence alleged that Beijing has been using so called “debt diplomacy” to expand its influence across the world.

Reading from Pence’s speech, some observers in Taiwan as well as in East Asia would conclude that U.S.-China relations will become a zero-sum situation, Bush said in an article titled “What Taiwan can take from Mike Pence’s speech on China” posted on the website of the Brookings Institution.

“China would have a lot to lose from all-out competition with America, but U.S. allies and partners in the region also might be at risk from both the current trade war and from wider Washington-Beijing rivalry,” Bush said. “Taiwan’s situation is particularly complex.”

Bush said since the early 1990s, Taiwanese firms have started to export their goods to China, helping the island sustain its economic growth and prosperity. As a result, Taiwan has become a critical link in supply and value chains that run from the U.S., Bush added.

“But for purposes of U.S. customs, the finished products are treated as Chinese goods, so a U.S. decision to increase tariffs on those goods would hurt the Taiwan companies and perhaps wipe out the narrow profit margins on which they operate,” Bush said.

In September, Washington announced a 10 percent tariff against US$250 billion worth of China goods and the tariff will increase to 25 percent by the end of this year after a 25 percent tariff was imposed on US$60 billion worth of China’s merchandise earlier this year. U.S. President Trump has even threatened to impose tariffs on an additional US$267 billion worth of Chinese goods.

In terms of political and security affairs, Bush said, some in Taiwan are likely to believe that the deteriorating U.S.-China relations will provide Taiwan with the best chance to seek benefits that Washington was previously unwilling to grant.

But Bush urged Taiwan to remain cautious, watching closely how the Washington-Beijing ties will evolve at a time when the nuclear threats in Iran and North Korea are still top issues.

“If previous (U.S.) administrations chose not to extend those benefits because it badly needed Beijing’s cooperation on issues like North Korea, Iran, and climate change, the reduction or disappearance of cooperation would obviate the need for American restraint on
Taiwan,” Bush wrote.