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Rethinking Taiwan

The phone call with Tsai was intended as a harbinger of things to come
By The News · 08 of December 2016 08:39:16
Tsai Ing-wen, No available, photo: Wikipedia

Earlier this month, U.S. President-elect Donald J. Trump sent shockwaves through the diplomatic world by tweeting that he had shattered a decades-old tradition to formally ignore Taiwan in favor of a One-China policy instigated by his predecessor Richard Nixon in 1972.

Despite the U.S. diplomatic precedence of refusing to even acknowledge the little breakaway island nation with a population of 25 million people (which, by the way, is a democratic, free-market society), Trump decided to “offend” the great Red Dragon by receiving a congratulatory phone call from (duly elected) Taiwanese President Tsai Ing-wen.

At first, censorious critics and pompous pundits lambasted Trump for the indecorous phone call, dismissing it as just another major diplomatic gaff by the former reality show star with a severe case of foot-in-mouth disease.

But it wasn’t long before political analysts began to realize that Trump’s indiscreet faux pas was not a diplomatic blunder at all, but rather a very intentional message to Beijing to either start complying with the rules of the World Trade Organization (WTO), which China joined in 2001, or pay the consequences.

Currently, China blatantly disregards international intellectual property rights and trademarks, subsidizes quasi-state industries with low-cost energy and other dumping practices and engages in other unfair business practices such as refusing workers the right to protest or form unions.

China also condones — directly or indirectly — the theft of U.S. business secrets and technology by its companies.

According to a recent bipartisan commission report conducted by the U.S. Congress, Chinese companies steal over $200 billion worth of U.S. business secrets each year.

That same report estimated that if China were to stop producing bootleg copies of films, electronics and software, more than two million jobs would return to the United States.

Early on in his campaign, Trump threatened to slap a 45-percent tariff on Chinese imports that do not comply with fair-trade practices, and the phone call with Tsai was a reminder that he meant business when it came to commercial ties with the Asian giant.

“If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs,” Trump added in June.

The phone call with Tsai was intended as a harbinger of things to come.

Trump also made it clear that Washington was not going to kowtow to Beijing and its political whims to castigate and humiliate a de facto independent democratic nation (Taiwan was established as a country in 1957) simply because China considers it a renegade province.

For the last decade, China has been intimidating its way to power in East Asia, not only by threatening Taiwan with a belligerent display of more than 16,000 ballistic missiles on its side of the Taiwan Strait and staging regular military exercises simulating a naval invasion of the island, but by infringing on the maritime rights of its neighbors in the South China Sea.

Even after a five-member panel of the Permanent Court of Arbitration (PCA) in The Hague ruled unanimously earlier this year to condemn the unlawful Chinese expansionism in the disputed area of the Spratly Islands and Scarborough Shoal in a suit brought by the Philippines, Beijing simply refused to recognize the PCA ruling and continued its invasion of the waters.

Whether it be the authority of the PCA, the United Nations Commission on Human Rights or the WTO, China basically thinks it’s too good and too big to have to comply with international law (i.e., might is right).

But should China decide to respond to the perceived insult of the Trump-Tsai phone call with a trade war, Beijing stands to suffer a lot more than Washington when it comes to the bottom line.

Sino-U.S. trade is heavily weighted in China’s favor.

In 2015, the United States purchased almost $500 billion worth of goods from China, while China only purchased $165 billion worth of goods and services to the Chinese.

Do the math.

It plainly gives Trump the upper hand in any game of economic chicken that Beijing might decide to wage.

Mexico, too, has an antiquated and unrealistic One-China policy that was implemented in the 1970s by then-President Luis Echeverría Álvarez.

But Taiwan is a much more important trade and investment partner for Mexico than China (which is guilty of the same infractions against Mexican companies as it is against U.S. companies, including against the Mexican steel industry).

Currently there are more than 300 Taiwanese companies with capital holdings in Mexico, providing direct jobs to no less than 60,000 workers.

In fact, Taiwan is Mexico’s third-largest Asian investor, and its ninth-largest trade partner worldwide, with a combined bilateral commercial exchange of about $7 billion annually.

Total Taiwanese investment in Mexico amounts to more than $3 billion.

By comparison, mainland China has only $281 million in investment holdings in Mexico.

And Chinese exports to Mexico far outnumber Mexican exports to China.

When it comes to trade — and just about anything else, for that matter — China is a bully that refuses to play by the rules and exerts an unfair demand from its commercial and investment partners around the globe to unjustly persecute the free and sovereign nation of Taiwan.

Clearly, it is time for Mexico — like the United States — to rethink its One-China policy.

Thérèse Margolis can be reached at therese.margolis@gmail.com.