Google: A Warning for Taiwan and Ma's ECFA

An article in the April 5th issue of Business Week targets China as a manipulator and a country where countries are starting to realize the lack of business potential there. It was a refreshing read in that until recently (with the Google vs China fiasco), the way to make money was to head east to China. I happened to pick up the paper magazine of this issue, but you can also read it here online.

All of the issues raised in this piece point to the same problems that the U.S. has been facing in regards to China. China has consistently struck deals with countries and organizations, only to renege on them.

Nearly a decade after China's entry into the World Trade Organization, many foreign companies say the warm reception they once received has turned frosty. While China can still be highly profitable, some question how long that will last as Beijing changes the rules to give a lift to its domestic companies, especially state-owned enterprises. A new government procurement program known as "indigenous innovation" features rules favoring local firms: It could block sales worth billions of dollars a year, says Joerg Wuttke, director of the European Union Chamber of Commerce in China. Beijing has written strict standards for everything from cell phones to cars, often couching them in a way that gives an advantage to domestic producers. A recently revised patent law could force foreign companies to hand over key technologies to Chinese bureaucrats.

Their strategy was simple, and the rest of the world was naive in its thinking. China sucked in all these global companies to create offices in China and spur growth. Meanwhile these companies from all over the world, the innovators, start making profits and just as they think all is well, China comes in with their own companies that do the same - but as fabricators and duplicators rather than innovators.

What then? As the article mentions, there is the potential that China could force these foreign companies into handing over patents if they basically don't make China happy. These foreign companies can't do much in a communist country, where in the end - these Chinese bureaucrats have the last say.

A couple more points that the article makes on how China has policies that could force foreign businesses out of business:

Standards: China issues more than 10,000 product standards each year, some written to keep foreigners out of the market. Several Italian appliance manufacturers were shut out by rules requiring hotter-burning gas stoves. And tiremakers say the rules make it less profitable to sell in China.

Approvals: Bureaucratic foot-dragging on licensing for foreign banks and insurers restricts access and boosts Chinese rivals. One insurer says he can apply to open only one branch at a time and that it takes more than 18 months to get the green light. So some foreign companies have no more than a handful of branches.

As we are seeing with Google, who courageously took the stand against China, despite the potential for the money to be made in China - you either get in bed with their policies or you fall to the wayside and get kicked out.

What does this mean for Taiwan and the ECFA? If you feel like Ma is pushing the ECFA faster than his declining approval rating, well you aren't alone. It feels rushed, it feels sloppy, it feels like a gimmick to get Taiwan in bed with China. A trade agreement between two countries should not be rushed, especially in this context where Ma wishes to put all of Taiwan's eggs into the China basket.

Some Westerners believe all these troubles can be traced to China's negotiations to join the WTO. In the rush to gain access to the huge market, many corners were cut, and trade officials simply hoped Beijing would interpret the deal in a way outsiders would consider fair. "People were focused on the enormity of what was being accomplished just by bringing China into the WTO," says an executive with a Western bank in Shanghai, who says capital requirements and recalcitrant bureaucrats have restricted his company's expansion. "They thought they could take care of [the details] later."

Does the above sound eerily similar to what's occurring in Taiwan? Ma and his cronies are trying to fast-track ECFA just so that he can claim he got it done. Well, what exactly will it be? If the end result is a trade agreement with details as vague as Ma Ying-jeou's birth records, then shouldn't all of Taiwan be concerned?

We already know what China does in deals. It makes promises and then "interprets the deal" in a way that benefits themselves.

There's something that has always irked me. Call China for what it is - communist. Ever heard of the Chinese Communist Party? So what if they have a pseudo capitalist economy, you can be communist and love money. What you can't deny is they have a one-party dictatorship that does whatever the hell they want, how they want, to whoever they want. Let's not deceive ourselves into believing you can have fair free trade agreements with a country that doesn't give a damn about any rules or agreements, except their own.

In other news, just wanted to point out that the Taiwanese drive for the 2010 Census is not the only group of people pushing for their own "write-in." Despite what a lot of Debbie Downers are saying about how Taiwanese people are trying to create division, being trouble-makers, and being non-American, this article points out that Muslims, Sir-Lankans, and Indonesians among others are having their own census push also.

Anyways, April 1st was the day to get your census form in by, so for the most part the talk about the 2010 Census is over! That is, until we start seeing some of the statistics come out and see how much us Taiwanese were actually underrepresented.