Burnishing the "Made in Taiwan" Label--An Interview with CEPD Vice Chair Thomas M. J. Yeh

Q: These days seemingly all of Asia's major ports, from Kobe to Singapore, are developing free port plans. What advantages does Taiwan have vis-a-vis these other ports?

A: Taiwan's location allows it to serve a bridge from Asia to Europe and the Americas; it is a convenient transshipment point for both air and sea freight. Our location, our high-tech industry and our R&D capabilities have allowed us to carve out a sizeable niche in logistics, transshipping and value-added manufacturing. Operations at Keelung and Kaohsiung Harbors currently center on the warehousing and re-export of goods. Once they make the transition to free ports, harbor businesses will also be able to engage in assembly, repackaging, processing and manufacturing. The ports will pull together the functions of export processing zones and technology parks to create a highly efficient hybrid-part free port, part high-value-added free trade zone.

Q: Taiwan's labor costs are relatively high. If the hiring quotas for Aborigines and foreign laborers set out in the Act for the Establishment and Management of Free Ports affect the willingness of businesses to set up operations in the ports, will the quotas be adjusted?

A: The act states that to protect Aborigines' right to work, 5% of port workers must be Aborigines. The CEPD has always respected this position. However, given that Aborigines make up only 2% of the population and only 1.7% of the workforce, it remains to be seen whether the 5% threshold is reasonable.

The CEPD has therefore proposed that incentives rather than penalties be used to reach this goal, an approach for which we have already received preliminary support from Aboriginal legislators. However, with elections approaching, the law is unlikely to be revised until the first legislative session of next year.

The act also states that at least 60% of employees must be ROC citizens. The Council of Labor Affairs' current policy is to reduce the number of foreign laborers in Taiwan. Including the number of foreign laborers working in the free ports in the total number of foreign laborers in Taiwan is unlikely to cause problems in the first stages of free-port operations. However, if the trial runs in Keelung and Kaohsiung are successful and the free-port model is extended to other ports around Taiwan, the number of foreign laborers employed by our free ports will grow, which may well affect the operations of businesses outside the ports. For this reason, we feel that the number of foreign laborers working inside the free ports should be independent of the quotas applied outside the ports. Such an approach would also be in keeping with the principles of flexibility and liberalization.

Q: Hong Kong and Singapore run their harbors as business entities, and have been internationally acclaimed for the efficiency and profitability of their harbor operations. Does Taiwan plan to privatize its ports in any way?

A: Taiwan is currently in the process of corporatizing some government functions. The administration of the National Chiang Kai Shek Cultural Center is a case in point.

In the future, the administration of public entities that engage in economic activities and have the potential to generate profits should be corporatized in order to minimize the legal and bureaucratic constraints under which they operate and reduce the burden on the government.

In addition, harbors have to provide efficient service to be competitive. Taiwan's ports are therefore likely to develop in this direction.

Q: Industries in Taiwan and mainland China have developed a relationship that is simultaneously competitive and cooperative. What effect would the implementation of the "three links" have on Taiwan's free ports?

A: The cross-strait industrial relationship has been complementary for the past 20 years, but now economic development in the mainland is gradually bringing us into competition with one another. This is true of our ports, as well. Once completed, the mainland's southeast coastal ports will represent a real challenge to their counterparts in Taiwan.

However, Taiwan retains significant advantages in the "deep processing" of goods. Our free ports will function as a base for Taiwanese businesses with investments in the mainland or elsewhere in the Asia-Pacific region, providing them with a supply depot from which to support their global operations. In addition, free ports will provide firms with a place in which to engage in the value-added processing of goods manufactured in the mainland-in international markets, "Made in Taiwan" is a much more attractive label than "Made in China."

If we can use these free ports to establish multiple direct trade routes with the mainland and create an effective cross-strait division of labor, shipping and industry on both sides of the strait will benefit. In other words, Taiwan and the mainland need not only compete, but can also cooperate.

At this point mainland capital and labor are both barred from entering Taiwan. However, once the free ports are up and running we will respect any suggestions the Mainland Affairs Council makes with regard to changes in their operations.