On April 14, the MOEA announced a package of protective measures against towel imports from China. Such imports will now be subject to a pricing tariff of 10.5%, and a quantity tariff per kilogram that will decrease over the next three years, starting at NT$42, dropping to NT$32 in 2007, and to NT$20 in 2008. These measures will raise the price of Chinese towels to about NT$110 per kilo; while this is still cheaper than the NT$160 locally produced towels cost, the moves may relieve some of the pressure on Taiwan's industry. The three-year plan offers local businesses a chance to restructure and upgrade to better tackle this challenge.

Since the accession of China and Taiwan to the WTO in 2002, the Chinese authorities have passed several pieces of anti-dumping legislation aimed at Taiwanese products, and levied punitive tariffs on goods coming from Taiwan. The Yunlin towels case is Taiwan's first investigation and invocation of WTO regulations, and as such its importance cannot be overstated.

Under WTO regulations, such "safeguard measures" are regarded as a mechanism to trigger negotiations between members, to begin within 60 days of the measures' being announced. Regardless of the outcome of such negotiations, the final decision on whether to enact the safeguard measures must come from consideration of Taiwan's national interests.

Taiwan has long been a major towel producer, but in recent years the industry has faced a growing challenge from China. At present the domestic industry is worth NT$300 million per year, and 97% of production is situated in and around Yunlin's Huwei Township.

While the MOEA put the measures in place in response to towel manufacturers' pleas, they are just a short-term solution. They offer a political means of protecting the local industry, but businesses must seize the opportunity and upgrade themselves as quickly as possible.

To encourage Taiwanese to buy locally made goods and avoid fake "local" brands that are actually produced in China, strict requirements for clear place-of-origin labeling may be put in place. A "Wholly Made in Taiwan" regulatory proposal has also been put forward for the towel industry.

In an effort to encourage the industry to become more productive, Yunlin County chief executive Su Chih-fen has invited professors from National Yunlin University of Science and Technology to provide assistance. There is also a plan to develop an area in Yunlin dedicated solely to the textiles industry, so that smaller businesses will have a better chance of survival.

While this "towel fight" is being framed as a cross-strait affair, some of the "Chinese" companies involved are actually from Taiwan, and a surprising amount of the competition is from China-based Taiwanese businesses, and from their Chinese proteges. It's not just the towel industry--around 15 other industries are calling for similar assistance from the MOEA, including the ceramics, marble, granite, craft paper, and printing paper industries.

Taiwan is not alone in facing an onslaught of Chinese products. While the percentage of the Taiwanese market comprised of Chinese goods is still only 11%, there are over 2000 kinds of product that may not come into Taiwan from China. Meanwhile in America and Europe Chinese goods' share of the market stands at 15%, and in Japan at over 20%, so Taiwan's situation looks comparatively moderate. However, the aforementioned 2000-plus products not only include products made by Taiwanese companies in China, but also those of Japanese, Korean, American, and European companies produced in Chinese factories. Facing growing international pressure, Taiwan may not be able to put off liberalization with regard to Chinese products for much longer, so government and local industries have to make hay while the sun shines and prepare themselves.

In April, the opposition Kuomintang and the Chinese authorities held a forum on cross-strait economic ties, which saw the Chinese lay out a series of propositions clearly designed to cosy up to the several hundred China-based Taiwanese businesses present. Meanwhile, besieged businesses in Taiwan find themselves in an increasingly difficult position. The government must find a way to reform Taiwan's industrial environment, encourage businesses to reform and upgrade, and prevent an influx of Chinese goods from coming in through illegal channels. More importantly, it needs to find a way to make its voice heard on the world stage and protect Taiwan's businesses through the mechanisms offered by the WTO. This will be a long and difficult fight, and is going to demand much hard work, patience, and time on the part of all concerned.