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Business at Beijing’s pleasure

by Hisahiko Okazaki

In a May 30 Wall Street Journal article, former U.S. Assistant Defense Secretary Charles W. Freeman III expressed doubts about the prospects of a free-trade agreement between the United States and Taiwan: “Given its almost obsessive antipathy for President Chen (Shui-bian), Beijing will do almost anything to stop him from achieving any new international ‘space’ for Taiwan. Beijing is not above hauling in representatives of American multinationals and forcing them to choose between a U.S.-Taiwan FTA and their businesses in China.

“Few would choose the benefits of expanding trade with the 23 million people of Taiwan,” he added, “if it meant sacrificing their ambitions for a market of 1.3 billion. So U.S. business has yet to rally to support President Chen’s vision of an FTA with the U.S.”

If the article had been written by an anti-China conservative, it would have been nothing new. But Freeman is known for his pro-China stance. Anti-China or not, most pundits agree that China is ready to make blatant economic interventions for political purposes.

Such action contravenes the principles of free trade that have supported global economic prosperity since the end of World War II and which have benefited China the most. It also violates the spirit of the World Trade Organization as a form of discrimination against a WTO member.

China could take similar action against Japan. For China, the feud over Prime Minister Junichiro Koizumi’s visits to Yasukuni Shrine is not so important, but the Taiwan problem is crucial. Someday, Japanese companies might have to choose between 1.3 billion Chinese and 23 million Taiwanese.

As a preemptive countermeasure, the Japanese government should protest against each case of Chinese intervention into Japanese business activities for political purposes. Such intervention violates the WTO’s spirit.

Basically, companies should join together in action to reject China’s politically motivated interventions. If one company moves to curry favor with China, other companies will be affected.

A major business lobby, the Japan Association of Corporate Executives, recently published a position paper urging Koizumi to stop visiting Yasukuni Shrine, and reportedly sent a copy of the document to the Chinese Embassy in Tokyo. How shameful!

The association reportedly adopted the appeal by a majority decision, overruling a number of negative votes. Many member companies are likely to have endorsed it to avoid the risk of Chinese harassment. They probably had no other choice. The association bears a grave responsibility for forcing member companies to support such embarrassing action.

The association’s sister group in Osaka, the Kansai Association of Corporate Executives, earlier published a statement saying Japan should deal resolutely with possible Chinese and South Korean interventions into Japanese affairs.

Companies that supported the Tokyo-based association’s appeal are likely to receive more favorable treatment from Beijing than those that endorsed the Osaka statement. In fact, the Tokyo-based association has acted heartlessly toward Kansai-based companies, which are more dependent on business with China.

Japanese companies may also fear losing out in competition with foreign rivals if they take a hard line against China. Such concerns are understandable.

In my opinion, Japanese companies are already being discriminated against by Chinese authorities. While visiting Shenyang more than a decade ago, I was told by a Chinese official that Beijing was giving priority to U.S. investments over similar deals with Japan.

Even while maintaining discriminatory practices against Japanese businesses, China continues to introduce badly needed Japanese capital and technology. I believe that under present circumstances China would hurt its own interests if it stepped up discrimination against Japan.

Japanese companies should be proud of their expertise and pursue fair play when dealing with China, considering individual matters on their own merits.