Paper on Parade: Technological innovations and industry clustering in the bicycle industry in Taiwan

My Taiwan-made Giant bike (blue), and Drew's Salsa La Cruz (orange), a bike sold as a US brand but whose frame and many other components are made in Taiwan, resting in Changhua as Drew and I wait out a rain squall.

This installment of our periodic blog feature, Paper on Parade, looks at Technological innovations and industry clustering in the bicycle industry in Taiwan (Technology in Society 31 (2009) 207–217)(LINK) by Chen, Lin, Chang, and Liu, originally published in one of my favorite journals, Technology and Society. As an avid biker, I found this paper particularly interesting.

This paper explores the interplay of two forces, technological innovation, and industry clustering, in the bike industry in Taiwan. The latter idea, clustering, is an old one in sociological and economic studies of industry and was first proposed by the immortal English economist Alfred Marshall in the early 20th century. Marshall noticed that in England and elsewhere, certain industries were associated with certain locales. Individuals in these areas grew up with the industries norms and practices "in the air". An important aspect of these industrial districts was that the relations between the firms were governed by social norms and networks that enabled firms to source information, capital, labor, and technology.

This idea basically lay dormant until the 1970s when a group of Italian scholars revived it to learn about how Italy worked. In Italy, as in modern Taiwan, industries -- many of them the same industries as in Taiwan -- occur in clusters, such as the machinery cluster around Bologna or the furniture industry cluster that occupies an arc around the city of Venice.

Such clusters typically occur in industries marked by rapid product and technological change, often seasonal, such as textiles or computer parts. The firms in them are small and highly specialized, performing only the manufacture of one part, or one step in the product manufacturing process. Typically the industry is export-oriented. Clustering has been demonstrated repeatedly to have all sorts of positive effects, speeding technology development and dissemination, lowering search and information costs, and so on.

Taiwan abounds in such clusters. In the north there is the massive computer industry cluster. In Taichung there is a sporting goods cluster. In San Chung outside Taipei there is a cluster of mold and die and machine tool firms. Central Taiwan is also home to Giant, the largest bike maker on earth, and the subject of this paper: Taiwan's bike and bike component makers. Chen et al begin with a description of the current situation:

Until China’s recent emergence as an economic power, Taiwan was the world’s leading bicycle manufacturing country. Most people assumed that large orders by original equipment manufacturers (OEMs) helped Taiwan attain this position, but they did not realize that considerable technological innovation has enabled Taiwan to attract foreign customers who place orders with Taiwanese bicycle companies. Ongoing technological innovations by those bicycle manufacturers and component manufacturers have never stopped, and R&D expenditures have remained constant at about 2% to 5% of sales.

While most OEM orders were transferred to bicycle manufacturers in China, Taiwan’s bicycle manufacturers and bicycle component manufacturers took advantage of their technical expertise and manufacturing technology to build their own brands. For example, Maxxis is the largest bicycle tire manufacturer in the world; the roller chain made by KMC accounts for 70% of world market share; bicycles made by FSA are highly favored in Europe; and the bicycle brakes made by PROMAX, particularly its mechanical disc brakes, account for 90% of world market share.

Chen et al divide the industry's history into six stages: Assembly (1946–1951), Import substitution and stagnation (1952–1968), Export-oriented production (1969–1974), Growth (1975–1986), Upgraded manufacturing (1987–1991), and Globalization stage (1992 to present). The war boosted local makers by removing Japanese competition, but makers copied Japanese parts. After the KMT instituted an import substitution policy in the early 1950s (under which imports were restricted and things were either made in Taiwan or not purchased), only 12 bike components could be imported. Local brands received government support, but counterfeiting was rife and people bought scooters instead. The energy crisis of the early 1970s drove US purchases of Taiwan bikes, rising from just 100,000 units in 1970 to 1 million units by 1972. Unfortunately many were low quality and Taiwan's image suffered. By 1986 Taiwan had passed Japan to become the number 2 maker of bikes, with a capacity of 10 million annually.

Moving off of Chen et al for a moment, the energy crisis, by dramatically increasing the popularity of bikes in the wealthy US, drove the development of bikes as a high differentiated consumer product and keyed the rise of Taiwan bike makers, led by Giant. During the 1960s Schwinn was the market and technology leader in the US. However, as bicycling rose in popularity in the 1970s due to the OPEC oil price shocks, bicycles themselves became more of a popular and highly differentiated consumer product, with consumer market trends driven by high-end machines. New models were introduced at higher rates, with shorter lead times and production cycles. To combat rising production costs, Schwinn shifted its production to Taiwan. Upham (2006) observed:

But to produce bikes in Taiwan, Schwinn had first to teach the Taiwanese how to produce such high quality bikes. Therefore, in 1981 it shipped its best engineers and its most sophisticated machinery to Taiwan and began training the workers at Giant plants in the art of making fine bicycles (which involved the use of both machine and hand labor).(p54)

Within a few years Giant was shipping Schwinn models to the US under a generic brand name, selling them for 15% less than Schwinn. By offshoring production, Schwinn’s design engineers lost the technological abilities they needed to stay competitive in a market where minor design modifications, often made on the shop floor, created market leverage in a market where demanding high-end consumers determined what was hip and what was square. By contrast, Taiwan, through Giant's vast network of suppliers in central Taiwan, acquired these abilities, and the potential to dominate what was then the world's largest bike consumer market.

Turning back to Chen et al, after 1987 pressure from other low-cost producers forced Taiwan into an upgrade-or-die position, so the government took the lead in upgrading the industry. This enabled Taiwan to move into its present dominant position in high end bicycles. Chen et al observe:

Table 2 shows the growth of exports in Taiwan’s bicycle industry from 1993 to 2006. In 1996, exports reached a peak of some 9.5 million bicycles, but by 2006 this number had decreased to 4.31 million. The average price per exported bicycle rose from $103 in 1993 to $200 in 2006, owing to the fact that Taiwanese bicycle manufacturers changed their business models to fit today’s dynamic environment, and are now exporting their high-price and high-quality bicycles to the market [2]. The result is that Taiwanese bicycle companies have moved to the top position. Moreover, they have moved away from the role of OEMs, instead becoming original design manufacturers (ODM) or original brand manufacturers (OBM), thereby striving to be specialized value-added bicycle manufacturers.

They also summarize the effect of government programs on technology acquisition:

Beginning in late 1984, the Industrial Technology Research Institute of Taiwan (ITRIT) was charged with implementing the Carbon–Fiber Bicycle Development Project, funded by the Taiwanese government. Initially, many Taiwanese bicycle companies participated in this R&D project but they later withdrew for financial reasons. However, GIANT continued to participate, thus reaping substantial benefits. It was a great opportunity for GIANT to upgrade its technological capabilities, but it was not easy to manufacture the carbon–fiber bicycle frame. Although GIANT continued to lead the Taiwanese bicycle industry, any failure that might result in a loss of its huge R&D investment would be devastating. However, in 1988 the first carbon–fiber bicycle was successfully developed, manufactured, and sold by GIANT, and by 1993 its annual production capacity had reached 100,000 bicycles. Later, the Materials Research Laboratories (MRL) and ITRIT transferred the technology for manufacturing carbon–fiber bicycle frames to other Taiwanese bicycle manufacturers. It is clear that the Taiwanese bicycle manufacturers relied on the Taiwanese government and semiofficial institutions before they accumulated enough resources to engage in R&D projects on their own [5].

As GIANT began to mass-produce carbon–fiber bicycles (before that, only some Italian and French bicycle manufacturers produced handmade carbon–fiber bicycles), Merida took the lead in developing the first aluminum alloy sport bicycle in 1993. Moreover, in 2002 Taiwan Hodaka applied a new magnesium alloy (also used in missiles) to develop advanced bicycle frames. Taiwanese bicycle manufacturers went to great effort to upgrade their capabilities, but that investment enabled them to obtain international competitive advantage and to succeed in the world markets.

The government's role in providing R&D and technology guidance to the local industry extended beyond helping it develop frame building technology. Chen et al describe the development of modular parts, a key to constructing modern bikes, as driven by government programs:

Taiwanese bicycle and bicycle components manufacturers modularize their bicycle components to improve quality control of their products. Modularization means integrating several related components into one unit or system. The best example is the integrated bicycle hub created by the R&D Center of Taiwan’s bicycle industryda front fork, disc brake, and V-brake as one oil pressure disc braked creating the world’s first modular bicycle unit. In today’s uncertain and complex business environment, modularization of components is essential for managing the growing complexities associated with product varieties, costs, time, and quality.

The government then helped local suppliers modularize and standardize their componentry, lowering manufacturing costs, and enabling makers to acquire more advanced technology skills. Not only does the government have a system of labs supporting the industry, there are also a semi-official labs under the aegis of the industry that receive government funding and to which the government often hands off projects.

The fact that the industry is clustered enables many positive effects. Chen et al note:

The center-satellite plant systems are located primarily in the middle part of Taiwan, including GIANT (mainly in Taichung County) and Merida (mainly in Changhwa County). These manufacturers integrated the needed component manufacturers to form their own center-satellite plant systems. For example, GIANT put together the largest center-satellite plant system by combining a total of 21 component manufacturers. With such close integration of center factories and satellite factories, these manufacturers are able to shorten their operations processes, decrease transaction costs, increase competitive advantage, and upgrade the R&D capabilities of the entire Taiwanese bicycle industry [37].

The networks that tie together the small supplier firms with the large central factories enable the transmission of technologies and information that keeps everyone up to date, with lower costs and at greater speed. The preference of Taiwanese for such clusters is a strong factor in their dominance of so many industries with product characteristics similar to those of bikes. These cluster effects also spillover to firms not in the central factory's production network, since they too can take advantage of the techology, labor, and information available to Giant. For example, the small town of Dajia, home to Giant, is also home to OEM frame makers like Maxway, which makes frames for well-known brands like Jamis, Salsa, and Surly, and boutique makers like Rikulau that specialize in steel and titanium frames.

What does the future hold? Obviously there is nothing happening in this industry here in Taiwan that China or some other low-cost producer cannot replicate. Taiwan has already destroyed many European and American makers; a friend of mine told me that he visited a local factory recently and was told he could photograph production here but not there, since in that part of the factory, the company is making bikes for European brands that do not want their customers to know the frames are made in Taiwan. Giant has already offshored low-end production to China -- a devastating blow to central Taiwan's suppliers -- and as China climbs up the technological ladder, it seems likely more will follow. How long can Taiwan's dominance last?

Nevertheless, we are living in a Golden Age of Bikes here in Taiwan, and I for one propose to get my money's worth! Hope to see you on a bike soon!

Refs:
Upham, S. P, 2006, Innovation and the Interrelatedness of Core Competencies: How Taiwan’s Giant Bicycles broke into the US Bicycle Market. Managing Global Transitions 4(1): 41-62
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Friday Night Lites

Ralph Cossa of CSIS, who has been a harsh critic of the DPP for "provoking" China, has suddenly noticed that the real problem is Chinese belligerence and intransigence in a recent PACNET piece:

What Beijing needs to understand is that arms sales are more than just the fulfillment of the US moral and legal commitment to help Taiwan defend itself. In the final analysis, these sales are driven by Taiwan's perceived defensive needs in the face of a relentless expansion of Chinese military capabilities across the Strait. The best way to get Taiwan to request less would be for China to significantly reduce the threat Taipei currently faces).

Arms sales to Taiwan are a clear demonstration of Washington's commitment to peace and stability in Asia that send a clear signal to allies and potential adversaries alike that the US is determined to be an Asia-Pacific power. A refusal to sell much-needed arms to Taiwan would raise serious doubts about the credibility of the US defense commitment to its other allies. It could also compel Taiwan to turn to
nuclear weapons as a last resort, an outcome that China, least of all, should want to see.

It's highly unlikely that Taipei would begin construction of a nuclear capability, especially with a party more or less allied to Beijing running the government. But that kind of rhetoric shows the concern and puzzlement among US commentators over Beijing's behavior, evidenced also in the Bush piece discussed below this post. Is there a re-assessment going on in the US foreign policy community? Let's hope so.....

The NYTimes also editorialized on The Challenge of China...

The sales could not have been a surprise to China’s leadership. Mr. Obama told President Hu Jintao of his intentions at their summit in November in Beijing. The arms were part of a package approved by former President George W. Bush, and Mr. Obama left out the most controversial items: F-16 jets and diesel submarines.

Rather than encouraging Taiwan’s independence, as Beijing claims, the arms sales will give Taiwan’s president, Ma Ying-jeou, the confidence to continue his efforts to improve relations with the mainland. It is absurd for China to think that any Taiwanese leader would not want to bolster his country’s defenses when Beijing is modernizing its arsenal and stationing more than 1,000 missiles across the Taiwan Strait.

Beijing’s threat to punish American companies is a dangerous game, especially at a time when criticism is rampant — around the world and on Capitol Hill — about China’s unfair trade practices.

Both Cossa and the NYTimes pointed out that Obama told the Chinese months ago this sale would go forward. The noise that Beijing is making is just a game their playing...

...one thing this military build-up during the China-friendly Ma Administration has done is made it extremely difficult for critics of the DPP to reasonably claim that it is "provoking" China. Beijing has made it quite clear that the military build up will go on irrespective of who is in power -- meaning that it is now crystal clear the problem is Beijing.

In other news, Taiwan's share of imports into China has fallen...

Though Taiwan remained China's third largest source of imports in 2009, its share declined as Chinese purchases of Taiwanese goods contracted dramatically, the Ministry of Economic Affairs (MOEA) reported Saturday.

The MOEA, citing data from Chinese customs, said that Taiwanese products accounted for 8.5 percent of Chinese imports in 2009, down from 9.1 percent in 2008.

Japan remained China's top source of imports with a 13 percent share in 2009, slightly down from 13.3 percent in 2008, while South Korea was second with a market share of 10.2 percent, up from the 9.9 percent of the previous year.

China's imports from Taiwan recorded the largest annual contraction of China's top three suppliers, falling 17.1 percent from a year earlier.

The solution, according to the Ministry of Economic Affairs? You know what it must be: ECFA.
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Daily Links:

• Thanks to the reader who left this list of what to read about Taiwan politics from Foreign Affairs. Speaking of such lists, Paul Katz has a great one on religion and Chinese modernity at The China Beat.
• Jerome K on bias in the Diane Lee, Ma, and Chen cases.
• Neil Wade with some lovely random Taiwan images.
• Despite massive layoffs of Filipino workers in Taiwan, remittances actually grew during the recession.
• Taroko indigenous people vs giant cement company: Wild at Heart has the report.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Strong Richard Bush Piece in LATimes

First, huge shift in the government today as NSC head Su Chi, who had become deeply unpopular both within the KMT and in Washington, has stepped down. J Michael at Far Eastern Sweet Potato has a long and useful analysis of it you should be reading.

Richard Bush, the longtime US government Taiwan expert, once again hits some high notes in describing the US-Taiwan-China triangle.... the title, which appears to assign blame for the problems to Taiwan, is probably not Bush's... but note that summary which correctly assigns the blame for the current spate of problems to China.

Taiwan comes between the U.S. and China again
Washington's decision to OK a $6-billion arms deal has upset Beijing. But Chinese policies are mostly to blame for the tension.

The meat, with my emphasis:

Before we panic over the high-pitched Chinese reaction, it is worth remembering the reasons for the Obama administration's decision. What drives the U.S. defense support of Taiwan, including arms sales, is how the island's civilian and military leaders assess their security needs. That assessment, in turn, is shaped by China's military buildup as it affects Taiwan. In fact, that buildup has continued even though the threat that China has perceived from Taiwan has receded since Ma Ying-jeou became the island's president in May 2008.

So the logic behind the sale is simple: China has increased the island's vulnerability even when it did not need to do so; at the request of Taiwan, the Obama administration seeks to reduce the island's insecurity.

Some context is in order. Since the mid-1990s, relations across the Taiwan Strait deteriorated as each side feared that the other was preparing to challenge its fundamental interests. China feared that Taiwan's former leaders would go for full, legal independence. Taipei feared that Beijing would use its growing power to subordinate Taiwan. Each sought to counter the perceived plans of the other, which only intensified the mutual suspicion. As this vicious circle widened, Washington worried about the danger of a clash.

Tensions have declined since Ma has chosen to address Taiwan's China challenge through engagement, and thereby improved China's strategic position. Oddly, the People's Liberation Army continues to procure and deploy equipment that puts Taiwan at risk. According to the annual Pentagon report on China's military power, Beijing each year probably adds 100 short- and medium-range missiles, which target Taiwan.

Why China has not adjusted to the new, positive reality is puzzling. Is it because of rigid procurement schedules? Is it because civilian leaders cannot impose a change even when it makes policy sense? Or is it because China wishes to create the capacity to coerce and intimidate Taiwan? The answer is not clear.

I think the paragraph on context rather misstates the "deteriorating relations" problem since the 1990s; there was never any question that Lee Teng-hui or Chen Shui-bian would go for full legal independence, as China well knew. China was merely using that "fear" (and what does Beijing have to fear from a non-territory becoming a formal state? Nothing at all) as a pretext to bluster and threaten.

The answer to the questions in that last paragraph, as I've stated before, are quite clear, actually. The military build up continues not only because China wants that capacity to bully Taiwan into submission, but also because of its effect on US policymakers -- as China's military build up grows, more and more US foreign policy thinkers move toward the position that Taiwan must be quietly sold out.

The build up also continues apace because as the recent comments from PLA hardliners suggests, China is preparing for a war in the region. From this writer's perspective, things are looking more and more like we will be facing another round of sprawling hegemonic wars. Although it is tempting to reach for the Nazi analogy when looking at the combination of victim consciousness, superiority complex, concentration camps, one-party rule, expansionism, land power strategic thinking, and so on, I believe a better historical analogy for China struggling to move from Empire to State is 17th century France.... and look how that ended in the guillotine and the Napoleonic Wars....

It should also be noted that the "weapons sale" is part of a package long predating the Obama Administration, and does not contain the much-needed F-16s. Perhaps Washington is retaining its decision on those depending on how China behaves after this sale of secondary items.

Consider the commentary on China being able to punish Taiwan, but instead foregoing that to punish the US-Taiwan relationship, as read.

Bush's concluding paragraph is, for a man given to reserve and subtlety in his public comments, a stinging critique:

Chinese critics of U.S. arms sales tend to assume that Washington is using arms to block China's unification with Taiwan. Nothing could be further from the truth. U.S. support for Taiwan's defense is and should be a function of the island's sense of insecurity, which in turn is the result of China's policies. Chinese critics should examine how their government's own actions have fostered the very outcome they oppose.

Bingo. As China's military builds, so does support for Taiwan independence in Taiwan. What's great about this piece is that it forthrightly identifies the problem as China, something that US commentators seldom do when discussing Taiwan, though they are happy to blame China for its expansionist nonsense elsewhere in Asia.

My friend Tom Patterson and I were discussing the piece (linked below) on Beijing's possible cancellation of the Nimitz visit to Hong Kong. After I suggested that allowing the visit might well be a signal to the regime's critics in the PLA who advocate tough anti-US policies, Tom wrote:

"About whether the anger is pro-forma or not, it did cross my mind that the words may sound a little more harsh, but that those at the top may have no intention of acting seriously unless Washington makes a much stronger commitment. The pieces are all there for those who care to look for them.

Consider a Reuters piece from today or yesterday that noted that voices from the military (three top generals) once again trying to pressure the CCP leadership for a stronger response. They hope that China's military expenditures will increase this year, want new troop deployments to areas near Taiwan, and think that China should respond through a mega-stupid move of selling US treasuries.

The expenditures might rise anyways, but the leadership wouldn't dare touch the treasuries now, and they would know that redeployment of troops to the Taiwan area would shock Taiwanese right in the middle of the ECFA negotiations.

So I am increasingly feeling that media outlets, and many journalists, indeed DONT understand China, but not for the reasons that the 50-cent crowd claims. The Chinese anger is not only a policy choice. The leadership may think it is necessary to save their own heads and be simultaneously unable to admit this.

The media fails to consider the balancing act that arms sales and Dalai Lama visits force the leadership to undertake. While Hu and Wen are solidly entrenched at the head of the party right now, things like ethnic riots, slowing exports, arms sales to Taiwan, etc, all invite internal criticism of their efforts. If China doesn't react with "anger", Hu, Wen and their allies lose credibility. Because the system doesn't have an in-built peaceful method of factional change, those on the top have to constantly show that they are pushing the hardest to defend China's interests. And since the nationalist population increasingly believes that China doesn't have to be flexible in its dealings with other countries, the leadership has to push harder. Can this possibly end well? :-(

Hu and Wen might not have to worry about being thrown out of power. But Xi and Li might. My former Chinese teacher, who is a follower of Chinese politics, told me once that he was concerned about the prospects of the next generation. Hu had the advantage of being hand-picked by Deng to succeed Jiang. Wen was already widely known as a good official at the time of his appointment. Yet my teacher noted that Xi was not chosen by one of the revolutionary luminaries. And neither Xi nor Li have records that have made them really stand out across the country in the past. Xi also appears to be gaffe prone. He is the one who said in Mexico, "China does not export revolution, hunger, poverty, nor does China cause you any headaches. Just what else do you want?" and whose staff forgot about protocol when meeting the Japanese emperor and had to request that the Japanese PM step in to arrange a rush visit. So if the current leadership is perceived as being too soft on any issue, opponents might choose to take it out on less experienced successors down the road.

Wouldn't it be refreshing if a media outlet said, just once: 'The Obama administration has notified Congress of a major arms sale to Taiwan, invoking an angry reaction from China's leadership, which often uses its outbursts to placate the increasingly nationalistic views of the party apparatus and the public. Such weapons sales are unpopular in China, where the US' commitments for maintaining Taiwan's self-defense capability under the Taiwan Relations Act are perceived as helping to maintain the de-facto independence that the island has enjoyed for decades.'"

As Tom asked: Can this possibly end well?

I'm off to play Europa Universalis III.....
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Daily Links:

• Beijing to allow US carrier Nimitz to visit Hong Kong despite arms sales and Dalai Lama visit. Is reading this in the international context wrong? Is the CCP trying to signal its own PLA hotheads that provoking a war with the US is a really stupid idea?
• Michael Klein's excellent pics of our fun in Thailand, with links to other days of the trip.
• Barking Deer with pics and commentary: is the Alishan Road Open?
• Wang Chien-ming may move to the Washington Nationals.
• Commentator argues that Taiwan's defense needs should be linked to Chinese cooperation on Iran. Just another echo in the vast abyss of the American obsession with the Middle East, the area of yesterday, that is impairing its position in Asia, the place of tomorrow.
• Gut-wrenching: Onboard security cams show bus accident in Changhua last year involving 13 vehicles and 4 deaths.
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

China guts Taiwan's industries

One of the goals of closer ties between Taiwan and China, at least from Beijing's perspective, is to increase China's ability to destroy Taiwanese industries that compete with Chinese industries. A dramatic example of this came to light the other day in the form of a report that China has pressured Indonesia to stop building fishing boats in Taiwan....

China pressured Indonesian fishing operators into turning their business away from Taiwanese shipbuilders, the Chinese-language Liberty Times reported yesterday.

In January, the Indonesian government ordered its fishermen to stop ordering the construction of fishing trawlers in Taiwan, resulting in missed income of more than NT$100 million a year, said opposition Democratic Progressive Party lawmaker Kuan Bi-ling.

The Ministry of Economic Affairs and the Fisheries Agency were unaware of the changes, said Kuan, though the latter admitted it was true after inquiries with fishing operators and Indonesian representatives. The Ministry of Foreign Affairs should talk to the Indonesian government about ending the situation, the lawmaker said.

China’s shipbuilding sector had recorded strong growth over the past few years and was now trying to take away market share from its Taiwanese competitors, according to Kuan.

This is the nation that President Ma wants to engage in "free trade" with. Right.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Foreign Reporters Shut out of ECFA press conference

The Liberty Times has it in Chinese, but emails were flying around yesterday with the news that the administration of President Ma -- you know, the Harvard educated one -- didn't want foreign reporters at what is intended to become a monthly press conference on ECFA. The Administration has attempted to do that before, probably on the assumption that local reporters are easier to intimidate.

The Taiwan Foreign Correspondent Club's full response letter, along with comments from Reporters Without Borders Asia, may be found at the Far Eastern Sweet Potato. As it makes clear, the government first failed to even notify the TFCC, and then told them, literally, that they could just watch the press conference on TV.

In other ECFA-related news, Heritage hosted an event entitled The Future of the US-Taiwan Economic Relationship. Video of it available at Heritage.

Meanwhile, the shift of Taiwan's technology and economy to China continues, as the Ma Administration has quietly eased certain restrictions on hi-tech firms moving to the Other Side. Expect an announcement today.

UNCONNECTED UPDATE: UDN has Hsiao Bi-khim down by 4 in the Hualien by-election, 30% to 26% but massive undecideds. Amazing news, if the poll is valid.
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Daily Links:

• Jon Adams in Global Post on Betel Nut girls, with pics by the awesome Tobie Openshaw!
• Does mating competition drive China's high savings rate?
• More hardliners in China call for retaliation against the US.
• An impressed post about the Taiwan music at Huffpost.

SPECIAL: Klaus' great post on what's happened to Jingmei Prison, the former martial law era detention center, under the KMT.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Complaints from the Blue Team

Chen Shui-bian had another two months added to his detention this week. The judges say that Chen, under 24 hour guard as a former president, is a flight risk. Once again, I thank the KMT for keeping Chen in detention, ensuring that he does not disrupt the upcoming elections, enabling DPP Chairman Tsai to carry out a smooth transition to the post-Chen era, and displaying for all to see the political aspects of his prosecution. Apple Daily called for his release on humanitarian grounds.

The China Times, pro-KMT but often functioning as a sort of loyal opposition paper, had this to say in an editorial hosted at KNN:

After years of thinning out, KMT party strength is considerably diminished at the grassroots. Compared to its early years, the KMT has fewer human resources, less equipment, and is smaller in scale. When party officials conducted field visits in the past, it was all pomp and circumstance. They were the equals of county executives and city mayors. Their decisions were final. County executives and city mayors could only nod. Even central and local-level elected officials were at their beck and call. But the golden age for authoritarian political parties has passed. Today when party officials conduct field visits, they must bow and scrape, and often get the cold shoulder. When nominees for local elections find themselves at loggerheads, they ask party-central officials to mediate, not always with success.

Times have changed. Officials from party headquarters have become a nightmare for party workers. They may have devoted a lifetime to the party. But the highest level, to which they can probably rise, is local party chapter chairman. But their positions have now become crosses to bear. In recent years, such positions have become a place to put party officials out to pasture. Outgoing legislators who want to run but who are unelectable, candidates who were pressured to withdraw, and anyone who unsuccessfully sought office, can be placed in these support positions. Such support positions are sources of friction due to post-election grievances and local or clan interests. Mediating between the heads of local factions is even more difficult.

The piece continues a bit further down:

Next, King Pu-chung recruited outsiders to conduct an evaluation of the party's use of human resources, and to recruit campaign volunteers for the Five Special Municipality Elections. Judging by past elections, the Democratic Progressive Party, whether it was in the opposition or in power, made far better use of volunteers than the KMT. Young DPP volunteers wrote songs, choreographed dances, and set up websites. Old DPP volunteers engaged in word of mouth campaigning through radio and television talk shows, in the parks, and local markets. These volunteers were campaign workers during the election, and party supporters after the election. There were no personnel expenditures involved. While the KMT was in the opposition for eight years, it began studying this approach. But it never got the hang of it. To recruit older volunteers it always had to mobilize. The most spontaneous of volunteers were older women. But even they were recruited through women's associations. Youth groups were once an important force behind KMT strength. Youth groups shone at public relations during the Kuan Chung era. But it is far more difficult for young people to rise through the ranks of the KMT than the DPP. The most successful example of a volunteer effort in recent years was the Red Shirt Army. But that was a spontaneous movement. The Chen corruption case outraged the public, creating a supportive social climate. When the Chen corruption case ended, the Red Shirt Army lost its rallying point. Its supporters each had their own political preferences. This political force is unlikely to play a key role in the future.

It must be hard for a party held together by money flows and whose theology consists of snuffing out Taiwan as an independent entity, to recruit volunteers in Taiwan. I feel their pain.... the editorial ends with some stinging criticisms of the KMT's position.

The DPP is slightly weaker in the central Taiwan region. But it is stronger in the two southern cities. It has many strong candidates. In the north its "Princes" are readying for battle. By contrast, the KMT has no heavy hitters in the south. The incumbent Taipei County Executive may have trouble in winning nomination for the new Xinbei City Mayor. The party is unaccustomed to internal debate. It is unable to put forth qualified candidates. Even pollsters are having trouble taking the political temperature. The nomination process and candidates may be flexible. But for the sake of momentum it would be better to present its roster of candidates, and engage in public debate. Election controversy is nothing to fear. Only lively public debate can create momentum. In order to win the Five Special Municipality Elections, the third and most important thing the KMT must do is encourage its leading candidates. The "Princes" of the party must have to the courage to say: I am willing to fight for the party.

The latest China Times poll has the DPP's Su ahead of the KMT's Hau in the year-end elections for the Greater Taipei Municipality ("New North City" is such a freaking ugly name). Su was Taipei County Magistrate several years before, did a bang-up job, and has a good rep in the north, while the outgoing KMT magistrate has turned in a lackluster performance.

The editorial also raises the interesting question of the future of the KMT. Who are its up and coming leaders? Not exactly thick upon the ground....
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Daily Links:

• Government to allow outside review of government report saying that massive water diversion project was not linked to destruction of Xiaolin Village (my long post).
• CEPD approves 3 major infrastructure projects worth $3.5 billion US, including improvements to the existing Suao-Hualien road.
• Look at the upcoming by-elections at the end of this month, UDN says DPP has comfortable lead in Chiayi.
• Taiwan still wants US subs, says AP, but Reuters says it has effectively dropped its request.
• Taiwan Beer sets up brewery in China to enter China market.
• Amidst all the silliness about the US provoking China, and China-US ties at a new low, etc, someone actually puts their finger on the right perspective: Can China afford its belligerance?
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Those Foreign Men

Anyone remember the tale of the young lady who had a catfight in the street over the affections of an alleged AIT employee? Reprise that tale on my blog, for the heroine of They're Rogering Our Women! is back with Rogered by Whitey: the Sequel. The Liberty Times has the call in Chinese.

Our Heroine claims that the guy somehow hurt her to the tune of NT$5000 in medical fees, which he blithely blew off. Because he used a fake ID and she couldn't find him, she says, she used a pic of one of the female stars of Cape No. 7 to entice him into coming out for a date, then got a friend of hers to pose as the woman in the photo. Woman #2 and her boyfriend then followed the hapless Aussie back to his lair someone in the wilds of Chunghsiao East Rd, Sec 4. She then filed a complaint with the police and Our Men in Blue pounced on the offender as he left his home.

They're rogering our women! is always a good trope when the news is slow, in most any culture. And on blogs!

UPDATE: Link fixed.
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Daily Links:

• Chinese hawks demand new Cold War. "A major-general in the People’s Liberation Army (PLA), Luo Yuan, told a television audience that more missiles would be deployed against Taiwan. And a PLA strategist, Colonel Meng Xianging, said China would “qualitatively upgrade” its military over the next 10 years to force a showdown “when we’re strong enough for a hand-to-hand fight with the US”."
• Gerrit van der Wees' review of new Jay Taylor book on the Generalissimo.
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Trifecta of the Terrible

Let's start with the just plain silly: China continues to make noise about the US arms sales. Yesterday at the Munich Security Conference, Chinese FM Yang complains that US arms sales to Taiwan are against international law, and says that Chinese news is more reliable than western news. Yang clearly has a promising second career in comedy.... For bonus reliability of Chinese media hilarity, don't miss China Daily's propaganda piece on Taiwan's people protesting against the arms sales. What, you didn't see any demonstrations? That proves your mind has been controlled by the horribly biased western media.

Speaking of comedy emanating from Beijing, our first entry in the trifecta of terrible is The Berkshire Encyclopedia of China has an absolutely hilarious entry on Cross-Strait relations that was written in China, so you know it is hopelessly biased. Enjoy its false claims of economic suffering under Chen "the radical" and its apparent omission of Chinese threats, missile launches, military build up, etc. The problem with an entry this bad is that it makes one suspicious of the competence of the other entries. I'd give this highly political load of crap a wide berth. I've written them about it; you should too.

Bazillions of pixels have been slain in the furious commentating on the US decision to sell arms to Taiwan -- arms that are nearly a decade in coming and will have very little effect on the military situation. The cacophony of commentary is a tribute to Beijing's ability to play US commentators. For example:

Leslie Gelb, former official and longtime national security policy commentator, lobbed Obama's Dangerous Game with China into The Daily Beast. Gelb's major points are contained in this paragraph:

The cage rattling won't come close to blows, but it will unsettle and unnerve international affairs, and ignite a new and damaging testing of great power wills. Count on this tug of war to block mutual cooperation on stifling the nuclear programs of Iran and North Korea and to further sour ongoing trade and investment disputes and charges of Chinese Internet censorship, and whatever else turns up. Most worrisome, it’s not at all clear that Chinese and American leaders have thought strategically about their next moves and how to keep the situation within bounds.

Dr. Gelb has catastrophically misunderstood the game. The point of China's "anger" -- a policy choice, not a visceral response -- is to strain relations between Taipei and Washington. Indeed, as I have noted, several commentators hastened to reassure that Beijing-Taipei relations would not be affected (example). As I have always noted, China could punish Taiwan, but never does, because that would not affect the one relationship it really wants to alter. Gelb falls for this completely. He also falls for the classic "now is not the time" fallacy: now is not the time to increase tension with Beijing because we are engaged in _____. Since we are always engaged in something sensitive with China, it follows that it is never the time to push back against Chinese bullying. I'd write more, but my friend Tom has an awesome response to Gelb there, that points out all this, and more, including Gelb's total misunderstanding of the US position on Taiwan.

The ominous thing about Gelb's piece is that it fits neatly into the flow of calls for abandoning Taiwan emanating from the Council on Foreign Relations and other US Establishment think tanks. This includes Gilley's awful piece in Foreign Affairs on Finlandizing Taiwan, which I looked at below, as well as this recent and very ugly piece by Carnegie Endowment for International Peace visiting scholar David Rothkopf: Can the US continue to afford supporting Taiwan?

I don't think there is any need to go into detail on the manifold problems of the Rothkopf piece, but the oddity of the strategic thinking expounded by the Dump Taiwan crowd is worth exploring. This crowd has on the whole evinced no great reluctance to waste billions on our criminally stupid wars in Iraq and Afghanistan, the latter being where good American boys are dying to make Central Asia safe for Chinese expansion. The CFR has issued several pieces in support of continued involvement in Afghanistan, but its house organ, Foreign Affairs, hosted Gilley's piece on Finlandizing Taiwan. In fairness Rothkopf says the real goal of US policy in Central Asia should be Pakistan, not Afghanistan, but that boggles the imagination: essentially the Dump Taiwan team consists of Serious Thinkers who want to dump Taiwan -- a key producer of technology products in the most important region in the world for the foreseeable future -- in order to keep Afghanistan or Pakistan.

Right. How's that again?

More on Arms Sales
Taipei Times: China Factor in Arms Sales
CNN cites Chinese scholar in Canada who has never visited Taiwan. Awful dreck.
AFP notes that the arms sale is aimed at reassuring countries around China.
AP echoes claims that arms sale will not hurt Beijing-Taipei relations.
VOA says effect of Chinese sanctions would be limited.
CSM on the effect on US-China military cooperation.
FT editorial says China overplays its hand.
China has also complained about EU chopper sales to Taiwan, but seems to be taking a softer line with the EU because Beijing hopes the arms embargo will be lifted. UPDATE: This is wrong, no protest from Beijing on this, says Eurocopter.
WSJ says arms sales help cross strait relations
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Daily Links:

• Rowan Callick with an excellent piece on Taipei. Someday the world will discover that Taiwan does not equal Taipei. Come to Taichung, Rowan, I'll take you biking.
  
• Chinese hackers also attack other US firms, this time the one involved in the Green Dam case.
• 10,000 fraud calls a day to local cell phones.
  
• Ma interviewed by former VP Annette Lu.
• Historic cart track restored in Hsinchu.
• Adm Keating interviewed in the Honolulu paper on Taiwan-China-US triangle.
• Say it ain't so! Taiwan calls foul over unfair flight arrangements. What did you guys expect?
• Fabulous piece on Jack London and the Yellow Peril in his fiction and non-fiction at JapanFocus.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Rounding up ECFA (=Exploiting China to Forego Annihilation)

Today, in our electricity bill, the government was kind enough to include this pamphlet exhorting us to support ECFA. Note the use of the HSR to invoke visions of modernity and progress. Sorry, DPPers, but you can't complain -- remember when you hung those UN for Taiwan banners on government buildings? The Ma government is trying harder to persuade the public that its suicide pact ECFA will be good for the island.

The 'sign or die' theme that dominates the government's approach to ECFA was on display in this recent piece from the CNA on the island's petroleum products industry and ECFA, highlighting an interview with the head of the island's synthetic resins industry....

In a move to support a proposed economic cooperation framework agreement (ECFA) with China, Hong said that if Taiwan's petrochemical industry does not receive zero-tariff treatment under the trade pact,it will not be able to survive.

One year later, after petrochemicals were included on the ECFA early harvest list, Hong still has concerns about the progress of signing the trade deal.

"If Korea and Japan -- Taiwan's two biggest competitors -- sign free trade agreements with China ahead of us, China will no longer need to place their orders in Taiwan, so there will be no room for us to survive," Hong said in a recent interview.

At present, Taiwan's petrochemical exports to China are subject to a 6.5 percent import duty -- already higher than the 5.5 percent import duty for Korea and Japan. However, the latter two will be granted zero-duty treatment from 2012.

"If we cannot grab the moment to secure the market, we are sending ourselves to the mortuary," said Hong.

Apocalyptic language notwithstanding, further down it is noted:

Hong, who has also served as president of the Formosa Chemicals & Fibre Corp., pointed out that while China's imports of petrochemicals were up to about 25 million tons a year, the country was also developing its own petrochemical industry to meet its growing domestic demand.

China's demand will remain strong in the next few years, said Hong, explaining that the per capita consumption of plastic materials in the country is only a few kilograms but is expected to grow to about 20 kg in the future, compared to Taiwan's per capita consumption of around 100 kg.

However, he predicted that China will slowly reduce its dependency on imports. "We don't have much time left," Hong said.

In other words, Hong argues that we should sign the ECFA immediately to save an industry which China is going to largely take over in any case -- the Taiwan version of trading permanent gains for China for temporary concessions to Taiwan. It's easy to see where this will go -- first the zero tariffs, then those won't be enough, and demands for even more subsidies will follow.

Meanwhile pressure from Beijing is growing to open the market to Chinese agricultural goods, move that would devastate local agriculture.

Last week, a high-level meeting started between Taiwan and China to hold talks on a proposed Economic Cooperation Framework Agreement (ECFA). The Library Times informed that China asked the island to open its market to the banned agriculture items in these talks.

While talking to reports, Vice chairman of the agriculture council Hu Hsing-hua talked about the ECFA and the potential effect on Taiwan’s farmers.

Hu said, “This is in fact a hypothetical subject.”

Further, Hu said, “ECFA does not take Taiwan's farmers into account. We must first see the benefit for the farmers before we discuss the subject. Whether or not to proceed also must be decided by the people. We also hope the people can oversee the agricultural imports together.”

There are also concerns that China will flood the market with its agricultural goods via a third country. Smuggling of agricultural products is already underway -- the island has been dependent on garlic imports from China for years. The Liberty Times reported the other day that KMT think tanks are starting to float trial balloons for the lifting of the ban on agricultural products -- remember too that the first trial balloons for the importation of Chinese labor date back two decades. It's all coming down the pike, probably in Ma's second administration.

Pan-Green Academics warn on signing ECFA, as they have for the last two years....

At a forum hosted by the group Taiwan Advocates yesterday, Taiwan Thinktank chairman Chen Po-chih (陳博志) said the director of China’s Taiwan Affairs Office, Wang Yi (王毅), had stated that after Taiwan signs an ECFA with Beijing, there would be few cross-strait economic issues left for both sides discuss, so dialogue on political issue would be unavoidable.

Soochow University political science professor Luo Chih-cheng (羅致政) said the Chinese Nationalist Party (KMT) government has expressed its hope to sign an ECFA this May. If that happens, Luo said, Taipei and Beijing would start talk on political issues from the middle of this year, and that political dialogue would possibly include signing a peace treaty with Beijing.

Luo said that a Democratic Progressive Party (DPP) victory in the 2012 presidential election might be too late if President Ma Ying-jeou’s (馬英九) signs a ­political treaty with China during his term.

2011 is the hundredth anniversary of the founding of the ROC.

...and as far as China's promises are concerned, there are quite a few complaints that China is not keep its side of bargains (like here, for example).

Finally, it should be noted that the recent arms sale to Taiwan, the subject of several awful commentaries in the US media recently, has had no effect on ECFA, according to Beijing.

The second round of negotiations will be delayed until late February or early March as Beijing has said there is "no way" to send negotiators to the island earlier, the Taipei-based China Times newspaper reported on Thursday.

Taiwan's China policymaking body confirmed the estimated dates but said they did not represent a delay in talks.

Taiwan's acceptance of a $6.4 billion package of U.S. weapons has had "no effect" on trade talks despite Beijing's outrage toward Washington, said a media relations officer at Taiwan's Mainland Affairs Office, a government body.

But look at that opening sentence of the article, which appears purposefully written to convey the idea that the arms sale and ECFA postponement are related : "China has postponed a second round of free trade talks with Taiwan until after the Lunar New Year holiday amid US plans of arms sales."

This article points to a central truth about the arms sale complaints of China: if China really wanted to stop Taiwan from purchasing weapons from the US, all it has to do is punish Taiwan. But it never punishes Taiwan though it has myriad ways of doing so; instead, it always attempts to transfer the costs back to the US-Taiwan relationship by hacking on the US. The goal, of course, is to chip away at US support for Taiwan. This was difficult even a decade ago, but now China's rise has spawned a whole class of commentators who argue that the US should sell out the island in order to reap the big bucks from China, making China's job that much easier -- surely the ultimate realization of the US habit of making permanent concessions to China for temporary gains....

UPDATE: A friend notes in the comments that FCC already has two petrochemical plants in China.
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Daily Links:

• Ben Goren with excellent piece on government's approach to ECFA.
• The Jamestown China Brief has several strong articles on China.
• Philip Bowring with another good one in the NYTimes on US-China confrontation.
• Consumer prices on the rise here.
• Taipei Times editorial argues ECFA is driving Taiwan's insane housing prices.
• SHOCKER: Taiwan whisky beats Scottish whiskys in blind taste test.
  

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Laos

For the last couple of weeks I've been in Thailand and Laos, enjoying sunshine and friendly people. I know it isn't about Taiwan, but I loved Laos, so I'm going to show you a few pictures from the week I spent there with Michael Cannon, Michael Klein, and Hui-chen, Michael K's wife. Here we are about to take the international bus from Khon Kaen, Thailand, to Vientiane, the capital of Laos.

Vientiane from the Victory Gate.

Breakfast vendors in Vientiane.

Laos was colonized by the French. A positive legacy of French colonialism is the excellent bread sold by vendors everywhere.

Samples of a photography shop's wares.

Morning traffic, Vientiane.

The Mekong, with Thailand on the far bank. I went out to eat with friends.....

....who took me for sunset on the Mekong. The river is low this time of year, the dry season.

The entertainment was provided by a group of locals who somehow managed to get their jeep stranded in the Mekong. Why they chose to drive it there was a mystery, but when we left after sunset, they still hadn't managed to winch the vehicle ashore.

Breakfast condiments.

The day after we arrived in Vientiane, Michael C and I rented scooters and drove north out of the city along 10, until we ran out of pavement. That scooter ride was a blast.

A house on the way.

Boats in a stream.

Michael inspects his picture as workman fix a wooden plank bridge over the stream.

We came to this ferry on the Nam Lik River north of Vientiene.

We had a great time chatting with the locals, one of whom got us the right price for the crossing, $2500 kip. Here I am on the ferry.

Boats on the shore.

The dirt road narrowed.....

...and shot straight through the rice fields of south-central Laos.

Video pan of the fields.

This farmer was thrilled that we were taking pictures of his cows and pond. Michael C got a great pic of him saluting, and here they are inspecting it. He thanked us and shook our hands.

Rice fields. Most of Laos only gets one rice crop per year.

We arrived at this dusty crossroads thoroughly lost.

There we asked directions, which involved me reading names in awful Lao off of the map while they laughed and said they had no idea what I was talking about. Finally I hit the name of the town of "Nadi" which they understood. That way! they pointed. Off we went, but first we gassed up at this boondocks gas station. There a young girl fed us the gas from 55 gallon drums out of a hose. Despite the isolation, we met plenty of people who could manage broken English, and one or two who could converse.

We crossed the Nam Lik again on another ferry similar to the first.

What's going on here? I never found out.

Our crew, and the engine.

The following day we headed up to Vang Vieng, a town overrun with foreigners of every description, all behaving as if they had just been paroled after a half-century in prison. The town has become a major stop on the banana pancake circuit, filled with the dreadlock-and-braless crowd. In the restaurants, the TVs showed Friends, on an endless loop. Laos is also overrun by Chinese merchants, and all the places selling clothing, souvenirs, and tools, were run by Chinese, most from the same district in Hunan.

No comment.

Vang Vieng is in an area of lovely karst topography, and there are treks, tubing expeditions, climbing, hiking, and bike rentals available.

We did a boat ride on the river, a great way to start the next day...

...and headed back to Vientiane.

From there we flew to Phonsavon, a town on the famous Plain of Jars.

There are three Jar sites open to the public. As you can see from the sign, there are extensive unexploded ordnance clearing operations ongoing. During the Vietnam War the US bombed Laos, resulting in millions of unexploded bombs, cluster bomblets, and other munitions still remaining unexploded in the ground to this date, and for the foreseeable future. The bombs make it dangerous to clear land, and maim and kill hundreds each year in the area.

We visited Site 3 first, which necessitated 15 minute walk through cow pastures.

Site 3.

The Jars are in varying condition. All are empty, if they ever held anything.

The views across the beautiful hills of Laos are one of the best reasons to visit the area.

Michael C, with Jar.

Michael K, with Jar.

The Jar sites tend to be on hilltops, and the plain is so flat that a little relief gives the impression of immense distances.

Jar and top.

Jar and Laos, Site 2.

Michael Cannon views a bomb crater. The Lao communists hid out in the area, which was the scene of bitter see-saw fighting between the Lao factions in the anti-communist wars in the area. The sites are cut through with their trenches. The US bombed the Plain of Jars extensively, meaning that craters litter the area, and many of the sites were hit. I felt a deep sense of shame knowing that my nation had bombed these precious historical relics. Amazingly, there does not seem to be much resentment among the Lao people.

The road back to Phonsavon.

A local homestead.

Walking home.

Dinner. Ground pork fried in basil with other spices (Lao laap), rice, and tea.

A foggy morn in Phonsavon.

Site 1, the most extensive of the open sites. Note the bomb crater at the bottom left of the site. Scars of bombs, lingering after 40 years, carpet the mountains.

A Jar at Site 1.

Drinks for the thirsty tourist.

We also visited a small set of ruins, which we were told US bombs also hit.

A ruined stupa.

...and a Hmong village.

Boys at play in the Hmong village.

Michael C pitched in to help them grind sugar cane for juice....

...shown here dripping from the ripe cane.

Terraces in the dry season. In this area I saw little, if any, irrigation.

Laos. I'll be back.
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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!