Chandler, James P.

Pilachowski, Martin

Prybyla, J. S.

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Maryland Journal of International LawVolume 3 | Issue 1 Article 9Remarks by Discussants:Martin PilachowskiJ. S. PrybylaJames P. ChandlerFollow this and additional works at: http://digitalcommons.law.umaryland.edu/mjilPart of the International Law Commons, and the International Trade CommonsThis Conference is brought to you for free and open access by DigitalCommons@UM Carey Law. It has been accepted for inclusion in MarylandJournal of International Law by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contactsmccarty@law.umaryland.edu.Recommended CitationMartin Pilachowski, J. S. Prybyla, & James P. Chandler, Remarks by Discussants:, 3 Md. J. Int'l L. 49 (1977).Available at: http://digitalcommons.law.umaryland.edu/mjil/vol3/iss1/9CONFERENCE PROCEEDINGS[The following is the summary of Mr. Pilachowski's state-ment.]COMMENTSMARTIN PILACHOWSKII won't go into some of the numbers that have been very ablypresented by my predecessors, other than to say that I do agreewith them. The progress that has been made is certainlysubstantial. I had a somewhat unique opportunity to see it on twolevels, first during the sixties as a naval officer in Kao-hsiung,and later in my banking career travelling extensively throughAsia.I think it's important to look behind the progress and try toget a feel for the motivating factors that have generated theROC's significant progress. I think the ROC is to be commended,and I think the ability of the country to come to the internationalmarketplace is a very strong indication of just how soundly andhow well they run their affairs internally and internationally.The financial institutions in Taiwan bear a very heavyburden because of the lack of the substantial capital markets thatone sees in other areas. To say the least, they have handled thisrole in a very commendable fashion. Looking at the structure, allthe financial institutions are under control of one format underthe Ministry of Finance with an ongoing relationship with theCentral Bank of China, which is the lender of last resort. There isprogress being made in areas that would be considered weak-nesses based on the short-term money market operations whichwould expand the ability of both the investor and business to takeadvantage of varying opportunities for taking and replacingfunds.In looking at how we as a bank invest in the financialcommunity in the ROC, it has traditionally been an ongoingTHE INTERNATIONAL TRADE LAW JOURNALsource of profits for U.S. banking institutions as well as Europeanand other Asian institutions to provide not only for theinfrastructure or developmental financing but also trade financ-ing. On a more local level, trade between the Republic of Chinaand the Baltimore area is probably a lot more significant thanmost people would realize in looking at the total tonnage thatpasses through the Port of Baltimore. We have been doingbusiness there for quite some time. While I can't give you the exactfigures, it is substantial, and it is constantly growing. For those of-you involved in the Baltimore business community, our localinvolvement will continue to expand with some additionalshipping lines coming into the Port, which I think bodes wellforfuture prospects of two-way world trade. Since there was mentionmade of the relationship between the ROC and the attitudesrevolving around the American businessman's approach to thePRC, I think all we need to do in this area is look at the numbersthat are involved. Two-way trade with the Republic of China, aswas mentioned, has now exceeded $4 billion; certainly, the tradevolume with the PRC in no way approaches this volume. I thinkthat the attitude of current business, as bankers see it, is that thenumbers are the key in a sense, and that we should continue to dothings in this vein.In summary, I again feel that the driving forces have been thegovernment's determination to succeed in both internal develop-ment as well as implementing the practice and putting theirproducts in the international marketplace. They have done acommendable job. Certainly the stability of the ROC economy isone of the most enviable in all of Asia. The exchange rate of theNT dollar has remained significantly stable over the last twentyyears or so, varying only slightly, again attributable to thegovernment's ability to implement ongoing economic thoughtprocesses which have kept the country headed in the rightdirection. Thank you very much.Dr. Chiu thanked Mr. Pilachowski for his comments,especially his remarks on Baltimore's trade and financialrelations with the ROC. He then introduced the second discus-sant, Professor J. S. Prybyla, to speak. Dr. Chiu said thatCONFERENCE PROCEEDINGSProfessor Prybyla is a prolific writer and also a person of wideexperience. He recently visited both the People's Republic ofChina (1974) and the ROC (1976) to observe their respectiveeconomic development, and is Professor of Economics at Pennsyl-vania State University.Professor Prybyla praised Mr. Wu's presentation as asynthesis of the crux of the situation. He cited the ROC's"textbook transition" from dependency to economic independence.He said Mr. Wu's guide should be followed by those responsible foreconomic decisions, and that insufficiently informed decisions asto future U.S. relations with the ROC could be destructive. Dr.Prybyla commented that while Mr. Wu's presentation is positiveon the investment and trade climate of the ROC, it does not revealthe difficulties and frustrations that investors face, e.g., frustra-tions arising from difficulties with workers and bureaucracies.[The following is the summary of Professor Prybyla's state-ment.]COMMENTSJ. S. PRYBYLAIAllow me, first of all, to congratulate Mr. Wu on hisinformative, well organized, and lucid presentation of the basicelements which constitute the investment and foreign tradeclimate of the Republic of China. The paper represents, in myview, a good synthesis of the fundamental facts of the situationand is a helpful guide for potential investors and traders.Mr. Wu performs a distinct service in stressing (i) thesignificant achievements of the Republic of China in economicgrowth over the last quarter century; (ii) the successful creation ofa model of development that combines private initiative withconstructive governmental intervention, and the profit motivewith equity in the distribution of land, income and opportunity;and (iii) an almost textbook perfect transition of a once dependenteconomy to self-sustained growth. Not the least of the paper'smerits is to remind us of the close commercial relationshipbetween Taiwan and the United States and of the important stakewhich this country has in the continued viability and prosperityTHE INTERNATIONAL TRADE LAW JOURNALof the Republic of China. Such reminders are especially importantat this time when crucial political decisions affecting ourdiplomatic and legal relations with the ROC are under activeconsideration in Washington. Mr. Wu's guide to investment in andtrade with the ROC merits attention by our policy makers and bythose whose involvement in trade and investment with Taiwanputs them in a position to bear influence on decision-makingcouncils of our nation. As other papers at this conference makeclear (I have in mind, in particular, the analyses by N. Shroder, Y.L. Wu and K. C. Yeh as well as the instructive German case studyby R. Heuser), nothing could be more disruptive to the economyand society of Taiwan as well as damaging to our own economicinterests and international credibility than an insufficientlyinformed decision concerning our future relations with theRepublic of China. In this setting, Mr. Wu's essay is most timelyand sobering.IIMy reservations about the paper are of two kinds. The firstconcerns a methodological point which, I think, is important bothas a matter of substance and from the standpoint of the paper'spersuasiveness or - if I may use the word - "saleability" toinformed American opinion. The second concerns updating andelaboration of some of the facts mentioned by Mr. Wu.1. As is to be expected, the paper draws a very positivepicture of the investment and trade climate in the ROC, andconcludes on an optimistic note. If there are shadows on theeconomic landscape, as there surely are, and if future prospectsare fraught with dangers and uncertainty, they are hardly to bedetected in the presentation. Now, we all know that there existdifficulties with which foreign investors in Taiwan must cope andof which they should be made aware in fairness to all concerned.While the argument of a favorable investment and trade climate isbasically accurate, it is not the whole story. Failure to spell out,openly and clearly, some of the more important problems, andfrustrations which foreign investors and traders are likely toencounter in their dealings with Chinese managements, workers,and government bureaucracies can only contribute to laterdisillusionment and discouragement. I think the paper's valuewould have been much enhanced had the author enumerated someof the major negatives and suggested ways and means of dealingwith them. In this regard the paper weakens, through omission,CONFERENCE PROCEEDINGSits own strong case. I have seen analyses of this kind from the penof researchers in the Republic of China, so the subject is clearlynot taboo.2. (a) The author correctly points to the crucial changescurrently taking place in the structure of the ROC economy. Thepivotal change concerns the transition to a more capital- andtechnology-intensive economy and the preoccupation with upgrad-ing the quality of output, especially exportable output. In thisconnection it would be useful, I think, to mention some of themeasures currently under active consideration by the governmentof the ROC aimed at revising the present Statute for Encourage-ment of Investment in a way that would generate the appropriateinvestment from foreign and domestic sources. I am thinking inparticular of discussions concerning the possibility of extendingthe five-year tax holiday by one to three years to encourageinvestment in the priority industries; proposed tax incentives tolarge trading companies as a means of expanding the exporttrade; the proposed revision of tax incentives to firms undergoingmergers; suggested exemptions from import duty to be given toproductive enterprises for the import of equipment not produceddomestically; and the exemption from withholding and consoli-dated income tax of one year savings deposits, post office savingsdeposits, and trust funds. These, plus the proposed revision of theStatute for Technical Cooperation, are important measuresdesigned to stimulate domestic and foreign private investments inthe years to come when the present stimulus provided byexpenditures on the ten major projects declines with the projects'completion.(b) Mr. Wu addresses himself briefly to the problem ofimbalance in Taiwan's trade with the United States. This is asensitive issue in this country and will certainly require thought-ful corrective measures by both partners. It would have beendesirable, I believe, to have dealt more fully with this subject inthe paper, for a continuation of the present lopsided exchangescould easily lead to a deterioration in the climate of US-ROCtrade.(c) Finally, I would have liked to hear more about theprogress being made in the development of the twelve newindustrial parks and the implementation of the Hsinchu Scientificand Industrial Park Project, which appears to be a mostinteresting pilot experiment in providing an appropriate environ-ment for the development of technologically advanced industries.I would be especially interested in the author's views on theTHE INTERNATIONAL TRADE LAW JOURNALability of Taiwan's social structure to absorb rapidly high-leveltechnology.I understand, of course, that time and space limitationsmilitate against the inclusion of all these various issues in thepaper. I am quite simply raising them as a possible subject of ourdiscussions.Dr. Chiu thanked Professor J. S. Prybyla for presenting suchconstructive comments on Mr. Wu's paper; he then announced afifteen minute break for this session, after which the floor wouldbe open for discussion. He also informed the participants that thethird discussant, Professor James P. Chandler, had just arrivedand would present his comments at the discussion period.This session adjourned at 11:20 a.m. and resumed at 11:30a.m.Dr. Chiu called the session into order and announced that thefloor was now open for discussion.

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