US and Taiwan to work on reshaping supply chains away from China

US and Taiwan to work on reshaping supply chains away from China

Officials from the US, EU, Japan and Taiwan have called for co-operation in rebuilding global supply chains after the US-China trade war and the coronavirus pandemic exposed the risks of relying on China.

Speaking at a conference in Taipei on Friday, Brent Christensen, director of the American Institute in Taiwan — the US’s quasi embassy — urged democracies with shared values to build more secure supply chains together elsewhere.

“This is going to require a co-ordinated effort from all of us,” he said.

Mr Christensen added that the question of reorganising supply chains was “on top of the list” for a new economic dialogue the US was initiating with Taiwan. The Taiwanese companies that built the global manufacturing base for technology hardware in the People’s Republic of China in the past 30 years had “increasingly recognised the danger of tying their future to the PRC,” he insisted.

The appeal comes amid a flurry of trade diplomacy aimed at making supply chains more resilient. But while most western governments agree on the urgency to rebuild some manufacturing capacity for medical supplies and diversify supply chains for security-relevant products, there is disagreement over whether this means decoupling from China altogether.

Joseph Wu, Taiwan’s foreign minister, said on Friday his government was already in talks over diversifying supply chains in the semiconductor, medical and energy industries.

Adam Boehler, chief executive of the International Development Finance Corporation, a US government-backed institution with a $60bn budget, said the DFC was ready to invest in Taiwanese companies seeking to move supply chains to the US or to third countries.

Taitra, Taiwan’s external trade development council, is also working with Japan to support companies from both countries to move partnerships from China to south-east Asia.

On Tuesday, the trade ministers of India, Japan and Australia said there was a pressing need for regional co-operation on supply chain resilience, and said they would launch an initiative to that effect this year that would also be open to other countries.

The EU has opened a public consultation on how it should work with trading partners to make supply chains more resilient.

Mr Wu said supplies of medical or IT goods could be “politicised or weaponised in the hands of a country that does not honour the rule of law and democracy”, and pledged to work more closely with countries with shared values.

But European diplomats and businesses are more cautious. “Supply chain reorganisation is something business is very focused on, but clearly there is a political push going on from the US government here,” said Freddie Hoglund, chief executive of the European Chamber of Commerce in Taipei.

A European diplomat said EU member countries were reluctant to get dragged into an anti-China movement.

Filip Grzegorzewski, the EU’s representative in Taipei, said governments were shouldering a “heavy responsibility” to convince businesses that it was in their interest to move supply chains.