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ASIAN SURVEY
Volume XLV
A Bimonthly Review of Contemporary Asian Affairs ■ University of California Press
Vol. XLV, No. 5, September/October 2005
■
Number 5
■➊Chinese
Perceptions of American Power, 1991–2004 •
BIWU ZHANG➊■➊Is There a Power Transition between the
U.S. and China? The Different Faces of National Power •
STEVE CHAN➊■➊The Evolution of China’s Engagement with
■
September/October 2005
International Governmental Organizations: Toward a Liberal
Foreign Policy? • JUSTIN S. HEMPSON-JONES➊■➊U.S.-Russian
Relations and the North Korean Crisis: A Role for the
Russian Far East? • JAMES CLAY MOLTZ➊■➊China-Taiwan
Tug of War in the WTO • HUI-WAN CHO➊■➊Explaining
Corruption at the Village and Individual Level in India:
Findings from a Study of the Panchayati Raj Reforms •
STEN WIDMALM➊■➊China’s Moderate Middle Class: The Case
of Home Owners’ Resistance • YONGSHUN CAI➊■➊Japan’s
Cabinet Secretariat and Its Emergence as Core Executive •
TOMOHITO SHINODA
CHINA-TAIWAN TUG OF WAR
IN THE WTO
Hui-Wan Cho
Abstract
Although Taiwan expects interactions with China to occur under the WTO
framework, China has developed a strategy of a WTO framework with oneChina gestures. This is to make a statement that Taiwan customs territory is in
fact China’s separate customs territory and to avoid acquiescing in the view
that Taiwan has a legal standing within the WTO.
Introduction
Major warfare ceased in 1949 between the governments
controlling Mainland China and Taiwan. But the half-century since then has
demonstrated the maxim that diplomacy is warfare continued by other means.
The history is well known and includes Beijing’s efforts to isolate the Taipei
government, reduce its diplomatic activities abroad, and counter any suggestion that Taiwan is more than a temporarily separated province of the mainland. Taipei has responded by seizing every opportunity to play a role on the
world stage and to assert its freedom to act independently of Beijing. The contest has often been marked by fine shadings of action and language. Nowhere
has this been more apparent than in the newest theater for the two governments, the World Trade Organization (WTO). At times, the parties may seem
obsessed with terminology to the extent of forgetting substance, but of course
they are interested in substance. This article attempts to show why, in the minds
of each side, it is so important to stand firm on the forms, even at the risk of
delaying other matters.
The People’s Republic of China (referred to here as “China” or PRC) became
the WTO’s 143rd member on December 11, 2001. Soon after, on January 1, 2002,
Hui-Wan Cho is Associate Professor of International Politics at National
Chung Hsing University, Taichung, Taiwan. Email: cho@nchu.edu.tw.
Asian Survey, Vol. 45, Issue 5, pp. 736–755, ISSN 0004-4687, electronic ISSN 1533-838X.
© 2005 by The Regents of the University of California. All rights reserved. Please direct all requests
for permission to photocopy or reproduce article content through the University of California
Press’s Rights and Permissions website, at http://www.ucpress.edu/journals/rights.htm.
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HUI-WAN CHO
737
the Republic of China (referred to here as “Taiwan” or ROC) also joined the
WTO, under the name “the Separate Customs Territory of Taiwan, Penghu,
Kinmen, and Matsu,”1 (TPKM) or “Chinese Taipei.” Although it was not the
first time that the two sides of the Taiwan Strait have held memberships in the
same organization, the WTO co-membership has special significance.2 Compared to such entities as the Asian Development Bank (ADB) and Asia-Pacific
Economic Cooperation (APEC), the WTO is much more universal in membership and influence.3 It is a global organization, overseeing 97% of the world’s
trade, conducted daily in huge quantities and governed by official trade policies. Despite their political separation for more than half a century, Taiwan
and China maintained a robust bilateral trade at the time of their WTO accession. How they would implement WTO obligations toward each other and
how the WTO rules would affect their interaction both became the focus of
global attention.
Some foreign observers expected the co-membership to accelerate bilateral
trade and investment, which in turn could become a cross-strait stabilizing
force. Taiwan’s Mainland Affairs Council (MAC) also expressed its view that
the two sides could discuss trade issues under the WTO framework without
spending time negotiating prerequisites for the talks.4 When U.S. President
George W. Bush met Chinese President Jiang Zemin in Beijing in February
2002, he did not miss the chance to talk about the new opportunities for crossstrait dialogue on trade created by China’s and Taiwan’s accession to the
WTO.5 But on the eve of the accession, Business Week questioned, “Can Two
Chinas Live Together in the WTO?”6 Its writer hypothesized a worst-case scenario a year after China and Taiwan both joined: without any warning, China
restricts polyester imports from Taiwan. Taiwan takes the case to the WTO,
but China refuses even to attend the proceedings, claiming that what happens
1. The name includes three major sets of islands under Taiwan’s control, all located in the Taiwan Strait.
2. “Co-membership” refers both to Taiwan and China “having memberships in the same organization,” without any implication of “sharing the membership.” See Gerald Chan, China and International Organizations: Participation in Non-Governmental Organizations Since 1971 (Hong
Kong: Oxford University Press, 1989).
3. Other groups in which China and Taiwan are both members include the International Office
of Epizootics (OIE), the International Seed Testing Association (ISTA), and the Study Group on
Asian Tax Administration and Research (SGATAR).
4. MAC, Report to the Advisory Committee (Taipei: MAC, 2002), November 22, 2002; “MAC:
Two Sides of Straits to Establish Bilateral Mechanism under the WTO Framework,” Zhongguo
Shibao [China Times] (Taipei), November 23, 2001, p. 11.
5. Press briefing by U.S. National Security Advisor Condoleezza Rice on President Bush’s
meetings with President Jiang Zemin on February 21, 2002.
6. Mark Clifford, “Can Two Chinas Live Together in the WTO?” Business Week, November
19, 2001.
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ASIAN SURVEY, VOL. XLV, NO. 5, SEPTEMBER/OCTOBER 2005
between Beijing and Taipei is an internal Chinese affair. Taiwan expects the two
sides to interact under the WTO framework, but China simply ignores Taiwan’s
WTO membership. The two sides engage in a cycle of escalating sanctions,
and trade across the Taiwan Strait shrivels.
China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC),
which was reorganized in 2003 as the Ministry of Commerce, in March 2002
announced its anti-dumping investigation against Taiwan’s steel and polyvinyl
chloride (PVC) imports, less than three months after Taiwan’s accession. Did
the worst-case scenario occur earlier than Business Week predicted? After
nearly two years, has the WTO co-membership sparked more cross-strait conflict or served as a bridge for bilateral trade dialogues? How have China and
Taiwan interacted under the WTO multilateral framework? As a background
for discussion, this article first reviews (1) cross-strait trade before the accession, (2) Taiwan’s qualifications in acceding to the WTO, and (3) China’s efforts to obstruct Taiwan’s accession. Then the article analyzes China-Taiwan
interaction after accession, scrutinizing the two sides’ strategies and actions in
light of WTO rules and general international law. The study finds that within
the first year, China changed its Taiwan strategy in the WTO to a more flexible
and active approach.
Cross-Strait Interaction before
WTO Accession
Trade Relations before Accession
After three decades of estrangement, indirect trade began clandestinely when
Chinese leader Deng Xiaoping espoused “peaceful reunification” and economic
reform in 1979. By the time Taiwan lifted its martial law in 1987, the officially
banned bilateral trade already had reached US$1.5 billion.7 Under such pressure, Taipei then legalized indirect trade across the Taiwan Strait, while strictly
limiting it lest the mainland hold Taiwan’s economy hostage.
But the Taipei government’s ability to control the economy eroded greatly
in the 1990s. Lured by China’s huge market and cheap labor, big businesses
allied themselves with political parties and legislators attempting to influence
government policy, while small- and medium-sized firms exploited different
loopholes8 such as going through offshore companies set up solely for doing
business with China. Since then, cross-strait indirect trade has grown annually.
According to the MAC, cumulative cross-strait trade volume between 1981
7. The cross-strait trade statistics mentioned in this article are all cited from MAC, Cross-Strait
Economic Statistics Monthly, no. 101 (January 2001), no. 120 (August 2002), and no. 127 (March
2003), Tables 6, 7, and 9, respectively.
8. Leng Tse-kang, The Taiwan-China Connection: Democracy and Development across the
Taiwan Strait (Boulder, Colo.: Westview Press, 1996), pp. 27–34.
HUI-WAN CHO
739
and 2001 reached $251.8 billion. Most alarmingly, both export dependence (as
a percentage of Taiwan’s total exports) and trade-surplus dependence (as a
percentage of Taiwan’s total trade balance) on China have grown drastically.
Taiwan’s export dependence on China grew from 0.88% in 1982 to a peak of
18.39% in 1997, making China the second largest market for Taiwan exports.
The figure dropped to 16.87% in 2000, but grew to 17.86% in 2001 and
22.56% in 2002.9 Starting in November 2001, China became Taiwan’s number
one market. Taiwan’s imports from China have also grown annually, although
these registered a mere 0.35% in 1981 and still accounted for only 7.06% in
2002. The export-import volume gap created a huge trade surplus for Taiwan.
If it were not for the large trade surplus between Taiwan and China/Hong
Kong, Taiwan would have had trade deficits from 1992 on. The surplus dependence on Hong Kong and China reached a peak of 386.47% in 1998. There
were subsequent changes but it still remained at 161.11% in 2002.
Taiwan’s Qualifications for GATT/WTO
and China’s Counter-efforts
Following World War Two, the ROC was one of the 23 original contracting
parties of the General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO before 1995.10 But the government withdrew after relocating
to Taiwan in 1949. The ROC later gained and then lost observer status; on January 1, 1990, it applied for GATT membership under the name TPKM. It is
noteworthy that GATT defines contracting parties as “governments” and not
“states” or “nations” as in most intergovernmental organizations, and that customs territories are what really count as contracting parties. Such a definition
was developed during the negotiation stage of the agreement so that governments with less than complete sovereignty, such as the then-British colonies
of Burma, Ceylon, and Southern Rhodesia (now Myanmar, Sri Lanka, and
Zimbabwe, respectively) could be contracting parties to GATT.11
TPKM has tariffs and other commercial regulations distinct from those of
any other area; its claim of autonomy is bolstered by the fact that the Taipei
government has been the authority that TPKM’s counterparts have had to deal
with. So, the Taipei government’s actions on behalf of TPKM conform to
GATT accession qualification requirements. Beijing argues, however, that Taiwan
9. The Board of Foreign Trade registers the Taiwan/China export dependence as high as 19.6%
in 2001 and 25.3% in 2002. See “Record High Export Dependence on China,” Zhongguo Shibao,
November 18, 2002, p. 23.
10. Since GATT is an agreement, each signatory is called “contracting party” instead of
“member.”
11. WTO, Analytical Index: Guide to GATT Law and Practice, 6th edition (Geneva: WTO,
1995), p. 919.
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is a province of China and had no right to accede to GATT by itself. Such an
argument not only contradicts the intentional design of the GATT functional
clause but also ignores GATT precedents. Following the tradition of avoiding
political judgments, the controversy over territorial claims was not an issue
within GATT at all.12 The request for accession in 1990 was not an application
from the government of the Republic of China; instead, it was from “the government on behalf of the TPKM.” According to GATT Article 33, the government in Taipei, acting on behalf of a separate, autonomous customs territory,
has a standing of its own in the agreement, regardless of the controversy over
sovereignty.13
If Taiwan wanted to join GATT, Beijing then argued, it should join GATT
under Article 26 5(c), as Hong Kong and Macao did, with China’s sponsorship. Even after the GATT Council accepted Taipei’s application, Beijing continued to argue that Taiwan’s status in GATT was exactly the same as that of
Hong Kong and Macao. But, in fact, substantial differences exist between Taiwan and the other two in their applications and eventual accession. Hong
Kong and Macao were customs territories on behalf of which two contracting
parties, the United Kingdom and Portugal, respectively, accepted the agreement. Hong Kong and Macao automatically became contracting parties in
1986 and 1991 when the United Kingdom and Portugal declared that the two
had acquired full autonomy in the conduct of their external commercial relations. On the other hand, TPKM is a separate customs territory that has always
been under the jurisdiction of the Taipei government, and its application under
Article 33 had to go through bilateral and multilateral negotiations and be decided by a two-thirds majority. The qualifications that Taiwan had to present
and the procedures it had to follow were totally different from those of Hong
Kong and Macao.
In September 1992, GATT set up a working party on TPKM’s accession.
After the WTO succeeded GATT on January 1, 1995, Taiwan requested that
the GATT working party be transformed into a WTO working party. This was
12. See the 1961 Portugal accession case, “Contracting parties were concerned only with what
was relevant to the General Agreement, which were the trading arrangements proposed with respect to these territories and not their status in international law . . . ” in Cho Hui-Wan, Taiwan’s
Application to GATT/WTO: Significance of Multilateralism for an Unrecognized State (Westport,
Conn.: Praeger, 2002), p. 175.
13. GATT Article 33, “A government not party to this Agreement, or a government acting on
behalf of a separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, may accede to this
Agreement, on its own behalf or on behalf of that territory, on terms to be agreed between such
government and the CONTRACTING PARTIES. Decisions of the CONTRACTING PARTIES
under this paragraph shall be taken by a two-thirds majority.” WTO, Analytical Index: Guide to
GATT Law and Practice, 6th edition (Geneva: WTO, 1995), p. 1017.
HUI-WAN CHO
741
done and the completion of review and bilateral negotiations finally allowed
TPKM to enter the WTO in early 2002. Relevant GATT and WTO articles
clarify TPKM’s solid legal standing in the framework of GATT/WTO, thereby
distinguishing Taiwan’s qualifications from those of Hong Kong and Macao. It
is this understanding that enabled WTO members to resist China’s pressure
when Beijing asked the WTO to add the word “China’s” in front of “TPKM”
in 199914 and when China wanted its protocol phrased to state that “TPKM,
Hong Kong, and Macao are China’s separate customs territories.”15
At the September 1992 GATT Council meeting, when Taiwan’s accession
working party was set up, Chairman B. K. Zutshi stated that many contracting
parties had agreed with the view that Chinese Taipei should not accede to the
GATT before the People’s Republic of China.16 A procedural linkage was thus
established between Beijing’s and Taipei’s accession. Because GATT had no
regulations on the timing of working parties’ meetings, political maneuvering
was possible. But such procedural linkage only delayed Taiwan’s accession; it
had no bearing on any of Taiwan’s qualifications to join or rights that it enjoys
after the WTO accession.
China’s and Taiwan’s Strategic Goals
and Moves
Taiwan’s Goal: A WTO Framework for
Bilateral Interactions
In order to avoid overdependence on Chinese markets, Taiwan demanded that
cross-strait trade remain indirect and posed restrictions on imports from
China, using “positive” and “negative” lists.17 Once the two sides joined the
WTO, however, the most-favored-nation clause would require Taiwan to treat
Chinese products equally with those from other WTO members. The Agreement
on Trade-Related Investment Measures would also require Taiwan to allow
Chinese investment in Taiwan. Taiwan worried that “mainland China would
use the opportunity . . . to sabotage Taiwan’s market.”18 Then, why did Taiwan
not invoke the GATT/WTO clause of “non-application,” thereby excluding
14. “‘One China’ Issue Clouds WTO Chinese Talks,” Reuters, July 27, 2000.
15. “WTO Does Not Intervene in Cross-Strait Politics,” Zhongguo Shibao, September 21,
2000, p. 14.
16. GATT C/M/259 (1992), p. 3.
17. A positive list is a list of items allowed by the government to be imported; a negative list
delineates prohibited items. A positive list is more restrictive than a negative list. For example, before WTO accession, Taiwan allowed agricultural import from China only of items on the positive
list, and importation of items on the negative list was not allowed for Chinese manufactured products.
18. “The View from Taipei,” Business Week, November 19, 2001.
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ASIAN SURVEY, VOL. XLV, NO. 5, SEPTEMBER/OCTOBER 2005
China from the bilateral application of WTO agreements? Both GATT Article
35 and WTO Article 13 stipulate members’ rights to non-application.
Taiwan’s decision not to invoke non-application against China was meant to
pursue two active objectives. First, the prospective economic interest was attractive. According to a trade analysis based on the Computable General Equilibrium model, if the WTO rules were not applied between China and Taiwan
after their accession, Taiwan’s total output would be reduced by $3.26 billion
and exports to China by $16.42 billion. Terms of trade would deteriorate by
2.4% and the trade surplus would fall by $216 million, gross domestic product
(GDP) by $11.17 billion, and social welfare by $16.11 billion. Moreover, the
higher the degree of liberalization, the greater the loss would be.19 The second
and most important objective for Taiwan was to use the WTO consultation
mechanism to have contact and dialogue with China. For despite robust indirect trade, cross-strait communication had been suspended indefinitely since
1999.
After the thawing of the cross-strait estrangement in 1987, flourishing civilian exchanges, indirect trade, and investment generated a range of issues, such
as document authentication, mail exchange, and fisheries disputes, which necessitated a systematic approach to bilateral contacts. Taiwan thus established
a private non-profit organization, the Strait Exchange Foundation (SEF), and
China set up as its counterpart the Association for Relations Across the Taiwan
Strait (ARATS) in 1991. In April 1993, SEF Chairman Koo Chen-fu and ARATS
Chairman Wang Daohan held the first talks between Taipei and Beijing since
1949. The meeting in Singapore resulted in several agreements and was followed by seven rounds of technical talks and three rounds of meetings at the
secretary-general level. Some agreements on document authentication, handling
of mails, repatriation of hijackers, illegal entrants, and fisheries disputes were
reached between the two semi-official bodies.
A second round of Koo-Wang talks was scheduled for May 1995. The talks,
however, were postponed indefinitely by Beijing, which objected to the U.S.
granting permission for Taiwan’s then-President Lee Teng-hui to visit his alma
mater, Cornell University, that June. China conducted missile tests near Taiwan in July and August and March of 1996, causing tensions to escalate into a
crisis in advance of Taiwanese presidential elections.
After Taipei’s repeated public appeals, Beijing finally agreed to resume
communications in February 1998, which facilitated a Koo visit to the mainland in October. But Wang’s scheduled visit to Taiwan was called off after
President Lee told a German radio station in July 1999 that bilateral relations
19. Ong Yong-he, Hseu Kang-chong, Hsu Shi-shun, “Impact of Non-Application and Direct
Transportation on Cross-Strait Trade under the WTO Framework,” Renwen ji Shehui Kexue Jikan
[Humanities and Social Sciences Collection] (Taipei) 13:2 (June 2001), pp. 183–88.
HUI-WAN CHO
743
across the Taiwan Strait should be characterized as a “special state-to-state relationship.” With the 2000 election to the Taiwan presidency of Chen Shui-bian,
an independence-minded Democratic Progressive Party (DPP) candidate, there
seemed to be little hope for resumption of cross-strait communication.
On the eve of WTO accession, President Chen said, “I hope the two sides
can use the WTO negotiation mechanism to have contacts and dialogues on
common issues in order to create a ground-breaking new phase.”20 Premier
Chang Chun-hsiung also made it clear that Taipei wanted to use WTO membership to begin a dialogue with China and foster friendlier bilateral relations
under the WTO framework. The MAC went further, saying that after accession,
Taiwan and Mainland China:
will be two independent, parallel, and equal members. The WTO mechanism offers
the two sides a new channel for communication, dialogue, and consultation. The two
do not have to set any preconditions or prerequisites. They can conduct dialogue and
consultation on mutually concerned issues based on the WTO rules and framework.21
The council’s chairwoman, Tsai Ing-wen, pointed out: “Healthy communication will be beneficial to cross-strait relations. When trade relations are normalized, the two sides will have common interests. Therefore, both will refrain
from disturbing stable bilateral political relations.”22 All these remarks clearly
demonstrated the Taiwan government’s great expectations that the WTO mechanism would help normalize Taiwan’s trade and stabilize its political relations
with China. The official and equal-footing bilateral interaction is obviously
one of the most important benefits that Taiwan’s DPP government looked for
in the WTO accession, not only to break the stalemate but also to gain equal
standing in bilateral negotiations.
China’s Strategic Goal: “One China” Framework
for Cross-Strait Affairs
Taiwan was full of expectations, but China has never intended Taiwan to be its
equal within the WTO. Although China changed its policy in 1979 from forceful liberation to peaceful reunification, its sovereignty claim on Taiwan and its
goal of reunifying Taiwan with the mainland have remained intact.23 In January
20. “President Chen: Create Cross-Strait Dialogue through WTO Mechanism,” Zhongguo
Shibao, November 10, 2001, p. 2.
21. MAC, Reference Information on the Impacts of the WTO Accession on Cross-Strait Relations (Taipei: MAC, 2001), November 22, 2001.
22. “Tsai Ing-wen: Cross-Strait Trade to Be Normalized,” Gongshang Shibao [Industry and
Business Times] (Taipei), November 8, 2001, p. 3.
23. Although peaceful unification is China’s “fundamental policy” on Taiwan, Beijing has never
renounced the use of force against Taiwan. This option is vividly demonstrated in China’s 2000
White Paper on “The One-China Principle and the Taiwan Issue” and in its 2005 Anti-Secession Law.
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ASIAN SURVEY, VOL. XLV, NO. 5, SEPTEMBER/OCTOBER 2005
1980, Deng Xiaoping clearly elaborated China’s priorities, saying that the country’s primary tasks were to fight against hegemony in international affairs,
bring Taiwan back to the motherland, and speed up modernization. Emphasizing that the first two goals depended on the success of the third, Deng said,
“When we succeed in the Four Modernizations, the economy will be fully developed, and our strength to achieve unification will be totally different.”24
Former National People’s Congress Chairman Peng Zhen said that although
“we are highly flexible as regards specific policies and measures . . . we are
absolutely unequivocal on the principle of safeguarding China’s sovereignty,
unity, and territorial integrity.”25
Beijing made it clear to the world that China’s sovereignty was not to be
compromised under any circumstances. China objected strongly in 1981 when
the Dutch government permitted the sale of two diesel submarines to Taiwan,
downgrading diplomatic relations with the Netherlands until 1984, when the
Hague promised to end arm sales to Taiwan.
When the United States adopted the 1979 Taiwan Relations Act (TRA), it
said in the Act that it would “consider any effort to determine the future of Taiwan by other than peaceful means . . . of grave concern to the United States”
and would “maintain the capacity of the United States to resist any resort to
force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”26 Faced with this stance,
Beijing asked what right Washington had to “interfere in the future, security,
social or economic system of China’s Taiwan province, which [are] entirely
within the framework of China’s sovereignty.” Another TRA provision specified that the United States would continue providing Taiwan with defensive
weapons; Beijing asked how the United States could “use its arms to support
the local authorities of a country to oppose its central government.”27
In China’s view, Taiwan has been and remains a part of China, even before
reunification. Hence, Beijing does not object to Taipei’s economic or cultural
ties with foreign countries but opposes anything that can be interpreted as implying the existence of two Chinas. As discussed earlier, when Taiwan applied
for GATT membership, China maintained that Taiwan, as part of China, had
24. Deng Xiaoping, Deng Xiaoping Wenxuan [Selected works of Deng Xiaoping] (Beijing:
Renmin chubanshe, 1983), pp. 203–04.
25. Peng Zhen was, in 1982, the PRC vice chairman of the Committee for the Revision of the
Constitution to permit the creation of special administrative regions to govern such areas as Hong
Kong, Macao, and Taiwan. Xinhua New Agency (Xinhua), “Peng Zhen on Reunification of Motherland,” November 26, 1982.
26. United States Code Title 22—Foreign Relations and Intercourse, Chapter 48––Taiwan Relations, Section 3301 Congressional Findings and Declaration of Policy, (b) Policy (4) and (6).
27. Zhuang Qubing, Zhang Hongzeng, and Pan Tongwen, “On the U. S.’s Taiwan Relations Act,”
Beijing Review 24:36 (September 7, 1981), pp. 19–23, and 24:37 (September 14, 1981), pp. 23–25.
HUI-WAN CHO
745
no right to accede to GATT by itself. While both applications were being
reviewed, China again attempted to claim sovereignty over Taiwan. But the
claims encountered strong opposition from the United States and other GATT
contracting parties and did not bear fruit.
China nevertheless continues to insist that it acceded to the WTO as a sovereign state, while TPKM joined only as a separate customs territory, and that
cross-strait trade relations are defined as existing between “China’s mainland
and its separate customs territory,” even after both became members of the
WTO.28 Cross-strait commercial negotiations are “a single country’s internal
affair” and should be conducted under the framework of one China.29 China
insists that such consultations need not be conducted within a multilateral organization such as the WTO.30
Taiwan’s Strategic Move: Use Import
Discrimination to Induce Consultation
After Taiwan and China acceded to the WTO, Taiwan stipulated that according
to the most-favored-nation clause, cross-strait trade could be direct, i.e., buyers
and sellers could be Chinese business people. Previously, third parties such as
brokers in Hong Kong had been used. Based on the same non-discrimination
rule, Taiwan should have treated imports from China equally with those from
other WTO members. But Taiwan says normalization of cross-strait trade involves huge adjustments and that, considering the impact of the process on its
domestic industries, transitional measures are justified. Therefore, imports from
China are not fully permitted. The positive and negative lists for agricultural
and industrial products were eliminated in 2002, but some imports from China
are still categorized as “MW0” or “MP1,” the respective codes for imports that
are prohibited and those permitted under certain conditions. Upon Taiwan’s
WTO accession, an additional 835 agricultural and 1,223 industrial Chinese
products were allowed to be imported into Taiwan, increasing the permitted
percentage to 72.5% of goods.31 However, 27.5% of Chinese products were
still prohibited or restricted. By November 18, almost one year after accession,
24.5% of Chinese products still could not be imported by Taiwan.32
28. China’s Taiwan Affairs Office, spokesman Li Weiyi’s statement at a press conference in
Beijing, April 24, 2002, at http://big5.chinataiwan.org/static/sy/tbxwfbh2/020424/020424txt.htm.
29. “China Welcomes Chinese Taipei’s WTO Accession: Spokespersons,” Xinhua, November
12, 2001.
30. Spokesman Zhang Ming-chin’s statements at press conferences of the Taiwan Affairs Office on October 31, 2001, December 5, 2001, and January 30, 2002.
31. “2,058 Chinese Products Allowed, Increasing Permitted Percentage to Over 72%,” Zhongguo Shibao, February 16, 2002, p. 6.
32. “300 More Chinese Products Allowed,” Jingji Ribao [Economic Daily], November 19,
2002, p. 10.
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Taiwan obviously is betting on China’s reluctance to use WTO mechanisms
in the settlement of cross-strait trade disputes. If China eschewed using the
WTO, Taiwan could protect its domestic industries for a longer period: should
China request consultation or a dispute-settlement panel under the WTO framework, the request would be welcome. Under the WTO framework, Taiwan and
China would be interacting with each other on an official and equal-footing
basis, which is exactly what Taiwan wants. The purpose of this tactic of discrimination to induce negotiation is made clear by Taiwan’s insistence that bilateral talks will be needed before Chinese imports can be fully permitted.33
This was also evident when Wu Wen-ya, the director of Taiwan’s Board of Foreign Trade, frankly said that Taipei wouldn’t avoid dealing with China on the
discrimination issue, should Beijing request consultations through the WTO.34
China’s Strategic Moves: Major Commercial
Interest to Evade Official Contact
In demanding bilateral talks, Taiwan took the offensive. China, however, did
so too. On March 23, China’s MOFTEC initiated an anti-dumping investigation against cold-rolled steel imported from Russia, South Korea, Ukraine,
Kazakhstan, and Taiwan.35 According to Chinese Customs statistics, total imports of that type of steel from Taiwan were valued at $490 million in 2001.
This accounted for 24.3% of China’s total imports of such steel and 22.99% of
Taiwan’s total steel exports to China.36
According to the WTO Anti-Dumping Agreement, when a member’s domestic industry suffers or faces the danger of material damage from dumping,
it may impose anti-dumping duties. Because steel overproduction was a global
issue in the 1990s and the early 2000s, many countries took anti-dumping
measures to reduce the impact on their domestic steel industry. In 2000 alone,
95 anti-dumping investigations on steel products were conducted, constituting
33. “Taiwan Entry to WTO Raises Concerns at Home,” Financial Times, January 2, 2002;
“Unilateral Removal of Restrictions on Mainland Imports Impossible: Yin,” Central News Agency
(CNA) (Taipei), November 21, 2002.
34. Y. H. Sun, “China Watch: Post-WTO China, Taiwan Far Apart on Trade,” Dow Jones
Newswires, November 5, 2002.
35. “Dumping” is an export sale at a price less than the price of the same product at home or
in other exporting markets. If dumping causes material injury or threat to the competing industry in
the importing country, GATT permits the importing country to impose an “anti-dumping duty” on the
item. When a plea is filed by a domestic industry, the government agency in charge of overseeing
international trade in the importing country will initiate an investigation. If dumping and injury are
found, an anti-dumping duty equivalent to the margin of dumping will be imposed. Exporting businesses, aided by their government, usually respond actively to an anti-dumping investigation, hoping
to end it as soon as possible or even to encourage a negative finding.
36. Board of Foreign Trade, press release, “Countermeasures on Mainland China’s AntiDumping Investigation on Our Steel Exports,” March 26, 2002.
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37.8% of a total 251 anti-dumping cases. Among these cases, the United States
initiated 37. It even announced safeguard measures on March 5, 2002, including tariff quotas and increased tariffs on steel. As a countermeasure, the European Union on April 3 also imposed tariff quotas on steel to prevent excessive
steel from going into the EU market.
China leads the world in steel production, but both the quality of its product
and the efficiency of its production are low. Most steel mills therefore are running deficits. Accession to the WTO forced China to lower its tariff and relax
its import restrictions, posing tremendous challenges to its steel industry. China’s
anti-dumping investigation was actually a reaction to the U.S. move, a countermeasure similar to those taken by the EU. As China’s fifth anti-dumping investigation, it aimed at protecting China’s steel industry: Taiwan was not the
only target. As delineated below, several factors made this investigation a flagship case in cross-strait interaction within the WTO context. This was the first
case China initiated against Taiwan products based on WTO rules, although—
significantly—China avoided official contacts with Taiwan in its implementation. Moreover, the case involved major Taiwan commercial interests. And
Taiwan meanwhile had imposed import restrictions in violation of WTO rules
on the same products from China.
According to WTO rules, all interested parties in an anti-dumping investigation should be given notice. Interested parties include foreign producers, exporters, importers, trade or business associations, and the government of the
exporting member. China, in this case, notified only the Taiwan Steel and Iron
Industries Association but not the TPKM Mission. Forty-five percent of the
total 2.6 million tons of cold-rolled steel that Taiwan produced in 2001 was
exported to China. The commercial interest was too big to be ignored. The industry, therefore, advocated toning down the government’s role and allowing
the industry association to be the contact.
One thing worth noting is that the cross-strait steel trade was unbalanced at
the time. Taiwan exported 3.8 million tons of steel to China that year, but imported only 70,000 tons from China, creating a $2 billion steel trade surplus
for Taiwan. Part of the reason for this imbalance was that Taiwan prohibited
most steel imports from China except for a few primary products. When the
chairman of China’s Steel and Iron Industries Association visited Taiwan in
February 2002, he denounced Taiwan’s treatment as unfair and implied that
the association might ask the Chinese government to start an anti-dumping investigation.37 Many analysts, therefore, believed that China’s anti-dumping
investigation was aimed not only at forcing Taiwanese exporters to discipline
37. “Mainland China Does Not Exclude the Possibility of Imposing Anti-Dumping Duties,”
Lienhe Bao [United Daily News] (Taipei), February 28, 2002, p. 24.
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themselves in their pricing but also at pushing the Taiwan government to open
its steel market.
On March 29, just six days after the investigation began on cold-rolled steel,
China announced another anti-dumping investigation on PVC imports from the
United States, Japan, South Korea, Russian, and Taiwan. According to Chinese Customs, Taiwan’s PVC exports to China in 2001 amounted to $230 million. Again, China failed to notify Taiwan’s government. However, China is
the largest market for Taiwan’s PVC exports, constituting 80% of its total
PVC exports. Considering the commercial interests at stake, Taiwan’s Economic Ministry could not but allow the Taiwan Plastic Industries Association
to be the contact in consultations over the investigation.
Under pressure from concerned exporters, on April 22, 2002, Taiwan lifted
import restrictions on 125 Chinese steel items. In the battle, China maintained
its advantageous position by taking Taiwan’s commercial interests hostage in
the investigation. Beijing has not only insisted on “no official contact through
the WTO” but also effectively forced Taiwan to open its market to Chinese
products.
Evolution amid Frictions
After being the subject of two anti-dumping investigations within a week without notification, the TPKM Permanent Mission to the WTO wrote twice to the
China Mission, reminding the latter of its notification obligation. Neither letter
was answered.
On May 20, China notified the WTO Committee on Safeguards of its first
safeguard measure. The Agreement on Safeguards stipulates that a WTO member may apply a safeguard measure to a product if that member has determined that the product is being imported into its territory in such increased
quantities, absolute or relative to domestic production, as to cause or threaten
serious injury to the domestic industry that produces similar or directly competitive products. China’s MOFTEC announced that it would start safeguard
investigations on 11 categories of imported steel on May 20. According to
China Customs, the import value of the affected products from Taiwan amounted
to $1.87 billion in 2001, accounting for 20.7% of China’s total imports of such
items.38
According to Article 6 of the Agreement on Safeguards, in critical circumstances where delay would cause damage difficult to repair, a member may
take a provisional safeguard measure. China thereby announced on May 21
that it would take provisional safeguard measures on nine categories of imported steel, starting on May 24, for a period of 180 days. The provisional
38. Board of Foreign Trade, press release, “China Initiated Safeguard Investigations and Provisional Measures on Certain Steels,” May 24, 2002.
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safeguard measures took the form of tariff quotas. Imported steel within the
quota would be levied according to a tariff schedule; imports exceeding the quota
would pay 7% to 26% in extra tariffs. Having a safeguard measure imposed
does not imply that an exporting member has done wrong, but the member
will still face adverse effects. The Agreement on Safeguards therefore stipulates that the member proposing a safeguard measure should notify those
members having a substantial interest as exporters of the product in question.
The safeguarding member must provide an opportunity for consultation in order to reach an understanding on adequate trade compensation for the affected
exporting members.
Taiwan is the second largest steel exporter to China. It is, of course, an exporting member with a substantial interest, and hence should be notified and
consulted for trade compensation. But China again ignored its WTO obligation vis-à-vis Taiwan. The TPKM Mission sent a letter to the China Mission
on June 18 formally requesting consultation on the latter’s provisional safeguard measures. The China Mission did not reply. But, on July 30, it sent out
retroactive notices of the two anti-dumping investigations on steel and PVC.
The notices were not written in any of the WTO’s official languages, English,
French, or Spanish. Instead, they were written in Chinese, the common language of China and Taiwan. The notices were addressed to “the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu,” but they abbreviated
TPKM as “China Taipei” instead of “Chinese Taipei.”39 A third notice was
also sent by the China Mission, notifying TPKM of its intention to initiate yet
another anti-dumping investigation, this time on phenol from Japan, South
Korea, the United States, and Taiwan, on August 1. China Customs statistics
show that phenol imports from Taiwan in 2001 were valued at $39.14 million.
Taiwan was the largest source of China’s phenol imports, supplying 37.3% of
the total. According to Taiwan Customs, phenol exports to China accounted
for more than 80% of Taiwan’s total phenol exports.40
China at first ignored its notification obligation to Taiwan but later sent retroactive notices and an advance notice of the planned probe. In a way, China
had moved in a direction more consistent with WTO rules. But it intentionally
used the Chinese language and the “China Taipei” designation to show its insistence that even after WTO accession, cross-strait trade issues are still “a
single country’s internal affair.” Meanwhile, China has avoided interacting
with Taiwan in multilateral meetings. In many mid-term reviews of China’s
implementation of WTO requirements, China has always replied in general
39. “Mainland Calls Us ‘China Taipei’ in a Notice to Our WTO Mission to Degrade Us,”
Zhongguo Shibao, August 2, 2001, p. 11.
40. Board of Foreign Trade, press release, “Mainland China Initiates Anti-Dumping on Our
Phenol Exports, BFT Gathers Manufacturers to Discuss Response,” August 1, 2002.
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terms when it encountered Taiwan’s written or oral inquiries. The Committee
on Financial Services held a mid-term review on China on October 21, 2002,
at which a Taiwan representative raised a question. When a foreign financial
service enters the Chinese market, the representative noted, the administrative
agency of its home state has to sign a surveillance cooperation memorandum
with China. If a Taiwanese financial service entered the Chinese market, the
representative asked, how would such a memorandum be signed? Yu Jianghua, a deputy director from China’s MOFTEC, responded that such a memorandum is bilateral and there is a bilateral channel for it, hence no need exists
to consult in the WTO.41
Taiwan did not just wait. On October 28, a regular session of the Committee
on Safeguards was reviewing the safeguard measures taken by 34 members.
Taiwan complained that China had consulted bilaterally with Japan, South
Korea, and Mexico after it initiated provisional safeguard measures but had
violated WTO regulations by ignoring Taiwan’s consultation request. Taiwan
requested the committee to compel China to comply with its obligation to
consult. Taiwan warned that it would not rule out the possibility of invoking
the WTO Dispute Settlement Understanding if its request was not met by
November 21.
Since the provisional safeguard measures on nine categories of steel were to
expire on November 19, the China Mission notified the Committee on Safeguards on November 1 that its investigation had been completed and would
take final safeguard measures. The measures would start on November 20 on
five categories of steel, and tariff quotas would remain in force until May 23,
2005. Imports within the quota would be charged according to the tariff schedule, but those exceeding the quota would have to pay an extra tariff of 10.3%
to 22.4%. Based on China Customs statistics, Taiwanese exports of the affected items were valued at $11 billion in 2001, accounting for 27.6% of
China’s total import value.42 Although its request for consultation on China’s
provisional safeguard measures had not yet gotten any response, the TPKM
Mission formally requested bilateral consultation on China’s final safeguard
measures on November 15, 2002.
Then, unexpectedly, the China Mission formally notified the TPKM Mission and the Committee on Safeguards, on November 20 that it was prepared
to conduct consultations between China and “Chinese Taipei” after November
25, pursuant to Article 12.3 of the Agreement on Safeguards. The notice was
sent to the TPKM Mission and the committee at the same time and was written in English. But it called the TPKM Permanent Mission the “Economic
41. “China, Taiwan Fight Hand to Hand, Becoming a WTO Focus,” CNA, October 22, 2002.
42. “Steel and Iron Industry Invites Business to Coordinate Quota; PRC Move Might Accelerate
Industry’s Relocation to China,” Lienhe Bao, November 20, 2002, p. 22.
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Trade Office,” demonstrating again China’s intention to downgrade Taiwan:
“Economic Trade Office” is the designation for Hong Kong and Macao in the
WTO. The TPKM Mission replied on December 5, reminding China that the designation was “inappropriate” but expressing its willingness to consult.43 The
China Mission and the TPKM Mission held their first-ever bilateral consultation on December 12 in a Geneva hotel, rather than at WTO headquarters
there. The consultation was defined as a “professional and technical level contact under the WTO framework.” Representatives of both sides used the terms
“China” and “the Separate Customs Territory of Taiwan, Penghu, Kinmen, and
Matsu” and talked in Chinese.44
China had claimed that cross-strait trade relations were “a single country’s
internal affair” and should be conducted under the one-China framework without the assistance of any international organization. Now, China seemed to
have softened its position.
Chinese Strategy of “WTO Framework
with One-China Gestures”
China has indeed changed its procedural behavior, from violation of to compliance with WTO notification and consultation obligations. But has it really
changed its mind? This article contends that the behavior change was based on
strategic considerations that incorporate political, legal, bilateral, and multilateral concerns: China has not changed its mind at all vis-à-vis Taiwan in the
WTO. China and Taiwan have had co-memberships before, but OIE, ISTA,
SGATAR are technical organizations. And although bilateral disputes at ADB
and APEC meetings have always involved Taiwan’s participation and designations, bilateral application of multilateral rules has never been an issue in these
co-memberships. The WTO has prescribed meticulous, binding rules for China
and Taiwan to follow in all their trade relations, including with each other.
Compliance with law is important in multilateral organizations, particularly
so for China while it is seeking wider recognition from the world. In the wake
of WTO accession, China found a strategy that would bring it benefits in two
ways. China would notify Taiwan and consult with it according to WTO rules,
hence earning itself a good reputation. But it would also distort Taiwan’s designation in order to stand firm on its one-China principle. That was why China
notified TPKM of the anti-dumping investigations in Chinese, the common
language of China and Taiwan, and abbreviated TPKM as “China Taipei.” This
43. “China, Taiwan to Hold First-Ever Talks on Steel Trade under WTO,” Agence FrancePresse, December 5, 2002; “Taipei Ready to Hold Cross-Strait Steel Talks, Says WTO Official,”
Financial Times, December 12, 2002.
44. “ROC, PRC Hold First Bilateral Consultations under WTO Framework,” CNA, December
12, 2002.
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is also why, when Beijing offered Taiwan bilateral consultations, it referred to
the TPKM Mission as the “Economic Trade Office,” a designation for Hong
Kong and Macao, which are China’s separate customs territories.
There is other evidence of China’s change in strategy. When Shi Guangsheng,
the Chinese trade minister, met Lin Yi-fu, the Taiwanese economic minister, at
an APEC ministerial meeting in Mexico in late October 2002, he told Lin that
China did not oppose bilateral consultations with Taiwan under the WTO
framework. In the November 1 notice to the Committee on Safeguards of its
final safeguard measures, China wrote: “Consistent with Article 12.3 of the
Agreement on Safeguards, the PRC is prepared to consult with those countries/
regions having a substantial interest as exporters of one or more of the products concerned . . . [emphasis added].”45 The timing of these statements indicates that China was acting on its own strategic plan instead of responding to
Taiwan’s threat to bring the case to a WTO panel. In an interview with the Financial Times on November 25, Shi again expressed China’s willingness to
abide by WTO rules in “notifying Taiwan of any actions that would affect Taiwanese exporters” [emphasis added]. He said that consultation on specific issues could be held “between the two sides through their representatives in
Geneva.”46 It is clear that under the new Chinese strategy, Shi’s words were
carefully chosen to follow WTO procedures in internal affairs.
On December 6, the day after the two sides reached preliminary agreement
on the bilateral consultation, China’s Taiwan Affairs Office continued to claim
that interactions between the two missions to the WTO are “interactions between China’s mainland and its separate customs territory in the WTO.”47 The
statement demonstrates once again the existence of a well-articulated strategy
in Beijing of employing what we may call a WTO framework with one-China
gestures.
The strategy means China will comply with WTO rules to notify and consult with Taiwan but at the same time will also make gestures to have Taiwan
regarded as another Hong Kong: to tell the world, in short, that interactions
with Taiwan are not international affairs, but internal matters. The one-China
gestures are intended to deny the international implications of Beijing’s compliance with WTO rules vis-à-vis Taiwan and to make sure that application of
WTO multilateral rules between China and Taiwan will not jeopardize the
PRC’s one-China stand.
China knows that unilateral acts can have consequences in international
law. Protest is one of the acts most commonly seen. A protest formally notifies
45. WTO G/SG/N8/CHN/1 (2002), WTO G/SG/N10/CHN/1 (2002).
46. “Taiwan and China Move Closer to Official Talks,” Financial Times, November 25, 2002.
47. Spokesman Li Weiyi’s statement, Taiwan Affairs Office, press conference, April 24, 2002,
http://big5.chinataiwan.org/static/sy/tbxwfbh2/020424/020424txt.htm.
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another state of an objection to its actions. The protest preserves the protesting
state’s rights in the issue by making it known that it does not recognize or
agree that the other state’s action is legitimate. On the other hand, an absence
of protest implies agreement: the state making no objection is understood to
have accepted the new situation.48 Since acquiescence may amount to renunciation of one’s rights, states often repeat their claims or protest rival claims, to
avoid acquiescence.
By using the Chinese language and calling TPKM “China Taipei” and its
mission the “Economic Trade Office,” China is stating that TPKM is China’s
separate customs territory, that China-TPKM interactions are “a single country’s internal affair,” and that TPKM’s status is the same as that of Hong Kong
and Macao. Distortion has become China’s way of protest. China has also
made a clear distinction between TPKM and Taiwan. In multilateral meetings,
China has insisted that Taiwan be called TPKM. When representatives of third
states have unconsciously called TPKM “Taiwan,” China has interrupted the
meeting to correct this. China has protested, too, when it has found TPKM
documents containing such words as “Republic of China.”49 The protests over
TPKM’s being called “Taiwan” are to insist that TPKM’s legal standing in the
WTO is based on its being one of China’s separate customs territories and to
avoid acquiescing in the fact that Taiwan—that is, the “Taiwan government on
behalf of TPKM”—has a standing of its own in the organization. Through
one-China gestures, China has been able to interpret its notices to and consultations with TPKM as “interactions between China’s mainland and its separate
customs territory.”
The United Nations has said, “The question of representation in an international organization [is] distinct from the question of recognition of a government by other members of that organization.”50 But China doesn’t want to run
any risks by acquiescing that Taiwan has an independent legal standing in the
WTO. This explains why China continues to avoid discussion on bilateral issues with TPKM in multilateral meetings.
What about Taiwan? The fact that TPKM has an independent legal standing, pursuant to GATT Article 33, was accepted by all contracting parties in
1992 when the GATT Council set up a working party to review Taiwan’s application and offered it observer status. The legal standing remained the same
when the WTO replaced GATT. Taiwan knows that there is no legal basis in
the WTO for China’s claim that “TPKM is China’s separate customs territory.”
48. Malcolm N. Shaw, International Law, 4th ed. (Cambridge: Cambridge University Press,
1997), pp. 70, 350; and Hungdah Chiu, Xiandai Guojifa [Modern International Law] (Taipei: Sanming Books, 1995), pp. 167–68.
49. “American Media Reports PRC’s Insistence on One-China Principle in the WTO,” CNA,
November 19, 2002.
50. GATT SR 22/3 (1965), pp. 1–2.
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Before China agreed to consult with Taiwan about its safeguard measures
on steel, both businesspersons and the Taiwan Steel and Iron Industries Association had contacted China on this matter. Taiwan’s representative to the WTO,
Yen Ching-chang, once said that such private contacts had de-linked the ChinaTaiwan WTO issue from the WTO, sabotaging Taiwan’s efforts to make WTO
the setting for cross-strait interactions and facilitating China’s intention to
make China-Taiwan WTO issues internal matters.51 This expression of blame
for operating outside the WTO shows that Taiwan’s strategic goal is to establish cross-strait, equal-footing contact mechanisms through the WTO. That
was why, when the China Mission called the TPKM Mission an Economic
Trade Office, Taiwan decided not to allow China’s distortion to obstruct Taiwan-China bilateral consultations under the WTO. Equal-footing bilateral interaction was the primary goal. Taiwan’s position is that the TPKM Mission’s
title is registered at the WTO Secretariat and is embodied in its accession protocol. The title has been used in WTO communications and documents and is
not altered by China’s unilateral behavior. So, Taiwan decided to correct China’s
wrong terminology but went ahead with the consultation. There, the two called
each other “China” and “the Separate Customs Territory of Taiwan, Penghu,
Kinmen, and Matsu,” thus avoiding both the abbreviated form of the designation
and the title of the mission.
Conclusion
Taiwan has attained its goal of interacting directly with China in the WTO, but
Beijing’s stance shows that China has not softened its stand at all; rather, the
flexibility of Chinese actions has been expanded. The tug of war will inevitably continue. Increasing Taiwan export dependence on the China market allows China to hold Taiwan’s economic interests hostage. To persist in its stand
that cross-strait affairs are a single country’s internal matters, China has
avoided discussions with Taiwan in multilateral settings. Taiwan’s wish to discuss non-WTO issues such as direct transportation under the WTO framework
will not come true.
China’s unilateral actions do have the effect of avoiding acquiescence in
Taiwan’s independent legal standing in the WTO, but these actions will in no
way affect Taiwan’s member status or its rights within the WTO. However, for
Taiwan to preserve its legal rights, it must protest each time China intentionally distorts its designation. What should worry Taiwan is that China may take
the offensive to request bilateral consultation on Taiwan’s discriminatory import restrictions on Chinese products, because fully opening up the market to
51. “Yen Ching-Chang: Prohibit Private Consultation with the PRC on WTO Issues,” CNA,
November 22, 2002; “Government Prevents the PRC’s Breaking through WTO Governmental
Mechanism,” ibid., November 23, 2002.
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Chinese products will have a severe impact on the island’s industries. Besides,
China’s refusal to discuss bilateral WTO issues in multilateral meetings has
hurt Taiwan’s interests. Should Taiwan discuss these issues with China in bilateral settings? Will such arrangements be interpreted by China as “internal
resolution of a domestic matter”? To Taiwan, its China policy has always been
a balancing act between tangible economic interests and symbolic national interests; Taiwan’s China policy in the WTO cannot avoid this balancing act.
How the Chinese WTO framework with one-China gestures strategy will be
played out and how Taiwan will react to it both require continued observation.