Contending Forces in Taiwan's Economic Policymaking: The Case of Hua Tung Heavy Trucks

Abstract

On July 30th, 1982, a dispatch from Detroit occupying two column inches on page six of the Wall Street Journal reported that General Motors (GM) was selling its 45% investment in the Hua Tung Automotive Corporation. A joint venture set up in Taiwan to build trucks, buses, and diesel engines, the enterprise was to be sold to the major local partner, the state-owned Taiwan Machinery Manufacturing Corporation, for US$13.8 million. The news aroused little interest in the United States, but it raised a storm of controversy in Taiwan. There it was revealed that the original contract allowed the American company to pull out its entire investment, with interest, should the government in Taiwan fail to protect adequately the highly noncompetitive venture from imports. Not only was the contract exceedingly generous to GM, it also failed to specify what degree of protection would be considered inadequate and it set no time limit on withdrawal. If, for example, the Taiwan government had reduced the level of protection years after the commencement of operations, GM presumably could still have pulled out with interest. In addition to repaying GM, the government had to compensate the various stateowned enterprises which had invested in the venture, and enter negotiations with the foreign banks, recently welcomed into the Taiwan market, which had extended some US$20-30 million in loans to Hua Tung.I