China flexes military muscles, then targets Taiwan’s citrus fruits

Madou township, Taiwan
CNN
 — 

For the last 18 years, Li Meng-han and his family have grown pomelos in a rural town near the southern Taiwanese city of Tainan.

Taiwanese pomelos, known for their juiciness and softness, are highly popular on both sides of the Taiwan Strait, especially during the Mid-Autumn Festival, an important holiday in Chinese culture that falls this year on September 10.

August and September are usually the busiest months for Li and other pomelo farmers in the Madou township, as they prepare for the harvest, but this year they’re facing an unexpected challenge: Chinese import bans.

On August 3, amid rising tensions between Beijing and Washington over US House Speaker Nancy Pelosi’s controversial trip to Taiwan, Chinese Customs officials announced an import ban on all Taiwanese citrus fruits – including pomelos – as well as two types of fish, citing “excessive pesticides” and “Covid-19 prevention” measures. Taiwan has condemned the move as violating international trade norms.

The announcement also came as Beijing conducted extensive drills encircling Taiwan in response to Pelosi’s visit – exercises that authorities in Taiwan said simulated a possible attack on the island. China’s ruling Communist Party claims Taiwan is part of its territory, despite having never governed it, and has refused to rule out the use of force to bring it under control.

Li, who typically sends about 60% of his pomelo harvest to mainland China, said he was “very surprised” when he first learned about the export ban, describing the situation as “the most challenging” since the family business began in the early 2000s.

“I didn’t see the ban coming so far, we were caught off-guard,” Li said. “I can’t do anything, it’s some kind of political issue between Taiwan and China … we simply want to grow good fruits and sell them at a good price.”

During the annual pomelo harvest, Li is usually busy on the phone finalizing deals with buyers in China and other parts of Asia as his 40 contractors pick the best fruit to be packed into boxes and sent abroad.

But this year, news of China’s sudden import ban threw his plans into disarray.

“When I heard about the ban, I immediately called my business partner in China to check whether this is really the case,” he said. “I was caught by surprise, because we already signed contracts and set the price, and even the shipment dates were already confirmed.”

“But now it’s all in vain, so we have to try to find ways to sell them to the domestic market,” he added.

Li is not the only Taiwanese affected by China’s economic retaliation. According to statistics from Taiwan’s Council of Agriculture, Taiwan produced more than 82,000 tons of pomelo fruit last year, of which about 7% – or about 5,000 tons – were exported to mainland China.

Together with China’s import bans on other pomelo fruits and two fish products, the council estimated that Taiwanese exports worth 620 million Taiwanese dollars ($20 million) would be affected.

Sun Tzu-min, general manager of Madou Farmers’ Association, said there are about 2,000 to 3,000 pomelo farmers in the township, adding that while most pomelos are sold domestically, the ban would likely affect market price and reduce farmers’ income.

“It’s been hard for farmers,” she said. “A sudden ban can put everything on hold. The pomelo trees can live for decades, and their fruits get sweeter as the trees get older, so it’s impossible for farmers to abandon them.”

“When all the fruits stay on the island, the market price will go down for sure… farmers are losing money when their fruits can’t be exported,” she said.

Since last year, China has targeted a number of Taiwanese agricultural products as it steps up its military, diplomatic and economic pressure on Taiwan – a self-governing, democratic island of 24 million people just off China’s southeastern coast.

Before the most recent ban, China had already suspended the imports of all Taiwanese pineapples, sugar apples, wax apples and grouper fish, each time citing the presence of pesticides or harmful chemicals.

Experts have argued that Beijing’s moves are a politically motivated attempt to pressure Taiwan to toe the line.

“The visit by US House Speaker Nancy Pelosi to Taiwan has given China another chance to coerce Taiwan economically,” said Chiao Chun, a former Taiwanese trade negotiator and author of “Fruits and Politics”. “This is a politically motivated economic sanction on Taiwan.”

“Mainland China is attempting to influence the views of farmers and low-income Taiwanese towards the ruling party, because their products are banned from selling to China,” he added.

After the ban on pineapples last year, Taiwan’s Foreign Minister Joseph Wu labeled the produce as “freedom pineapples,” while shoppers across Asia – including the late former Japanese leader Shinzo Abe – rushed to buy them as an act of political solidarity.

Chiao said while the latest ban will have some short-term impact on Taiwanese farmers, it’s unlikely to create any significant economic impact because agricultural exports only make up a tiny percentage of Taiwan’s overall trade.

The island’s most valuable export is its cutting-edge semiconductor chips, which are needed to power everything from computers and smartphones to robots. One Taiwanese company in particular – Taiwan Semiconductor Manufacturing Company (TSMC) – is the world’s largest contract manufacturer of chips, and accounts for 90% of the world’s super-advanced chips, according to industry estimates.

More than half of Taiwanese exports to China are semiconductors, while agricultural products make up less than 1% of the total value, according to Roy Lee, a deputy executive director at Taiwan’s Chung-hua Institution for Economic Research.

“I think weaponizing sanctions on agricultural and food products produces a bigger symbolic effect than actual economic impact,” Lee said.

Chiao agreed that “psychology is a bigger factor” behind the import bans. However, he said that economic coercion will likely create greater anti-China sentiment among the Taiwanese public.

“This time, China announced these economic sanctions against the backdrop of large-scale military drills,” he said. “If you think of the military drills as the main protagonist, there must be other supporting roles. Hence the Commerce Ministry also enacted economic sanctions to support (China’s) intimidation.”

Lee, the economist, said while China is Taiwan’s largest trading partner, Beijing has so far not targeted more valuable Taiwanese industries because it could end up disrupting its own economy.

“Expanding economic sanctions to include semiconductors would have a bigger, negative impact on China’s economic growth than (it would on) countries against which China is trying to achieve a political or diplomatic objective,” he added.

However, he cautioned that as cross-strait tensions worsened, Beijing could step up its retaliation by targeting Taiwanese firms operating in mainland China.

Last year, Taiwanese conglomerate Far Eastern Group, which also operates in mainland China, was fined millions of US dollars by Chinese regulators over a series of violations. Chinese state media openly criticized the company for financially backing Taiwan’s ruling Democratic Progressive Party, prompting group chairman Douglas Hsu to declare that he opposes Taiwanese independence.

“I think we are going to see an increasing number of Taiwanese investments in China being investigated, or being pushed to make remarks or statements in favor of China’s position toward Taiwan,” Lee added.

But for the farmers in Madou township, the impact of China’s economic coercion has already been felt.

To mitigate the financial impact, Taiwan’s Council of Agriculture has announced plans to boost citrus fruit sales across the island with advertising and distribution campaigns, as well as providing subsidies for farmers.

Sun, who heads the farmers’ association, said they are also turning the pomelos into other products – such as essence oil, jam and facial masks – to attract new customers in Taiwan.

But farmer Li is not optimistic. As pomelos begin to pile up in his depot, he worries that he may have to lay off 30% of his contractors next year if the ban is not lifted.

“To be honest, it doesn’t matter who is visiting Taiwan,” he said. “The US-China tension should be solved between the two nations. I don’t think Taiwanese farmers should be the ones to suffer.”