Wed, 30 Sep 2020

Taiwan Plans to Shift Medical Supply Chain Away from China

Voice of America
12 Aug 2020, 09:35 GMT+10

TAIPEI - The United States and Taiwan are making a public show of strengthening ties this week, signing a memorandum of understanding to improve cooperation in public health as part of a high-level U.S. visit to the island.

In the absence of formal diplomatic ties, the MOU was signed on Monday by W. Brent Christensen, director the American Institute in Taiwan, and Yang Jen-ni, chairwoman of the Taiwan Council for U.S. Affairs on behalf of the Taipei Economic and Cultural Representative Office in the United States.

Visiting U.S. Health and Human Services Secretary Alex Azar and Taiwanese Minister of Health and Welfare Chen Shih-chung witnessed the signing ceremony at the Central Epidemic Command Center in Taipei.

Three Taiwanese industry experts who spoke to VOA say the memorandum will bring business opportunities to Taiwan, especially if the U.S. provides technology transfers in advanced medical material to support Taiwan's public health industry. That will enable Taiwan to begin shifting its medical supply lines away from China and towards the United States.

Shifting away from China

Darson Chiu, a research fellow at the Taiwan Institute of Economic Research, told VOA that the coronavirus pandemic has prompted Taiwan's policy makers to reassess Taiwan's reliance on raw materials from China.

"The Trump administration wants to reduce its reliance on China from its medical supply chain, and the trend is the same in Taiwan," he said. "The past model is Taiwan will use China as a supplier for materials before sending goods to the U.S. In the future, we are moving to get rid of this 'middleman'."

He said, as an example, that China has used masks made in Taiwan since the COVID-19 pandemic that were produced without elements produced in China. Previously, Taiwanese companies either imported raw materials from China for low-cost products, or sent high value semi-finished medical equipment or other public health products to China for assembly, before exporting these goods to other markets.

He added that if there's strong demand from the U.S. for these public health products, some Taiwanese companies might consider shifting part of their supply chains to Mexico, "where they can enjoy low labor costs, zero tariff from USMCA [the United States, Mexico and Canada trade agreement], and lower transportation costs."

Aaron Chen, the chief operating officer of TCI, said collaboration with Taiwan is consistent with America's public health policy needs. TCI is a leading contract research manufacturing organization based in Taiwan.

"President (Donald) Trump wants to move the medical supply chain back to the U.S., but he has to consider costs," said Chen. "For things like masks, which have low profit margins, it's hard to shift the supply chain back to the U.S. For high value-added products, it also depends on if the U.S. government can roll out supporting policies for companies to shift their supply chain across the Pacific."

He said an option is for the U.S. to shift part of this supply chain to Taiwan.

"Let's do a simple comparison of production costs. Generally speaking, if the manufacturing cost to produce in China is 1, then in Taiwan it's around 1.25. If made in Japan, it will be 1.75; and in the U.S., the cost will double," Chen said. "So made in Taiwan products have cost advantage, they can also enjoy tariff preference."

A pool of talents

Chan Chang-chuan, former dean of National Taiwan University College of Public Health, told VOA that there's another important playing card in Taiwan's public health industry.

"Taiwan has great biotech R&D talents, and more than 70% of them are trained in the United States.," said Chan.

He hopes the new memorandum of understanding will facilitate collaboration and investment in biotech firms between the U.S. and the island.

Taiwan Minister of Health and Welfare Chen Shih-chung called this week's signing of the MOU a "historic moment," adding that it marked a breakthrough in health and medical cooperation between Taiwan and the U.S.

Azar, the U.S. health chief, described the MOU as a "landmark achievement," as it formalized more than 20 years of collaboration between his department and Taiwan's Ministry of Health and Welfare on a wide range of issues.

Azar also praised Taiwan for its response to COVID-19, saying it has been "among the most successful in the world."

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