MEMORANDUM TO: OPINION LEADERS

FROM: GARY SCHMITT

SUBJECT: Gutless in Seattle

In 2002, Taiwan-based China Airlines was closing in on a decision to purchase nearly two-dozen new jets to add to its existing air-fleet. Both Boeing and Airbus, the American company's European rival, were competing for the contract. Initially, the airline decided to go with the bid from Airbus, believing it to be the best deal. Boeing then asked Congress and the administration to step in. Scores of senators and congressmen wrote letters to Taiwan's President Chen Shui-bian - some even suggesting a Boeing purchase by China Airlines was key to continued good relations between the two countries. Doug Paal, our "ambassador" to Taiwan, followed up with visits to key government ministries. The pressure worked: the government-controlled airline split its order between the two companies, signing a contract late last year with Boeing for ten new passenger and freight-carrying jets.

With Boeing's agreement, Taiwan's Vice President Annette Lu was scheduled to visit the company's plant this coming Monday. But, then, officials from the People's Republic of China heard about the trip and raised hell with Boeing management. Now, Taiwan's vice president has been uninvited.

As we have often noted, those who argue for economic engagement with China usually claim that it will change China's behavior for the better. However, as far as we can tell, the only change in behavior here is Boeing's - and it is not for the better.