Smugglers and Illegal Investment Prompt Taiwan to Ease Restrictions on Trade

TAIWAN's entrepreneurs are one of the most potent forces behind the expansion of ties across the Taiwan Strait, as they defy bans on direct trade and investment in the mainland. Unofficial estimates indicate that as much as 25 percent of trade across the strait is now shipped directly to cut the cost of transporting via Hong Kong. Moreover, fishing boats are fast becoming water-borne ``supermarkets,'' as they smuggle goods across the strait.

Indirect trade is also booming, topping $4 billion last year compared with $2.7 billion in 1988, when the government began authorizing limited items for export and import.

Troubled by rising labor costs at home, Taiwan investors are attracted by the mainland's low wages and huge work force. With a shared language and culture, many prefer China to Southeast Asia, where labor disputes and discrimination against ethnic Chinese occur.

Although Taipei only authorized indirect investment four months ago, at least 1,000 factories with Taiwan investment had already opened on the mainland, involving capital of more than $1 billion.

The government's ban on direct trade and investment suffered a blow in late 1988, when the Supreme Court acquitted two businessmen charged with sedition for directly importing $3,000 worth of baby eels.

Even the June 4, 1989, crackdown on China's pro-democracy movement caused only a minor dip in business across the strait.

``It's not too risky,'' says Chen Chia-chun, spokesman for the Chung Shing Textile Co., which just invested nearly $1 million in a venture to produce its famous ``Three Gun'' brand men's underwear in Shanghai.