Asia Times: Taiwan's WTO entry hits home


	January 3, 2002	atimes.com

China

Taiwan's WTO entry hits home

TAIPEI - To the movers and shakers in government and business, Taiwan's long-awaited accession to the World Trade Organization (WTO) on Tuesday was a historic event. To ordinary Taiwanese, Tuesday was the day the price of Red Label rice wine soared sixfold.

The 20-proof Red Label, which is as much a part of Taiwanese culinary tradition as rice itself, now carries a suggested retail price of NT$130 (US$3.71) per 600-milliliter bottle, up 519 percent from the two-decade-old government-fixed price of NT$21 per bottle.

In conjunction with Taiwan's WTO entry on the first day of the new year, the island's long-standing tobacco and wine monopoly system gave way to a free-market system and a NT$90 per bottle distilled-liquor tax was levied on the rice wine - making up a large part of the price increase. The long-anticipated price hike had sparked a month-long panic buying spree that lasted right up to the final day that the kitchen staple was sold at the old price at Taiwan Tobacco and Wine Board (TTWB) distribution centers around the island.

Taiwan became the 144th WTO member on Tuesday under the name of the "separate customs territory" of Taiwan and its islands of Penghu, Kinmen and Matsu to avoid political sensitivities surrounding Beijing's claim of sovereignty over Taiwan. Mainland China became a WTO member on December 11.

In his New Year's address, Taiwan President Chen Shui-bian hailed the dual WTO entry of the mainland and the island, saying his government would like to push for economic and trade cooperation with its old rival across the Taiwan Strait. "Taiwan, Penghu, Kinmen and Matsu used to be the anti-communist fortress in the Cold War era, but the time of confrontation has long gone," Chen said.

Although Taiwan, the world's 14th-largest trading economy, has fought for WTO admission since 1990, it will bring mixed blessings to the island of 23 million people. The economy was set to post its first full-year contraction on record - 2.12 percent - and market-opening as well as competition from powerful multinationals will bring tough challenges and cause already record-high unemployment levels of an estimated 4.57 percent to rise even further.

Officials said that although there may be some stormy seas for several economic sectors, for the most part, WTO membership will be clear sailing in the long run for the island.

Individual consumers are expected to benefit most. Nevertheless, WTO entry is certain to have an adverse impact on certain fields of the domestic economy, including agriculture, traditional industries, the automobile industry and even the information-technology industry.

In an effort to allay public misgivings and suspicions about the possible negative impacts, Ho Mei-yueh, vice chairwoman of the Council for Economic Planning and Development, said at a seminar that WTO entry will enable Taiwan to trade with more than 140 other countries around the world on an equal footing.

Noting that Taiwan relies heavily on foreign trade, with the total amount of exports and imports exceeding the island's annual gross domestic product, Ho said WTO membership will help ensure equal trading status and benefits for Taiwan. "In the past, our major trading partners didn't adopt discriminatory measures against us mainly because they thought that Taiwan would eventually become a WTO member," Ho explained.

After decades in operation, Ho said, the WTO has developed a comprehensive, binding mechanism for regulating international trading practices and resolving trade disputes. "WTO accession will offer Taiwan a formal channel through which to consult with other members in forging new trade deals and settling trade disputes," Ho said, adding that the WTO mechanism will facilitate Taiwan's trade expansion and globalization.

More important, Ho said, WTO membership will allow Taiwan to have a say in the formulation of new international trade rules and regulations. Because of mainland China's diplomatic embargo, Taiwan has been unable to join the United Nations. Ho said a seat in the WTO, the "economic United Nations", will be conducive to helping upgrade Taiwan's international profile.

Touching on the price Taiwan will have to pay for its WTO accession, Ho said that superficially, the island may lose a huge amount of tariff revenues as it must lower import duties on more than 5,000 agricultural and industrial items in the first year after entry.

"The impact, however, will be manageable," Ho said. "Among the products to be subject to tariff reductions, the average tariff rate for over 2,000 industrial items will be lowered by only 0.25 percentage point, from the current 6.03 percent to 5.78 percent." Ho admitted though that the imminent tariff cuts will have a greater impact on domestic farmers as the average customs duty rate for 3,000-plus agricultural items will be slashed from the present 21 percent to 14 percent.

As for traditional labor-intensive industries, Ho said, Taiwan secured assurances during the WTO negotiations process to protect its manufacturers in certain fields. For example, Taiwan is entitled, if necessary, to impose a 5 percent flexible hike on its tariff rate for ready-to-wear clothing. In addition, Taiwan will have a grace period of up to three years to implement a zero-tariff policy on paper pulp and steel imports.

Taiwan began to allow compact-car imports in 1997. The quota for compact-car imports is set at 10,000 for 2002, with the tariff rate to be lowered from the current 30 percent to 29 percent. "The impact should be limited," Ho said. More than 9,900 foreign compact cars entered the Taiwan market last year. In fact, Ho said, the market share of locally built automobiles has increased to 80 percent from 60 percent recorded before Taiwan opened its car market, thanks to domestic automakers' strenuous efforts toward presenting vehicles with styles and options catering to the tastes of local consumers.

Wu Wen-ya, director general of the Board of Foreign Trade (BOFT), said that auto imports from the United States, Canada and the European Union will adopt a tariff quota system, while car imports from Japan and six other countries will be individually allocated according to the manufacturing country, within the tariff quota system. Taiwan will grant quotas of 120,000 units for the US and the EU next year, while giving Canada a quota of more than 10,000 cars and quotas of 10,000 each for Japan, South Korea, Mexico, Malaysia, South Africa, Thailand and Australia.

Wu also said that Taiwan will lift restrictions on 41 farm products in line with promises made during WTO entry consultations. He said that 22 items will be imported on a tariff quota system, while another 18 items will be freely imported. Rice imports will be subject to a quantity-limited quota system, Wu said.

Meanwhile, Taiwan's Mainland Affairs Council (MAC) said that contrary to media reports, it will allow the domestic market to be further opened to mainland Chinese products and capital as of WTO entry.

An MAC spokesman said that based on the consensus and agreements reached in the Economic Development Advisory Conference in August, the MAC will promote direct cross-Strait trade step-by-step. As it is already government policy, the spokesman went on, the MAC will make public all relevant measures in the near future.

He said that the MAC will first allow in larger amounts of capital to the domestic service sector and more products from the mainland and added that restrictions on cross-Strait remittances, postal links and mainland-bound investment will also be relaxed.

For her part, Taiwan's Vice President Annette Lu said that Beijing should accept the new era of cross-Strait cooperation ushered in by the dual WTO membership. She said ties between the two sides in the fields of investment and services would "negate" disputes such as the long argument over the meaning of "one China".

Lu was referring to the so-called "1992 consensus" in which Beijing and Taipei agreed that there was only one China, but left open the definition of "China". Beijing views the island as a breakaway province. Lu said there is no point in arguing about the issue now that both sides are equal WTO members.

Despite political tensions, Taiwan businesses have poured about US$60 billion into China since rapprochement began in the late 1980s, lured by low land and labor costs as well as common language and culture.

To mark Taiwan's first day as a WTO member, 600 people, including Lu and former president Lee Teng-hui, took trains from Taipei and the southern city of Kaohsiung to meet in central Taichung to discuss impacts of the WTO accession.

Meanwhile, back at the wine shops, Red Label was sold in a new bottle design to differentiate it from the cheaper version, which will continue to be sold at the old price at retail stores until their stocks run out. Stores found to be selling the old wine at the new price will be fined NT$2,000 per bottle, TTWB officials said.

The public will now be allowed to apply for licenses to manufacture their own distilled or fermented liquor and the TTWB will introduce a new 40-proof rice wine to be priced at NT$180 per 600-milliliter bottle.

Another TTWB product - 20-proof cooking wine - will also undergo a price adjustment from NT$24 per bottle to NT$48 per bottle, and its 40-proof cooking wine will be sold at a new price of NT$64 per bottle instead of the current NT$44 per bottle.

Without referring specifically to rice wine in his New Year's address, Chen said: "No matter how difficult the environment is and how formidable future challenges will be, we must meet the challenges and move forward with unwavering confidence. Dear colleagues, friends, and fellow countrymen, let us struggle together and work hand in hand."

(Asia Times Online/Asia Pulse/CNA)