Really Going WTO?  (c) Simon Xi Zhang, 2002



1.      Trade in Services (Investment)


a.  Overview: Opening to Chinese Capital Investment

Due to Article 73 of Relations Statute, mainland Chinese residents and business are barred from direct investment in Taiwan; as to indirect investment, Chinese capital must be no more than 20% of registered capital of the investing entity[55]. In order to comply with GATS, WTO Plan proposes to eliminate those discriminating requirements.

Amendment to Relations Statute has to be approved by Legislative Yuan. The current draft amendment, as endorsed by Executive Yuan, recommends the 20% ceiling requirement to be abrogated and investment to be subject to approval by related agencies in charge[56]. The “application and approval” procedure applies to all the foreign investment in Taiwan therefore the “subject to approval” clause is not a discrimination against China.


b.  Detailed Study: Door is Opened, but Less Access to Targeted Market

What remains unresolved is the extent of "market access" available to Chinese investment regarding each service sector. The Plan stresses "gradual progress" and "selective openness". First, only indirect investment is permitted during the initial period. Second, notwithstanding Taiwan's Schedule of Commitments on Services, the market access of Chinese investment only extends to those sectors that are not regarded as "with economic monopoly nature", "sensitive to politics, society and culture" and "affecting domestic economic development or financial stability"[57].

The Plan authorizes the publication of a "List of Opened Sectors" specifically applying to mainland Chinese investment. It manifests that with respect to GATS commitments, China will not enjoy equal rights, as other WTO members will. The Plan further explains that within the coverage of Schedule of Commitments on Services, three types of sectors should be dealt with differently. Type A is "priority sectors to be opened to Chinese investment"; Type B is "to be opened in consideration of development of situations"; Type C is "temporarily not to be opened". The MAC and Ministry of Economic Affairs have prepared the List of Opened Sectors to Mainland Investment in Services (Type A) (hereinafter "the A-List")[58].

There are 108 sectors altogether in Taiwan's Schedule of Commitments on Services, but only 58 sectors are included in the A-List[59]. Furthermore, some A-List sectors do not cover all sub-sectors thereunder as in GATS Schedule. For example, A-List permits Chinese investing in "accounting, auditing, and bookkeeping services" only if the service is a sub-sector "not performed by certified public accountant"[60]. However, under Taiwan's GATS Schedule, both CPA and non-CPA "accounting, auditing, and bookkeeping services" are open to foreign investment[61]. Another example is that of all financial services, Chinese investment is only permitted in sub-sector of "reinsurance and retrocession service"[62]. Other insurance sub-sectors and the entire banking sector are excluded from the A-List[63].

Besides the publication of A-List, Taiwan also intends to promulgate a new law titled Regulations Governing Permission of Investment in Taiwan Area by People from Mainland Area[64]. Legislative Yuan has yet to publish it and no draft version has been offered by MAC and Ministry of Economic Affairs. Considering the fact that Legislative Yuan still needs to amend Relations Statute, the basic-tier law, before the promulgation of the second-tier regulations, there is still a long time before Chinese businesses to invest in service sectors available to them under A-List.

Therefore, after Taiwan finishes its legal revision procedure, it will still discriminate against China with respect to the extent of market access (A-List), and will lay down special procedure and requirements governing Chinese investment in Taiwan (second-tier regulation on mainland investment). Revision of laws will still fail to bring them to comply completely with WTO obligation vis-à-vis China. As a legal matter, Taiwan did not invoke "non-application" clause to China at the time Taiwan joined WTO; in fact, Taiwan is simply doing that at present. Thus, Taiwan is and will continue breaching its Schedule of Commitments on Services. 

[55] See, texts surrounding notes 24-25, supra.

[56] See, page 10 of Appendix VI to WTO Plan. Accordingly, Taiwan – Hong Kong/Macau relations law is to be revised, too, eliminating current requirement that Hong Kong and Macau business cannot pool with Chinese capital where Chinese is to hold more than 20% shares, see, page 2 of Appendix VII to WTO Plan.

[57] WTO Plan, Part IV-I-(II)-1-(1)-B.

[58] Appendix Table II to WTO Plan.

[59] WTO Plan, Part IV-I-(II)-1-(3)-C.

[60] Page 2 of Appendix Table II to WTO Plan.

[61] WT/MIN(01)/4/Add.2 (November 11, 2001), p.8.

[62] Page 3 of Appendix Table II to WTO Plan.

[63] C.f., WT/MIN(01)/4/Add.2 (November 11, 2001), pp.27-28 (Insurance and Insurance Related Services), and pp.29-36 (Banking and Other Financial Services).

[64] See, page 3 of Appendix VII (Division of Implementation Tasks and Timetable) to WTO Plan.