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



3. Trade in Goods

Since both China and Taiwan are WTO members now, Taiwan has to lift the ban on Chinese product importation and abandon indirect trade practice; otherwise, it will breach the MFN clause. In order to adjust cross-strait trade policy, WTO Plan lists three tasks: adoption of direct trade; gradually opening mainland product importation; and establishment of safeguard measures against imported products from mainland.


a.  Direct Trade in Goods

Trade Regulations was amended in February 2002 to permit direct trade transaction across the Taiwan Strait. However, the transportation is still to be conducted indirectly through a third area or Overseas Transportation Centers[66].


b.  Direct Trade, but Permitting Mainland Imports Gradually

The lifting of importation ban is implemented on a gradual basis[67]. WTO Plan stated that different priorities are set for different types of goods. Type A is for "immediate open"; Type B is "to be open within an adjustment period"; Type C is "sensitive items or items subject to control, and temporarily not to be open"[68]. The Plan also provides that authorities will examine the list at least once every six months and may reallocate products to other types[69].

The first list of Type A items was published on January 16, 2002 by Ministry of Economic Affairs. Newly opened are 901 items of agricultural products and 1,225 items of industrial products, totaling 2,126 items. Combing with the already opened 5,967 items[70], there are 7,757[71] out of all 10,604 items on Catalogue of Classification of Goods, representing a 73.15 percentage[72].

Several items were added when the second list of Type A items was published on February 25, 2002. Current data shows that the ratio between opened agricultural products and non-open agricultural products is 58.49 / 41.51; as for industrial products, the ratio is 76.32 / 23.68[73]. The reason that agricultural products are subject to more stringent restriction than industrial products is that the production condition and diet customs of peoples of China and Taiwan are similar, but production cost in mainland is lower[74]. Therefore, mainland agricultural products have competition advantage over domestic products. To protect the interest of domestic farmers, Taiwan does not want to see a flood of agricultural imports from mainland[75]. Mr. Qiu I-ren, Secretary General of Executive Yuan, also told the public that product-items that were locally produced in Taiwan would not be open for mainland importation[76].


c.  Discriminative Treatment in Effect

To protect domestic agriculture sector is a legitimate interest of a government and it is pursued by major WTO members in various forms. However, selectively banning agricultural importation from a special trade partner, without justification available under WTO, is wrong. After Taiwan joins WTO, on its Catalogue of Classification of Goods, only 56 out of 10,610 items (0.52%) are "subject to import control"[77] and all others are freely importable. Even with respect to those agricultural products subject to import control measures, Taiwan adopts Tariff Rate Quota (TRQ) instead of no-importation policy and many TRQ measures will be terminated from year 2004[78]. This provides evidence that Chinese products are not accorded MFN treatment as those of other WTO members.

The record also shows that 10,480 items are exempt from import licensing requirement[79], but A-List only provides exemption for 7,317 items of imported mainland products[80]. The discriminative import-licensing scheme adds another example to Taiwan's breach of MFN principle.


d.  Establishment of Special SGM Targeted against Chinese Imports

For sake of the interest of domestic producers, WTO permits members adopting safeguard measures (SGM) or levying anti-dumping duties (AD) and countervailing duties (CVD) in manners consistent with relevant WTO Agreements. MAC proposes in the WTO Plan adopting an SGM mechanism against mainland products. The SGM reflects two of the three underlying guidance on trade-normalization with mainland: maintaining "stability and safety", and taking advantage of what is "under our control power"[81].

Upon recommendation by WTO Plan, the Import Remedy Cases Disposition Method was revised to insert a Chapter VI-A[82], specifically applying to "market disruption" or "threaten of market disruption" or "significant diversions of trade" caused allegedly by mainland imports. Compared with the usual term in SGM and AD/CVD measures of “material injury”, Chapter VI-A standards are more protective to domestic producers in maintaining stability and safety.

Even though only Chinese product is subject to this Chapter VI-A, it is not a violation of MFN requirement. It is devised to accommodate a particular set of rules applicable to China only, as included in China's Protocol of Accession[83]. Taiwan takes the advantage in promulgating that special chapter fighting against Chinese imports. Generally, consultation with China should be requested before taking safeguard measures (withdrawing concessions or limiting imports), but provisional safeguard measure in critical circumstances is also allowed[84]. Taiwan accordingly takes advantage on the allowed provisional SGM as well, by authorizing "related agency-in-charge to report to Executive Yuan for the application of temporary suspension of importation from the mainland"[85].

[66] Article 5, Trade Regulations, amended by Ministry of Economic Affairs Order, Jing Mao-tse No.09104604110 (February 13, 2002).

[67] WTO Plan, Part VI-I-(I)-3.

[68] Id.

[69] Id., Part VI-I-(I)-2-(2)-A.

[70] Some newly opened items were already "partially opened".

[71] Original "partially opened" items are not twice counted in the final total amount of opened items.

[72] With respect to allowed mainland imports, Taiwan will apply MFN Tariff Rate without discrimination. See, Executive Yuan Reply Tai (90) Shih-tze No.65869, Reply to Inquiry of Representative Mr. Liu Sung-fan of Legislative Yuan (December 3, 2001).

[73] Table of Opened Agricultural and Industrial Product Items for Mainland Imports, Ministry of Economic Affairs (February 25, 2002).

[74] WTO Plan, Part II-I-(II)-1-(1).

[75] In late December 2001, Taiwan suddenly revised its policy governing agricultural investment in China. "Forbidden items" jumped from 73 to 436, with relocating 75 items that were originally under "permitted items" to "forbidden items". The tightened measure was adopted to prevent Taiwanese capital flying to mainland investing in agriculture and then have those products flowed back to Taiwan, causing great impact to domestic agriculture producers. See, Zhu Shu-juan, U-Turn in Policy on Agriculture Investment in Mainland, United Daily News, section 13 (Taipei, December 22, 2001)   

[76] Wen Shih-ming: Mainland Products Coming to Taiwan, List Published Today, Central Daily (Chung-yang Il-pao), January 16, 2002.

[77] Data as of March 2002. Note 23, supra.

[78] Publication: Opportunity and Impact to Domestic Agriculture after Joining WTO, Bureau of Foreign Trade of Ministry of Economic Affairs.

[79] Note 74, supra.

[80] Note 73, supra.

[81] See, texts between notes 52 and 53, supra.

[82] Adopted jointly by Ministry of Economic Affairs Order, Jing Diao-tse No.09104603340, Ministry of Finance Order, Tai-tsai Kwan-tse No.0910550092, and Council of Agriculture Order, Nung He-tse No.0910060079 (February 15, 2002).

[83] See, Article 16 of Protocol on the Accession of People's Republic of China, WT/L/432 (November 23, 2001), pp.9-10. Article 16 "will be terminated 12 years after the date of accession", see Article 16(9).

[84] Article 16(7), p.10, id.

[85] Article 8(2), Trade Regulations, amendment history, see note 66, supra.