Really Going WTO?
 ---- Trade across the Taiwan-Strait, Its Past and Future
(c)Simon Xi ZHANG, 2002



Less than half a year ago at Doha, a Persian-Gulf city and capital of the tiny state of Qatar, something important to a place of four thousand miles away happened. The Doha Ministerial Conference of the World Trade Organization (WTO) approved by consensus the text of the agreement for People's Republic of China's entry into the WTO on November 10, 2001[1]. On the following day, the Ministerial Conference approved the admission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (TPKM, a/k/a., Chinese Taipei)[2].

On January 1, 2002, for the first time since the past fifty-two years, China and Taiwan became coequal members to a common worldwide organization[3]. The parallel memberships of both sides across the Taiwan Strait in WTO will become a hotbed of various issues in international trade and international law.

The WTO is famous for its open-trade ideology and it seeks to break down trade-distorting barriers behind every borderlines. The WTO has one of the most effective enforcement mechanisms among international organizations. The achievement of the open trade policy as facilitated by dispute settlement process relies on the mutual interest building and voluntary cooperation among all WTO members rather than the dull and dry command pacta sunt servanda. Bearing in mind the past hostile history between China and Taiwan, whether the cross-strait trade will see the similar achievement is still a largely unknown issue.

The fundamental obligation of any WTO member is to grant Most-Favored-Nation (MFN) treatment to other WTO members[4]. Another obligation is the National Treatment[5]. Now that both China and Taiwan are members of the WTO, each of them is required to grant above-mentioned treatments, with collateral rights and privileges acknowledged by WTO rules, towards goods and investments from the other party[6]. Taiwan is yet to bring up its laws and regulations to comply with WTO standards with respect to the treatment of Chinese goods and investment[7].

This article examines the conformity with WTO rules of legislation modification measures taken by Taiwan, and its future policy on mainland trade and investment. If Taiwan does not fulfill its obligation owed to China, in theory, China can take Taiwan before the DSB for a settlement. Whether this will happen is addressed in this article, too. It has to be emphasized upfront that the trade relationship between China and Taiwan is largely dependent on politics. A Taiwanese private business is no less than a mainland state-owned-enterprise wishing to see the full and smooth flow of commerce across the strait, but WTO issues are determined at the very top of two governments. In this case, the research on trade problems involves inevitably observation and contemplation on political policies at both sides.

* In this article, "China", "mainland" and "mainland China" refer to the "People's Republic of China" acknowledged in U.N.G.A. Res. 2758 (XXVI) (October 25, 1971), but excluding "Taiwan" (as defined herebelow); "Taiwan" and "Republic of China" refer to the de facto Government in Taiwan (Formosa). The usage of term "Taiwan" or "Republic of China" and the reference to any official title of persons or official name of government entities in Taiwan, in this article, bear no effect to the author's opinion on the issue whether Taiwan is an independent state in international law.

[1] WTO Press/252, November 10, 2001. For text, see WT/L/432 (November 23, 2001).

[2] WTO Press/253, November 11, 2001. For text, see WT/L/433 (November 23, 2001).

[3] Following the eviction from (and superseded by China) the United Nations in 1971, Taiwan has no membership at any political international organization, or important economic international organizations such as World Bank and IMF. Taiwan has even no membership at certain important technical or specific international organizations such as the World Health Organization, International Telecommunication Union, International Civil Aviation Organization. Before 2002, the only important international economic organization where China and Taiwan have parallel membership is APEC (Asian-Pacific Economic Cooperation). However, APEC is "less-international" than WTO because of its regional (Asian-Pacific) character.

[4] Article I of General Agreement on Tariffs and Trade, October 30, 1947 (61 Stat. A-11, T.I.A.S 1700, 55 U.N.T.S. 187) (hereinafter, GATT 1947).

[5] Article III of GATT 1947. Also appearing in Article XVII of General Agreement on Trade in Services (hereinafter GATS), Annex 1B to Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, April 15, 1994 (hereinafter Final Act), in The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations, 33 I.L.M. 1125 (1999). Note that unlike in GATT, national treatment is a specific commitment under GATS. The applicability of national treatment is subject to the scope of each member's Schedule of Concessions with respect to trade in services.

[6] Contrary to what is predicted by certain sources, neither China nor Taiwan invoked Article XIII "non-application" (Article XIII of Agreement Establishing the World Trade Organization, in Final Act) to each other before Doha Ministerial Conference approved their respective accession.

[7] China's treatment of Taiwanese goods and investments is not discussed in details in this article for reasons followed. For MFN issue, China does not discriminate Taiwan goods and investments against those from other countries. In addition, foreign investment has long enjoyed supra-national treatment in China since 1978, and Taiwan, Hong Kong, and Macau are considered "foreign" under Chinese law with respect to economic activities (in fact, domestic mainland business are now arguing for bring down supra-national treatments to the level playing after China joins WTO). Therefore, Taiwanese investment enjoys supra-national treatment as other foreign investments. National Treatment is the main issue in China's seventeen-year negotiation with Working Group of GATT (pre-1995) and WTO (after 1995). In China's Accession Protocol (WT/L/432, November 23, 2001, pp.2-12), Taiwan is not singled out against other members with respect to national treatment. Therefore, this article focuses on Taiwan's treatment of mainland China good and investment after both sides become members of WTO.

  For China's administration over mainland persons' trading activities with Taiwan persons, there is no special restriction. In essence, trading with Taiwan is not different from that with any foreign country.