1. Theoretical framework____________________________________________ 35
1.5 The protectionism scale
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The mixture of theories presented in the paragraphs above may seem convoluted as it brings together several different perspectives. However, as this research aims to fully understand the meat markets of Taiwan, the proposition of having different theoretical prisms is a helpful one in order to unravel the causal complexity behind the selective protectionist, or selective liberalization policy taken up by the country. In his compilation of the Ohlin lectures, Jagdish Bhagwati (1988) is clear about the influence of ideological factors, interests (or material reality) and institutions (as they shape constraints and opportunities) in the determination of policies. In a similar vein, Helen Milner established in her work that “The formulation of a nation’s trade policy involves a struggle among domestic groups, the national government, and foreign governments. The complex interactions of these groups provide insights into the relationship between domestic and international politics” (Milner, 1988, p. 3). Not one single source of analysis will reveal the whole story, since several levels of analysis are involved, and they receive influence shaped by different factors.
1.5 The protectionism scale
In order to complete this theoretical framework, we need to define the concepts of selective protection and selective liberalization, which will represent the key to defining Taiwan’s position in the protectionism scale after the research has come to an explanatory understanding of the research question.
A workable definition for selective protectionism will be taken under the following parameters:
- Selective political privilege: Following the definition of protectionism presented below, selective protectionism will also be understood as a political privilege shielding some actors and sectors from a competitive market. This privilege will be applied selectively as a policy tool, in order to achieve the policy interests of one or several of the bureaucracies involved. A selective political privilege will not be considered only in its sectoral dimension, but also on Taiwan’s capability to select both the actors and the timing on which this privilege is applied.
- Partially distorted prices without supply problems: The market is distorted in terms of price (due to limited competition and the shielding of actors with low productivity), but the supply of the goods to consumers and distribution channels is efficient and constant.
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- Relevant role of trade-restricting ideas: In a scenario of selective protection, ideas that are trade-restricting (such as food safety or food security for this case) make their way into policy aiming genuinely for goals aligned with them.
- Absence of the sectoral development goal: A policy of selective protectionism will not have the goal of developing the protected economic sector, since the application of this concept will be used for a within-sector analysis, and the selective participation of actors will not allow the generation of a fully protected environment.
- Political and social goals are evident over economic targets: The partial opening of the sector will respond to political goals and social stability, rather than development objectives, since competition will be allowed to develop on a gradual manner; but this competition is not allowed with the goal in mind of creating competitive markets, but with the objective of granting political gains to institutions in return for political privileges: A bargaining chip.
- Tool of policy: Foreign economic policy is not necessarily considered an end on itself, but rather a tool for trade-offs to be used by linking issues that are of interest to the bureaucratic unit under analysis.
- Mix of restrictive and regulatory protection: The tools used to implement a policy of selective protectionism will be a mix between restrictive and regulatory policy tools;
while somehow disguising protection under regulatory frameworks, these will co-exist with restrictive mechanisms (quotas or prohibitions). Such measures will be straightforward protectionist without the “make-up” that regulatory protection brings.
The definition of selective protection towards this research, according to the abovementioned parameters, will be the following: A policy of political privilege granted on a gradual and selective basis to different domestic or international actors in order to help them maintain (or increase) their market share in view of potential foreign competition as bargaining chip towards the achievement of broader foreign policy goals. It is not aimed at the domestic economic development of the shielded sector, rather at the political gain obtained from granting or limiting market access. Such a policy is covered by trade-restricting concepts or ideas, legitimized in international organizations like multifunctionality of agriculture. It is a policy that distorts prices, but does not distort the amount of supply required by the market, and is applied through a socio-political rather than economic rationale using tools that mix regulatory protectionism with import prohibition. This definition distances itself from strict protectionism, where the granting of political privilege is granted solely domestically, and its goal is political as well as economical. If a policy is applied to a whole sector, this research will consider it protectionist rather than selectively protectionist,
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as it is being shielded completely from foreign competition and different rationales may apply to it.
The main difference between selective protection and selective liberalization will be given by the objectives of the policy. While selective protection is considered a political privilege aimed at shielding certain actors from competition, selective liberalization will strive for the gradual creation of a competitive market, favoring an efficient allocation of resources within the economy rather than the garnering of political gains. Even if players are allowed into the market in a gradual basis, there is an end goal of having an open market to those who comply with the existing regulations. Standing on this base, the parameters used for a workable definition of selective liberalization are the following:
- Gradual elimination of political privileges: The policy will be based on the gradual elimination of trade-restricting measures affecting foreign players, without shocking the market with a massive liberalization of the sector under analysis. The selection of players will be based on both domestic demand for the goods, and foreign demands for market access.
- Efficient resource allocation and economic growth as a pillar of policy: The efficient allocation of resources, towards the goal of optimal productivity within the economy, will be the goal informing policy makers and policy alternatives. Alongside this main goal, safeguard measures are taken to make this process gradual conducting it in a manner of shock avoidance, where uncompetitive industries are allowed to die, but giving them time and resources to relocate the factors of production to more competitive sectors.
- Compliance with the WTOs blue and green boxes for agricultural support measures:
Amber box measures are price and trade distorting. On the other hand, blue box measures are considered to reduce distortions, and green box measures are considered non-price distorting. A movement towards compliance with green box measures (or mediating blue box measures towards that goal) will be considered as part of a selective liberalization policy moving towards a non-distortionary agriculture.
These measures will differ from strict liberalization where no support measures will be implemented to support a sector which is not export-competitive.
- Diminished relevance of political considerations: The political considerations for granting protection to domestic or foreign players will be limited vis-à-vis economic growth. Liberalization is viewed and conducted in light of reciprocity rather than issue linkage, where the efficient allocation of resources through trade becomes the main goal.
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- Exclusively regulatory protectionist measures: While restrictive measures are highly visible towards every trade partner, a protectionist mechanism involving only regulatory restrictions speaks of the country’s concern towards appearing to be on a path of liberalization, by disguising its gradualism with stringent regulations. While regulatory protectionist measures can have the same effect as restrictive protectionist policies, they are disguised so that rhetorically the country appears to be on a path of liberalization.
A policy of selective protectionism will apply measures based on gains to be received from the granting of a political privilege. A policy of selective liberalization, on the other hand, puts itself within a process towards strict liberalization, and it does not move based on potential trade-offs and issue linkages, but rather on reciprocal market access and the goal of efficiency. Thus selective liberalization can be defined as a policy of gradual elimination of political privileges in the marketplace, informed by liberal theories with the objective of achieving efficient resource allocation without shocking the economy with abrupt changes.
The relevance of political choice is diminished, and the gradual and selective changes are taken in light of consumption’s demand for certain goods and supplier’s plea for market access. With a policy of selective liberalization, the tools implemented are disguised under the framework of regulatory protection, avoiding restrictive trade practices. For the particular case of agriculture, the process will aim for the establishment of non-price distorting green box support measures towards domestic producers.
Therefore, even though a selective protectionist policy and a selective liberalization policy may have similar effects on the market, the ideas informing them and the forms they take in policy and rhetoric differ widely and are therefore not hard to qualify.
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best means of maximizing overall societal welfare, why has it proven so hard to achieve in certain sectors such as agriculture? The political element of the answer is bound to surpass the economic rationale that it frames. Thus the guiding research question here is, why does Taiwan have in place a partially protectionist trade policy?Protection
Liberalization