5. Significance of the research
1.2 Further Unilateral Liberalization in the 21 st Century
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Besides tariffs and quotas, commitments were made on the area of NTBs, particularly in regard to the SPS chapter of the negotiations. SPS commitments establish two kinds of concerns that should be taken into account when discussing import controls: Animal health and human health. In order to protect animal health, countries control (or ban) the inflow of pests and diseases by establishing certain levels of protection and banning products from areas where these pests/diseases have appeared. In order to protect human health, countries set standards regarding the additives that food can or cannot contain; for meats it is the Maximum Residue Limits (MRL) for veterinary drugs that establishes the levels of protection.
Regarding SPS commitments in animal health, the representative of Taiwan towards the WTO reported that Taiwan was endeavouring to modify its standards for the protection of animal health in order for them to match the international standards (WTO Ministerial Conference, 2001, p. 40), such as what had been done in order to match the international standards for MRLs in the use of veterinary drugs. However, the representative further recognizes that Taiwan will not follow the recommendations of the Office International des Epizooties (OIE) regarding trade restrictions due to infectious disease in animals, but it will add to the existing OIE lists nine further diseases which, if detected, will impede meat trade with Taiwan (WTO Ministerial Conference, 2001). In trade terms, this situation generates SPS requirements that are more stringent than what international standards recommend, therefore limiting trade through the creation of additional barriers.
The liberalization process so far reflects a two-headed dialogue where tariffs are reduced, but non-tariff barriers remain or increase. Upon its WTO accession, Taiwan made several important commitments towards meat trade liberalization by reducing tariffs, implementing a schedule for phasing out TRQs, and negotiating INRs with several important exporting countries. But at the same time, Taiwan managed to develop important NTBs through the SPS chapter of its accession, making sure that the central control of imports remains largely on the state’s hands, with stringent sanitary conditions for the exporting of meat, and arbitrary licensing procedures required in order to have importing permits.
1.2 Further Unilateral Liberalization in the 21st Century
The framework for analysis in this research goes up to the year 2014. After Taiwan’s accession to the WTO in 2002, the WTO worked as the main trade forum where member economies requested further liberalization, and where Taiwan expressed its policy alternatives. The Trade Policy Reviews (TPRs) are the documents that best reflect the
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progresses made, as they are composed by a document generated by the WTO secretariat, a document written by Taiwan’s trade representative, and a final revision of both. These TPRs were presented every four years, thus providing a valid interval for analysis of progresses. These were presented in 2006, 2010 and 2014.
In the 2006 TPR, the WTO Secretariat is clear when it states that “Chinese Taipei has continued to liberalize its trade regime; this liberalization has involved tariffs as well as non-tariff measures, such as prohibitions and licensing” (WTO, 2006, p. X). These commitments are further highlighted by showcasing the descending trend of tariffs, and the transparency of import regulations. However, the Secretariat is quick to pinpoint agriculture as a sector where liberalization is not progressing alongside other sectors, as some measures taken (like establishing non ad-valorem duties) are not in line with liberalization efforts. Reviewing sector by sector, the Secretariat dictates that “the sector [agriculture] receives relatively high border and domestic support compared with other sectors. In 2005, the average MFN tariff on agricultural products was 22.3% whereas that on non-agricultural products was about 5%”
(WTO, 2006, p. XI). The TPR concludes with an outlook of Taiwan’s economy, where it establishes that further growth is conditional to several reforms, strengthening corporate governance and “trade liberalization, particularly in agriculture” (WTO, 2006, p. XII).
The paragraph above calls for further reforms in agricultural liberalization; it does not say that gradual efforts had not been made since Taiwan’s accession. In terms of tariffs, Taiwan decreased its simple average applied tariff on agricultural products from 24.7% to 22.3%, representing a small improvement (WTO, 2006, p. 31). If we look at the item titled
“Live animals and products thereof” the average rate descended much more rapidly from 54.8% in 2002 to 18.8% in 2005 (WTO, 2006, p. 33) indicating a much higher liberalization in meats than in the average of agricultural products, where items like rice continued to be highly protected. The descended levels of tariff rates in meats responded in part to the TRQs adopted (which were to be phased-out by January 2005 for meats), and in part to the implementation of the accession commitments.
Trade facilitation measures taken in the tariffs realm were not necessarily matched with similar efforts in NTBs. “Import prohibitions, restrictions, and licensing apply, inter alia, by reason of the requirements of various trade agreements, essential security, and for the protection of culture, hygiene, or the environment” (WTO, 2006, p. 41). Sanitary reasons continued to deter stronger liberalization of the meat sector by 2006. In spite of the commitment made by Taiwan to match its standards to the international standards of food safety requirements, in 2006 Taiwan had 451 agricultural standards, of which only 80 (17.7%) were matched to the international standards (WTO, 2006, p. 54). Adding to the restrictions
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and stringent standards, SSGs were activated yearly for chicken meat and poultry offal during the 2002-2005 period, leading to partial closures of the market, since the trigger level of imports was surpassed. This happened because the trigger levels for items with SSGs were set at a very low level; for example, the trigger level for chicken legs and wings (under HS 0207) was set at 14.080 tonnes. During the year 2000, the consumption of chicken legs and wings in Taiwan was of 187.029 tonnes; thus the trigger level is activated when imports represent even less than 10% of the total market share.
NTBs and TBs seemed to be moving in different directions in this liberalization process.
While Taiwan managed to bring down the tariff level up until the year 2006, its NTBs became harder to comply with for exporters, making it difficult for foreign producers to get a decent market share in Taiwan’s meat market. Taiwan commented in its own TPR on 2006 that
“SPS measures are in compliance with the relevant international standards, recommendations and guidelines developed by the International Plant Protection Convention (IPPC), the World Organization for Animal Health (OIE) and the Codex Alimentarius Commission, based on scientific principles and risk assessment” (WTO, 2006, p. 6). While some of the measures taken are effectively in compliancy, as we have shown some others are not, and establish requirements that go further than recommended by international standards. Measures taken such as the constant implementation of SSG measures, inclusion of more MRL standards, and sanitary requirements stronger than those required by the OIE impeded further liberalization in the meat sector.
Taiwan itself recognizes the need to keep reforms in agricultural trade within the parameters of “flexibility” in order to avoid damages to the economy. “While committed to a substantial reduction in trade-distorting domestic support, as well as substantial improvements in market access, it holds the belief that a certain amount of flexibility should be given to Members when adopting agricultural reform policies, in the interest of maintaining the sustainable development of the sector” (WTO, 2006). Since tariffs are the easiest-to-measure item when it comes to trade barriers, the reductions conducted by Taiwan represent a commitment towards further liberalization; but the NTBs established or sustained impeded increases in trade that would go in parallel with market needs.
Moving further down the timeline, the WTO Secretariat and Taiwan again provided TPRs on the year 2010. Overall, Taiwan’s economy continued through an aggressive liberalization path praised by the WTO members. “Chinese Taipei's overall trade policy objectives have remained governed by its need to be increasingly integrated into the global economy through its active participation in multilateral trade and economic organizations, the negotiation of free-trade agreements (FTAs), the strengthening of trade facilitation and
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promotion activities, the elimination of trade barriers in overseas markets and the diversification of these markets” (WTO, 2010). Improvements were highlighted (among others) in the areas of transparency, customs management, institutional development (the creation of the Office of Trade Negotiations among others), the signing of bilateral FTAs, opening of the service sector, and improved access to government procurement. However, as the report will notice, not all sectors have moved in that direction, and there are serious doubt regarding trade liberalization in the agricultural sector as the report establishes that
“Chinese Taipei met virtually all its notification requirements under the WTO Agreements on time, except for those relating to import licensing procedures and domestic support in agriculture (2006, 2007, 2008). (…) Import protection involves some of the highest tariffs in the economy, tariff-rate quotas, and special safeguard measures.” (WTO, 2010).
In terms of tariffs, TRQs on meats did not exist since the year 2005. The tariff levels did go down slightly from the previous measurement in the year 2005, reaching an average level of 22.1% for agriculture. The existence of non ad-valorem duties did not disappear, and most of the existing ones still affected agricultural goods, including meat products. Thus international market prices would not have a repercussion in the percentage of tariff collected from meat, since it is fixed on volume (kg). Nonetheless, there continued to be a slight advancement towards liberalization in tariff reduction.
In terms of NTBs, the situation was not much better in 2010 than what it was in 2006.
“The large majority of Chinese Taipei's standards remain voluntary; in 2009, 18% of applied standards were aligned to international standards, down from 25% in 2005. Measures have been taken to address maximum residue limit requirements” (WTO, 2010). In agriculture, Taiwan included three more standards taking the total to 454 of which only 81 were international standards. In the year 2008 Taiwan established 218 MRLs for veterinary drugs in meat products; these efforts were to be in line with the Codex but the total amount of MRLs had not been established by 2010, therefore it was impossible to asses. Regarding animal health and protection against disease, the TPR quotes an article by which Taiwan established a period of 10 years of ban from countries were BSE (mad-cow disease) was declared (WTO, 2010, p. 62). This made imports of beef much more complicated, and the amount of time needed to re-open the market seemed excessive.
SSGs continued to be important in the protection of poultry and certain pork products.
As in the previous period, these were activated several times, imposing SSG tariffs on imported products, thus giving a competitive edge to domestic producers. “During the period under review, Chinese Taipei has imposed safeguard provisions on poultry imports several times, and SSGs have been triggered on several other products, including types of offal” and
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pork belly (WTO, 2010, p. 47). The persistence of low SSG trigger level sustained this protectionist measure as a truly effective one regarding the control of sensitive meat inflow from foreign countries into Taiwan, keeping a high level of border protection for poultry and pork.
As in the previous period, TBs and NTBs moved in parallel and different directions. TBs continued to be reduced, TRQs were not re-implemented, and the import of these goods enjoyed a more favourable tariff treatment. In terms of NTBs, however, there were no particular signs of progress towards liberalization: SSGs stayed in place with low trigger levels, standards did not move forward to match international standards, the implementation of MRLs was slow, and some sanitary measures taken (such as the BSE restriction of 10 years) seemed to go over the recommended standard of sanitary precaution.
Taiwan’s position throughout this period was in line with its general policy towards liberalization, and it argued in its 2010 TPR that “the government remains a firm supporter of trade liberalization and believes that protectionist measures can only create a vicious cycle that will worsen the situation” (WTO, 2010, p. 2) when referring to the ongoing economic crisis. Taiwan’s commitment with liberalization remained strong, and the whole document showcased policies through which Taiwan had supported trade liberalization in several areas.
When it comes to agriculture, however, Taiwan is emphatic to point out that “trade liberalization in the sector should proceed in a gradual manner” (WTO, 2010, p. 14). Very important becomes to highlight the fact that Taiwan starts to refer to the multi-functionality of agriculture, something it had not done before. The idea that agriculture is a sector requiring a particular treatment, due to the fact that it offers to the country much more than just economic activity, has taken hold of Taiwan’s agricultural trade policy, apparently altering the rank-scale of values selected by policymakers. The battle of ideas was therefore reaching its peak. While the government stands in line with liberalization in order for the world to overcome (or at least not aggravate) the current economic crisis, agriculture needs to be safeguarded and protected from trade liberalization. These ideas influencing policy could be related to the decrease in tariff barriers (which depend on trade-related bodies) accompanied by the implementation of stringent NTBs in agriculture (which depend on agricultural policy and sanitary related bodies).
Jumping on the final TPR which was submitted on 2014, the situation evolves. The TPR report by the Secretariat is not available, since it is at the time of writing being revised16. However, there are documents which are adjacent to the TPR, which include the questions that were made to Taiwan regarding its progress on trade issues. The first one is the
16 It was searched for on June 28th and July 28th respectively without a positive result.
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“Minutes of the Meeting” of Taiwan’s TPR (WTO, 2014), and the other one is “Minutes of the Meeting Addendum” (WTO, 2014) which includes the questions and answers made to and by Taiwan. Alongside, the document presented by Taiwan is available.
While the information available in these documents is mostly qualitative, there are several complaints regarding the high level of agricultural tariffs in relation to industrial tariffs.
Mexico points out that “the average agricultural tariff is more than four times the industrial average” (WTO, 2014, p. 14). Similarly, the United States points out that “The Secretariat's report notes that Chinese Taipei's agricultural tariffs remain high. For instance, there are 37 lines with rates higher than 100%” (WTO, 2014, p. 36). While the WTO average of agricultural tariff is not available, the abovementioned comments point out at least to a sustained high-level of agricultural tariffs, and showcases that the commitment made by Taiwan to reduce tariff lines in agriculture to 50% was not executed. While there may have been a small drop in average tariffs, this was not large enough for countries to highlight it and eliminate their agricultural trade concerns. The response by Taiwan on this matter alludes to the Doha round of negotiations and its conclusion in order to advance into further tariff reductions in the agricultural sector. With the Doha round stuck (possibly beyond repair), this seems to be a safe answer towards the maintenance of protectionist policies.
In terms of SPS for animal health, Taiwan was questioned by the EU on its strict position on BSE imports. The questioning points at the lack of alignment between Taiwan’s regulations and the OIE’s recommendations, and a lack of transparency in the approval process, as it states that “EU Member States have to undergo a lengthy and non-transparent risk assessment process which can take several years (one Member State has an application pending for now more than 8 years), while other WTO Members with the same or even a higher country-risk status for BSE (under OIE), can export beef and beef products to Chinese Taipei” (WTO, 2014, p. 6). This represents a very strong allegation on part of the EU regarding NTBs of Taiwan’s meat market, and the difficulties that there are in order to achieve market access. Taiwan is quick to respond that it is adapting its regulations to match the OIE’s recommendations, denies arbitrariness in the process, and certifies that it is carrying studies of risk assessment regarding BSE.
Beyond the particular topic of BSE, the EU questions Taiwan again on its process for the recognition of “disease-free” area, which is not line with the OIE, of which Taiwan is a member. “The EU is concerned about the Chinese Taipei's interpretation of defining a disease free status” (WTO, 2014, p. 6). This situation should be highlighted due to the existence of a TW-EU Bilateral SPS Working Group, where these matters are discussed, but apparently there has been no consensus. While the EU is the strongest complainant
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regarding Taiwan’s protectionist measures based on animal health concerns, it is not the only one; these include Indonesia and Brazil.
Regarding human health concerns, the discussion on MRL is dominated by the ractopamine issue, as Taiwan has rejected all residues of ractopamine in pork, while the CODEX establishes an MRL for this substance in pork meat. Thus the questioning points once again a lack of alignment between international standards and Taiwan’s regulations.
Ractopamine is however a very complex issue (since it is also a banned substance in the EU and many other countries), thus it is not representative of the SPS situation as a whole. In order to achieve a broader perspective, another question posed by Brazil regarding food safety standards sheds more light on the issue. Brazil mentions that Taiwan is not part of the Codex nor the IPPC, but it does follow IPPC recommendations, thus it infers that Taiwan does not follow the Codex standards. Then, Brazil poses the following question:
“Can you confirm that Chinese Taipei does not follow Codex Alimentarius Commission standards? If so, can you explain the rationale for that?” (WTO, 2014, p. 92), to which Taiwan answers “We establish our food safety standards through a risk analysis process that takes the latest scientific research, our national dietary pattern, existing standards in Codex and developed countries into account, consistent with Codex principles” (WTO, 2014, p. 92). In this sense, Taiwan acknowledges that it deviates from international standards for food safety reasons, and establishes a rationale for this deviation. A similar question and answer is also posed by Malaysia, as it questions why Taiwan is not a member of the Codex (WTO, 2014, p. 133).
It appears that by the year 2014, the questioning on Taiwan’s meat and meat products trade policy has increased concerns internationally. While tariffs may have stayed at the same level, or even decrease slightly, the comments on the WTO members still point out a high level of TB protection relative to other sectors. In terms of NTBs, liberalization is not progressing either. After more than one decade of WTO membership, there are several pending complaints on agricultural trade, and many of them are specific to the meat sector and the voluntary measures taken in order to make it hard or impossible for countries to comply with.
Unlike the report by the Secretariat, the report submitted by Taiwan is available, and in it
Unlike the report by the Secretariat, the report submitted by Taiwan is available, and in it