4. Mexico-Taiwan trade and investment relationship
4.5. Antidumping measures
One of the elements affecting the relationship between Taiwan-Mexico is unfair trade practices. In particular, since the 1990s, Mexico has imposed definitive antidumping measures on the following products: kitchen articles of iron and steel; steel balls; carriage and strollers; and textured polyester filament. These measures were eliminated when the conditions that gave them origin changed. Currently, there is only a preliminary antidumping measure in force on coated flat steel for Taiwan.28 Taiwan has not applied any measure to Mexico in the last years.
27 Study quoted in BOFT, La participación de Taiwán en el TPP fortalecerá la relación México-Taiwán, el comercio bilateral y la inversión, Ministry of Economic Affairs of Taiwan, 2013.
28 Unidad de Prácticas Comerciales Internacionales, Sistema de Información sobre Prácticas Comerciales Internacionales, Secretaría de Economía, October 2016. Available at http://www.contactopyme.gob.mx/upci/
5. TPP
MAIN PROVISIONS AFFECTING THEM
EXICO-T
AIWAN TRADE AND INVESTMENT RELATIONSHIPAccording to its members, the TPP is a high standard, ambitious, comprehensive and balanced agreement. There are five defining features of the agreement. First, it eliminates or reduces tariffs and non-tariff barriers in substantially all trade in goods, services and investment. Second, the agreement promotes the development of production and supply chains and seamless trade. In the third place, it fosters innovation, productivity and competitiveness by addressing new issues that are relevant to the global economy. Next, it aims at ensuring that all economies and all businesses within them benefit from trade.
Finally, and not less important, the TPP is considered to be a platform for regional economic integration and designed to include additional economies.29
The 30 chapters of the TPP deal with traditional issues in FTAs (i.e. market access for goods, services, and agricultural products; rules of origin; and, customs procedures) but also establishes rules in other areas which relation with trade could be less apparent (i.e. e- commerce, State-owned enterprises, intellectual property, labor policy and environmental policy).
TPP chapters could be classified according to their nature as follows:30 market access; rules and governance; administrative; and suggestive. Evidently some chapters are more relevant than others, but they are related in very important ways. For example, those on rules and governance could have a very important impact in market access (i.e. Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Electronic Commerce, and State- owned Enterprises). Also, the administrative ones are key in the sense that could affect the functioning of the agreement and hence the relationship among members (i.e.
Administrative and Institutional Provisions). Finally, the suggestive chapters should not be downplayed because they could open important opportunities for confidence building and cooperation among members (i.e. Small and Medium Size Enterprises, Development).
The classification of the chapters is presented in the following table.
Table 21 – TPP chapters and their classification by nature and relevance
Chapter Nature
Initial Provisions and General Definitions Administrative National Treatment and Market Access Market Access
Rules of Origin Market Access
Textiles and Apparel Market Access
Customs Administration and Trade Facilitation Market Access
Trade Remedies Market Access
Sanitary and Phytosanitary Measures Rules and Governance
Technical Barriers to Trade Rules and Governance
Investment Market Access
Cross Border Trade in Services Market Access
Financial Services Market Access
Temporary Entry of Business Persons Market Access
Telecommunications Rules and Governance
Electronic Commerce Rules and Governance
Government Procurement Market Access
Competition Rules and Governance
State-Owned Enterprises Rules and Governance
Intellectual Property Rules and Governance
Labor Rules and Governance
Environment Rules and Governance
Cooperation and Capacity Building Suggestive
Competitiveness and Business Facilitation Suggestive
Development Suggestive
Small and Medium Enterprises Suggestive
Regulatory Coherence Rules and Governance
Transparency and Anticorruption Suggestive
Administrative and Institutional Provisions Administrative
Dispute Settlement Rules and Governance
Exceptions Administrative
Final Provisions Market Access
Source: CATO Institute
In order to assess the main provisions of the FTA affecting the Mexico-Taiwan trade and investment relationship, this section takes into account the features of the Mexico-Taiwan relation and the objectives pursued by both economies in participating in TPP. When relevant, references are included to Taiwan’s commitments in its FTAs with New Zealand (ANZTEC) and Singapore (ASTEP).31
31 The participation of New Zealand in Taiwanese trade was of 0.3 percent and of Singapore of 4.8 percent of the total in the period January-November 2015. New Zealand occupied the 37th position among Taiwan’s trading partners during that period and Singapore the 6th. Source: BOFT. See New Zealand Commerce and Industry Office, A Comprehensive Guide to Understanding the Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation, 2013. Available at http://nzcio.com/webfm_send/58/ (accessed 13 September 2016), and International Enterprise Singapore, The Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic
Partnership. A business guide for companies, 2014. Available at
http://www.iesingapore.gov.sg/~/media/IE%20Singapore/Files/Trade%20from%20Singapore/ASTEP/ASTEP_30_04_20
In any case, it is important to have in mind, as will be seen latter, that the accession processes requires negotiations between the candidates and TPP members. That is, the final impact of Taiwan’s entry into TPP will depend on the outcome of the negotiations to accede.
ANZTEC and ASTEP are the latest agreements negotiated by Taiwan, with countries that happen to be TPP members. Both are comprehensive agreements aimed at liberalizing substantially all trade in a manner consistent with WTO, that include commitments in trade in goods, trade in services, investment, government procurement, intellectual property rights, competition, electronic commerce and trade facilitation, among other areas. In general terms these agreements, however, fall short of the coverage and ambition of the TPP, though in some cases the gaps should not be difficult to resolve.32
This section describes briefly how the TPP could impact the bilateral relation between Taiwan and Mexico. Each subsection starts with a brief description of TPP chapters. The section does not pretend to assess Taiwan’s readiness to join TPP.
5.1. Assessment of TPP chapters33
5.1.1. Initial Provisions and General Definitions
The chapter establishes that the Parties to the TPP create a free trade area consistent with Article XIV of the General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS) of the WTO. This means that substantially all trade of goods and services should be liberalized as a result of the TPP.
The chapter also defines the relationship of the TPP with other agreements; it established that the previous agreements between the Parties will coexist with the TPP, including the WTO agreements and the bilateral and regional agreements. The chapter also allows the use of the dispute settlement mechanism to resolve potential conflicts between the TPP and other agreements.
Accordingly, trade agreements signed by each party with TPP members will coexist with TPP. This is important given that in some cases the commitments are complementary or members have gained access already to other markets with previous FTA given them a temporary advantage to adjust to strengthened competition. In this sense, when Taiwan joins TPP, ANZTEC and ASTEP will coexist with it, the same as previous Mexico’s FTAs with TPP members, such NAFTA and the Economic Partnership Agreement with Japan.
5.1.2. National Treatment and Market Access
Other provisions of the chapter include: a prohibition on import and export restrictions (with limited exceptions); a prohibition on performance requirements; clear, transparent and non-discriminatory import and export licensing rules; a commitment to publish promptly import and export regulations; and disciplines to administer tariff-rate quotas in agriculture in a transparent and impartial manner.
The TPP is very ambitious in the sense that practically all trade in goods will be liberalized, most of it with the entry into force of the agreement. For sensitive products, tariff rate quotas, longer transition periods and partial elimination of tariffs were negotiated by members.34 This chapter could have the most important impact between Mexico and Taiwan because it would open each other’s goods market. In the case of Mexico, with TPP Mexico will open its market to those members with which it does not have FTAs. This would be the case of Taiwan when joining the TPP. In turn, Taiwan would open its market to Mexican goods. Most TPP countries negotiated a single tariff schedule for all TPP members; although exceptions were included to address specific interests or concerns at bilateral level.
As shown in previous sections, Taiwan’s average tariff is 6.5% for all goods, but higher in animal products; fruits, vegetables and plants; fish and fish products; clothing; textiles;
and transport equipment. Additionally, in agriculture Taiwan applies 16 TRQs in products like rice, bananas and pineapples.35 With TPP Taiwan will have to eliminate and reduce substantially such tariffs. As exporter of agricultural goods, U.S. has expressed concerns over Taiwan’s relative high tariffs and TRQs in agriculture.36 Given that Mexico is also an exporter of agricultural products a similar concern would be expected from the country.
As a result of TPP, Mexico will eliminate tariffs for more than 99% of its tariff lines bringing its average tariff close to zero; Taiwan would benefit from this commitment to enter the Mexican market. If joining TPP, a similar commitment would be expected from Taiwan to Mexico and other TPP parties. In fact, Taiwan has shown that kind of commitment in ANZTEC and ASTEP where it liberalizes practically all trade in goods with New Zealand and Singapore (more than 99%)37, most of it with the entry into force of the agreements.
In conclusion, the accession of Taiwan to TPP would mean obtaining and offering market access with Mexico and other TPP members in the context of very comprehensive and ambitious commitments by founding members. Bilateral negotiations would be expected to address specific interests and concerns between Mexico and Taiwan.
34 See Freund Caroline, Tyler Moran and Sarah Oliver, Chapter 2. Tariff liberalization, in Peterson Institute for International Economics, Assessing the Trans-Pacific Partnership, Volume 1: Market access and sectoral issues, PIIE Briefing 16.1, February 2016, p. 34. Available at https://piie.com/publications/briefings/piieb16-1.pdf (accessed on 13 September 2016), and Schott, et. al., p. 17.
35 See WTO, Report by the Secretariat, Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, p. 46, and United States Trade Representative Office, The 2016 National Trade Estimate Report, 2016, p. 406. Available at https://ustr.gov/sites/default/files/2016-NTE-Report-FINAL.pdf (accessed 20 September 2016).
36 See Bush and Meltzer, p. 11.
5.1.3. Rules of Origin and Customs Procedures
The rules of origin define whether a good is from the TPP region (originating) and therefore eligible to receive preferential treatment. The chapter provides rules of origin that promote regional supply chains when allowing for cumulation among TPP countries, that is, that a good could be produced with inputs from different TPP members and be considered originating for tariff purposes. TPP rules of origin also considered when inputs to produce a good are not available in the region. Product-specific rules of origin are contained in the agreement; for sensitive goods such rules are stricter to guarantee that producers from TPP are the primary beneficiaries of it. The rules feature regional value content requirements and/or tariff shifts. Customs procedures are defined to determine when a good is originating.
Different from the tariff preferences, the accession of Taiwan to TPP would not mean a bilateral negotiation since the rules of origin are already defined and apply to all members.
With its participation in TPP, Taiwan´s goods will receive preferential treatment to TPP members’ markets. Likewise, it will be able to be part of regional value chains since its inputs would be taken into account for determining that a good is TPP originating thanks to cumulation provisions. For both Taiwan and Mexico, originating goods would be exported with tariff preferences to each other’s markets, including inputs that could be used to export to other TPP members as part of regional value chains.
5.1.4. Textiles and Apparel
The TPP contemplates the elimination of all tariffs on textiles and apparel, most of them with the entry into force of the agreement and over longer timeframes for the sensitive products. The rule of origin defined for most of these products is yarn forward, that is, fabric and clothing will be considered originating only if they are made of yarns manufactured in the region. Some exceptions were incorporated into the rule, including through a “short supply” list where certain yarns and fabrics would be considered originating even if they are sourced from outside the region when they are not produced in sufficient quantities in the region. The chapter also incorporates commitments on customs cooperation and enforcement to prevent duty evasion, smuggling and fraud, as well as a special safeguard to these products to avoid affecting the sector in TPP members with a sudden surge in imports.
It is worth mentioning that within the TPP and subject to the dispute settlement mechanism, Mexico and Vietnam negotiated the implementation of a program by the Vietnamese authorities to monitor the production and exportation of textiles and clothing
As with other sectors, with its participation in TPP, Taiwan´s textiles and apparel goods will receive preferential treatment to enter member’s markets and the economy will be able to be part of regional value chains. Both, for Taiwan and Mexico, originating textile and apparel goods would be exported with tariff preferences to each other’s markets, including inputs that could be used to export to other TPP members.
As mentioned before, tariffs for textiles and clothing in Taiwan, as in Mexico, are relatively high. Taiwan, as Mexico committed, would have to reduce such tariffs when joining TPP, which should increase bilateral trade in the sector. But perhaps most important, if not joining TPP, Taiwan will not be able to become an even more important supplier of inputs for TPP members in this sector because of the strict rule of origin. Taiwan, after China and South Korea, is a major supplier of textiles to Vietnam; even some Taiwanese firms have moved to Vietnam for that purpose.39 Joining TPP will provide an advantage to Taiwan as supplier of textiles and also to TPP members by having a competitive source of inputs.
As supplier of inputs for this sector, Taiwan’s incorporation into the TPP represents a challenge and an opportunity to Mexico. A challenge because some of the founding TPP members would be able to use Taiwanese inputs to export textiles and clothing to Mexico and U.S. (main destination for Mexican goods) with tariff preferences, and an opportunity because Mexico would be able to export to TPP countries in such conditions using those same inputs. Also, as reflected by the customs cooperation agreements of Mexico with Vietnam and Malaysia, there is an important concern in Mexico with circumvention, that is, altering the country of origin when exporting to the country to avoid the application of certain restrictions or to take advantage of preferential treatment. This is the case given the competitiveness of non-TPP countries in Asia in the sector. It would not be surprising that Mexico requests to have a similar agreement with Taiwan.
5.1.5. Customs Administration and Trade Facilitation
Improvement in customs will reduce the cost for doing business and taking advantage of the TPP. The chapter defines rules to ensure that customs procedures are implemented in a predictable, consistent and transparent manner. It also encourages efficiency in customs and border procedures, and cooperation. The chapter provides for the issuing of advance rulings on customs valuation and other matters. Also TPP members have agreed to provide expedited customs procedures for express shipments. The chapter covers similar topics than the WTO Trade Facilitation Agreement that is expected to enter into force early next year.
Mexico and Taiwan have ratified the WTO agreement on the subject. Both parties will benefit from the entry into force of either of the agreements. Mexico has incorporated this kind of commitments in other agreements such as the Pacific Alliance. The provisions of this Chapter in TPP would ease and expedite trade, and strengthen supply chains between Taiwan and Mexico, consequently reducing transaction costs, as with other parties to the agreement.
5.1.6. Trade Remedies
This chapter reaffirms the right of TPP members to use their domestic safeguards, antidumping and countervailing duties laws in a manner consistent with WTO agreements. Additionally, it contains a transitional safeguard mechanism, with notification and consultation requirements, which allow members to apply a transitional safeguard measure for a limited period of time in case there are import increases as a result of the tariff cuts that cause serious injury to a domestic industry. The chapter provides for a mutually-agreed compensation. Transitional safeguard measures should not be applied to any product imported under a TPP tariff rate quotas, and may exclude TPP products from a WTO safeguard measure if they are not a cause or threat of serious injury.
With the tariff phase out to be negotiated by Taiwan and Mexico once the first one enters the TPP, both of them would be able to apply transitional safeguard measures in case their imports increase as a result of the tariff phase-out. Also their rights to use domestic safeguards, antidumping and countervailing duties are guaranteed.
5.1.7. Sanitary and Phytosanitary Measures (SPS)
The chapter aims at ensuring transparent, non-discriminatory rules based on science, and reaffirms the right of TPP members to protect human, animal or plant life or health. The TPP builds on the WTO agreement and work of the committee on the subject for identifying and managing risks so that measures are no more trade restrictive than necessary. Also, TPP Parties commit to improve information exchange related to equivalency or regionalisation requests. Parties commit to promote systems-based audits to assess the effectiveness of regulatory controls of the exporting members. The chapter establishes a consultation mechanism to strive to solve SPS matters among members before using the dispute settlement mechanism of the TPP.
The TPP chapter aims at avoiding that SPS measures mask protectionist measures through extensive provisions on the subject. Once in TPP, Mexico and Taiwan will have additional mechanisms to ensure that SPS measures are science-based and not imposed for protectionist purposes. Given the high quality standards of TPP, Taiwan will have to adjust or modify domestic regulations in a more aggressive fashion than the FTAs with New Zealand and Singapore40 to ensure the adoption of science-based regulations for food safety41; these two agreements basically confirm commitments on the subject of the WTO.42
Taiwan has recognized the need to develop capacity building to be able to implement TPP.43
5.1.8. Technical Barriers to Trade
TPP Parties agreed on transparent, non-discriminatory rules for developing technical regulations, standards and conformity assessment procedures. Parties preserve their ability to fulfill legitimate objectives. They committed to cooperate to ensure that technical regulations and standards do not create unnecessary barriers to trade. TPP creates rules to facilitate the acceptance of the results of conformity assessment procedures from the conformity assessment bodies in the other TPP Parties.
TPP obliged members to allow for the public to comment on proposed technical regulations, standards, and conformity assessment procedures. Parties will ensure a reasonable interval between publication of technical regulations and conformity assessment procedures, and their entry into force. The chapter includes annexes related to regulation of specific sectors to promote common regulatory approaches: cosmetics;
medical devices; pharmaceuticals; information and communications technology products (goods that use cryptography; electromagnetic compatibility of goods and telecommunications equipment); wine and distilled spirits; proprietary formulas for prepackaged foods and food additives; and organic agricultural products. As in the previous chapter, the TPP establishes a consultation mechanism to strive to solve TBT matters among members.
It has been identified the need for Taiwan to base its standards of international ones and to adopt the best practices of its regional competitors.44 Also, as with sanitary and phytosanitary measures, Taiwan has recognized the need to develop capacity building to be able to implement TPP.45
Given that the chapter goes beyond WTO in areas such as mutual recognition and good regulatory practices, including by defining commitments in specific products that could be of interest to Taiwan and/or Mexico, like information and telecommunications technology (ICT) goods and food, both parties will have an additional instrument to guarantee that technical barriers are not unnecessary barriers to bilateral trade.
5.1.9. Investment
As in other FTAs and investment agreements, the chapter provides the basic investment protections, including: national treatment; most-favored-nation treatment; and “minimum standard of treatment” for investments in accordance with customary international law principles. At the same time, it prohibits expropriations that are not for public purposes, without due process, or without compensation, and also the imposition of “performance requirements” such as local content or export performance. The chapter provides for free
43 BOFT, Taiwan’s preparations for joining the TPP, Ministry of Economic Affairs, p. 3.
44 See Bush and Meltzer, p. 13. For example, the U.S. has expressed concerns in a mandatory biotechnology labeling, and labeling and other requirements for cosmetics. United States Trade Representative Office, p. 403.