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... Taiwan's Major Exports for the years 1997 and 1998. Taiwan's Trade Regime Like a number of its Asian neighbors, Taiwan's economy was protected in many sectors in the 1950 s and 1960 s. As part of a trade liberalization effort encouraged by Taiwan's major trading partners, notably the United States in accordance with WTO accession, many of these trade barriers have been reduced or dismantled in recent years. However, substantial barriers remain in a number of sectors. In an effort to attract more international trade, Taiwan has substantially reduced the applied level of tariffs over the years.
Taiwan's average nominal tariff rate of 8. 2 percent is similar to that of other developed countries and it is scheduled to be lowered to five percent in WTO accession talks. (Taiwanese Trade Statistics) For comparison, the average U. S. tariff rate is just over five percent. (U. S. Trade Statistics) These tariff concessions will ultimately impact 3, 470 industrial products and 1, 021 agricultural products. (Mastel) Beyond that, however, the average tariff hides the fact that in a number of sectors, tariffs remain important barriers to trade.
As is the case in many countries, tariff spikes are quite high in a number of sectors; automobiles and agriculture provide two notable examples. Many countries have employed various trade barriers to protect the automotive sector. In the case of Taiwan, most of this protection has come in the form of tariffs. Currently, tariffs on passenger vehicles range slightly over 60 percent bringing the average tariff on automobiles to almost 44 percent. (Mastel) At this level, tariffs have a strong impact on trade and a substantial restraint on imports. There are similar high tariffs on imports of auto parts; auto part tariffs reach over 20 percent and average over 17 percent. (Mastel) Most of these tariffs, however, will be reduced substantially upon WTO accession.
The average tariffs on automobiles will fall to 16 percent and auto parts tariffs to just over 10 percent. (Mastel) At these levels, tariffs will still impact trade, but imports of both can be expected to rise substantially. In the agricultural sector, tariffs as well as non-tariff measures (NTMs) are also quite significant. Tariffs on many meat products exceed 50 percent and tariffs on various types of fruits and vegetables are also prohibitive. (Mastel) Taiwan's textile and apparel market is also potentially a promising export opportunity for many developing countries around the world although Taiwan itself imports a significant volume of textiles and apparel. Most of the formal protection in this sector is provided by tariffs, which average almost 12 percent.
Upon completing accession to the WTO, the average tariff on textiles will be lowered by about 20 percent to under 10 percent. (Mastel) At this level, tariffs will still restrain imports, but substantial trade opportunities will be created and tariffs on specific products will decline even more dramatically, creating various niche opportunities. In the industrial sector, tariffs are already fairly low. For example, tariffs on semiconductors are now at less than one percent and scheduled to fall to zero. (Mastel) Tariffs on semiconductor manufacturing equipment are now just under six percent and scheduled to be cut by more than 50 percent. (Mastel) Tariffs on a number of consumer electronic products, such as cassette players, are sizeable many in the low teens and also scheduled for substantial reduction. (Mastel) Tariff reductions on these and other consumer products will undoubtedly create substantial opportunities for Taiwan's trading partners and more business opportunities for Taiwanese companies. Of course, tariffs are not the only barriers to trade. A number of products are also subject to various trade licensing and import permit restrictions in Taiwan. These restrictions affect several hundred product classifications and in cases ranging from pharmaceuticals to sport fishing boats, they constitute significant barriers to imports. (United States Trade Representative) Notable restrictions are also applied to a number of agricultural products, including sugar and rice. (United States Trade Representative) Foreign companies exporting to Taiwan have also raised issues regarding various arbitrarily enforced standards on products, such as air conditioners. (United States Trade Representative) Taiwan's import system for alcohol and tobacco products has also been criticized as cumbersome and costly. (United States Trade Representative) Many of these non-tariff barriers are the subject of ongoing bilateral discussions with major trading partners and inconsistent with the WTO and would be reduced or eliminated by the WTO accession process.
As is the case with a number of countries, Taiwan also enforces substantial government procurement preferences and requirements that limit the importation of foreign goods and services. Taiwan's technology transfer requirements have also drawn some criticism, particularly in the aerospace sector. Taiwan has, however, agreed to adhere to the WTO Government Procurement Agreement upon accession to the WTO and has voluntarily undertaken some reform in this area. (United States Trade Representative) Protection of intellectual property in Taiwan has been a long-standing trade issue between the United States and Taiwan. Piracy in various forms has been a significant problem in the past. Through several bilateral agreements with the United States and a number of legislative changes, Taiwan has brought intellectual property protection to a high-level comparable to that of most other developed countries. Concerns are sometimes raised, however, concerning some alleged connections between Taiwanese firms and piracy on the mainland.
As a developed country, Taiwan would be bound to fully adhere to WTO provisions on Trade Related Intellectual Property (TRIPs) upon accession. (United States Trade Representative) In addition, as is the case in a number of countries, Taiwan maintains substantial restrictions with regard to a number of services. Financial services and telecommunications services are two sectors in which there is substantial potential for imports. Taiwan has voluntarily liberalized in both sectors and made particularly significant moves regarding telecommunications services. Taiwan has also agreed to fully participate in the General Agreement on Trade in Services (GATS) upon WTO accession. (United States Trade Representative) As noted, Taiwan has substantially reduced both tariff and non-tariff barriers and improved protection of intellectual property voluntarily over the years. In a number of sectors, however, WTO membership as a developed country would commit Taiwan to economically significant further liberalization. Taiwan and the world trading system have a complex history.
Even without formal membership in the trading system, Taiwan has developed into an important trading partner for many countries. Despite the lingering impact of the Asian Economic Crisis, Taiwan's total trade with the world has approached $ 250 billion in 1999; placing Taiwan in the top rank of trading powers. From the perspective of the WTO and its trading partners, Taiwan has proven itself a responsible trading power. In the last decade, Taiwan has greatly liberalized its trading system; tariffs and NTMs have come down and protection of intellectual property has improved to a level consistent with other developed countries. There are still areas in Taiwan's trading regime which could be improved, but Taiwan's economy is already more open than that of most of its Asian neighbors. Unlike the PRC and many current members of the WTO, Taiwan's trading regime is already in compliance with the provisions of the WTO.
Upon accession to the WTO, Taiwan has agreed to undertake a series of additional trade liberalizing measures that will open billions of dollars in new trade opportunities annually for its trading partners and for Taiwan itself. Certainly, Taiwan's largest trading partners, such as the United States and Japan, will enjoy a substantial share of these new opportunities; however, Taiwan is a diversified trader that maintains substantial trade relationships with many countries. All of these are likely to see some additional export opportunities and some countries that do not currently trade with Taiwan may also enjoy some benefits and in the end, Taiwan's membership in the WTO will strengthen the WTO as an institution. The trade liberalization that results will benefit Taiwan, Taiwan's trading partners, and the world trading system. The economy of Taiwan is undoubtedly affected and will continue to be affected by the loosening of trade restraints.
Because of the relative small size of the island and lack of natural resources, many Taiwanese companies have already been forced to transfer to Mainland China where their operating expenses are significantly lower due to availability of space and cheaper labor. With further liberalization of import tariffs, Taiwanese companies will be further challenged by the influx of cheaper foreign goods. Unless Taiwanese companies gear themselves to handle the changing market and competition, they will lose a significant share of their home and foreign markets and also be forced to move to mainland China or somewhere else that offers cheap labor. In addition, Taiwanese companies will have to invest in newer technologies to further compete with the ever-increasing number of foreign companies. Along with the negative effects of trade liberalization, there are also positive outcomes for the Taiwanese economy. With imports at lower tariff rates, the people of Taiwan will experience increased buying power.
The standard of living will also increase since Taiwanese will have a wider range of products at cheaper prices from which to purchase. Taiwanese companies will be forced to raise the quality of their products and services in order to compete with foreign companies thus affording the Taiwanese people more products for their money and ultimately increase spending leading to an even more robust economy. Bibliography: 1) Taiwan's Twenty Years of Economic Expansion. Taiwan Almanac. 29 March 1999.
Viewed on 15 April 2000. 2) Taiwan's Economy Remains on Track, The Washington Times, 8 October 1999. Viewed on 15 April 2000. 3) The Flexible Tiger, The Economist 3 Jan. 1998: p. 73. 4) Tanker, Andrew. Tight Little Island, Forbes 12 January 1998: p. 52 - 53. 5) Taiwanese Trade Statistics. Viewed on 15 April 2000. 6) U. S. Trade Statistics.
Viewed on 15 April 2000. 7) Dr. Mastel, Greg. Taiwan in the WTO: An Economic and Policy Analysis. 6 October 1999. Viewed on 15 April 2000 8) United States Trade Representative. 1998 National (U.
S. ) Trade Estimate Report on Foreign Trade Barriers. Washington D. C. : GPO, 1998; p. 318.
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