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Editorial: The import-export paradox

From last year, there has been a continuous rise in the international price of raw materials, which in turn has pushed up the price of many daily necessities. Convenience stores and supermarkets, which directly pass on higher prices to the customer, along with hypermarkets, which claim to "protect customers' wallets," have all been powerless to hold back price increases. The price of daily necessities like cooking oil, chicken, toilet paper, washing powder and bottled water, have all increased since last month, as shown in a review of retail prices by the Ministry of Economic Affairs this month.

One cause of higher prices has been the rise in the price of oil. Soaring oil prices have led to a substantial increase in the price of many raw materials. The price of wheat, soybeans and corn on the international market has risen between 24 percent and 50 percent, which has raised the cost of all products made from these materials.

In order to make Taiwan's export industries more competitive, reduce imports and encourage Taiwanese to spend less on foreign travel, the Central Bank of China (CBC) lowered the New Taiwan dollar exchange rate. Its value has been declining vis-a-vis the euro and the US dollar. And it has seen a more than 10 percent decline against the currencies of Asian countries, such as Singapore, Malaysia, Thailand and the Philippines. The depreciation of the New Taiwan dollar has helped boost export performance, but has also increased the price of imported goods.

Statistics provided by the Directorate General of Budget, Accounting and Statistics show the price of imported goods increased 10.41 percent last month, an eight-month high, leading to higher prices for imported materials and higher production costs affecting even the prices of domestically produced items.

Although costs are rising everywhere, figures provided by the government on domestic prices have been slow to reflect this. In particular, changes in the consumer index haven't been as dramatic as the nation's jittery consumers and media reports would suggest. For example, the directorate-general's consumer price index has risen only 0.67 percent, even lower than had been predicted. The real reason why there still has not been a clear rise in Taiwan's retail and consumer prices is the sluggish economy and the low purchasing power of the average buyer. As a result, producers and distributors have been reluctant to raise prices, which accounts for the delayed response in domestic prices.

The increasing cost of imports will ultimately be transferred to the consumer. If rising prices are a result of unfair competition -- such as would result from monopolies or price fixing -- the Consumers' Foundation can issue a warning about unreasonable increases, or the Fair Trade Commission can invoke the Fair Trade Law (公平法). But if they are a result of rising prices internationally and the undervaluing of the Taiwanese currency, neither organization, nor the Ministry of Economic Affairs, can do much about it.

One possible solution would be to lift government restrictions and intervention and allow the New Taiwan dollar exchange rate to return to a normal market position. However, this could hurt export industries, which are aided by the low rates. In light of China's announcement on interest rate hikes and relaxed restrictions on yuan trading, the Taiwanese central bank has a decision to make: Will it prioritize encouraging export industries or checking price increases to help the average consumer?
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