Tue, Aug 07, 2007 - Page 8 News List

Editorial: Time to focus on rising prices

The ongoing dispute between the executive branch and the pan-blue camp over the issue of what name to use in the UN membership application -- Taiwan or the Republic of China -- is not the nation's most urgent political issue. Instead, the most pressing need is keeping a lid on rising prices.

The media is rife with reports about rising prices, with skyrocketing oil prices accompanied by the increased cost of flour and milk. In the absence of wage increases, such price increases are alarming.

The Cabinet has decided to deal with oil prices by amending the floating price mechanism so that the weekly oil price adjustment is now being made bimonthly, which should ease the pressure of weekly price rises, while also subsidizing domestic oil products. Although this will offer temporary relief for bus and taxi operators, it has also been severely criticized for not following the movement of the market and using the taxes of the poor to subsidize the transportation of the rich.

As for other products, the Cabinet has responded with six measures, including halving import taxes on wheat, corn, soy beans and four other bulk commodities and suspending the export of wastepaper. This is clear evidence that the government attaches great importance to the threat of rising prices and is working to guarantee stability for the general public.

But the wave of rising prices is the result of prices going up globally and there is little room for Taiwan, which depends on imports, to fight the increases. Add to this the slow growth of the Taiwanese economy and the stagnation in salaries and it is easy to see that the government's efforts can be little more than symbolic.

Import taxes are not very high on domestic bulk commodities to begin with -- 6.5 percent on wheat, for example. Halving that to 3.25 percent only translates into about NT$1 for a bag of flour, which doesn't help much when it comes to driving down the cost of imported raw materials.

This is why the suggestion of offering a NT$2 subsidy per liter of gasoline in exchange for not hiking taxi fares has not been welcomed by taxi drivers. They would rather increase fares following the gradual rise of gasoline prices, which has blown a big hole in the Cabinet's policy.

To make matters worse, some businesses have hoarded commodities to give an extra push to rising prices. The Fair Trade Commission and prosecutors should launch an investigation into unfair price rises and put an end to this kind of damaging manipulation of the market.

The government could also make judicious use of exchange rate and interest rate adjustments as methods to slow the price increases of imported products as long as such adjustments do not negatively affect exporters.

Rising international commodity prices, a phenomenon that affects the whole world, is one effect of economic globalization that Taiwan cannot escape. The most effective way to fight rising prices, therefore, is for Taiwanese to minimize their use of imported commodities and use them more effectively.

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