Mon, Mar 31, 2014 - Page 8 News List

Pact may contravene basic WTO regulations

By Yeh Chin-hung 葉錦鴻

Vice Minister of Economic Affairs Woody Duh (杜紫軍) has been busy defending the cross-strait service trade agreement on television lately. As a lecturer in international trade regulations at National Chung Cheng University, I think some of his assertions contradict the basic rules of the General Agreements on Tariffs and Trade (GATT) employed by the WTO.

Both Duh and the Ministry of Economic Affairs say repeatedly that the impact of opening up the selected service sectors to Chinese investment will be insignificant — since many Chinese service sectors are not competitive and some in Taiwan are already saturated. They say that the Chinese will be reluctant to invest in the Taiwanese market. This reasoning can still be seen in a section called “24 crucial issues concerning the cross-strait service trade agreement” on the ministry’s Web site.

However, dispute settlement regulations of both the GATT and the WTO repeatedly state that the organization aims to “protect expectations of equal competitive relationships.” The fact that this has effects on trade, whatever they may be, it is not a reason to argue that domestic law violates these regulations.

According to WTO regulations, if country A and country B are both member states, and if A levies a 5 percent tax on bicycles manufactured domestically, it must levy the same tax on bicycles manufactured in country B when they are sold in country A in order to ensure full conformity with the national treatment principle. If A levies a 6 percent tax on bicycles imported from B, it would be violating B’s expectations of fair competition. Even if B has not yet sold any bicycles to A, it can still claim that A has violated the principle.

If the sales and revenues of the bikes from country B are higher than those manufactured domestically in country A, A can not argue that levying a 6 percent domestic tax on B’s bikes is not a violation of the national treatment principle, because trade effect cannot be cited as a reason for such an argument. The ministry, then, can not claim that the pact is fair just because the ministry itself thinks the impact on Taiwan will be insignificant.

The signing of the pact will bring both advantages and disadvantages. Did Taiwan and China sign the agreement as equals? The government, industry and the public seem to disagree on this point, but since Taiwan is set to open certain service sectors, the impact on the nation will be wide and deep. The ministry should therefore stop saying that the agreement will have an insignificant impact, based on insufficient research by related agencies. As a matter of fact, the GDP forecasts by President Ma Ying-jeou’s (馬英九) administration or those of the economic institutions it entrusts is inaccurate almost every year. The constant changes to these forecasts has made the government a laughingstock. Given these circumstances, how can officials expect to be taken seriously?

Moreover, putting aside international trade regulations, why do officials constantly defend China and try to rationalize all the possible disadvantages to Taiwan? Again, according to the question-and-answer section on the ministry’s Web site, it seems China will profit less than Taiwan. It brings to mind the axiom that “there is no such thing as a free lunch” — is such an imbalanced trade agreement really credible?

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