China and South Korea have recently completed substantive negotiations for a free-trade agreement (FTA) that they plan to formalize next year. However, as soon as this news got out, South Korean farmers’ organizations stood up to voice their opposition. Since the agreement needs legislative approval before it can go into effect, it is not certain when it will do so.
When the deal between China and South Korea is up and running, it will have an impact on the economies and trade figures of both Taiwan and Japan. Research carried out by the Japan External Trade Organization indicates that the FTA will cause about US$5.3 billion of Japanese exports to be replaced by South Korean goods.
As for Taiwan, Deputy Minister of Economic Affairs Bill Cho (卓士昭) says that the completion of the FTA will have a very big impact on the economy, to the measure of NT$260 billion to NT$650 billion (US$8.45 billion to US$21 billion) within three to five years. The Chinese Nationalist Party (KMT) predictably followed Cho’s comment by laying the blame on the Democratic Progressive Party and other opposition parties, accusing them of maliciously boycotting proposed trade measures, thus causing Taiwan to “leave itself behind.”
Once again, the KMT is calling for speedy approval of an oversight mechanism for cross-strait agreements on trade in services and goods, but it has done nothing more to resolve its differences with the opposition. This approach may well make these measures an issue in the approaching elections, but it will do nothing to help the laws in question get passed.
The free-trade negotiations between China and South Korea and those between the US and Japan over the Trans-Pacific Partnership both involve South Korea and Japan having to make concessions on agricultural issues, and Taiwan faces the same sort of quandary when it engages in regional trade talks.
Apart from the China factor, this is probably the most urgent issue that the government has to deal with. The question is whether the government is ready to face the challenge.
Some agricultural products produced by boldly innovative Taiwanese farmers are of high quality, comply with food safety regulations and may be certified organic or have other kinds of official certification, such as the Traceable Agricultural Product or Taiwan Good Agricultural Practice labels.
These factors put these products in the high-quality category, and quality differentiation enables them to compete with imported farm products that are low-priced but may be associated with food-safety risks. Some of them are even exported and sold abroad. Farmers who produce such high-quality goods are not afraid of the competition brought by trade liberalization.
The problem is that high-quality products such as these represent a relatively small proportion — about 15 percent — of total production. The majority of farmers are limited by factors such as scale, capital, technology and market access, and their products are of ordinary quality.
They are often hit by imbalances between production and sales, along with sudden price cuts that may even leave them unable to cover their outlay, and they are unable to compete on price with products grown overseas in massive quantities and with low production costs.
Considering the present state of Taiwanese agriculture, joining regional economic cooperation organizations, hastily making big tariff cuts and opening up the domestic market for farm products would indeed present an unbearable challenge for the majority of Taiwanese farmers, so it is not without reason that farmers and their organizations are opposed to such moves.
For Taiwan to be able to withstand the impact of free trade, it must institute a new wave of agricultural reforms.
The starting point should be a national land-use plan that draws a red line on land use to safeguard Taiwan’s food security. Land-use allocation should ensure that fertile farmland cannot be put to other uses without going through very strict review procedures.
However, it is not enough to just impose restrictions without offering incentives and guidance.
Farmers who wish to continue working in agriculture will need to thoroughly upgrade in terms of operational concepts, production methods, marketing techniques, environmental conservation, food safety and so on, so as to reduce the proportion of ordinary-grade production and increase that of high-quality production.
The government can provide assistance in the form of funding, technology, information, marketing and so forth. Most advances in agricultural science and technology research are made by government-run institutions. To meet the needs of agricultural transformation and upgrading, the allocation and duties of people working in government-run experimental and research institutions and agricultural research and extension stations need to be readjusted. It will also be necessary to review and adjust the existing extent of access to intellectual property rights and technology transfer royalties, and the ways in which they are allocated.
These measures are essential to fully support farmers so that they can attain their aim of upgrading.
As for those who wish to get out of the farming sector, there should be a comprehensive support system for them to leave the field.
These changes would make it possible to adjust and upgrade the agricultural sector’s competitiveness in terms of productivity and manpower structure, and to readily respond to the impact of free trade, allowing trade negotiations to smoothly reach their goal.
Some overseas media have also commented that the creation of a China-South Korea free-trade area is likely to give South Korea a competitive advantage over Taiwan, so the nation must do its best to catch up.
To this end, Taiwanese society should put pressure on the leaders of the pan-blue and pan-green parties, encouraging them to engage in dialogue to come up with responses and solutions. Nobody stands to gain if Taiwan is brought to its knees, so it is time for politicians to desist from mutual smear campaigns and tackle the issues that really matter.
Lee Wu-chung is a professor of agricultural economics.
Translated by Julian Clegg
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