Thu, Oct 18, 2018 - Page 8 News List

EDITORIAL: New WTO status to bring difficulty

Minister Without Portfolio John Deng (鄧振中), who is also head of the Office of Trade Negotiations, announced that Taiwan has agreed to amend its WTO membership status from a “developing” to a “developed” country.

Deng said the move would benefit Taiwan in negotiations and demonstrates its commitment to further market liberalization, but some have questioned the change, as even if it does bring these benefits, it will also bring challenges.

Taiwan applied to join the WTO as a developed member, then became a developing member in 2002 after it joined the organization.

Nations are given the option of deciding their own status within the WTO, which operates according to the “principle of self-selection.”

Some have suggested that the status change comes following pressure from the US.

There are arguments for and against considering Taiwan a developed or developing nation. The definition is not set in stone and depends on the context in which the definition applies.

While Taiwan cannot exactly rub shoulders with major economies such as the US, the EU or Japan, it is ranked at about 34th out of 200 countries in terms of national income. In terms of trade volume, it is ranked at about 20th globally, while the service sector accounts for 60 percent of the nation’s industry.

Singapore, with an annual per capita income of US$61,000, and South Korea at US$32,000 are designated as developing countries, as is China, the world’s second-largest economy with its prodigious economic, political and military clout.

In that context, is it reasonable for Taiwan, with an annual per capita income of US$25,000, to be designated as a developed country?

This matters because developing countries are accorded special rights and privileges in WTO agreements, including longer time to implement commitments and the ability to levy higher tariffs on imports to safeguard domestic industry.

For example, in the latest Doha round of WTO negotiations on tariffs for industrial products, developed members must attempt to reduce all tariffs to zero within three years, while developing countries only need to commit to reducing the tariffs to 30 percent within the same period.

Taiwan will no longer have access to these special privileges with the change in its member status. The hardest-hit sector will be agriculture, which is already struggling with the intensely competitive international market.

The other question revolves around the Doha negotiations. These have essentially been stalled for a decade in terms of reaching a comprehensive agreement between all WTO member states. It was this breakdown of talks that led to the trend for more regional trade agreements.

What negotiations does Deng envisage the “upgraded” status to benefit?

According to Deng, the change of status allows Taiwan to signal its willingness to liberalize its economy and its agreement with the trajectory of WTO reforms preferred by the US, EU and Japan. This convergence with the main economies would afford Taiwan more leverage in future negotiations, he said.

Unfortunately, it will also have other effects, such as greater difficulty when applying to join initiatives, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as a developing nation.

The jury is out on the wisdom of the change. The potential benefits must be weighed against the loss of preferential treatment and its effects on the nation’s agriculture sector.

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