The Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation (ANZTEC) is the first free-trade agreement (FTA) that Taiwan has signed with a country with which we do not maintain diplomatic relations.
While this agreement will almost certainly have a stimulating effect on the depressed domestic economy, the joint efforts of the public will be the factor that decides whether it will meet the expected targets.
New Zealand is a great agricultural nation that possesses advanced agricultural production technology: Its quality control and cold process technologies are the best in the world.
The country’s agricultural production value exceeds US$25 billion and it exports the bulk of its farming products, which include meats, dairy products, fruit and wool to a total value of US$31.5 billion. This makes up as much as 71 percent of New Zealand’s total exports, which are well received around the world.
In recent years, the country has been even more active in its efforts to develop Asian markets, such as China, Japan and South Korea.
In contrast, Taiwanese farmers are small farmers, with limited tolerance and ability to adapt, making the prospect of such strong competition out of the ANZTEC agreement daunting.
Official data shows that New Zealand’s agricultural exports to Taiwan reached a total value of US$607 million last year.
The bulk of these exports, 105,253 metric tonnes, consisted of livestock products at a value of US$434 million, 55,981 tonnes of agricultural products at a value of US$111 million, 7,936 tonnes of aquatic products worth US$13 million and 155,635 tonnes of forestry products at a value of US$49 million.
On the other hand, Taiwanese agricultural exports to New Zealand only amounted to US$2.53 million. These exports included 1,063 tonnes of agricultural products worth US$2.25 million, 85 tonnes of aquatic products worth US$270,000, 12 tonnes of forestry products at a value of US$10,000 and no livestock products.
The domestic consumer market for agricultural products is limited, but when the import tax exemption for New Zealand agricultural products takes effect, its beef, mutton, deer antler, kiwifruit, apples, wine and dairy products will increase sharply.
With price drops, these products are likely to take an increasingly large share of the market.
Although there is complementarity with local agricultural products due to seasonal differences, there will be increased competition for apples and livestock products.
The reason for this is that domestic consumers focus on price, quality and brand name when making their purchasing decisions.
Since domestic agricultural production costs are high and there is a lack of economies of scale, a drop in the price of New Zealand kiwifruit, beef, mutton and dairy products while maintaining quality means that these products are likely to replace other local Taiwanese fruits and livestock products.
This is likely to create an even more difficult situation for the local industry.
To strengthen support for local products among consumers, the government should be quick to introduce a complete set of guidance measures to promote variety improvements, production technology advancements, added-value increases, food safety certification and marketing, which would all help farmers.
It also would not hurt to learn from the global marketing of New Zealand kiwifruit and Norwegian salmon.
In order to expand the export market for Taiwanese agricultural products, the government should use the agreement to implement a planned selling program directed at New Zealand for outstanding Taiwanese agricultural products such as mango, pineapple, wax apples, tea, Taiwanese tilapia, striped bass, mullet, Phalaenopsis orchids and Oncidium orchids.
It should take such concrete measures instead of relying on fuzzy slogans saying that the agreement will not have an impact on the Taiwanese market and farmers, that there is no need to fear competition and that it will help promote an upgrade of Taiwan’s agricultural industry.
There is research to show that by signing the ANZTEC, the total production value of Taiwan’s agricultural industry will shrink by about NT$4 billion and that livestock products will bear the brunt of the impact.
Using economic models to make deductions and estimates, making too many assumptions and leaving too much space for intervention, frequently produces results that differ greatly from the real world.
Since this is the case, it could well be that although losses don’t seem to be particularly high, they could be concentrated in a small number of industries.
In addition to its having a substantive effect, we also must not neglect the psychological impact of the ANZTEC agreement. It is natural for us to worry about or fear the unknown.
Half-deliberately, half-unintentionally, government agencies have lately created the impression that Taiwan’s agricultural industry is the main obstacle to international trade talks. It has not communicated sufficiently with farmers either before or after international trade talks have taken place.
In particular, officials have long focused on commercial industries at the cost of the agricultural industry.
This has made farmers feel that they are coming under pressure and it also makes them lose confidence and trust in the government.
As a result of this lack of mutual trust, farmers worry that the government will make compromises on agricultural issues just as easily as it did in connection to the deregulation of US beef imports, and that this will endanger their livelihoods and, by extension, have a negative impact on the implementation of government agricultural policy and on how the government plans it’s global trade strategies.
Looking at the controversy that has resulted from the recent signing of the cross-strait service trade agreement between Taiwan and China, the government should avoid reporting only positive effects of the agreement while keeping quiet about any negative impact it may have.
It should make a point of providing timely reports that give farmers full information about the actual situation, and it should also promise to provide concrete support measures to those farmers that are negatively affected to allow them to go on with their farming without worrying about the future since this would help facilitate future FTA talks with other countries.
Du Yu is chief executive officer of the Chen-Li Task Force for Agricultural Reform.
Translated by Perry Svensson