Liu Da-nien talks on the WTO challenge

Taipei Times: Taiwan is expected to enter the WTO as early as next year, what kind of impact will membership bring to Taiwan's economy?

Liu Da-nien (劉大年):There are three important impacts to consider here. First is the( impact of WTO entry on Taiwan's economy, the second is its impact on China's economy -- which has become one of the most important export markets for Taiwan -- and lastly, its impact on the cross-strait relationship. When we discuss the impact, we have to consider all three of these elements.

TT: Let's talk about Taiwan first. What kind of impact could it bring to Taiwanese sectors, such as the agricultural sector?

Liu: In the agricultural sector, WTO entry is expected to bring a significant impact, with the average nominal tax rate for tariffs in the agricultural sector to be lowered from last year's level of 20 percent to 15.21 percent in the first year and down to 12.9 percent by 2006 when the tariff-reductions conclude. The tariffs on a total of 1,021 agricultural products is going to be cut by an average of 35 percent [within the next five years]. Since the tariff-cut is comprehensive, its impact would be also comprehensive.

Products like garlic and mushrooms, for example, will face strong competition from China. Other products like coconuts will face competition from Southeast Asia. The poultry sector will also be affected, since import prices will be less than domestic prices.

The consequence is that the unemployment rate is likely to increase when the agricultural sector eliminates unnecessary labor.

TT: What measures should the administration take to ease the impact on the agricultural sector?

Liu: The most important measure that the administration should take is to adjust the transportation and distribution of agricultural products (農產運銷). Since there is little effect on the service of transportation and distribution for agricultural products, the administration should pay more attention to this to increase competitiveness .

TT: What about the impact on the industrial sector?

Liu: Generally speaking, since the importation of most industrial products have been liberalized, the impact of WTO entry will not be too significant. On the whole, WTO entry could bring more advantages than disadvantages to the domestic industrial sector, since Taiwan is basically an international trade-oriented economy.

As for [industrial] tariff reductions, the average nominal tax rate is going to drop from 6.03 percent in 2000 to 5.79 percent in the first year after WTO entry, to 4.05 percent in 2004 when the tariff-reductions are completed. There are 3,470 industrial products involved in the tariff-reductions with an average reduction of 31.18 percent.

The most important tariff-reductions in the industrial sector include beer and alcohol, medical equipment, furniture and paper products. Their tariffs will be reduced to zero upon entry. The tariff on most information technology products will be reduced to zero, according to the Information Technology Agreement signed in 1997.

Other important aspects of the non-tariff agreement include abolishing the monopoly system on tobacco and wine. The local content requirement on automobiles and motorcycles will also be abolished. An import quota system on automobile and motorcycle products will be adopted upon entry and the quota will be removed completely ten years after entry.