Due to popular resentment at the state monopoly over the sale of wine and tobacco products, and as part of the government's efforts to gain entry into the WTO, restrictions against the importation of foreign wines and tobaccos began to be lifted back in 1987. The Legislative Yuan has also approved the "Wine and Tobacco Management Act" (
The demand for rice wine peaked during the Chinese New Year holidays. Most people today do not drink rice wines, but use them for cooking and religious ceremonies. Buyers, therefore, are mostly housewives and restaurant owners for whom cost is an important consideration, although they may be unconcerned about politics or the WTO.
These consumers were angererd last year when the price of rice wine sky-rocketed overnight.
Why must the price of the rice wine be increased just because Taiwan is joining the WTO? The association between the two is simply too remote for most people. An infuriated legislator showed a picture of people waiting in line to buy rice wine and shouted: "We are not at war and the people are not refugees. Why is the line to purchase a measly bottle of rice wine so long?"
All types of buying frenzies have hit Taiwan in recent years. Some have been the result of fashion crazes, such as those over McDonald's Hello Kitty dolls and Japanese ramen. Others have been caused by price increases on products ranging from toilet paper to gas. Is the rice wine shortage comparable?
Let us look at the problem from the theory of supply and demand. The demand for rice wine -- ie, the level of rice wine consumption -- has not changed. However, although the Taiwan Tobacco and Wine Monopoly Bureau (菸酒?1/2賣局) has repeatedly increased its production of rice wine, there is still a shortage.
The problem is that everyone knows that the price will soon increase, jumping from NT$20 per bottle to as much as NT$140. Therefore, the shortage is the result of anticipated future demand. Since spirits may be stored for a long time, people may be hoping to reap profits from subsequent resales. As a result, the demand for rice wines has multiplied.
However, on the supply side, the government still enjoys a monopoly. It is illegal for the private sector to brew rice wine. Limited by its output capacity, the monopoly bureau cannot increase production. The inability of supply to meet the demand results in disequilibrium. As a result, people who have a real need for rice wine, such as restaurant operators and pregnant women, are unable to obtain it.
The use of special cooking wine has a long history in the west. However, we Chinese do not have such a custom. We add salt and the wine separately during the cooking process. Therefore, the introduction of the "Tiao-hsiang Cooking Spirits"
A product for which demand growth stopped suddenly became a hot item due to a change of policy. As you can see, a product is subject to other forces besides supply and demand. Therefore, we ought not to underestimate the WTO's impact on many agricultural products closely linked with our daily life.
Taiwan has to join the WTO in order to be incorporated into the global system of game rules that dictate national treatment to foreign products and market-determined prices of goods.
However, the reason for the rice wine price increase is an anticipated massive increase on alcohol taxes in the future. Since illegal producers of rice wines evade sales taxes, such evasion will be rampant in the future, given the lack of government manpower. This will put law-abiding producers of rice wines in a very disadvantageous position.
Price increases for rice wine are inevitable. However, it appears that the government does not dare touch this time bomb before the presidential election. Hopefully, after the election, the government, including the legislature, can deal with this artificial shortage and embrace economic liberalism in line with the WTO spirit.
We need to seriously analyze the root of the illness and provide fair rules, so that the people of Taiwan can purchase quality rice wine at a reasonable price.
Wang Tzeng-shing is an associate researcher at the Research Institute for Wine of the Taiwan Tobacco and Wine Monopoly Bureau.
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