After a Decade in WTO, Agriculture Growing Well


2012 / 3月

Sam Ju /photos courtesy of Jimmy Lin /tr. by Scott Williams

It is axiomatic that agriculture requires land, and that producers need markets. How has Taiwanese agriculture fared during its decade within the World Trade Organization’s free-trade framework?

On January 1, 2012, Taiwan celebrated its 10th anniversary as a member of the World Trade Organization (WTO). Prior to joining, many in Taiwan were greatly concerned about the prospective impact on local agriculture of market-opening measures and imports. But, contrary to expectations, the value of the industry’s output began increasing in Taiwan’s second year of membership, and by 2010 had reached NT$420 billion, an increase of 20% from its pre-WTO (2001) level.

The WTO opened doors, allowing Taiwan’s agricultural industry to step onto the brutally competitive global stage. Ten years later, the industry’s pursuit of transformation and of higher-quality products has won it a share of the global market. Taiwanese agricultural products are now sold all over the world, and in 2011 were worth some NT$4.6 billion, an increase of 53% from 2001’s NT$3 billion figure.

Taiwanese agriculture has reaped a rich harvest from its first decade in the WTO, but an enormous amount of work went into preparing the ground.

Steady growth

The value of the industry’s output on either side of WTO entry provides a good starting point.

According to Wu Chia-hsuan, an associate research fellow with the Chung-Hua Institution for Economic Research’s Taiwan WTO Center, the industry’s output saw negative growth over the eight years preceding WTO entry (1994–2001), declining by an average of 0.88% per year to just NT$350 billion in 2001. In contrast, growth over the eight years following WTO entry averaged 2.16% per year, with output value rising to NT$400 billion in 2009.

Even rice cultivation, which was expected to be most severely impacted by WTO membership, saw improvement, with output value rising an average of 0.77% per year in 2002–2009, versus an average decline of 2.55% per annum in 1994–2001.

Taiwan’s agricultural industry consists of four major sectors: farming, forestry, fishing, and animal husbandry. Of those, only two have performed less well in the post-WTO era than in the decade preceding WTO. Wu says that the poor performance of the fishing sector is largely the result of a decline in the output of the coastal and offshore fleets linked to international conservation rather than to WTO membership.

In the case of the forestry sector, growth was negative before joining WTO and has remained negative since. While the sector has shrunk more rapidly since joining WTO, it comprises such a small percentage of agricultural output (just 0.15%) that its impact has been negligible.

The animal husbandry sector, on the other hand, has benefited greatly from WTO, posting the largest year-on-year post-WTO growth of any of the four sectors.

But the number of people employed in agriculture decreased from 706,000 in 2001 to just 550,000 in 2010 despite the industry’s growth. Academics generally agree that the decline was caused by farm workers moving into manufacturing and services, not by trade liberalization.

Wu notes that with employment falling and output rising, the industry’s productivity (output per worker) grew at a very rapid cumulative annual rate of 6.13% during the 2002–2009 period.

The fact that the agricultural industry as a whole has been little impacted by the liberalization of imports and trade strongly suggests that government measures aimed at stabilizing it have been successful.

Tariffs and quotas

Prior to joining WTO, Taiwan barred the import or placed restrictions on the point of origin of 41 ­sensitive agricultural products, including rice, cane sugar and peanuts, and was therefore not in compliance with the accord on agricultural products from the Uruguay Round of the General Agreement on Trade and Tariffs (GATT, the predecessor to the WTO). Once Taiwan joined the WTO, it was required to open its markets to these previously restricted products. The new system utilized quotas tied to a two-tiered tariff system, such that imports below the quota enjoyed low tariffs, while those above it were subject to higher tariffs.

The agricultural products still subject to these quotas include rice, deer antlers, Asian pears, bananas, adzuki beans, liquid milk, peanuts, garlic, coconuts, betel nuts, pineapples, and mangoes. The domestically produced versions of these sensitive products are far more expensive than their international counterparts, making them uncompetitive. If imports were not limited, domestic producers would soon be driven out of business.

The year after Taiwan’s entry into the WTO, the ban on imported rice was lifted in favor of the quota-linked tariffs and the quota was set at 144,720 tons. About 65% of this amount is imported by the government, and the remaining 35% by the private sector. The tariffs on rice imports under the quota are relatively low—none on rice, and 15–25% on rice products. Those on imports beyond the quota are higher—NT$45 per kilogram on rice and NT$49 per kilo on rice products. The quota is set at a level intended to “give imports a chance” without guaranteeing that the full quota will be taken up.

According to Huang Mei-hua, deputy director of the Agriculture and Food Agency (AFA), businesses bid for the 35% of the total quota imported by the private sector, with the government setting a floor price to minimize price disparities between domestically grown and imported rice, ensuring domestic rice prices remain stable.

The 65% imported by the government is either purchased by the AFA or tendered to the private sector at auction. The AFA rice is largely used for prison food and disaster relief within Taiwan, while the auctioned rice is resold in the market.

Huang says that the AFA sets rice production targets every year in an effort to keep supply and demand in balance. This year’s targets are 280,000 hectares of land in rice and production of 1.33 million metric tons.

Currently, domestically grown rice accounts for 90% of the Taiwanese rice market, versus just 10% for imports.

Competing globally

Taiwan’s exports of agricultural products have performed better than expected since the island joined WTO. According to data put together by Wu, early forecasts called for Taiwanese agricultural exports to grow by just NT$160 million post-WTO. Instead, they grew by NT$1.72 billion over the 2002–2009 period.

Chang Su-san, a former member of Taiwan’s WTO agriculture team who now serves as director general of the Council of Agriculture’s Department of International Affairs, explains that the WTO’s most-favored-nation rules, which require member nations to lower tariffs, have provided expanded opportunities for Taiwanese produce exports.

Taiwan’s WTO representatives stand on equal footing with those of other nations and have achieved outstanding results. Bilateral talks with the US on sanitary and phytosanitary measures are a case in point. As a result of these talks, in 2004 Taiwan became the first nation permitted to export moth orchids in growing media to the US. The orchids have since become Taiwan’s most profitable agricultural export, valued at nearly NT$3 billion in 2010, up 372% from 2002’s figure.

The liberalization of trade has also spurred upgrades to our agricultural industry. Our producers’ migration to higher quality products and branding has made them more competitive in the international marketplace.

But, as Chang reminds us, some of these high-quality products are expensive to produce and raise issues of food security, and are therefore not practical to export. Rice is a case in point. Huang says that with rice, the primary goal is meeting domestic food needs. It is only after those needs that we should think about encouraging exports. The AFA therefore limits the amount of rice that Taiwan can export, sets a floor price, and establishes quality control measures, adjusting each figure in response to domestic supplies and international prices. Foreseeing no supply problems in the first half of this year, the AFA has permitted the export of up to 30,000 tons.

February’s cabinet reshuffle put Chen Bao-ji in charge of the COA. Both Chen Bao-ji and his predecessor at the COA, Chen Wu-hsiung, have abundant WTO negotiating experience. Chen Wu-hsiung was even Taiwan’s chief agricultural representative during the negotiations to enter WTO. Drawing on this experience, Chen Wu-hsiung offered a word of advice when handing over the reins of the COA: “Don’t let agriculture be a stumbling block to trade liberalization.” Instead, Taiwan needs to develop strategies for dealing with bilateral free-trade agreements and the Trans-Pacific Strategic Economic Partnership Agreement early on to ensure that our agricultural industry grows still more competitive.

Once opened, the door to trade liberalization is very difficult to close. A decade into our WTO membership, the real challenges for Taiwanese agriculture are just getting underway.



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