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World Trade Organization |
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WT/TPR/S/165 16 May 2006 | |
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(06-2312) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW Report by the Secretariat SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU |
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This report, prepared for the first Trade Policy Review of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei), has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Chinese Taipei on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr. Masahiro Hayafuji (tel: 022 739 5873). Document WT/TPR/G/165 contains the policy statement submitted by Chinese Taipei. |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Chinese Taipei.
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) Economic Environment ix
(2) Trade Policy Regime: Framework and Objectives ix
(3) Trade Policies and Practices by Measure x
(4) Trade Policies by Sector xi
(5) Outlook xii
I. Economic environment 1
(1) Macroeconomic Performance 1
(2) Macroeconomic Policies 3
(i) Monetary and exchange rate policy 3
(ii) Fiscal policy 5
(3) Structural Policies 5
(i) Tax reform 5
(ii) Financial reform 6
(iii) Corporate governance 6
(iv) Industrial policy 7
(v) Privatization 7
(4) Developments in Trade 7
(i) Overview 7
(ii) Composition of merchandise trade 8
(iii) Direction of merchandise trade 8
(iv) Trade in services 8
(v) Inbound and outbound direct investment 11
(5) Prospects 13
II. trade policy regime: framework and objectives 14
(1) Introduction 14
(2) Development and Administration Of Trade Policy 14
(i) Main trade laws 14
(ii) Agencies involved in trade policy implementation 14
(iii) Transparency 16
(3) Trade Policy Objectives 17
(4) Trade Agreements and Arrangements 17
(i) Multilateral agreements 17
(ii) Regional and bilateral agreements 18
(5) Trade Disputes and Consultations 19
(i) Dispute settlement in the WTO 19
(ii) Other 19
(6) Investment Regime 19
(i) Direct investment 19
(ii) Cross-strait investment 23
(iii) Measures to encourage investment 23
Page
III. trade policies and practices by measure 25
(1) Introduction 25
(2) Measures Directly Affecting Imports 26
(i) Registration, documentation, and procedures 26
(ii) Customs valuation and rules of origin 27
(iii) Tariffs 28
(iv) Other charges affecting imports 39
(v) Import prohibitions, restrictions, and licensing 40
(vi) Contingency measures 41
(vii) Government procurement 43
(viii) State-trading activities 46
(ix) Countertrade 46
(3) Measures Directly Affecting Exports 47
(i) Registration, documentation, and procedures 47
(ii) Export taxes, charges, and levies 47
(iii) Export prohibitions, restrictions, and licensing 47
(iv) Export operations of state-owned enterprises 48
(v) Export finance, insurance, and guarantees 48
(vi) Export promotion and assistance 48
(vii) Free zones (export processing zones, science-based industrial parks and free-trade zones) 49
(4) Measures Affecting Production and Trade 50
(i) Taxation and tax-related assistance 50
(ii) Subsidies 52
(iii) Trade-related investment measures 53
(iv) Standards and other technical requirements 53
(v) Intellectual property rights 57
(vi) Privatization of state-owned enterprises 63
(vii) Competition policy 63
IV. trade policies by sector 66
(1) Introduction 66
(2) Agriculture 66
(i) Overview 66
(ii) Border measures 67
(iii) Domestic measures and support programmes 68
(3) Energy and Utilities 70
(i) Overview 70
(ii) Petroleum, petroleum products, and natural gas 70
(iii) Electricity 72
(4) Manufacturing 72
(i) Overview 72
(ii) Border measures 73
(iii) Domestic support measures 73
(iv) Main subsectors 74
(5) Services 75
(i) Features 75
(ii) Financial services 76
(iii) Telecommunications and postal services 80
Page
(iv) Transport 82
(v) Tourism 84
(vi) Legal services 84
REFERENCES 85
APPENDIX TABLES 89
CHARTS
Page
I. ECONOMIC ENVIRONMENT
I.1 Product composition of merchandise trade, 2001 and 2004 9
I.2 Direction of merchandise trade, 2001 and 2004 10
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 MFN tariff averages by HS section, 2002 and 2005 32
III.2 Distribution of MFN tariff rates, 2002 and 2005 33
III.3 Tariff escalation by 2-digit ISIC industry, 2002 and 2005 36
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Performance of Chinese Taipei's economy, 2001-05 1
I.2 GDP by major sector and service sub-sector, 2001-05 3
I.3 Share of employment by sector, 2001-05 3
I.4 Composition of trade in services, 2001-04 11
I.5 Inbound and outbound flows of direct investment (approval basis), by source and
destination, 2001-04 12
I.6 Inbound and outbound flows of direct investment (approval basis), by activity, 2001-04 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Chinese Taipei's main trade-related laws and regulations 15
II.2 Industries in which inbound direct investment is prohibited or restricted in Chinese Taipei 21
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Tax revenues, 2001-04 29
III.2 Structure of the MFN tariff, 2001-05 31
III.3 Summary analysis of the Chinese Taipei's MFN tariff, 2002-05 33
III.4 Adjustment of customs duties in 2004 (for the period 4 October 2004-3 October 2005) 37
III.5 Commercial port dues, 2005 39
III.6 Customs service fees and charges, 2005 40
III.7 Anti-dumping measures in force, December 2005 42
III.8 Procurement share by type of procedure, 1999-04 44
III.9 Procurement by origin, 1999-04 45
III.10 Bid-challenge cases, 2002 to September 2005 46
III.11 Government support for export promotion, 2002-05 49
III.12 Tobacco and alcohol tax, 2005 51
III.13 Domestic standards and their equivalence to international standards, end-October 2005 54
III.14 Commodity inspection, by type, 2000-04 56
III.15 IPRs applications and approvals, 2001-04 58
III.16 IP cases investigated and concluded by district public prosecutors' offices, 2001-04 62
III.17 IP adjudication findings, 2002-05 62
III.18 Enforcement statistics related to competition policy, 2001-04 65
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IV. TRADE POLICIES BY SECTOR
IV.1 Composition of agricultural production, 1999-04 67
IV.2 Taxes and fees on energy, 2005 72
IV.3 Weighted average interest rates on deposits and loans, 2001-04 77
IV.4 Insurance business assets, 2000-04 78
IV.5 Telecommunications market, 1997-04 81
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1 Exports by product group, 2001-04 89
AI.2 Imports by product group, 2001-04 91
AI.3 Exports by destination, 2001-04 93
AI.4 Imports by origin, 2001-04 94
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
AII.1 Principal notifications under WTO Agreements, end-March 2006 95
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Tariff rate quotas and their utilization, 2004 97
AIII.2 Prohibited imports, 2005 98
AIII.3 Imports subject to licensing, 2005 100
AIII.4 Prohibited exports, 2005 101
AIII.5 Products subject to export licensing, 2005 103
AIII.6 Goods subject to commodity tax, 2006 104
AIII.7 Main intellectual property laws and regulations (as last amended), 2006 105
AIII.8 State-owned enterprises, November 2005 106
IV. TRADE POLICIES BY SECTOR
AIV.1 Main laws regulating services, 2006 107
(1) Economic Environment
1. The economy of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu (Chinese Taipei) has grown steadily. Growth averaged 6.4% in the decade to 2000. GDP declined slightly in 2001 but has since recovered, to average some 4.0% in the period 2001-2005; it was just over 4% in 2005, against the background of slower world growth together with higher energy prices and interest rates. After recording negative rates for several years, inflation was 1.6% in 2004 and 2.3% in 2005. The unemployment rate was 4.1% in 2005, down from its most recent peak of 5.2% in 2002. Per capita GDP in 2005 was US$15,270, compared with US$13,090 in 2001. Chinese Taipei's external current account surplus narrowed from a peak of around 10% of GDP in 2003 to 5.7% in 2004 and 4.7% in 2005, reflecting the declining gap between domestic saving and investment.
2. The central bank, with economic recovery and an increase in food and energy prices, began to tighten monetary policy in September 2004 with a view to pre-empting inflationary expectations. Since October 2004, the bank has raised the discount rate six times, to 2.25% in December 2005. According to the authorities, independence of the central bank has been respected, although the bank remains an agency of the government. The exchange rate regime of Chinese Taipei involves a "managed float"; the bank may intervene in the event of, for example, significant volatility.
3. The government's overall budget deficit was around 2.5% of GDP in 2004 (down from 3.5% in 2003), and overall government debt continued to increase over 2001-05, to about 37.6% of GDP. The government aims to achieve fiscal balance by 2011.
4. Trade has played an important role in the economy. The shares of imports and exports are each around 62% and 59% of GDP, respectively. The surplus on merchandise trade narrowed to around 5% of GDP in 2004 and 2005, compared to over 8% in 2002 and 2003, while the deficit on services has grown to almost 2%, compared to around 1.2% on average in the previous three years. Foreign exchange reserves have continued to increase over the past five years, to US$253.3 billion at the end of 2005 (equivalent to some 15 months of merchandise imports). Underpinned by its accession to the WTO on 1 January 2002, Chinese Taipei has substantially liberalized its trade and related regimes.
5. Continued strong growth would appear to hinge on Chinese Taipei's continued implementation of trade liberalization and structural reforms, as the government recognizes. This would improve the efficiency of Chinese Taipei's economy and its attractiveness to inbound direct investments.
(2) Trade Policy Regime: Framework and Objectives
6. The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) acceded to the WTO on 1 January 2002. It is party to the plurilateral Trade Agreement on Civil Aircraft. Main trade policy objectives of Chinese Taipei include: active participation in the WTO; building bilateral and regional economic and trade relationships; strengthening trade promotion activities; and implementing trade liberalization and facilitation. In order to achieve these objectives, Chinese Taipei seeks a further strengthening of the multilateral trading system under the WTO and to promote Chinese Taipei's linkage with its trading partners in Asia and elsewhere.
7. Since its accession to the WTO, Chinese Taipei has continued to take steps to improve transparency. Most laws and regulations are made available through government publications and websites; legislation aimed at transparent administrative procedures entered into force in 2001. Various anti-corruption laws have also been enacted.
8. Almost all of Chinese Taipei's trade is on an MFN basis; for example some 98% of its imports are subject to applied MFN tariffs. However, Chinese Taipei prohibits inbound cross-strait trade involving some 2,200 tariff lines. Chinese Taipei has started to participate in preferential trade agreements. In 2004, a free-trade agreement entered into force between Chinese Taipei and Panama.
9. Most sectors are open to inbound direct investment, if approved by the Ministry of Economic Affairs. However, inbound direct investment is prohibited in several major sectors (notably, certain toxic chemicals, and television and broadcasting) for reasons of security and public health. In certain other sectors, inbound direct investment requires approval by authorities other than the Ministry of Economic Affairs. As regards cross-strait direct investment, little inbound investment has been allowed, and outbound investment, if not prohibited, requires the approval of the relevant Chinese Taipei authorities. Various incentives, including tax incentives, are provided to encourage investment, including inbound direct investment.
(3) Trade Policies and Practices by Measure
10. Since its accession to the WTO, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) has continued to liberalize its trade regime; this liberalization has involved tariffs as well as non-tariff measures, such as prohibitions and licensing.
11. The tariff is Chinese Taipei's main trade policy instrument and a significant source of tax revenue (5.8% of total taxes collected in 2004). Most products are subject to applied MFN tariffs not higher than 10%, and about 31% of all tariff lines are duty free. In 2005, the simple average applied MFN tariff rate was 7.8%, down from 9.5% in 2002. All tariff lines are bound and most applied rates coincide with bound rates, thereby imparting a high degree of predictability to Chinese Taipei's tariff; the current average bound MFN rate is 8.1%, compared with the final bound rate of 7.7%. Non‑ad valorem duties are an element of the tariff, particularly in agriculture. Such duties, which account for 1.8% of all lines, tend to involve high ad valorem equivalents. About 130 tariff lines, including certain agricultural products, passenger cars and chassis, were subject to tariff rate quotas in 2005. Under its bilateral free-trade agreement with Panama, Chinese Taipei grants preferential access to imports from Panama, the simple average preferential tariff rate being 3.9%; zero rates applied to 74.5% of all tariff lines in 2005, and are to apply to 97% of all tariff lines by 2014. Additional charges, such as a trade promotion service fee and harbour service dues, are imposed on Chinese Taipei's imports and exports. Harbour-service dues on domestic trade are 60% lower than those for overseas routes.
12. Chinese Taipei’s non-tariff measures involve mainly prohibitions and licensing requirements. Since 2002, Chinese Taipei has substantially reduced the number of products subject to these measures; 56 tariff lines are currently subject to import prohibition, and 24 lines, including certain metal products, to import licensing (February 2006). There are no quantitative import restrictions.
13. Chinese Taipei has not used countervailing or safeguard measures since its accession to the WTO; however, it does maintain anti-dumping measures on two products. Special safeguards are applied in agriculture.
14. In government procurement the relevant legislation allows a margin of preference to local suppliers of up to 3% and procuring entities may request tenderers to purchase locally produced goods. However, these preferences appear to be little used. Non-Chinese Taipei suppliers accounted for around 17% of the total value of government procurement in 2004 and around 11% of the total number of contracts awarded. About 25% of all procurement is awarded through selective and limited tendering procedures.
15. State trading in Chinese Taipei involves rice and banknote paper.
16. Chinese Taipei maintains prohibitions and licensing requirements on some exports, mainly for security and public health reasons. Exports of some fish, including trout and salmon, is prohibited. Chinese Taipei has not notified any export subsidies to the WTO. Nonetheless, various forms of assistance, including subsidies, are provided for agriculture, fisheries and industrial products and activities.
17. In 2005, about 25% of Chinese Taipei’s standards were aligned to international standards. Non-Chinese Taipei test data are accepted on the basis of reciprocal arrangements.
18. Chinese Taipei adopted various laws and regulations to ensure the protection of intellectual property rights; it has intensified efforts to enforce laws and regulations in this regard.
19. Competition policy in Chinese Taipei has, by and large, remained unchanged since its accession to the WTO. Statutory monopolies exist in petroleum, electricity, sugar, steel, and water supply industries. Certain activities, such as export and import cartels, may be exempted from the application of the Fair Trade Law, if approved by the Fair Trade Commission. Engaging in prohibited anti-competitive practices incurs penalties including imprisonment.
(4) Trade Policies by Sector
20. Since its accession to the WTO, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) has continued to pursue trade liberalization and structural reform, especially in the services sector, where shares in GDP and employment have continued to increase and labour productivity is substantially higher than the rest of the economy. By contrast, there has been a relative decline in the contributions of agriculture to GDP and employment.
21. Labour productivity in agriculture is substantially lower than elsewhere in the economy, and the sector receives relatively high border and domestic support compared with other sectors. In 2005, the average applied MFN tariff on agricultural products (WTO definition) was 22.3% whereas that on non-agricultural products was about 5%. The highest applied MFN rate in agriculture was 1,069.9% (ad valorem equivalent of a mixed tariff) for certain rice products. The government of the Separate Customs Territory has implemented a range of support and adjustment programmes for agriculture, including price stabilization measures for rice and sugar, and income support programmes for elderly farmers.
22. About 98% of energy demand in Chinese Taipei is met by imports. State-owned enterprises are among the main suppliers in the petroleum and electric power generation industries.
23. The share of manufacturing in GDP was about 21% in 2005, down from around 23% in 2001. The government provides tax incentives and subsidies for R&D and "newly emerging, important and strategic" industries, which mainly include machinery and electronics. Passenger cars and chassis are subject to tariff rate quotas. Office machines, telecommunication equipment, and other electrical machines accounted for about 41% of Chinese Taipei's merchandise exports (in value) in 2004.
24. The services sector was the largest contributor to the economy, accounting for about 74% of GDP in 2005. The government has pursued various liberalization measures to facilitate domestic structural reform and provide better market access for non-Chinese Taipei firms; such measures include the recent privatization of dominant carrier in telecommunications. Postal and railway transportation services are fully owned by the government. The government intends to proceed with further reforms, such as the privatization of state-owned banks. The state-owned postal savings system had the largest share of deposits among all financial institutions in Chinese Taipei in 2004. Chinese Taipei's Schedule of Specific Commitments under the GATS covers about 120 of around 160 sectors. MFN exemptions in Chinese Taipei's services commitments involve land acquisition and air transportation.
(5) Outlook
25. The economy of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) appears to be on a steady growth path, given the ongoing implementation of private and public investment projects, the recovery of share prices, and upward trend in capacity utilization. The government forecasts GDP growth of 4.25% in 2006. However, growth may be adversely affected by several factors, including expected rises in world oil prices and U.S. interest rates, persistent fiscal deficits, further shifting overseas of Chinese Taipei's production base, and an aging population. The government recognizes the need to continue with trade liberalization and structural reform, and attract inbound direct investment, which remains substantially lower than outbound direct investment, by further improving Chinese Taipei's investment environment. The growing importance of cross-strait movement of goods in Chinese Taipei's economy would seem to indicate the need for further liberalization of cross-strait traffic; such liberalization would contribute to improving the efficiency of Chinese Taipei's economy and its attractiveness to inbound direct investment. Of great importance to Chinese Taipei's longer-term growth prospects will be its efforts to implement structural and other economic reforms to boost competition; these reforms would include continued tax and financial reform, strengthening of corporate governance, and trade liberalization, particularly in agriculture.
