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.
With the Economic Cooperation Framework Agreement reducing tariffs to 5% last year, grouper exports rose to NT$3.6 billion. With this year’s elimination of tariffs, exports are expected to rise still further. The photo shows grouper farmer Tai Kun-tsai (left).