The international market collapses
Huang went abroad to negotiate an order for the first time at the age of 26. “Taiwan’s economic miracle was all about toting samples and luggage” all over the world to open up new markets. Huang himself ultimately visited more than 60 countries and territories.
But Taiwan’s export tea business collapsed in 1974, when exports began falling by 1–2,000 tons per year. They fell below 10,000 tons in 1987, and dropped to just 4,800 tons in 2010.
Taiwan began importing tea in 1985. While imports started small—just 3-400 tons in the first two years—they expanded rapidly, reaching 30,000 tons in 2010.
There were multiple reasons for the turnaround. When Taiwan’s economy took off in the 1970s, labor costs soared and urban job opportunities attracted many workers from rural areas. The NT dollar also appreciated. That made our tea less cost-competitive on the export market, bankrupting many local producers.
Drinking fine teas had not yet become fashionable, so there was little domestic demand to take up the slack. As a result, the number of tea growers and of acres planted in tea began to shrink in the north.
The government’s elimination of the Regulations Governing Tea Production in Taiwan Province in 1982, permitting farmers to produce, process and sell their tea themselves, was another issue. The move benefited the farmers, but removed tea processors and brokers from the production chain.
In the old days, the mountains of central and southern Taiwan were not important tea-growing regions despite having a climate very well suited to tea. But as incomes rose across the island, consumer interest in quality teas from the mountains grew. Farmers cultivated increasing numbers of tea bushes, and plantations began to sprout at ever higher elevations.
But even with domestic demand increasing and unit prices rising, acreage in cultivation and output declined. Moreover, high production costs made Taiwanese teas relatively uncompetitive in the export market, and made it virtually impossible for even those processors who wanted to remain in the export business to do so.
When Huang buys tea from local farmers, they often ask him why he wants to sell it abroad when “there isn’t enough to meet domestic demand.”
“Taiwan’s tea output accounts for less than 1% of global production. Our tea farmers ignore international prices. They set their prices so high, there’s no way for me to sell it.” He complains, “Back in the old days, we produced and sold whatever tea the global market demanded. Now, that’s been turned on its head. The farmers decide what tea to grow. They ignore what the international market has to say about varieties and prices.”
Different streams
Given that the old days of separate growers and processors aren’t coming back, how do we bring back the glory days of Taiwanese tea exports?
Huang recommends that the government establish an export-processing zone for tea as a base for licensed tea processors and registered factories. They want the government to permit tariff-free imports of cheaper Southeast Asian and mainland Chinese teas that could be processed and blended in this zone, then re-exported.
Huang stresses that the government would be able to protect the rights of local growers and consumers by keeping tea processed in the zone out of the domestic market. It could also levy a tax on beverage makers that used leaves from the zone to make their beverages. In other words, it could employ separate systems to advise and regulate producers of commercial and premium teas.
Responding to their suggestion, Shi Qiongyue, a technical consultant with the Council of Agriculture’s Department of International Affairs, says that tea processors first need to reach a consensus on whether to establish such a zone before the COA can approach the Ministry of Finance and the Ministry of Economic Affairs about the feasibility of a tax measure.
Tea growers, tea brokers, and the government are going to have to put their heads together and pool their resources if Taiwan is going to again produce tea for both the domestic and international markets.