NT$100 billion in relief for businesses affected by WTO entry, NT$150 billion in agricultural development funds, idle land subsidies up from NT$41,000 per hectare to NT$46,000, and reemployment assistance for 4,100 middle-aged and elderly farmers.

The government is also pushing various relief measures to alleviate any impact WTO membership might have on agriculture. In a series of meetings organized by the Council of Agriculture (COA) to discuss how to deal with Taiwan's entry into the WTO, however, farmers seemed apathetic.

"The WTO is just no competition for the prime-time soaps!" remarked a COA official on his way south to attend a meeting. As farmers generally tend their fields during the day, most meetings around the island over the past six months have been held in local farmers' associations and senior citizens centers in the evenings. Very few people show up, however, as many farmers are reluctant to give up their prime-time TV. The venues tend to be rather desolate.

Liu Chao-lung, a PhD student from a farming background, wrote his master's thesis at National Chengchi University on "The Agriculture Sector during the Taiwan Miracle." He notes, "Taiwan's farmers have experienced too many setbacks and endured 'WTOs' of various shapes and sizes."

Agriculture, which is less flexible, international, or competitive than the industrial and commercial sectors, was already falling by the wayside back in the '70s as a result of Taiwan's industrialization. Imbalances in production and marketing and in supply and demand produced annual reruns of egg dumping, mango flinging, and price drops so severe that winter cabbage sold for as little as NT$1 per kilogram. Bananas, asparagus, pineapples, pigs, and eels, important sources of foreign exchange at one time, found themselves losing ground to competition from Southeast Asia and the PRC. "Subsidies," "purchases," "aging work force," and similar words and phrases with negative connotations began to pop up with increasing frequency in discussions about agriculture. Liu Chao-lung clearly remembers the mess-hall food served during his stint in the military, "When a certain type of food showed up repeatedly on the dining tables, you could rest assured that farmers were losing money again, because supply had once again exceeded demand."

Setbacks of all kinds have been a major theme of Taiwanese agriculture for the past two decades. Scenes of farmers taking to the streets on May 20th 1989 are still fresh in the minds of many. Some say that when Taiwan enters the WTO in January 2002, Taiwan agriculture will be hit for six.

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.

Last line of defense

Tariffs are the only means the WTO permits for regulating imports, so other past practices must be dismantled. Furthermore, countries are required to incrementally reduce import tariffs annually until they come in line with international standards.

To soften the blow of membership, Taiwan has, in fact, already been gradually opening up its doors to agricultural imports for several years. Consequently, all kinds of imported products can be found in supermarkets. Twelve years ago, for example, the opening up of turkey meat imports stirred chicken farmers to protest. Now, however, colorful packages of plump, mouth-watering turkey wings can found most anywhere.

At present, Taiwan only restricts imports of 41 of over 3,000 types of agricultural products. Eighteen of these, including apples and grapes, are only semi-restricted, with quotas for certain regions are controlled. As a result, Japanese Fuji apples and Oriental pears, and California grapes have long been available in Taiwan. These will, therefore, no longer be the most sensitive issues after Taiwan officially enters the WTO. A COA official explains that the focus of concern is on 23 of Taiwan's mainstay agricultural products. This final line of defense, too, is due to be abandoned. It includes rice, shiitake mushrooms, golden mushrooms, garlic, peanuts, adzuki beans, chicken, pork bellies, offal, and three types of fish.

After Taiwan opens to competition, lower prices from Southeast China's coastal regions will elbow many of these 23 products out of the market. This region lies very close to Taiwan and resembles it in climate and latitude. In reality, Taiwanese farmers growing peanuts, shiitake mushrooms and adzuki beans were already taking a beating long before WTO accession, first because of cross-strait smuggling, and later because of the opening up of the "three small links" between the mainland and Taiwan's outlying islands of Kinmen and Matsu.

Let's take a look at the peanut and garlic producing area of Yunlin County as an example. Peanuts from mainland China cannot hold a candle to peanuts grown in Taiwan, but cost less than NT$5 per kilogram, while peanuts produced in Taiwan are almost NT$20 per kilo. Many peanut processors have simply opted to shift operations to Kinmen to facilitate direct importation from mainland China. Keeping their ears to the ground, Yunlin peanut farmers with the resources to do so have invested in advanced greenhouses for crops such as tomatoes and cucumbers. Those without the resources to get out remain at the mercy of the whims of nature, eking out livings on narrow profit margins earned by the sweat of their brows.

"To them, entering the WTO is nothing more than the legalizing imports of agricultural products that used to be smuggled in from the PRC," points out Yang Feng-shuo of the Taiwan Institute of Economic Research. The COA further predicts that the importation of non-staple crops from mainland China will cause the value of Taiwan's peanut crop to drop by 17%, land under adzuki beans to fall by a quarter, and land used for shiitake mushroom cultivation to decline by half over the next four years.

Against the backdrop of the overwhelming riptide of globalization, one thing is certain: The later an industry opens up and the more it has been protected, the more damage it will incur. Therefore, although most crops will experience setbacks, they will pale compared to what rice will suffer. Agricultural officials are fretting because the impact on rice is still an unknown.

Faced with WTO membership, farmers are shifting to flowers and tourism to create a new future for Taiwan agriculture. From champignon mushrooms to improved flamingo flowers-Yen Feng-chi, a farmer from Liuchia Rural Township, Tainan, has to think on his feet to keep the wolf away from the door. Husband and wife take care of almost 7 or 8 thousand square meters of flamingo flowers.

A harsh winter for rice farmers

During the International Food Exhibition held last June, American and Australian rice made their debuts in Taiwan. Trumpeting the clean water and air of the farmlands of New South Wales, Australia printed "Australian White Rice-Sunshine for the People of Taiwan" in Chinese on the rice sacks. Representatives from the US said that American rice will be loaded on ships the moment the WTO's starting gun is fired. Both nations are promoting high-grade koshihikari rice, a strain suited to Taiwanese tastes. Many housewives at the exhibition venue were overheard to comment on how pleasing to the palate the "foreign rice" was.

Since January 1, rice is the only agricultural import on which Taiwan will be permitted to limit quantity. Only 8% of the domestic market, or 140,000 metric tons, will be opened up over the course of the first year. Despite the relatively low percentage, agricultural agencies were already offering increased subsidies early last year to encourage farmers to not cultivate their lands.

Profits on rice are among the lowest of Taiwan's crops, but because of its status as a food staple, Taiwan urged increased rice production into the '70s. Following the food crisis of 1974, the government launched the Stabilization Fund to ensure a steady rice supply. In the '80s, more varieties of food were introduced into the Taiwanese diet and the population by this time consumed much more than the recommended daily minimum of 2,500 calories. Food security considerations and Stabilization Fund purchases resulted in the overproduction of rice. Rice continued to comprise more than half of all agricultural output.

Later, as agricultural agencies promoted leaving land fallow and using land for alternate crops, like flowers, vegetables, and fruit, output value shot up. To this day, however, rice is still a major industry in Taiwan. 350,000 rice farming households (over 50% of Taiwan's agricultural workforce) cultivate 350,000 hectares of rice paddies in 20+ counties and have the highest average age of the agricultural workforce in Taiwan.

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.

Increasing production doesn't help

Most rice in Taiwan is cultivated on small parcels-the average farming household tills less than one hectare. This will be their downfall under the onslaught of modern market competition. At one point, agricultural agencies tried to address this by promoting mechanization and large-scale farming, but the production costs of Taiwanese agriculture remain far higher than in Australia and North America.

Furthermore, Chiu Yung-chung, chairman of the Chinese Agricultural Promotion Association, points out, "The government neglected the education of farmers for a long time. Its subsidies, guaranteed purchases, and welfare measures merely threw agricultural development into a tailspin." Economist Yang Feng-shuo choruses this, saying: "Focusing on guarantees and preferential treatment for agricultural prices and assets created a vicious surplus cycle-the more a farmer produced, the higher the guaranteed prices he could get. Taiwan agriculture was no longer competitive."

COA chairman Chen Hsi-huang, who earned his degree in agricultural economics at National Taiwan University (NTU) notes that Taiwan's agricultural policies used to stress increased production-producing as much as possible on the limited land available. Consequently, Taiwan-produced canned champignon mushrooms and asparagus commanded 65% of the international market. Coupled with the export of massive amounts of sugar, rice, and bananas, this stimulated the formation of capitalistic agriculture which, in turn, helped prepare the way for the subsequent take off of industry. When agriculture later peaked out in the '60s, agriculture policies continued to emphasize quantity. Based on domestic considerations, no attempt was made to increase the added value of agricultural produce. After the 1980s, "the crystal ball of most agricultural economists had gone dark." Chen Hsi-huang explains that, with the exception of a few products like flowers which have managed to make their way into international markets, overall agriculture in Taiwan has been in steady decline. Today, agriculture accounts for a mere 2.6% of the ROC's GDP. The trade deficit for agricultural products stands at US$4.5 billion.

Agriculture was once the cornerstone of Taiwan's economy. Government food policies led to a mentality that it was the government's responsibility to bear the brunt of losses incurred in the agricultural sector. The fundamental agricultural policy of "subsidizing agriculture with income from industry" after Taiwan's economy took off was evidenced in the way the government dealt with grain, vegetable, and fruit crops. Liu Chao-lung remarks that Taiwan is simply "committing slow suicide." Sugar cane and tobacco are prime examples of these policies. With prices three times the world average, they were propped up by guaranteed purchases and a state-run contracting system that limited production amounts. Now, with the opening of their respective markets, we find the sugar and tobacco industries on their deathbeds. When the rice market opens up, it appears that Taiwan's rice industry may go into decline just like the sugar and tobacco industries did before it.

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.

Propping up agriculture

The global economy is putting almost every industry, including agriculture and traditional manufacturing, through their paces. Agriculture, industry, and commerce, however, all play different roles in national development. In addition to a trade function, agriculture performs roles in maintaining food security, in travel and leisure, maintaining a green environment, and even the social function of absorbing the unemployed. Agriculture offers many "side benefits" that cannot be measured in terms of income. With the exception of a very few city states, no country, including those considered agriculturally viable, such as the US, Canada, Australia, and New Zealand, dares neglect the intangible values of agriculture. Nations tend to disproportionately protect agriculture because it is at the mercy of natural disasters, production requires a great deal of time, and products are similar. Of all the items negotiated in the WTO, agriculture has been among the worst sticking points. Hoping to protect their own agricultural sectors, countries with small-scale farming industries have argued for flexibility and a broad focus on the many different aspects of the issue of agriculture.

The WTO has also maintained a certain amount of tolerance in regards to domestic protective measures. With the exception of a strict ban on price guarantee measures that could distort fairness in trade, it has permitted a variety of subsidies, including subsidies for R&D, infrastructure, and to promote reduced output. "Agriculture is vital to social stability," Yang Feng-shuo explains. But while protection is needed to ensure that agriculture performs its basic functions, it must also adjust to the times.

Liu Chao-lung, who grew up on a farm in Yunlin, notes, "In the end, Taiwan's agricultural sector is not competitive internationally. It would be foolish to hope to use protection to delay overhauling the industry."

Liu believes that Taiwan's past macroeconomic strategy of using agriculture to foster industry and industry to develop agriculture brought about Taiwan's economic miracle. Later policies, however, failed to internationalize the economy and liberalize the trade of Taiwan. Government agencies did not realize that operational concepts from commerce and industry should be used in agriculture. "Agriculture was the last industry to recognize the need to use marketing and brand names to increase the added value of products."

A bountiful harvest of green onions and garlic. Sanhsing County's Garlic Festival in Ilan County draws visitors from near and far. Tourist farms, which integrate agriculture and local culture, have come into vogue in Taiwan. (photo by Pu Hua-chih)

All production, no marketing

Lee Shan-ren of the Taiwan Agriculture Strategy Coalition, remembers a '70s television program entitled Provisional Government Mailbox which specialized in answering problems encountered by farmers. "Technological developments in Taiwan's agriculture have never ceased to move forward," says Lee. With its myriad technological breakthroughs, agricultural testing institutions, experimental farms, fishery testing institutions, and private enterprises, Taiwan is one of the best in the research and development of new agricultural strains. "You would not be going overboard if you said Taiwan leads the world in this aspect."

Taiwan's agricultural technology is indeed a marvel, "but R&D, production, and marketing still need to be better integrated. This has been the main obstacle to the internationalization of Taiwan's agriculture." Lee Shan-ren feels that farmers' associations must take partial responsibility for the fix agriculture finds itself in today. Farmers' associations, the organizations that best understood Taiwan's agriculture in the past, have not done everything in their power to ameliorate things. This has allowed farmers to kill each other in price wars, leaving them to be sucked dry by wholesalers. This imbalance in the distribution of profits has led to a vicious cycle wherein "agriculture would never experience three good months in a row." "Farmers' associations best understood the needs of each area. If agriculture is to have any hope, the farmers' associations need to take advantage of computer technology so as to become the connection point for local farmers and agriculture around the world."

With market globalization, a variety of inexpensive foreign goods can be seen everywhere. Nations with small-scale farming take it on the chin.

Building a new agriculture

NTU Agricultural Economics Department professor Chen Cheng-wei reminds us that if we look further out onto the horizon, "the significance of WTO to ROC agriculture will not be limited to simply increasing the added value of agriculture so as to catch up to the international competition." The government needs to take this opportunity to reexamine the direction of Taiwan agriculture as a whole and make appropriate plans for the industry and the nation. Chen Cheng-wei cites the example of the unbridled development of the livestock and aquaculture industries in the past. This was a thorny issue for agricultural agencies, for they seriously damaged the environment.

As Taiwan's industrial structure undergoes transformation, we see the traditional manufacturing firms migrating offshore in search of cheap labor, materials, and land. Although this has reduced the ROC's tax revenues, the industries that have stayed behind, forced to reinvent themselves, have adapted with flying colors to the new structure. The agricultural sector encompasses farming, forestry, fisheries, and livestock. Forestry is no longer relied on for earning foreign exchange, but now plays a major role in environmental protection. Farming continues to limp along under government protection, while the overuse of water by the livestock and fishery industries has led to land subsidence and the eutrophication of Taiwan's lakes and waterways. In recent years, the COA has taken advantage of agricultural epidemics and market liberalization to persuade under-competitive farmers to withdraw from the industry and make Taiwan's agriculture resource-efficient.

Taiwan's pork industry, for example, boomed when Japan opened up its market to pork imports in 1977. By 1994, Taiwan had already been the biggest exporter of pork to Japan for many years, but the 10 or 20 thousand small scale pig farmers (raising from a few dozen to a few hundred head) could not afford antipollution equipment nor could they lower costs. Taiwan farmers found it increasingly difficult to compete against mainland China pork on the Japanese market. Adding insult to injury, smuggled pigs brought hoof-and-mouth to Taiwan in 1996, dealing another heavy blow to Taiwan's livestock industry. The government issued almost NT$1 billion in subsidies to 6,667 farmers that agricultural agencies succeeded in encouraging to leave the livestock industry. Taiwan's 14 million pig population was chopped in half almost overnight.

In the same way, the demand for seafood increased when Taiwan's economy took off. Taking advantage of this favorable situation, aquaculture began sprouting up on the west coast. At one point, coastal counties were waterlogged with fully 58,000 hectares of fish farms, causing massive erosion problems. With the widespread smuggling of seafood from the PRC in recent years, aquacultural land in Taiwan has dropped to 40,000 hectares as fisheries have shifted operations to mainland China. The COA hopes to further reduce that number to 30,000 hectares and, in recent years, has been encouraging operators to switch over to the leisure industry.

Agricultural imports have long been a white-hot issue in Taiwan. The frequent promotion of imported beef by retailers is one example.

Seafood industry's counterpunch

"These are the worst of times and the best of times." We watched as abalone, black tiger shrimp, and eel penetrated Japan's market and were sold back to Taiwan from new locations in the PRC and Southeast Asia. Shih Sheng-lung, deputy director of the COA's Department of Aquaculture and Coastal Fisheries, points out that the poor condition of Taiwan's aquaculture has been made evident in the past few years, but the industry has not collapsed.

Due to the deterioration of mainland China's aquaculture environment and the technology gap that exists between the PRC and Taiwan, the PRC's seafood does not hold a candle to that of Taiwan. Taiwanese consumers, for example, have a difficult time swallowing the large clams raised in mainland China because they are too tough. Furthermore, demand in mainland China's domestic market is growing fast. "Five years ago, per capita consumption of seafood in the PRC stood at 30+ kilograms. That 30+ kilos has since doubled and redoubled. The market price of groupers exported from Taiwan to mainland China is three times the price in Taiwan. A plate of shrimp goes for over NT$1,000 in inland metropolitan areas," notes Shih Sheng-lung. The ease of transportation due to the geographical proximity of Taiwan and mainland China will create a niche for Taiwan in the future.

More importantly, aquaculture must redefine itself after all the ups and downs that it has been through. Shih points out, "Fries, tropical fish, and high-end salt water fish have already become the three main pillars of future aquaculture in Taiwan." Taiwan's aquacultural technology is cutting edge. Its foundation in the development of tropical fish strains and the breeding of fries is solid. With the depletion of sea life in the deep oceans, fries, which require the least water of any industry, are an especially important driving force in fishery. In the future, there will be a demand of US$2 billion for fries in the Asia-Pacific region. As a result of the collective efforts of the fishing population and agricultural agencies, fries already represent one-tenth of the annual $30 billion aquacultural industry. Taiwan has only managed to capture NT$600 million of the global market for tropical aquarium fish, which runs to US$1.5 billion annually.

With export markets shrinking, the livestock industry is also overhauling operations. In the past few years, many pork farmers and food processors have been busy carrying out vertical mergers and expanding their scope of operation. Yang Feng-shuo rattles off a list of manufacturers that have successfully completed the mergers: "Tacheng, Changcheng, Pufeng. . . ." Firms produce their own feed, breed pigs, operate farms and slaughtering facilities, process meat, and even operate their own supermarkets and restaurants."

Taiwan's bananas, which for years sold very well on the Japanese market, have been mashed by PRC and Southeast Asian produce, but Taiwanese bananas are pleasing to the palate and tasty. If a high-end market niche can be found for them, they can enjoy a bright future.

High prices for high quality

American management guru Michael Porter says that traditional industries strive to reduce costs, but neglect the development of high added value. Ten years ago, Japanese rice and dairy farmers strapped on headbands and took to the streets, like Taiwanese farmers on May 20th 1989, but imported rice and pork could not compete with the high quality and safety guarantees of organically produced agricultural products, no matter how cheap they were. Japanese consumers remained very loyal to local rice. Two years ago, Japan abandoned its hard won caps on rice imports, because they no longer feared competition. By the same token, Japan is the world's largest pork importer. Domestic farmers still raise 20 million pigs, because they produce high-quality pork. It is more expensive, but it still commands its own market.

Chen Hsi-huang, a strong advocate of the Agriculture Strategic Coalition, notes that globalization is not necessarily a death knoll for Taiwan's agriculture. Since early last year, the Taiwan Agriculture Strategy Coalition began working to promote an alliance of farmers, farmers' associations, production, and marketing channels to carry out strict grading and packaging of a dozen or so agricultural products, including garlic, vegetables, mangoes, and wax apples, which are to be marketed abroad.

WTO membership will be a blow to many agricultural counties, but in recent years tourist farms have sprouted up. These new operations offer rural residents a new way to make a living by offering visitors a taste of specialty products and unique local cultural attractions. Many novel ideas, like liquor-producing towns, and farming villages specializing in vanilla and other local crops, have appeared. Many may sound farfetched, but the traditional agriculture that fed Taiwan for 50 years no longer exists. What we need most right now is ingenuity and imagination, n'est-ce pas?

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.

Cobia and groupers have replaced eels and black tiger shrimp as the staple exports of Taiwan aquaculture. (photo by Pu Hua-chih)

Agricultural products like sugar cane, bananas, pineapples, and champignons laid the foundation for Taiwan's development. Later, they all but disappeared, because they couldn't keep up with the pace of globalization. To enter the international market, agricultural policies must integrate technology and marketing. (Sinorama file photo)

The WTO threatens farming, aquaculture, and livestock industries. Under competition from the PRC, production of crops like peanuts and shiitake mushrooms is bound to drop markedly. The livestock industry will undergo adjustments. Fisheries will shift focus to the development of high value-added products, such as fries and tropical fish.