To facilitate its entry to the World Trade Organization (WTO), the ROC began the last stage of bilateral negotiations with the United States on February 9. The two sides were at the table until February 20, when they finally reached an agreement. To join the WTO the ROC will have to take more steps to open its markets, but the agreement with the US is a major step on the way to formal membership. In the future, how should the ROC government help domestic industry to upgrade and even confront competition from mainland China? These are difficult questions that the government will have to answer.

In 1995 GATT (the General Agreement on Tariffs and Trade) became the WTO. It is now the world's most important international trade organization, governing over 95% of all international trade. Taiwan has been working hard to become a formal member for over six years. Altogether, 26 nations have entered into talks with Taiwan about WTO admission. When the agreement with the United States was reached on February 20, it brought to 24 the number of nations agreeing to ROC membership. Negotiations with the European Union and Switzerland are still to come. Minister of Economic Affairs Wang Chih-kang says that those agreements should be reached in March. Taiwan could then become a formal member in May of this year, GATT's 50th.

The agreement with America was reached during the 17th round of US-Taiwan talks. The areas under discussion were gradually whittled down over the first 16 rounds, but because those that remained were sensitive issues for both sides, talks proceeded slowly. In order to speed entry to the WTO, various relevant officials-including those in economics, finance and agriculture-made trips to the United States. Minister of Economic Affairs Wang Chih-kang engaged in high-level negotiations with US Trade Representative Charlene Barshefsky. These talks focused on opening Taiwan's agricultural, manufacturing and service industry markets. Agriculture was the sticking point, and it almost caused the talks to derail.

Because the two sides were sincere in their stated desire to come to an agreement quickly, both ended up giving way on some issues: The United States agreed that during a period of transition, its pork and chicken exports to Taiwan would be subject to high tariffs when they exceeded an annual quota or their prices fell below a certain level, whereas Taiwan agreed that before it became a formal WTO member it would import an agreed amount of animal products at current tariff levels.

After making the breakthrough in agriculture, the two sides were quickly able to agree on other issues. The agreement with the United States represents a major hurdle that Taiwan has cleared in its quest to join the WTO. It was not easy. Before this round of negotiations, there were rumors that ROC negotiators would "give up the pigs to protect the rice"- that they would, in other words, open the market to US pork imports in order not to have to give way on rice. Domestic hog farmers strongly objected. Peng Tzuo-kuei, Chairman of the Council of Agriculture, noted that the outbreak of hoof and mouth disease here has made it impossible for Taiwan to export pork. With more than 4 million hogs in Taiwan, the price of pork has plummeted. Whether or not Taiwan joins the WTO, he argued that the number of pigs here should fall. Nevertheless, he declared that there was absolutely no policy to "sacrifice pigs for rice." President Lee Teng-hui, Vice President Lien Chan, and Premier Vincent Siew all came forward to stress that Taiwan would not sacrifice any segment of the agricultural industry.

But the government's assurances didn't quell the fears of hog farmers. Aside from joining with chicken farmers, dairy farmers and the animal feed industry in organizing an advocacy group to resist imports of American feed and animal oils, hog farmers even pelted the American Institute in Taiwan with eggs and pig manure on March 12. When the agreement was reached, they only grew more dissatisfied and issued a call for large-scale protests. Fang Ching-chuan, who heads an ROC hog farming industry association, points out that the ROC agreed that it would, even before becoming a full-fledged member, import 90% of its quota for the first year of membership, which means that Taiwan hog farmers will lose more than NT$10.5 billion in sales this year.

ROC trade negotiators were pressured from both sides. In addition to the complaints of domestic industry, they were confronting experienced US negotiators pushing them to open markets and reduce America's US$6-7 billion trade deficit with Taiwan. And they were trying to get the deal done quickly so that Taiwan could become a formal member before mainland China. Even after Minister of Economic Affairs Wang Chih-kang pulled off this great feat, the government still had to deal with protests from domestic industry.

The move toward open agricultural markets was agreed upon by the WTO member nations in the Uruguay round of GATT. With this international consensus and the global trend toward free trade in agriculture, Taiwan is finding it difficult to swim against the current by maintaining its protectionist agricultural policies. Tu Chiao-hsia, a researcher for the Chung Hua Institution for Economic Research, notes that the ROC will sooner or later have to face up to the demands to open its markets to agricultural imports. She also points out that agricultural production proceeds at a comparative disadvantage in Taiwan, with its high population density and expensive land. Although past agricultural policies may have succeeded in providing stable food supplies, they have also caused environmental damage and forced consumers to pay high prices.

Li Chien-chuan, vice chairman of the Council of Agriculture, points out that when the Taiwan market opened to imports of US turkey meat, many people thought that Taiwan's domestic chicken industry would collapse, but in fact there was no such dramatic result. Some people say that there is nothing to fear from imports of frozen pork, because frozen pork can not be used in offerings to gods and ancestors and it doesn't taste as good.

Wang Chih-kang estimates that after the ROC joins the WTO, its gross domestic product will increase US$33 billion, consumer spending will jump US$23.7 billion, investment will rise US$3.9 billion, and exports will leap US$25.9 billion. Moreover, in the future, Taiwan can also enjoy "most favored nation" status, can participate in the drafting of WTO trade regulations, and even more importantly can appeal to the WTO to resolve trade disputes. Moreover, says Wu Chung-chi, the chairman of the Consumer Foundation, falling tariffs will greatly benefit consumers, bringing lower prices and more choice.

Steps must be taken toward further market opening, but they should be slow and steady. On the one hand, Peng Tzuo-kuei says that tariffs and health regulations can be used to protect Taiwan's agricultural products, and on the other hand, the government has set aside a fund of NT$90 billion to provide assistance to farmers and bring about a transformation in agriculture in three to six years. Lai Hsiou-sui, a professor of veterinary medicine at National Taiwan University, says hog farmers can become more competitive by raising production and cutting costs and organizing cooperatives so as to reduce the cut of the middle men. But Legislator Wang Tuo points out that although we have been facing outside pressures to open markets for many years, within the nation we are still discussing how to protect our farmers. From this it is clear that in taking gradual steps over the course of many years of negotiations, government agencies are still unclear about what measures need to be taken to upgrade agriculture. The government should press forward with its efforts in this regard, while ensuring the farmers' survival.

It is possible that Beijing will step up efforts to block Taiwan's formal membership. But if both sides are able to join the WTO in the first half of this year, eventually the matter of direct mail, trade and transport between Taiwan and mainland China will be put on the table. The government should start preparing for this event as soon as possible.

(For further details about the US-Taiwan WTO agreement, visit the Sinorama website: http://www.sinorama.com.tw/)

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Opening Tai-wan's market for agricultural goods was one focus of US-ROC trade talks. In Taiwan, fear-ful pig farmers protested, demanding that the negotiations take their interests into account. (photo by Hsueh Chi-kuang)