The Taiwan food industry has put itself on display for the first time since its accession to the World Trade Organisation. At Food Taipei 2002 this month, Glenn Smith took the temperature of local producers – and spoke to foreign exporters looking to gain a foothold in this newly accessible sales territory.
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William Farmer, the aptly surnamed director of the Asia programme of the USA Rice Federation, was at Food Taipei 2002 to promote – you guessed it – US-grown rice. “There’s a lot of interest here because US rice is new,” he said, nodding toward the stream of visitors passing his booth. “The import ban has been lifted, and this year Taiwan has agreed to import 144,720 metric tons, brown rice basis.”
Taipei Food 2002, held 12-15 June at the Taipei World Trade Center, was Taiwan’s first show since its accession to the World Trade Organisation 1 January.
That prying open of the island’s food market – much dreaded by local growers, but much anticipated by foreign exporters and domestic retailers – prompted a record turnout. Joining the ranks of ‘national’ pavilions were first-time exhibitors Spain, Brazil, Thailand and Malaysia, which mingled with old-timers the US, Canada, Australia, France, South Korea, Chile and Central America.
Pushing back the frontiers for new entrants
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By GlobalData“What Taiwan’s entry into the WTO has done is level the playing field on products to which the US had exclusive access,” said Martin Charron, deputy director and trade commissioner for the Canadian Trade Office in Taipei.
Duli Chang, senior business development manager of the Australian Business Centre, voiced a similar opinion. “Taiwan has always favoured the US,” said Chang. “In the past, there were lots of quota limitations on Australian produce, for example, apples, stone fruit and citrus. The US didn’t have quotas on these.”
For decades, the US, due to its ‘special’ relationship with Taiwan [read: weapon sales], has wrangled exemptions to restrictions on certain agricultural and food imports. But that preferential treatment has ended, as have many of the bans, restrictive quotas and heavy tariffs – often in excess of 50% – that kept Taiwan’s market closed to foreign food exporters.
Tariffs reduced
Under WTO, Taiwan reduced its tariffs on agricultural products, which averaged 20.02% before accession, to 14.01% as of 1 January, and this will drop to 12.86% in the next few years. These changes are complex and defy description. In broad view, of the 41 food items formerly controlled, 18 are now open, and 22 now have quotas or tariffs.
“[WTO’s] greatest impact will be for items once protected by quota or tariff – for example, rice, sugarcane, pork, poultry and milk products,” said Li Ho-shui, first scientist of the planning department of the Food Industry Research & Development Institute. “For other import categories, the increase will be gradual. Taiwan has opened its market over several years, and food imports are already huge.”
True, but until recently the biggest import category has been soybeans and corn for animal feed, and when combined with foods for human consumption, the value of imports is only 15% of that of domestic production.
Pork among the first to benefit
One of the first winners might be pork. Taiwan is self-sufficient in pork production, and prior to a devastating outbreak of foot and mouth disease in 1997, it was a major exporter to Japan and other markets. To protect local farmers, Taiwan put heavy tariffs on pork cuts, and banned imports of pork offal.
“People here eat tripe and it commands strong prices,” said Charron. “In a sense, pork offal cross-subsidised [Taiwan] pig farming. In the fall of 1997, [the Canadian trade office] was told ‘You will never get access to our pork offal.’ Now, under WTO, that has changed, and our exporters can get good money for something that can’t even be sold back home.”
Prevailing view optimistic for importers – despite unclear statistics
The welcome that other food imports can expect is less certain, but the prevailing view is that future is promising.
To date, it is difficult to gauge what impact WTO has had on food imports to the Taiwan market. The trade statistics aren’t much help. In the first quarter of the current year, food and agricultural imports totalled US$24.1bn, compared to the US$28.4bn of the same quarter of 2001. That’s a shocking 15% drop, and regarded as a bit of a fluke.
Taiwan entered WTO at an inopportune time. 2001 was the worst year in the island’s economic history. The Asian Flu, which arrived late in Taiwan, suddenly turned virulent. Exports plummeted –23.4% and the island saw its first ever negative GNP growth – 1.38%. Unemployment hit record highs, and consumers tucked away their wallets. To stimulate the economy, the government depreciated the currency from NT$31.4:US$1 in 2001 to a low of NT$36.5 this year.
WTO tariffs offset depreciation worries
“If it wasn’t for the WTO, we would have had to raise prices,” said C. Eric Liu, director of U N Farm and importer of St. Dalfour jams and teas.
Essentially the same view was voiced by Bruce Fu, import division manager of Emporium Corp., a distributor of foodservice products for Pillsbury, Monarch, Kraft Foods, J.M. Smucker, Petrini and a dozen other foreign companies.
“The WTO tariff cuts helped offset the increased cost of imports caused by the NT dollar’s depreciation,” said Fu.
Many US and European food companies have contacted Emporium looking for a distributor. “There’s lots of interest in Taiwan,” Fu said, “but the economy has to improve.”
Inside view of foreign competitors
So, how do the island’s food conglomerates view the horde of foreign competitors at their gate?
They’re pretty blasé about it. “Local products sold on the basis of freshness will feel little impact,” said Chen Wen-min, public relations manager of Wei Chuan Foods, the island’s second largest food company. “Foreign products with long shelf lives still must compete on taste.”
In other words, Taiwan consumers are accustomed to the superior taste of our products, and they will have no interest in their foreign counterparts. That’s the standard line, and some version of it is uttered whenever anything new appears in Taiwan.
Taiwan more worried by competition from China
If anything, Taiwan food companies are less concerned with competition from the West than from their fellow WTO member next door – China.
China was admitted to the WTO 1 January, the same day as Taiwan. FIRDI’s Li said: “Imports from China could have a drastic effect on Taiwan’s farms. Vegetables are perishable and difficult to ship, but the cost of production in China is so low [our farmers] wouldn’t be able to compete against them.”
That is, if Chinese produce and foods are allowed to enter Taiwan. “Right now we are allowed to sell to China, but our government still prohibits or restricts the import of Chinese products into Taiwan,” said Jean-Yves Yao, director of the public affairs division of Uni-President Enterprises Corporation.
Free and fair trade is a basic tenet of WTO membership, but how that is applied to the Samson and Goliath battle that has raged across the Taiwan Strait for five decades is anyone’s guess.
On 1 January, Taiwan’s government stated it would “gradually open up [its] market to China within a certain transitional period of time” but based on past history, it won’t happen overnight. More likely it will take a decade before it is ironed out.
By Glenn Smith, just-food.com correspondent in Taiwan
