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2006 Asia Industrial and Economic Roundtable
“Rethink World Trade System: Imperatives for
Sustainable Growth”
James Wu
Deputy Director General
Bureau of Foreign Trade,
Ministry of Economic Affairs
Talking Points Prepared for Session 3: Rethink World Trade
System (17:30-18:30)
Topic: Taiwan’s participation in the WTO and its prospective role
in the world trade system
Contents:
I. Active Participation in the WTO
II. The impact of Taiwan’s accession to the WTO
III. The progress of the WTO Doha Round and Taiwan’s
observations
IV. The perspectives of Taiwan’s role in the world trade
system
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Chairman Hsu, Chairman Siew, Chairman Yen, Professor Lehmann,
Mr. Jonquières, Distinguished Guests, Ladies and Gentlemen,
It is a great honor and an enormous pleasure for me to attend
the 2006 Asia Industrial Economic Roundtable, and especially to
take part in this important session. I would like to share some of my
own views and observations, in the hope that they might further
stimulate our discussion today on the subject of "Rethink World
Trade System." My speech will focus on Taiwan’s participation in
the WTO and its prospective role in the world trade system.
I. Active participation in the WTO
As you may be aware, Taiwan encounters numerous political
difficulties in conducting bilateral trade talks with many of its
trading partners. In such circumstances, our participation in the
multilateral framework offers Taiwan the best opportunity for
pursuing a more stable, liberal and predictable trade environment.
It is in our interest to help work for a strong multilateral system that
benefits all countries in general. Doing so will ensure the sustained
growth of Taiwan’s economy for the future.
After twelve long years of great effort, Taiwan acceded to the
WTO in 2002, representing a milestone in Taiwan’s economic
development. Since entering the WTO, my government has been
devoting itself to implementing its accession commitments and
participating in WTO activities, especially in the Doha Round of
trade negotiations.
Through these endeavors, Taiwan hopes to
greatly contribute to the multilateral trade system.
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During the more than four years that Taiwan has been a
member of the WTO, it has sent more than 500 officials to attend
WTO activities including the Doha Round of negotiations, two
Ministerial Conferences, bilateral negotiations with acceding
countries, and other meetings of various committees and councils.
We have submitted more than 73 proposals or papers regarding
Doha Round issues, many of which have received an enthusiastic
response from other Members.
In addition, Taiwan has joined many informal groups, such as
“AD Friends” for the anti-dumping negotiations, “G-10” for the
agricultural negotiations and 14 groups for the services negotiations.
Participation in these negotiations is helping Taiwan to secure its
trade interests and make more friends, thereby enhancing Taiwan’s
visibility and enabling it to make more contributions to the
multilateral trading forum.
Furthermore, I would like to highlight the fact that not only do
our officials have an excellent record of performance in WTO
activities, but the law experts of our academic community are also
highly valued by the WTO Secretariat. We are very proud that Dr.
Chang-fa Lo, the Dean of National Taiwan University and an
outstanding law professor, was selected to be a panelist in the
dispute of Brazil’s Measures affecting Imports of Retreaded Tyres.
II. The impact of Taiwan’s accession to the WTO
Since Taiwan entered the WTO in 2002, people from both the
private and public sectors have been concerned about the impact of
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WTO accession on Taiwan’s economy. According to the economic
studies conducted by the Chung-Hua Institution for Economic
Research, accession to the WTO has brought a positive impact on
Taiwan’s overall economic and trade development. Taiwan’s
economic and trade system has been consistent with WTO rules,
including transparency of laws and regulations. This will increase
the confidence of both domestic and foreign companies regarding
Taiwan’s economic system. The building of intangible confidence
has been the most important benefit Taiwan has received from its
membership in the WTO.
1. The performance of Trade and Economic Growth
Taiwan’s trade and economic development has been in an
upward trend since its accession to the WTO. Here are some
statistics for your reference. Total trade increased by 6.1% in
2002, 12% in 2003 and 26% in 2004. Even in 2005- the year of
unstable oil prices- we managed to keep our trade growing at
8.5%. Of course, all this trade growth has been kicking up our
GDP- in 2004, it hit 6.1%.
Table: The Growth rate of Taiwan’s GDP and Trade 2002-2005 (%)
2002
2003
2004
2005
GDP
4.3
3.4
6.1
4.1
Total Trade
6.1
12.0
26.0
8.5
4
Exports
7.1
11.3
21.1
8.8
Imports
4.9
13.0
31.8
8.2
2. The impact on Taiwan’s Industries
(1) Industry sector: Since our accession to the WTO, both the total
production value and exports of manufactured goods have
been increasing steadily. The negative impact caused by
accession has been limited. The industries that have faced
more competitive pressure from foreign imports are those
which sell most of their products in domestic market, such as
the heavy electrical machinery, home electronics and textile
industries. On the contrary, production of Taiwanese
automakers has increased by 60% over the past three years
and its market share rose to 87% in 2004, even in spite of
Taiwan’s commitment to reduce tariffs and expand its quota
of foreign auto imports.
(2) Agricultural sector: Our accession has indeed brought a
negative impact on some sensitive products, such as rice and
fruit. However, those negative influences are not as serious as
what we had expected prior to accession. Employment in the
agricultural sector has been decreasing, while total production
value and per capita production have been rising.
(3) Services sector: In the services sector, we have witnessed
growth production, employment and trade. Production in this
sector increased by an annual rate of 3.56% since 2001, and
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its contribution to Taiwan’s GDP has risen to 68.7% from
66.9% in 2001. The opening of our services market has
helped attract foreign investment, improve operating skills,
enhance
quality,
reduce
costs
and
increase
the
competitiveness of Taiwan’s services. The liberalization in
telecommunication, financial and transportation services has
brought more momentum to our economic growth.
III. The progress of the WTO Doha Round and Taiwan’s
observations
1. The progress of the Doha Round
To further liberalize multilateral trade, the WTO in 2001
launched the Doha Round of negotiations, which is also known as
the Doha Development Agenda because of its strong development
perspective. This round of negotiations is no less ambitious than the
previous one. In fact, it marks for the first time ever in the history
of GATT and the WTO that members have agreed to negotiate not
only the creation of trade benefits, but also the equitable sharing of
the benefits generated. Moreover, members agreed to further
increase market opportunities, strengthen multilateral trade rules,
and conclude negotiations in three years.
The topics being negotiated in this round include the nine
issues of Agriculture, Non-agricultural Market Access, Trade in
Services, Rules, TRIPS, Trade and Environment, Trade and
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Development, Dispute Settlement and Trade Facilitation. Indeed,
the broad coverage and the high level of ambition of the Doha
negotiations are very likely to benefit WTO Members in areas
important to them.
However, on many occasions WTO Members have failed to
live up to the level of ambition agreed upon in Doha. In Geneva,
there is a joke that “GATT” stands for “Gentlemen’s Agreement to
Talk and Talk,” while “WTO” means “We Talk Only.” There may
be some truth to these phrases, given the fact that WTO Members
seem to miss deadlines again and again.
This round, originally set to be completed at the end of 2004,
has stumbled due to divergent positions among Members on most
issues. Among these, agriculture is the most sensitive and important,
and it continues to hold up the progress of other issues. Though the
July Package and Hong Kong Ministerial Declaration adopted in
2004 and 2005 set guidelines and injected needed momentum into
the negotiations, the tangos that our trade negotiators have danced
so far have fallen well short of the standards of performance we set
as our goals in the Doha Round.
It was very disappointing that Members could not complete
the task set in the Hong Kong Ministerial Conference last
December, and failed to finalize the modalities on Agriculture and
NAMA at the end of last month. This is likely to further impede the
goal of concluding the round at the end of this year.
2. Taiwan’s observations
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After four years of membership and participation in the
WTO, I would like to share some of my observations with you.
(1) The impact of the stalled Doha Round
Those who have witnessed the slow progress of the Doha
negotiations might feel doubtful about the chances for a
successful outcome of the Doha Round. This is indeed a difficult
mission given the fact that there are 149 Members engaging in
the talks and so many issues to be tackled. Yet we must
remember that compared with the eight years that it took to
complete Uruguay Round, the Doha Round has just entered its
5th year of negotiations. Therefore, the stalled progress is not
totally unexpected. And there is no need to be too pessimistic.
What’s more important and more worthy of our attention is
what might happen if this round can not be finished in the near
future. The following are some likely negative impacts:
- According to an evaluation by the World Bank, the
successful conclusion of the Doha Round will boast world
trade by about US$300 billion. If the round fails, however,
the huge benefit to the open global market will not be
realized in the near future. The world economy will fail to
grow as rapidly as anticipated, and fewer new business
opportunities will appear.
- Countries will lose confidence in the multilateral trade
system. They might devote less effort to the WTO
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negotiations, and turn instead to focus more on bilateral
arrangements. In the trend of signing regional or bilateral
free trade agreements, more and more countries will
likely compete in this game. This will diminish the
benefit of the multilateral trading system and keep most
countries--especially the least-developed countries-- from
equitably enjoying the fruitful trade interests thereof. I
believe that no one would like to see this happen.
(2) The challenges of the WTO
One difficulty faced by the multilateral trading system is
how to ensure internal transparency in the Organization, and
how guarantee the effective participation of all Members.
Complaints about the lack of transparency in multilateral
trade negotiations include the “green room meeting” and
“mini-ministerial conferences”.
How to keep a balance
between full transparency and an effective decision-making
process remains a very difficult challenge for the WTO.
As a full Member of the WTO, Taiwan has spared no
efforts in contributing to the multilateral trading system, and
we also believe that all Members are indispensable to the
WTO. In that spirit, all Members should be able to participate
on an equal footing.
(3) The importance of informal groups
In order to strengthen their negotiating power in the WTO
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negotiations, many countries have been seeking to form
coalitions and cooperative relations with others. We have seen
dozens of informal groups established that are centered
around various issues. These groups have played a very
important role in the negotiations by presenting papers and
facilitating discussions. It is impressive that the developing
countries, and even the least-developed countries, have been
more actively engaged in the Doha Round than they have in
previous rounds. They have worked together and formed
united fronts-such as the G-20 (led by India, Brazil and
China), the G-33 and the African Group- to demonstrate their
positions and prevent passage of resolutions that run contrary
to their interests.
The abundance of coalitions makes negotiations more
difficult, but the influence of developing and least developed
members on the multilateral trading system is increasing. This
is a good sign. As more members become involved in the
multilateral trading system, more trade interests can be shared
equally.
(4) The participation of private sectors
When we talk about private sectors participating in the
WTO, the impression of the protests by anti-globalization
NGOs might be the first thing that comes to mind. But today,
I will focus on the participation of industrial sector.
In
Geneva, we saw delegations of industry associations or
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alliances from the US, EU and Japan visit the WTO and
Members’ permanent missions to the WTO and try to lobby
their proposals to be included in the negotiation results. Take
the US National Association of Manufacturers(NAM) and
The Union of Industrial & Employers’ Confederations of
Europe(UNICE) for example. Both of these associations are
very familiar with related trade rules, and always follow the
latest progress of the WTO negotiations so they can respond
immediately to any situation that arises in the situation of
Doha Round. Their suggestions are often made part of the
trade policies and negotiation strategies of their respective
countries. They have had great influence on their countries’
national trade and industrial policies, and also successfully
assisted their governments in trade negotiations.
IV. The perspectives of Taiwan’s role in the world trade system
According to Thomas Friedman’s basic argument in his book
“The World is Flat,” the fall of the Berlin Wall, the rise of the
Internet, and the increasingly interoperable nature of software have
resulted in a "flat" global political, economic, and cultural
landscape. In this environment, people previously cut off from the
centers of power and affluence can join right in on the
moneymaking and opinion forming--as long as they have the skills,
the courage and the broadband connections. The trade liberation
pursued in the previous eight rounds of GATT and the Doha Round
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of WTO, bringing down the tariff barriers and non-tariff barriers,
can be seen as another force that has served to make the world
“flat.” This would seem to be good news for Taiwan, a small island
with limited resources and few diplomatic relations. Most
Taiwanese companies are small and medium enterprises, which
might be better equipped to cope with this rapidly changing
business environment. Yet while a flat world may create more
opportunities and make it easier to do business, it also leads to the
entrance of more competitors to the market. Taiwan’s ability to
survive and become successful in a flat world will require the
government, companies and individuals to think thoroughly and
find their own solutions. I believe we are all inspired by the
valuable suggestions and insights from the previous outstanding
speakers and experts we have heard today.
Let’s go back to the WTO. The WTO is the only binding
economic and trade organization that Taiwan can enter as a full
member. Membership in the WTO marks Taiwan’s first
opportunity to participate in trade negotiations, to seek further
reduction of trade barriers and to make fairer and freer trade rules
with other Members. Due to the political difficulties that it faces in
signing bilateral free trade agreements with major trading partners,
participating in the WTO has become extremely important for
Taiwan. Therefore, we should seize every opportunity to promote
the rules and policies that are favorable to our industries and
economic development.
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As a newly acceded Member, what role can and should Taiwan
play in the world trade system? It should be an active player and a
creative contributor. To reach this goal, it needs the government,
industries and scholars to work more effectively and more closely
together. Based on the above observations, I would like to make the
following suggestions.
1. For government agencies
It is the responsibility of government agencies to actively
participate in WTO meetings and negotiations. As for external
negotiation strategies, these need more effective coordination
and cooperation among different government agencies.
The
current decision-making process has been working well, but it
can be further enhanced by organizational restructuring in the
future. Moreover, seeking more alliances and strong coalitions
with other countries will help to promote our proposals. For our
internal economic and trade policies, the government should
prepare for further trade liberalization. Though the Doha Round
is progressing slowly, it will be concluded sooner or later.
Related authorities should evaluate in advance the possible
outcome and impact of these negotiations and make necessary
related reform and adjustment. Then, informing our private
sectors about the negotiation progress and policies, and making
sure they understand, is another important task. Regular
communication mechanisms should be established as soon as
possible.
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As the 16th largest economy in the world, Taiwan will
continue to uphold its share of the responsibility to provide the
least developed countries(LDCs) with technical assistance and
capacity building. To achieve this, we will continue donating to
the Doha Development Agenda Global Trust Fund, and offering
duty-free treatment to imports from LDCs.
2.For Industries
Depending on the government’s participation alone, without
assistance or support from private sectors is not enough. Because
the issues addressed during the Doha Round range from the
reduction or elimination of tariffs on industrial and agricultural
products, to market access in services and the revision of trade
rules, the outcome of the Doha Round will greatly influence the
world’s economic and trade development, especially for tradeoriented countries like Taiwan. We must explore all potential
business opportunities that the Doha Round will bring to the
world. I would like to call on our industry sectors pay more
attention to WTO issues in addition to doing your own business.
The government needs more constructive advice or suggestions
from our industries if it is to formulate make more useful and
effective negotiation strategies.
I would also encourage our
industrial associations to try to set up cooperation with related
foreign or international associations, such as NAM and UNICE, to
promote initiatives with mutual benefits.
2. For academia
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I have very much appreciated the great efforts of the ChungHua Institution for Economic Research over these past few years
to help our government deal with WTO affairs by doing research,
providing consultations, presenting papers and training officials.
It is our hope that the Institution will continue to upgrade its
research ability, and help the government to making more
constructive proposals to the WTO negotiations, thereby making
Taiwan an important contributor for the world trade system. I
encourage the Institution to set up more exchanges and
cooperative relations with other well-known think tanks, such as
the Evian Group. We are looking forward to seeing the
Institution become one of the world’s leading think tanks for
WTO research in the future.
Thank you very much for your attention.
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