At a press conference on April 13, Minister Without Portfolio Yiin Chii-ming (尹啟銘) questioned the accuracy of comments on an economic cooperation framework agreement (ECFA) made by Wang To-far (王塗發), a professor of economics who claims that Taiwan would have to remove the tariffs on 90 percent of its Chinese imports within 10 years of signing an ECFA.
According to Yiin, the length of time and the percentage of products that will be tax-exempt will be determined by the needs of the signatory countries. Using the Japan-Singapore Economic Partnership Agreement as an example, he said that agreement only covers 76 percent of Japan’s imports from Singapore.
In response to Wang’s estimate, the Chinese-language daily the Liberty Times (the Taipei Times’ sister paper) reported on April 14 that Article 24 of the General Agreement on Tariffs and Trade, the predecessor of the WTO, states that a free-trade area shall be formed within “a reasonable length of time” after a free-trade agreement (FTA) is signed and that this period may exceed 10 years only in exceptional cases. It is thus wrong to say that it will depend on the needs of the signatory countries.
As for Yiin’s claim that the Japan-Singapore FTA covers 76 percent of Japan’s imports from Singapore, that only tells half the story, and the wrong half at that.
The WTO calculates the ratio of openness — the trade coverage ratio — using two methods: One is calculated based on the number of product categories and the other is calculated based on import value.
The Taiwan WTO Center at the Chung-Hua Institution for Economic Research, which is responsible for the government’s ECFA research, also publishes an e-paper on the WTO. Deputy Director Tu Chaw-hsia (杜巧霞) published an article in Volume 36 of the e-paper, released in 2005.
According to Tu’s article, “The concerns over coverage in RTA [Regional Trade Agreement] negotiations,” the tax-exempt ratio of Japanese imports from Singapore is indeed 76 percent when calculated based on the tax number of product categories. If, however, calculated based on import value, the tax exemption ratio reaches as high as 93 percent.
The reason for the large gap between the two methods, as Tu explains in her article, is that “Japan has reservations about opening its agricultural market while Singapore has no agricultural sector … Japan does not import any agricultural products from Singapore.”
In other words, Japan could have listed Singaporean agricultural products as duty-free and increased the coverage to more than 90 percent as calculated based on the number of product categories.
However, this would not increase the value of imports from Singapore, since it has no agricultural sector and thus cannot export agricultural products to Japan.
This means that the tax-exempt ratio of Japan’s imports from Singapore is more meaningful when calculated based on import value, which is 93 percent.
More interestingly, Tu’s article also states that according to WTO statistics from 2002, the tax-exempt ratio on imports exceeded 95 percent for most of the 53 RTAs for which information was available in August 2001. For industrial products, the ratio was also as high as 95 percent with the exception of Turkey.
Despite already far exceeding Yiin’s claim, Wang’s prediction of a ratio of 90 percent is in fact rather conservative.
Lin Kien-tsu is a member of the Taiwan Association of University Professors.
TRANSLATED BY EDDY CHANG
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