Taiwan Nears Its Goal of Joining the World Trade Organization

Report Asia

Taiwan Nears Its Goal of Joining the World Trade Organization

April 22, 1998 7 min read
Carl Cohen
Distinguished Fellow

This lecture was held at the Heritage Foundation on February 19, 1998.

I am here in Washington, D.C., to conclude bilateral negotiations between the Republic of China on Taiwan and the United States on our accession to the World Trade Organization (WTO), an effort that we began in 1990. As the world's 14th largest trading partner, and 7th largest overseas investor, we reasoned that it was only logical that we join the organization that sets the rules for the conduct of international trade. For the past eight years, we have discussed extensively with the United States and other trading partners the reforms that we needed to implement to bring our market into conformity with international trading rules.

We have made great progress in our bilateral WTO accession negotiations with the United States. This opens the way for us to accede formally to the WTO as the "Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu." We will participate fully in all WTO meetings and activities under the informal name of "Chinese Taipei."

As you know, we bring a great deal of experience on international trade issues to the WTO. In little more than 40 years, we transformed a small, primarily agrarian economy into an international industrial and trading powerhouse. It is enormously important for our economic future to be a member of the WTO. Trade is our lifeblood, and we look forward to working closely with our trading partners once we have joined the WTO to decide the rules that will apply to trade in the future.

I would like to take a few minutes to put into perspective the financial crisis in Asia as it affects Taiwan and to review the highlights of the many liberalizing steps we will take to open our economy as part of our WTO

Asia's Financial Crisis

First, let me reassure you that the economic fundamentals in Taiwan are favorable and strong. The Republic of China has kept its level of international debt to a very manageable level of less than $100 million, and our foreign reserves of more than $82 billion are the second largest in the world. We have kept our level of inflation low--it is expected to be less than 3.0 percent this year, for example--even while maintaining a healthy level of economic growth.

Our per capita gross national product now stands at $12,838, a level that has allowed our population of just over 21 million to enjoy a strong and steadily improving standard of living. We estimate that our economic growth rate in 1997 was 6.7 percent, with inflation quite low at less than 1.0 percent. The net effect was to enable the income of consumers in Taiwan to grow significantly. This means that Taiwan, of course, will continue to be a good market for U.S. exports of goods and services. In 1998, we predict that our economy will grow once again at a pace between 6 percent and 7 percent, despite external uncertainties.

In comparison with some of the other countries in Asia that are experiencing economic difficulties, Taiwan is fortunate indeed. As a result of prudent management of our economy, today we have the economic flexibility to weather the current financial turmoil. We also have a strong entrepreneurial tradition in Taiwan. The backbone of our economy consists of thousands of small- and medium-sized businesses, which are highly flexible and can more easily adapt to changing market conditions. Another source of Taiwan's strength is our vibrant democracy. It keeps decision making in the open and allows many opportunities for public debate and discussion of nearly every aspect of our economic affairs.

Our good fortune has made it possible for us to offer assistance to our neighbors in resolving their liquidity problems. In December and January 1998, for example, Premier Vincent Siew held consultations with key decision makers in the Philippines, Singapore, Malaysia, and Indonesia to explore ways in which my government could be helpful, if needed. In addition, the government sponsored a number of trade missions to our neighbors in Southeast Asia to allow members of our business community to explore opportunities for future cooperation and investment. We were pleased to be able to fulfill this role during a difficult period.

Accession to the WTO

The WTO establishes the "rules of the road" for international trade. We are entering the WTO as a developed economy. As a result of our accession, which we hope will become final either late this year or early next year, we have agreed to undertake a wide range of important reforms in our economy. In general terms, these steps will guarantee foreign investors treatment in our market that is equal to that extended to our national companies.

The following examples illustrate some of the most important steps we have agreed to take as a result of the WTO accession negotiations:

  • We will lower tariffs by more than 40 percent, from an average of 7.90 percent to an eventual average level of 3.26 percent. We are removing non-tariff barriers on agricultural products and opening up trade in industrial goods, like autos, where purchases previously were restricted to certain foreign markets.

  • We were one of 14 original signatories to the International Technology Agreement (ITA) to eliminate tariffs on computers and computer products, telecommunications equipment, and other electronic goods accounting for more than $1 trillion in global trade. We are signing other "zero for zero" deals as part of our WTO accession, and will participate in "ITA II" to expand the list of electronics products
    qualifying for duty-free treatment.

  • We are offering trading partners world-class protection for intellectual property rights, including such areas as trade secret protection and retroactive copyright protection.

  • We will provide foreign providers of financial services with access to our securities, banking, and insurance sectors.

  • We have liberalized significant portions of our telecommunications markets, and are putting into place the regulations that will privatize the monopoly that previously dominated the domestic market.

  • We will open up our government procurement market to foreign competition
    In this area alone, we estimate that our government procurement offer, which takes effect once we become a WTO member, will provide U.S. companies with opportunities to bid on government purchases worth at least $15.4 billion annually.

Our negotiations with the United States are the last of the bilateral talks that are needed to bring this phase of our WTO accession negotiations to a close. Following these talks in Washington, D.C., we will need to finish only a few formalities with the European Union and Switzerland. We and our trading partners will then move the process to Geneva, Switzerland, to finish the legal drafting of the terms of our accession, which are contained in the formal protocol of accession.

Membership in the WTO will be a significant accomplishment for Taiwan. It acknowledges the role we already play in the world economy. It enables us to put our trading relations with the rest of the world on a firm and predictable footing. As a member of the WTO, Taiwan will enjoy all the rights and obligations of the organization, including access to the dispute-settlement process. Important, too, we will be able to work side-by-side with our trading partners in future negotiations to decide the new rules for expanding international trade. I am proud to be here today to share this moment with you, and I want to thank you for the long-standing friendship and support you have offered us as these negotiations have proceeded over the years.


WTO accession is one of a number of reforms we are pursuing to strengthen our international competitiveness. For example, we are continuing to pursue an ambitious plan to modernize and expand infrastructure through the Asia Pacific Regional Operations Center. Through this plan, we are modernizing the transportation and communications infrastructure, liberalizing the financial sector, and streamlining government regulations and bureaucracy to make it easier to do business in Taiwan. We are encouraging multinational companies to locate their Asian operations in Taiwan and to form "strategic alliances" with our companies, especially in the high-technology sector. Out of 42 such arrangements now in place, 26 are with U.S. firms.

We are continuously examining ways to deliver more efficient and competitive services to our citizens, and to find ways to do better what we already do well. International trade has been a critical element in Taiwan's "economic miracle," and the United States has been a vital friend and ally in making our economic success possible. I believe that Taiwan's accession to the WTO will lead to even closer economic relations between the Republic of China and the United States, as well as to the development of many new opportunities for business. We have reached a very good outcome with our American friends on the WTO bilateral negotiations, and now it is time to make sure that our accession moves forward in a timely manner. We appreciate the considerable help you have given us in working toward this goal so far, and we look forward to your support for our efforts in the months ahead.

--Wang Chih-kang is Minister of Economic Affairs for the Republic of China on Taiwan.


Carl Cohen

Distinguished Fellow