CHENNAI: The "growing importance" of cross-strait movement of goods (namely, import-export trade with the People's Republic of China)

In Chinese Taipei's economy "would seem to indicate" the need for further liberalisation of cross-strait traffic, according to the World Trade Organisation.

The Trade Policy Review (TPR) of the "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu," prepared by the Secretariat of the WTO and released on Tuesday, says that such liberalisation would contribute to improving the efficiency of Chinese Taipei's economy and its attractiveness to inbound direct investment.

The report also emphasis that "of great importance to Chinese Taipei's long-term growth prospects will be its efforts to implement structural and other economic reforms to boost competition; these reforms would include continued tax and financial reform, strengthening of corporate governance and trade liberalisation, particularly; in agriculture.''

The WTO review points out that Taiwan, which joined the organisation on January 1, 2002, has an impressive economic profile: per capita GDP in 2005 at (US) $15,270, compared to $13,090 in 2001. Unemployment declined to 4.1 per cent in 2005, from 5.2 per cent in 2002. Growth averaged 6.4 per cent in the decade to 2000; GDP declined slightly in 2001, but has since then recovered to an average of 4 per cent.

Trade has played an important role in the economy. The shares of imports and exports are each around 62per cent and 59 per cent, of GDP, respectively. The surplus on merchandise trade narrowed to around 5 per cent of GDP in 2004 and 2005, compared to over 8 per cent in 2002 and 2003, while the deficit on services has grown to almost 2 per cent compared to around 1.2 per cent on average in the previous three years. Foreign exchange reserves have continued to increase over the past five years, to $253.3 billion at the end of 2005 (equivalent to some 15 months of merchandise imports). Underpinned by its accession to the WTO, Chinese Taipei has substantially liberalised its trade and related regimes.

Continued strong growth would appear to hinge on Chinese Taipei's continued implementation of trade liberalisation and structural reforms, as the government recognises. This would improve the efficiency of Chinese Taipei's economy and its attractiveness to inbound direct investments.

Trade Policy Regime: Framework and Objectives

The report points out that Taiwan is party to the plurilateral Trade Agreement on Civil Aircraft. Main trade policy objectives of Chinese Taipei include: active participation in the WTO; building bilateral and regional economic and trade relationships; strengthening trade promotion activities; and implementing trade liberalisation and facilitation. In order to achieve these objectives, Chinese Taipei seeks a further strengthening of the multilateral trading system under the WTO and to promote Chinese Taipei's linkage with its trading partners in Asia and elsewhere.

Since its accession to the WTO, Chinese Taipei has continued to take steps to improve transparency. Most laws and regulations are made available through government publications and websites; legislation aimed at transparent administrative procedures entered into force in 2001. Various anti-corruption laws have also been enacted.

Almost all of Chinese Taipei's trade is on an MFN basis; for example some 98 per cent of its imports are subject to applied MFN tariffs. However, Chinese Taipei prohibits inbound cross-strait trade involving some 2,200 tariff lines. Chinese Taipei has started to participate in preferential trade agreements. In 2004, a free-trade agreement entered into force between Chinese Taipei and Panama.

Most sectors are open to inbound direct investment, if approved by the Ministry of Economic Affairs.

However, inbound direct investment is prohibited in several major sectors (notably, certain toxic chemicals, and television and broadcasting) for reasons of security and public health.

In certain other sectors, inbound direct investment requires approval by authorities other than the Ministry of Economic Affairs.

As regards cross-strait direct investment, little inbound investment has been allowed, and outbound investment, if not prohibited, requires the approval of the relevant Chinese Taipei authorities.

Various incentives, including tax incentives, are provided to encourage investment, including inbound direct investment.

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