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The Challenges and Opportunities of Joining the Trans-Pacific Partnership Agreement for Taiwan’s Agriculture
Twelve Parties of Trans-Pacific Partnership (TPP) announced on October 5, 2015 that the TPP had been sealed and its content had been made public on November 5. Sharing 38% global GDP and 25% of world total trade, this large regional economic and trade agreement would bring new rules and standards to international trade. At the same time, it makes a significant impact on Taiwan’s economy which relies heavily on external trade.
According to the TPP Article on Entry into Force, the agreement would come into force after all the twelve original signatories complete their own domestic ratification procedures. However, if the agreement is not ratified by all in two years, it will enter into force after ratification by at least 6 states which together have a GDP of more than 85% of the GDP of all signatories after 2 years. Since the TPP would only accept new entry applications from other nations only after it had come into force, the Council of Agriculture (COA) would use this waiting period to review TPP contents related to agriculture as well as continue to study and analyze negotiation process and outcomes for the opening of agricultural product market. Moreover, the COA would actively collect the feedbacks and responses from other nations about Taiwan's entry application, especially issues about agriculture for preemptive tactics preparation.
In addition, based on the TPP Entry Promotion Overall Action Plan passed by the Executive Yuan, the Council reviewed and updated data on TPP’s impact on agriculture, expedited the mediating process between industry response and regulations, deepened public communication and consultation, and sought the support of TPP Parties. The aim is to grasp new opportunities for Taiwan’s agriculture export by joining the TPP, and minimize possible impacts in order to protect our farmer's interests as well as a sustainable development of agriculture.
II. TPP Agreement and its content concerning agriculture
There are 30 chapters and 122 annexes in the TPP Agreement, among which the chapters National Treatment and Market Access for Goods (agricultural product market access), Sanitary and Phytosanitary Measures, Technical Barriers to Trade (certification of organic agri-products and information exchange), Intellectual Property (protection of plant variety rights and agrichemical information), and Environment (protection or conservation of wild flora or fauna, including endangered species and protection of the marine environment of its sustainable resource) are directly related to agriculture. Moreover, the agreement covers the tariff concession of agricultural product in member Parties, which serves as an important reference for Taiwan to join the second round negotiation of TPP.
1.TPP text and content related to agriculture
(1) National Treatment and Market Access for Goods
(2) Sanitary and Phytosanitary Measures
(3) Technical Barriers to Trade
(4) Intellectual Property
2. Results of TPP negotiations of agricultural products (Each Party’s market access status as shown in table 1, and important Japanese agricultural product market access status as shown in table 2)
TPP market access is carried out by bilateral negotiation, and as far as the outcome is concerned, the tariff concession commitment made by 7 Parties would apply to all other countries, and the remaining 5 Parties (Canada, Chile, Japan, Mexico, and the United States) will grant different levels of tariff concession to individual countries depending on the agricultural product in question.
The average agricultural product (HS Chapter 1-24) liberalization (zero tariff after implementation period) rate of the 12 Parties is 97.03%, among which Japan is 85.96%, the United States 96.62% and Canada 93.53%. Regarding the tariff reduction schedule mode, Japan applies the most type of modes (18) and the longest schedule period (21 years). Moreover, 6 Parties (Canada, Japan, Malaysia, Mexico, United States, and Vietnam) adopt tariff quota measure, while only Japan (beef, pork, whey product, and orange) and United States (cheese and milk powder) take up import safeguard measure (similar to WTO special safeguards).
Table 1. TPP Parties agricultural product market opening status
Note: 1. The scope of the agricultural products in the Table is HS Chapter 1-24.
Table 2. Japan's important agricultural product TPP market opening status
III. Impact and opportunity to Taiwan's agriculture after joining TPP
The total value of agricultural product imported from TPP’s 12 Parties in 2014 by Taiwan is US$8.48 billion, taking up 53.9% of total agri-product import value. As for Taiwan’s export of agricultural product to TPP Parties was US$2.24 billion, accounting for 42.5% of total agri-products export value. The statistic shows that Taiwan enjoys close relations with all TPP Parties, especially countries such as the United States (the 5th largest export market and the 3rd largest import source for Taiwan’s agri-products), Japan (the 2nd largest export market and the 1st largest import source), Malaysia (the 9th largest export market and the 6th largest import source), and Australia (the 10th largest export market and the 5th largest import source) are all important trade partners of Taiwan.
1. Impact on agriculture after joining TPP
(1) Properly solve important agricultural issues that are concerned by the Parties
In order to participate in the second round TPP entry negotiation, Taiwan needs to properly address important agricultural issues that are concerned by the Parties. Currently the Parties pay more attention to SPS, particularly the United States requesting Taiwan to lift the ban on Ractopamine pork. Regarding this issue, the government ought to handle with caution since it is a sensitive issue.
(2) Revise relevant law and regulation to meet TPP requirement
To comply with the TPP Agreement, relevant agricultural laws and regulations must be revised, including: 1. Amend the Plant Variety and Plant Seed Act and its enforcement rules to bring all plant varieties under the protection of variety right. 2. Modify the Pesticide Management Act and extend pesticide registration data from 8 years to 10 years. 3. Revise Fisheries Act and administrative ordinances to practice the protection and management of marine resource and prohibit subsidizing IUU fishing. 4. Add the Distant Water Fisheries Management and Development Act to complete the management system of marine fisheries.
(3) The further opening of agricultural product market
Presently import customs duties are imposed on 71.5% agricultural product items (total 1,291 items of 8-digit codes) with an average tariff rate of 16.6% (excluding non ad valorem tax). Moreover, tariff quota or special safeguard measures that are implemented on 20 items of agricultural product, including rice, peanut, red beans, garlic, dried shiitake, dried daylily, coconut, betel nut, pineapple, mango, pomelo, persimmon, dried and longan pulp, pear, banana, deer velvet, liquid milk, chicken, pork belly and animal offal, should be eliminated the tariff or relevant protection measures after joining the TPP. This will result in certain impact on agriculture.
2. Export opportunities for Taiwan's agriculture after joining the TPP
Even though joining the TPP would bring certain impact on Taiwan’s agriculture, there are still positive benefits for exports. For instance, because of the Japan-Thailand Free Trade Agreement, fresh soybeans sold to Japan by Thailand enjoy a lower tariff rate (0%) than Taiwan (6%). Additionally, Japan grants products from the Philippines Generalized System of Preferences (GSP) status and only imposes 5.5% to 9.1% customs duty on banana, while Taiwan still faces 20% to 25%, which contributes to the decrease in Japan’s banana market share. After joining the TPP, agricultural products are entitled to enjoy favorable tariff rates offered by TPP Parties, thus boosting the export of quality agri-products from Taiwan (see table 3). Moreover, it would attract foreign agribusinesses to invest in Taiwan, taking advantage of Taiwan’s outstanding production and export processing technology.Table 3. Potential export agricultural products after joining the TPP
VI. Agricultural Adjusting Strategies for joining TPP
1. Implement industry response strategy
Regarding joining the TPP, the COA has already take adjusting strategy, including "promote value-added agriculture and expand international market", "encourage local production for local consumption and enhance market segmentation", "accelerate structural adjustment and exert industrial resource", and "enhance quarantine and inspection and ensure high quality environment". The proposed project should be implemented based on these strategies. For instance, promote value-added agriculture and industrialization of agricultural technology, reactivate fallow land, reform welfare allowance for elderly farmers, counsel young farmers, and continue to allocate funding for the Redressing Damage to Farmers Caused by Agricultural Imports Fund with the purpose of providing timely assistance and stabilizing the price. All these efforts aim to decrease the negative impact on agriculture and seize export business opportunities.
Concrete measures and action plan include:
(1) Promote value-added agriculture and expand international market: establish export-oriented agriculture value chain to attract industrial investment which utilizes imported or domestic contractual raw materials and integrates key production technology with added value to export products. Key industries include agricultural, fishery, and livestock processing products, ornamental aquatic animals, agricultural machinery, and animal vaccine. Provide counseling in brand establishment and international marketing enhancement for characteristic and quality agricultural products. Moreover, actively assist processing manufacturers and their products to obtain Halal certification so that Muslim consumers can easily identify these products. Targeting at the Asian Muslim market, businesses are encouraged to take up strategies such as participating in overseas trade shows and business opportunity matching, so that Taiwan’s agricultural products may enter the Asian Halal food market (such as Malaysia, one of the TPP Parties).
(2) Enhance market segmentation and boost consumer confidence on domestic product: put emphasis on sanitary safety and production management, establish tracing and tracking system, conduct distributed management to prevent mixing, strengthen brand image and marketing as well as food and agriculture education.
(3) Adjust land use and industry structure: promote the Fallow Land Reactivation and Small Landlords and Big Tenants programs, increase effective agricultural land utilization, expand scale of operation, counsel new-coming young farmers, encourage college students to work in agriculture, and cultivate interdisciplinary human resources in agri-technology to enhance technology integration and commercialization management.
(4) Develop Six level agriculture: Japan takes primary agriculture as foundation, and then combines secondary and tertiary agriculture to facilitate the development of production, processing and sales strategy, so that value-added agriculture could be strengthened to increase domestic consumption and food self-sufficiency ratio. Taiwan can use Japan's experience as reference: loosen grip on regulations regarding policies and projects such as agricultural processing, agricultural center-satellite system, rural regeneration program, farmers market, farmers’ direct sales point, and recreational agriculture development. The ultimate goal is to increase farmers' income through enhancing industrial value chain and interdisciplinary cooperation.
2. Make good use of the Redressing Damage to Farmers Caused by Agricultural Imports Fund
The COA established the Redressing Damage to Farmers Caused by Agricultural Imports Fund in 1990 and allocated NT$100 billion to substantiate the fund from 2003 to 2005 based on Agricultural Development Act in response to possible impact on agriculture after joining the World Trade Organization (WTO). The fund is used mainly for adjusting cultivation system and utilizing farmland (former diverse application of rice paddy project), adjusting industrial structure or safeguard measure, redressing damage to farmers caused by agricultural import, and stabilizing price. Regarding import damage, four successful cases has already been carried out in redressing damage to farmers caused by tea imported in Taoyuan, Hsinchu, and Miaoli. It has ensured income for farmers and has effectively reduced impact on agriculture after joining WTO.
Since TPP is a high standard regional economic integration agreement, requirements for market opening of agricultural product are more demanding than those of WTO. The Council would make proper use of the aforementioned fund to establish new agriculture value chain, to develop competitive agriculture and characteristic local industry, in order to maintain sustainable development of Taiwan’s agriculture. In the mean time, the Council would continue to monitor import quantity and price of important agricultural products while offering timely relief measure to extenuate possible loss for farmers.
Since 2013 the COA has launched special projects to collect agricultural negotiation progress and different Parties’ position in TPP and other important regional trade agreements. The collected information is used to assess the impact and serve as reference when developing negotiation strategy and industry response adjustment. In response to trade liberalization, the Council not only highlights the explanation on official website but also organizes seminars on agriculture and food, livestock, and fishery to foster further communication between farmers, fishermen, farmers' groups and industry associations. At the same time, the COA also hosts discussions with professional experts, young farmers and county governments while gathering different opinions towards agricultural measures from all sectors of society.
Taiwan's economic development relies on trade, and joining regional trade agreement has become a national policy. It is also a serious challenge that agricultural sector has to face. Regarding the impact and opportunity of joining the TPP, the Council will cooperate with farmers, farmers' groups and industry associations. Besides defensive measures, innovative value and structural adjustment would also be enhanced to strengthen Taiwan’s agricultural texture and increase the agricultural value.