The WTO ministerial conference in Doha, Qatar in November 2001 aspired to promote trade as a way of improving partnership between industrialized and developing countries. The Doha Round collapsed in a dispute over richer states' farming subsidies and tariffs imposed on agricultural imports from developing countries, among other issues, but got back on track with an agreement referred to as the July package on August 1, 2004 designed to focus negotiations. Major provisions of the framework for agricultural negotiations in the July package include the requirement that countries substantially reduce their trade distorting domestic support (the total Aggregate Measurement of Support, or AMS) and substantially improve market access. The AMS was already reduced after the Uruguay Round. Another reduction is bound to necessitate major policy adjustments in many countries, and Taiwan is no exception. Both of these provisions will leave price-sensitive Taiwanese agricultural products open to competition they may not be ready for. The past few rounds of negotiation have shown that increasing market access for agricultural products is a long-term process. Although it may be some time before negotiations are finalized, it is important to begin considering the implications of possible negotiation outcomes immediately so that preparation and development of countermeasures can get a head start. The Uruguay Round closed with an agreement to reduce AMS and reform trade in sensitive sectors of agriculture.
In response, Taiwan's agricultural agencies had to examine every item with domestic support and determine the subsidy amount and which items to designate as sensitive products. During negotiations, the sudden announcement of a “down payment agreement” with the U.S. on tariff quotas for pork and chicken played an instrumental role in Taiwan's later accession to the WTO. It also troubled agricultural agencies in Taiwan. Cutting back domestic subsidies the minimum requirement to fulfills the minimum requirement for AMS reduction. However, in Taiwan, reduction of domestic support for rice production involves sensitive issues, such as how to support farmers who allow their fields to remain fallow, setting the market price for rice, and finding ways to effectively reduce the government's financial burden in supporting the price. Farmers often complain about meager subsidies for leaving their fields fallow. Inefficient use or management of fallow fields is also often a point of criticism as is the complaint that fallow fields may spoil the village landscape. Taiwan must formulate an effective policy for rice production in order to respond effectively to WTO agricultural agreements. Taiwan's rice import control policy entails a tariff quota and a tender bidding system. Taiwan has also agreed to allow a quota of 144,000 metric tons of unpolished rice to be imported each year, of which 35% will be available for free trade. Taiwan now faces a difficult situation in which the price of domestic rice has dropped to a near-cost level.
Despite seasonal adjustments to the quantitative restrictions on rice imports, and continual review of policies on rice inventory, production, consumption, and processing, there is still much room for improvement. In other words, Taiwan has failed to develop reliable policies to deal with the impact of rice imports. The dwindling income of rice farmers is a sensitive political issue that has impeded the formulation and implementation of an effective agricultural policy. Taiwan faces difficulty not only in drafting a policy on rice according to WTO requirements, but also in implementing the policy. Only if Taiwan's rice production is reduced, tender bidding of imported rice is effectively managed, fallow fields are productively utilized, and the quality of domestic rice improved, will Taiwan be able to realize the benefits of its agricultural policy. Taiwan needs to be ready for the possible outcomes of the new round of negotiations so that it is ready to face the demands of increased market access. The framework for the next round of negotiation has been set, that is, AMS reduction and greater market access. Taiwan signed the Free Trade Agreement (FTA), which called for greater access for agricultural products. Taiwan’s leaders should be clear about what needs to be done. It will be important to keep the interests of farmers in mind as the framework for reducing domestic support is developed. The existence of a market mechanism is extremely important. Without it, farmers tend to rely on subsidies and adjustment of Taiwan's agricultural structure will be more difficult. Taiwan will not be able to respond effectively to new imports. Greater market access will result in a flood of imports requiring effective management to separate quality domestic agricultural products from imported ones in order to avoid unfair competition. Establishment of the Rules of Origin (ROO) for Taiwan’s agricultural products cannot wait any longer.
A ROO system not only requires certification of the origin of imported goods, it also demands traceability of all agricultural products imported into Taiwan at all distribution/transport stages, including processing. Traceability helps prevent unfair trading in which cheap foreign products are passed off as domestic agricultural products. A traceability mechanism is crucial to ensuring that policies aimed at increasing the quality of Taiwan’s agricultural products are effective. In sum, the new round of agricultural negotiations is a part of an ongoing process of market liberation that Taiwan needs to be prepared for. Effective implementation of corresponding agricultural policy is essential to attaining good results. Taiwan must devote effort to developing and implementing such policy, which should emphasize measures ensuring a market mechanism to benefit adjustment of Taiwan’s agricultural structure. Establishment of a ROO system will ensure that Taiwan’s agricultural policy enhances the quality of domestic agricultural products.