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Trade

China’s agricultural bans don’t yet threaten Taiwan’s economic security

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A hawker sells pineapples on the streets of Taipei following China's ban of Taiwanese pineapple imports, Taipei, Taiwan, 27 February 2021 (Photo: Ceng Shou Yi/Reuters).

Author: Roy C Lee, CIER

Following China’s ban of Taiwanese pineapple and wax apple imports in 2021, grouper fish and citrus fruits joined Beijing’s expanding list of restricted Taiwanese agricultural products in August 2022. Because agriculture accounts for just 0.6 per cent of Taiwan’s exports to China, the direct macroeconomic impact of these restrictions is limited. Yet the coercive nature of these measures suggest that Taiwan needs to be prepared for the future.

The official reasoning behind the bans are sanitary and phytosanitary concerns, such as excessive pesticide residue and fruit insects. While WTO rules grant China the right to impose measures necessary to protect human, animal and plant life, China’s bans do not seem evidence-based or necessary.

For all the restrictions imposed to date and despite Taiwan’s repeated requests for information, China has not provided any scientific documentation other than border inspection data. Taiwan was even able to divert its pineapple exports to Japan two months after China’s ban, where agricultural imports are subject to equally if not more stringent sanitary requirements. This underscores concern regarding the scientific validity of China’s restrictions.

The bans are also excessive. China’s justification of its pineapple import ban is that scale insects have been detected in exports from Taiwan. Scale insects have also been found in some exports from Taiwan to Japan — but instead of being denied entry, the pineapples underwent methyl bromide fumigation at the border to alleviate the risk. This signifies the excessiveness of China’s total ban without considering less restrictive alternatives.

China’s practices also go against the obligations of the Cross-Strait Cooperation Agreement on Phytosanitary Measures regarding Agriculture Products, which has been in force since 2009. Articles 5 and 6 of the Agreement expressly stipulate that both Taiwan and China need to ‘immediately notify’ the other party of major incidents, followed by an expedited fact verification and consultation process. According to Taiwan’s Council of Agriculture, a total of 14 requests were lodged between March 2021 and March 2022 without any acknowledgment of recipient from China.

Taiwanese government and industry actors alike have concluded that these agricultural import bans amount to economic coercion, reflecting China’s political displeasures. Although the overall economic shock for Taiwan is small, these measures do create significant impacts on individual farmers involved. In the case of pineapple, while only 10 per cent of Taiwan’s pineapple production is bound for export, 90 per cent of the export goes to China. Similarly concentrated export structures can be found for wax apple, citrus fruits and grouper fish, suggesting that these agricultural products have been specifically chosen to maximise the coercive impact.

Increasing domestic consumption and diversifying export markets have been Taiwan’s main tools to alleviate the shock. With assistance from the Council of Agriculture and other government agencies, pineapple exports to Japan and elsewhere is set to reach roughly 80 per cent of exports to China in 2022.

Yet the ability to diversify might not be an option available for other targeted products, with the Council of Agriculture admitting the unlikelihood of finding alternative markets for grouper fish in the short run. More importantly, there is growing concern that these developments indicate that Beijing is moving toward a strategy of weaponising Taiwan’s economic interdependence with China to increase political pressure.

As the Taiwan–China relationship deteriorates, Taiwan needs to prepare new economic security risk assessments. China remains Taiwan’s largest trading partner and investment destination. In 2021, China and Hong Kong accounted for over 40 per cent and 22 per cent of Taiwan’s total export and import respectively and received 30 per cent of Taiwan’s total outward investment. On the contrary, Taiwan accounts for an insignificant share of China’s external trade and investment, constituting only 2.3 per cent of total exports and 9 per cent of imports. Investment to Taiwan falls outside China’s top 20 destinations.

Yet the risk level for Taiwan is still modest for the time being. For Taiwan’s import from China, over 90 per cent are intermediate inputs and alternative supply sources are available in most cases. Around half of Taiwan’s export to China are semiconductors and alternative sources of advanced chips outside…

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WTO ministerial trading in low expectations and high stakes

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The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Trade

Getting Vietnam’s economic growth back on track

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Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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Thailand’s post-pandemic economic recovery still trailing behind

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Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.

## Thailand’s Economic Slowdown

Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.

## Government’s Economic Policies

The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.

## Challenges in International Trade and Industrial Policies

Thailand’s new government is looking to boost international trade through free trade agreements. However, concerns are raised regarding the effectiveness of FTAs in driving global value chains and boosting trade. Additionally, industrial policies that emphasize domestic value added are being reconsidered in light of evidence that it runs counter to development from engaging in global value chains. The success of Thailand’s economic growth goals will depend on how supply-side constraints are addressed and resolved.

Source : Thailand’s post-pandemic economic recovery still trailing behind

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