A study of the impact of direct trade on Taiwan's fishery sector with special reference to the effect of China's WTO accession

Abstract

After Taiwan became a member of the WTO in 2002, its tariff rates for fishery products decreased by an average of 35.5% from the level in 2001. Direct imports of fishery products from China would be allowed in 2004. These tariff reductions and the relaxation of import restrictions will have a strong effect on Taiwan's fishery sector. In this paper, we present an analysis of how fishery production, prices, input usage, and welfare distribution might react to trade liberalization. In addition to evaluating the overall impact of tariff reduction on Taiwan's fishery sector, we assess the effects of China's WTO accession on the Taiwanese market. We use a fishery sector equilibrium model in which 40 products and 68 fishing activities are identified. The model also includes an import-export subsector, a factor input subsector, and a supply-demand equilibrium condition to analyze the distributions of social welfare due to trade liberalization. Three simulations are conducted to investigate the impact of tariff reductions in 2004, 2 years after Taiwan has jointed the WTO. The results indicate that Taiwan's fishery sector will be adversely affected when it encounters the extremely low import prices of certain fishery products from China. The total production of the fishery sector and its value are predicted to decrease by 4.03% and 9.96%, respectively, in 2004. Aquaculture would suffer the heaviest loss with a 7.48% reduction in the production and a 19.23% reduction in its value. The demand for labor will decrease by 8.71%. The effect is most pronounced in aquaculture in which the demand for labor will go down by 11.40% and the wage rate will decline by 14.28%. To meet the challenge of globalization, the Taiwanese fishery industry will have to diversify, and improve its operational efficiency as well as production and distribution structures for a sustainable development.