Required Report - public distribution

**Date:** 08/16/2004

**GAIN Report Number:** TW4034

TW4034

**Taiwan**

**Livestock and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Scott Sindelar

American Institute in Taiwan

**Prepared by:**

Rosemary Kao & Eric Trachtenberg

**Report Highlights:**

The discovery of BSE in the U.S. in December 2003 continues to
dramatically affect the Taiwan beef market. Beef consumption in 2004 is
expected to fall by 17 percent to 63,200 mt (86,000 mt CWE), reversing
steady increases since 2001. At the same time, the ongoing outbreak of
Porcine Circovirus (PCV) continues to depress local swine production,
keeping local pork prices high and stimulating pork meat imports, which
will reach 78,000 tons (CWE) in 2004. Imports of other meat products
such as offals are expected to increase.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Taipei \[TW1\]

\[TW\]

**Table of Contents**

[Executive Summary 3](#executive-summary)

[Beef 4](#beef)

[Production 5](#production)

[Consumption 5](#consumption)

[Trade 5](#trade)

[Beef Variety Meats 6](#beef-variety-meats)

[Tariffs & Trade Policy 7](#tariffs-trade-policy)

[The Dairy Sector 8](#the-dairy-sector)

[Marketing 8](#marketing)

[Swine 10](#swine)

[Production 12](#production-1)

[Long-term Trends 13](#long-term-trends)

[Prices 14](#prices)

[Feeder pigs 15](#feeder-pigs)

[Consumption 15](#consumption-1)

[Trade 15](#trade-1)

[Products Entering Under TRQs 16](#products-entering-under-trqs)

[Policy 18](#policy)

[TRQ Regulations 18](#trq-regulations)

[Non-TRQ Duties 19](#non-trq-duties)

[Special Safeguards 19](#special-safeguards)

[Sanitary Regulations 20](#sanitary-regulations)

[Cross-Straits Trade and Investment
20](#cross-straits-trade-and-investment)

[Marketing 20](#marketing-1)

[Internet Resources 21](#internet-resources)

# Executive Summary

The discovery of Bovine Spongiform Encephalopathy (BSE) in the U.S. in
December 2003 continues to dramatically affect the Taiwan beef market.
Beef consumption in 2004 is expected to fall by 17 percent to 63,200 mt
(86,000 mt CWE), reversing steady increases since 2001. Assuming the
market remains closed to U.S. beef, 2005 consumption is expected to
increase slightly to 64,700 mt (88,000 mt CWE) as the trade compensates
for the absence of U.S. beef. Consumption is not expected to recover
strongly because of high prices, increased concerns about food safety
and constrained beef supplies. Prices of beef remain high because
Australia and New Zealand are unable to fully make up for lost U.S.
supplies. The burdens of high prices and short supplies will continue to
causes heavy losses, especially in high-end restaurants. Total Taiwan
economic losses from the beef ban are estimated at \$10 million and
climbing.

Imports of beef variety meats were fully liberalized upon Taiwan's WTO
entry. Without cumbersome bidding for quotas and with lowered import
tariffs, imports of beef variety meats should grow robustly in coming
years. Given the absence U.S. product in Taiwan, liberalization will
likely boost the already strong position of suppliers from Australia and
New Zealand, who already have the largest market shares.

The ongoing outbreak of Porcine Circovirus (PCV) continues to depress
local swine production, keeping local pork prices high. This will likely
stimulate pork meat imports although more than 95 percent of consumption
is supplied locally. In the long term, Taiwan's relatively efficient
swine industry will only contract slowly, continuing to produce pork for
the local market while imports enter for processing or during period of
high prices.

The demand for imported pork variety meats, which adds to the reduced
local supply since the 1997 foot-and-mouth disease outbreak, is expected
to remain strong for the foreseeable future. As Taiwan\'s current
leading supplier of pork and pork offal, U.S. suppliers should benefit
most from WTO market opening measures. Sanitary concerns are likely to
keep key competitors, such as South Korea and Mainland China, off the
market for several years.

**Note: This report assumes that there will be no changes in Taiwan's
ban on imports of U.S. beef and livestock products.**

Exchange rate: approximately NT\$34.5=US\$1 in 2001, 2002 and 2003,
roughly NT\$33.5=US\$1 in 1-6/2004.***\
***

#    

# Beef

Table 1. Taiwan Beef Production, Supply and Distribution

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Tai |       |       |       |       |       |
|                   | wan** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **    |       |       |       |       |       |
|                   | Meat, |       |       |       |       |       |
|                   | Beef  |       |       |       |       |       |
|                   | and   |       |       |       |       |       |
|                   | V     |       |       |       |       |       |
|                   | eal** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2003  | ####  | 2004  | ##### | 2005  | ##### |
|                   |       | ## Re |       | # Est |       | # For |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | *     | USDA  | *     | USDA  | *     |
|                   | Off   | *Post | Off   | *Post | Off   | *Post |
|                   | icial | Est   | icial | Est   | icial | Est   |
|                   | \[    | imate | \[    | imate | \[    | imate |
|                   | Old\] | \[Ne  | Old\] | \[Ne  | Old\] | \[Ne  |
|                   |       | w\]** |       | w\]** |       | w\]** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Market Year Begin |       | *     |       | *     |       | *     |
|                   |       | *01/2 |       | *01/2 |       | *01/2 |
|                   |       | 003** |       | 004** |       | 005** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Slaughter         | 0     | *     | 0     | *     | 0     | *     |
| (Reference)       |       | *28** |       | *27** |       | *27** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks  | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production        | 5     | **6** | 5     | **5** | 0     | **5** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Imports  | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Imports     | 98    | *     | 85    | *     | 0     | *     |
|                   |       | *98** |       | *81** |       | *83** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports     | 98    | *     | 85    | *     | 0     | *     |
|                   |       | *98** |       | *81** |       | *83** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 103   | **    | 90    | *     | 0     | *     |
|                   |       | 104** |       | *86** |       | *88** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Exports  | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Exports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Exports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Human Dom.        | 103   | **    | 90    | *     | 0     | *     |
| Consumption       |       | 104** |       | *86** |       | *88** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Other Use, Losses | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Dom.        | 103   | **    | 90    | *     | 0     | *     |
| Consumption       |       | 104** |       | *86** |       | *88** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 103   | **    | 90    | *     | 0     | *     |
| DISTRIBUTION      |       | 104** |       | *86** |       | *88** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Calendar Yr. Imp. | 22    | *     | 0     | **4** | 0     | **0** |
| from U.S.         |       | *22** |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Calendar Yr. Exp. | 0     | **0** | 0     | **0** | 0     | **0** |
| to U.S.           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

The conversion factor used to derive the carcass weight equivalent (CWE)
for beef in the above PSD table is 1.36. Beef variety meats imports are
not included in the beef PSD table. The PSD table and Trade table
include beef traded under HS 0201 and 0202. Trade of processed beef,
under HS 021020 and 160250, are negligible (less than 300 mt).

# Production

Domestic beef, mostly from culled dairy cattle, meets only 5 to 6
percent of Taiwan's total beef demand. Total local beef production is
expected to continue slowly contracting in 2004 and beyond.

# Consumption

The December 2003 detection of Bovine Spongiform Encephalopathy (BSE) in
the United States and the resulting closure of the Taiwan market to U.S.
products is expected to cut beef consumption by 17 percent in 2004 to
63,200 mt (86,000 mt CWE), reversing steady increases since 2001.
Assuming the market remains closed to U.S. beef, 2005 consumption is
expected to increase slightly to 64,700 mt (88,000 mt CWE) as the trade
compensates for the absence of U.S. beef. Assuming there are no further
BSE detections or other setbacks (such as another SARS outbreak), beef
consumption is expected to rise in line with Taiwan's economic growth
that is expected to reach 5.3 percent in 2004, 4.4 percent in 2005 and
run between 4-5 percent thereafter. Moderate economic growth, the
continued stability of the New Taiwan Dollar, continued public
confidence in Taiwan's food safety system and pent up demand should
support higher beef consumption in the future.

[]{.mark}

In 2004, consumption is expected to remain low because of high beef
prices, dissatisfaction with the quality of non-U.S. beef supplies at
the high end of the market and increased public concerns about food
safety. Since the BSE discovery in the U.S., Taiwan prices for
high-quality beef doubled while those for lower quality beef such as
heel muscle or shank rose by 17 -- 20 percent. High prices for lower
grade beef have also discouraged imports out of fear that a sudden
market reopening to U.S. beef would make previously imported non-U.S.
beef much less valuable, exposing importers to major losses. These
problems have put considerable pressure on Taiwan's HRI sector, which
was the largest importer of high quality U.S. beef. This situation has
been difficult for both high-end restaurants that rely on quality U.S.
beef and less expensive establishments whose thinner margins are
squeezed by high prices. Supplies continue to be limited by the tendency
of New Zealand and Australia packing plants to sell their grain fed beef
by the full set, which forces importers to dispose of unwanted cuts.
Total Taiwan economic losses from the ban on U.S. beef are estimated at
\$10 million and rising.

# Trade

In line with lower consumption, the BSE-related closure of the Taiwan
market is expected to cut Taiwan's 2004 beef imports by 17 percent to
60,000 mt (81,000 mt CWE). Total 2005 imports are forecast slightly
higher at 61,000 mt (83,000 mt, CWE). U.S. market share remained above
zero in early 2004 because of "pipeline" beef imports of 634 mt. Since
these shipments, virtually all other U.S. beef exports to Taiwan have
been replaced by New Zealand product.

Beef imports from 2002 to the first half of 2004 are listed below:

**Table 2. Taiwan Beef Imports, 2002 - 2004 (mt)**

  ----------- ------------ -------- ----------- --------- -------- ----------- ---------- ------------
  Supplying   **U.S.**     Canada   Australia   New       Panama   Nicaragua   Paraguay   **Total**
  Source                                        Zealand                                   

  2002        **13,167**   3,604    33,227      14,703    329      0           25         **65,055**

  *-'02 Share ***20%***    *6%*     *51%*       *22%*     *\>1%*   *0%*        *\>1%*     
  (%)*                                                                                    

  2003        **16,119**   2,050    31,713      21,854    320      9           0          **72,065**

  *-'03 Share ***22%***    *3%*     *44%*       *30%*     *\>1%*   *\>1%*      *0%*       
  (%)*                                                                                    

  2004        **643**      0        14,444      17,467    311      120         0          **32,985**
  (Jan-Jun)                                                                               

  *-'04 Share ***2%***     *0%*     *44%*       *53%*     *1%*     *\>1%*      *0%*       
  (%)*                                                                                    
  ----------- ------------ -------- ----------- --------- -------- ----------- ---------- ------------

Source: Board of Foreign Trade

Note: The most recent World Trade Atlas (WTA) data are only until Oct.
2003. The COA data are from Customs data, the same as WTA but may differ
slightly.

As a result of the market closure to U.S. products, New Zealand became
the largest beef supplier to Taiwan in 2004. Its market share rose from
30 percent in 2003 to 53 percent during the first half of 2004.
Australia's market share remained at 44 percent because of short
supplies caused by a serious drought and sharply higher domestic prices.
Reportedly, Taiwan continues to have difficulties sourcing beef because
local importers do not pay as much as the Japanese or South Koreans.

Supplies available from other sources remain very limited. Imports of
beef and products from Canada were banned entry on May 21, 2003 in
response to the Canadian Bovine Spongiform Encephalopathy (BSE)
detection. Taiwan still bans imports from most EU countries. Although
Taiwan has tried to source beef from Nicaragua and its sole FTA partner
Panama, the quality of the beef from these origins is generally low.
Although Taiwan's FTA with Panama allows free imports (no quantity
limit, zero tariff) of beef beginning January 1 2004, Taiwan has only
approved two packing plants. To avoid transshipments from other Latin
American countries, imports from Panama also require a government-issued
Country of Origin certificate with the ranch and packing plant locations
listed. Cattle tag/tattoo numbers will also be required starting January
1, 2007. In July 2003, Nicaragua was approved to supply beef and
products to Taiwan but only three packing plants have been approved.

## Beef Variety Meats

No further U.S. beef offal is expected to come into Taiwan in 2004
beyond the 65 mt that entered as pipeline shipments early in the year.
BSE is likely to push down demand for beef variety meat imports to 3,200
mt in 2004. This forecast is higher than the previous forecast of 2,700
mt because of sharply increased shipments by New Zealand. Imports from
new suppliers such as Nicaragua still are unable to ship offals that
meet Taiwan importer specifications. Honeycomb and tendon account for
the majority of Taiwan\'s beef offal imports, unlike other Asian markets
that import mainly tongues and intestine.

[]{.mark}

Prices are expected to hold fairly steady for beef offals in Taiwan.
Since Taiwan is one of the world's largest honeycomb importers, supplies
are contracted for in advance and mostly come from Australia and New
Zealand. However, as Japanese and Korean consumers keep shying away from
all beef consumption, there may be some overstock of beef offal in
Australia or New Zealand which may reduce prices for these products.

In the long run, offal imports should remain strong because local demand
exceeds supply. However, Australia and New Zealand will likely continue
taking the largest market shares because of their close proximity to
Taiwan. Since offals are a lower cost product than muscle meat, lower
transport costs from the antipodes will give their suppliers a major
advantage in the Taiwan market.

[]{.mark}

Imports of beef offal, once subject to an import quota, were liberalized
on January 1, 2002 in line with Taiwan's accession to the World Trade
Organization (WTO). Offal imports are not included in the beef PS&D
table.

Table 3. Taiwan Beef Offal Imports, 2002 and 2003 (mt)

+-------------+-------+--------+-------+----------+--------+---------+
| Supplying   | **U   | Canada | Aust  | New      | Others | **      |
| Source      | .S.** |        | ralia | Zealand  |        | Total** |
|             |       |        |       |          |        |         |
|             |       |        |       |          |        | **Im    |
|             |       |        |       |          |        | ports** |
+-------------+-------+--------+-------+----------+--------+---------+
| 2002        | **    | 264    | 2,108 | 766      | 32     | **      |
|             | 719** |        |       |          |        | 3,856** |
+-------------+-------+--------+-------+----------+--------+---------+
| *-'02 Share | ***1  | *7%*   | *55%* | *20%*    | *\<1%* |         |
| (%)*        | 9%*** |        |       |          |        |         |
+-------------+-------+--------+-------+----------+--------+---------+
| 2003        | **    | 117    | 1,836 | 772      | 25     | **      |
|             | 698** |        |       |          |        | 3,448** |
+-------------+-------+--------+-------+----------+--------+---------+
| *-'03       | ***2  | *3%*   | *53%* | *22%*    | *\<1%* |         |
| Share(%)*   | 0%*** |        |       |          |        |         |
+-------------+-------+--------+-------+----------+--------+---------+
| 2004        | *     | 2      | 850   | 708      | 41     | **      |
| (Jan-Jun)   | *65** |        |       |          |        | 1,666** |
+-------------+-------+--------+-------+----------+--------+---------+
| *-'04       | ***   | *\<1%* | *51%* | *42%*    | *3%*   |         |
| Share(%)*   | 4%*** |        |       |          |        |         |
+-------------+-------+--------+-------+----------+--------+---------+

*Source: Board of Foreign Trade*

Offal imports are not included in the PS&D table.

## Tariffs & Trade Policy 

The duty for beef products is NT\$10 per kilogram, ending a market
advantage for some U.S. exports. Starting January 1, 2004, the Taiwan
ended a small preferential tariff formerly given to Special Quality Beef
(SQB), defined as USDA-graded prime or choice beef and Canadian AAA
beef. Another preferential tariff for muscle meat such as shin, shank,
short plate, brisket, ribs, and rib finger classified as
shin/shank/intercostal (s/s/i) cuts also ended at the same time. On the
other hand, falling duties are expected to increase overall trade,
especially in shoulder cuts or products customized for the Taiwan
market.

[]{.mark}

The tariff for beef offals is now 15 percent, ending a series of
reductions starting upon Taiwan's WTO accession. Import tariffs for beef
offal formerly ranged from 20 to 50 percent. Tariffs for frozen bovine
bones will be gradually reduced from 35 percent in 2004 to 30 percent in
2007. The rate will be 34 percent in 2005, 32 percent in 2006 and 30
percent in 2007. The tariff rate for fresh or chilled bovine bones will
remain at 35 percent.

Table 4. Tariff Comparison for Beef and Beef Offal

+-------------+-----------+-------------+-------------+-------------+
| **Beef      | 2001      | 2002        | 2003        | **2004**    |
| Cate        |           |             |             |             |
| gory/Year** | (Pre-WTO) |             |             |             |
+-------------+-----------+-------------+-------------+-------------+
| **Special   | NT        | NT\$20/kg   | NT\$15/kg   | **          |
| Quality     | \$22.1/kg |             |             | NT\$10/kg** |
| Beef**      |           |             |             |             |
+-------------+-----------+-------------+-------------+-------------+
| **Non-SQB** | NT\$27/kg | NT\$24/kg   | NT\$17/kg   | **          |
|             |           |             |             | NT\$10/kg** |
+-------------+-----------+-------------+-------------+-------------+
| **          | NT        | NT\$23.8/kg | NT\$16.9/kg | **          |
| SQB-S/S/I** | \$23.8/kg |             |             | NT\$10/kg** |
+-------------+-----------+-------------+-------------+-------------+
| **Beef      | 20-50%    | 20-25%      | 17.5-20%    | **15%**     |
| Variety     |           |             |             |             |
| Meats**     |           |             |             |             |
+-------------+-----------+-------------+-------------+-------------+
| **Bovine    | 50%       | 35%         | 35%         | **35%**     |
| Bones**     |           |             |             |             |
+-------------+-----------+-------------+-------------+-------------+

**Sanitary Regulations**

In order to export beef or any meat to Taiwan, a country's quarantine
inspection and health certification system must be reviewed and approved
by the Taiwan authorities. Currently, the only countries eligible to
supply beef or beef variety meats to Taiwan are: Australia, New Zealand,
Panama, Nicaragua, Honduras and Sweden. Although Taiwan accepted Japan's
FMD-free status in late 2001, entry is still banned along with U.S.,
Canadian and most types of European beef because of BSE.

[]{.mark}

Until the December 24 2003 BSE detection in the U.S., Taiwan consumers
did not associate beef consumption with BSE \-- unlike some neighboring
economies. While earlier press coverage was rational and short-term, the
negative effects since December will probably take a few years to
reverse.

Imports of beef and products from the United States and Canada were
suspended on December 24 and May 21, 2003 respectively, in response to
single BSE detections in each country. New Zealand and Australia are
expected to take North America's entire market share as long as the bans
stay in place.

## The Dairy Sector

The profitable dairy industry is expected to contract slowly following
the removal of the fluid milk import ban after WTO entry (see Taiwan
Dairy Annual TW3040). The increasing acceptance of long-life (UHT or
ultra high temperature pasteurization) will increase competition for
locally sourced fresh milk. The stable market for fluid milk and the
limited market share of competing milk powder will also slow the
contraction of local production.

# Marketing

Although demand for beef fell sharply after December 2003, industry
sources believe that consumer concerns about the safety of U.S. beef in
the aftermath of BSE can be resolved. However, this process of assuring
the public about the safety of beef has been set back as suppliers from
other countries have taken advantage of this situation. For example,
many restaurants continue to post signs supplied by U.S. competitors
saying they only use only Australian or New Zealand beef.

[]{.mark}

The U.S. BSE detection has interrupted U.S. imports to Taiwan, forcing
local restaurants to find alternative suppliers, pay higher prices and
switch to different menu items. This impact has fallen most heavily on
the high-end restaurants that were traditionally the largest buyers of
U.S. beef. These establishments often built brands based on U.S. beef,
although some restaurants have learned to partially compensate for the
lack of U.S. product. They will have difficulties adjusting to short
U.S. supplies since supplies of high-quality Australia and New Zealand
beef are insufficient to meet demand.

# Swine

Table 5. Taiwan Swine Production, Supply and Distribution

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Tai |       |       |       |       |       |
|                   | wan** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **A   |       |       |       | (1000 |       |
|                   | nimal |       |       |       | HEAD) |       |
|                   | Num   |       |       |       |       |       |
|                   | bers, |       |       |       |       |       |
|                   | Sw    |       |       |       |       |       |
|                   | ine** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2003  | ####  | 2004  | ##### | 2005  | ##### |
|                   |       | ## Re |       | # Est |       | # For |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | *     | USDA  | *     | USDA  | *     |
|                   | Off   | *Post | Off   | *Post | Off   | *Post |
|                   | icial | Est   | icial | Est   | icial | Est   |
|                   | \[    | imate | \[    | imate | \[    | imate |
|                   | Old\] | \[Ne  | Old\] | \[Ne  | Old\] | \[Ne  |
|                   |       | w\]** |       | w\]** |       | w\]** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Market Year Begin |       | *     |       | *     |       | *     |
|                   |       | *01/2 |       | *01/2 |       | *01/2 |
|                   |       | 003** |       | 004** |       | 005** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Beginning   | 6794  | **6   | 6779  | **6   | 6800  | **6   |
| Stocks            |       | 794** |       | 779** |       | 800** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Sow Beginning     | 795   | **    | 812   | **    | 0     | **    |
| Stocks            |       | 795** |       | 812** |       | 820** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Production (Pig   | 10000 | **10  | 10300 | **10  | 0     | **10  |
| Crop)             |       | 273** |       | 300** |       | 500** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Imports  | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Imports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY      | 16794 | **17  | 17079 | **17  | 6800  | **17  |
|                   |       | 067** |       | 079** |       | 300** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Intra EC Exports  | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Exports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Exports     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Sow Slaughter     | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| OTHER SLAUGHTER   | 9430  | **9   | 9500  | **9   | 0     | **9   |
|                   |       | 460** |       | 500** |       | 500** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Slaughter   | 9430  | **9   | 9500  | **9   | 0     | **9   |
|                   |       | 460** |       | 500** |       | 500** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Loss              | 585   | **    | 779   | **    | 0     | **    |
|                   |       | 828** |       | 779** |       | 900** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Ending            | 6779  | **6   | 6800  | **6   | 0     | **6   |
| Inventories       |       | 779** |       | 800** |       | 900** |
+-------------------+-------+-------+-------+-------+-------+-------+
| TOTAL             | 16794 | **17  | 17079 | **17  | 0     | **17  |
| DISTRIBUTION      |       | 067** |       | 079** |       | 300** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Calendar Yr. Imp. | 0     | **0** | 0     | **0** | 0     | **0** |
| from U.S.         |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Calendar Yr. Exp. | 0     | **0** | 0     | **0** | 0     | **0** |
| to U.S.           |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

Table 6. Taiwan Pork Production, Supply and Distribution

+-------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**     |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Country**       | **Tai |       |       |       |       |       |
|                   | wan** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**     | **    |       |       |       |       |       |
|                   | Meat, |       |       |       |       |       |
|                   | Sw    |       |       |       |       |       |
|                   | ine** |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 2003  | ####  | 2004  | ##### | 2005  | ##### |
|                   |       | ## Re |       | # Est |       | # For |
|                   |       | vised |       | imate |       | ecast |
+-------------------+-------+-------+-------+-------+-------+-------+
|                   | USDA  | *     | USDA  | *     | USDA  | *     |
|                   | Off   | *Post | Off   | *Post | Off   | *Post |
|                   | icial | Est   | icial | Est   | icial | Est   |
|                   | \[    | imate | \[    | imate | \[    | imate |
|                   | Old\] | \[Ne  | Old\] | \[Ne  | Old\] | \[Ne  |
|                   |       | w\]** |       | w\]** |       | w\]** |
+-------------------+-------+-------+-------+-------+-------+-------+
| Market Year Begin |       | *     |       | *     |       | *     |
|                   |       | *01/2 |       | *01/2 |       | *01/2 |
|                   |       | 003** |       | 004** |       | 005** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Slaughter       | 9430  | **9   | 9500  | **9   | 0     | **9   |
| (Reference)**     |       | 460** |       | 500** |       | 500** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Beginning       | 0     | **0** | 0     | **0** | 0     | **0** |
| Stocks**          |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Production**    | 890   | **    | 895   | **    | 0     | **    |
|                   |       | 893** |       | 895** |       | 895** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Intra EC        | 0     | **0** | 0     | **0** | 0     | **0** |
| Imports**         |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Total Imports** | 54    | *     | 60    | *     | 0     | *     |
|                   |       | *54** |       | *78** |       | *70** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL Imports** | 54    | *     | 60    | *     | 0     | *     |
|                   |       | *54** |       | *78** |       | *70** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL SUPPLY**  | 944   | **    | 955   | **    | 0     | **    |
|                   |       | 947** |       | 973** |       | 965** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Intra EC        | 0     | **0** | 0     | **0** | 0     | **0** |
| Exports**         |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Total Exports** | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL Exports** | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Human Dom.      | 944   | **    | 955   | **    | 0     | **    |
| Consumption**     |       | 947** |       | 973** |       | 965** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Other Use,      | 0     | **0** | 0     | **0** | 0     | **0** |
| Losses**          |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL Dom.      | 944   | **    | 955   | **    | 0     | **    |
| Consumption**     |       | 947** |       | 973** |       | 965** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Ending Stocks** | 0     | **0** | 0     | **0** | 0     | **0** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **TOTAL           | 944   | **    | 955   | **    | 0     | **    |
| DISTRIBUTION**    |       | 947** |       | 973** |       | 965** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Calendar Yr.    | 22    | *     | 25    | *     | 0     | *     |
| Imp. from U.S.**  |       | *22** |       | *33** |       | *28** |
+-------------------+-------+-------+-------+-------+-------+-------+
| **Calendar Yr.    | 0     | **0** | 0     | **0** | 0     | **0** |
| Exp. to U.S.**    |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

The conversion factor used to derive pork meat to carcass weight
equivalent (CWE) is 1.43. Imports of pork bones are also included in the
PSD Table at a conversion factor of 1.0. Imports of pork variety meats
(offal) are not included in the PSD table. This report includes pork
trade under HS 0203. Trade of processed pork, under HS 021011, 021012,
021019, 160241 and 160242, has been negligible (below 500 mt).

# Production

In 2004, swine production (fat pigs slaughtered) is estimated to grow
less than one percent to 9.5 million head. This is down 6 percent from
the post-FMD outbreak peak of 10.1 million head in 2001 but above
Council of Agriculture (COA) "target" production of 9.3 million. The
most recent pig inventory survey conducted in May 2004 was not available
because of a typhoon that disrupted data collection. Despite ongoing
attempts to increase herd size in response to high prices, production
continues to be limited by a persistent outbreak of Porcine Circovirus
Infection (PCV), which has high mortality in pigs weighing between 15 to
30 kg. When and if Taiwan gets PCV under control, high prices are
expected to result in a larger number of breeding and standing pigs.

Post forecasts a total 2005 slaughter of 9.5 million. Production will
not rise from 2004 despite high local pork prices because of disease,
high feed prices, the imminent liberalization of competing imports and
the continuing closure of the once-lucrative Japan export market.
Farmers may also be reluctant to expand production too quickly in order
to keep prices high. To prevent an oversupply of pork, Council of
Agriculture has been continuously urging farmers not to expand
production too quickly.

Table 7. Taiwan Hog Population Data

+--------------+----------+----------+----------+----------+----------+
|              | May 2002 | Nov.     | May 2003 | Nov.     | #        |
|              |          | 2002     |          | 2003     | May 2004 |
+--------------+----------+----------+----------+----------+----------+
| No. of farms | 12,931   | 13,054   | 13,022   | 13,154   | **NA**   |
+--------------+----------+----------+----------+----------+----------+
| Pigs on farm | 6        | 6        | 6        | 6        | **NA**   |
|              | ,920,763 | ,793,941 | ,747,658 | ,778,799 |          |
+--------------+----------+----------+----------+----------+----------+
| Boars        | 36,640   | 36,572   | 36,586   | 36,697   | **NA**   |
+--------------+----------+----------+----------+----------+----------+
| Sows/gilts   | 800,603  | 795,480  | 797,769  | 811,909  | **NA**   |
+--------------+----------+----------+----------+----------+----------+
| Sows         | 720,911  | 711,136  | 717,395  | 720,055  | **NA**   |
+--------------+----------+----------+----------+----------+----------+
| Gilts        | 79,692   | 84,344   | 80,374   | 91,854   | **NA**   |
+--------------+----------+----------+----------+----------+----------+
| Fattening    | 6        | 5        | 5        | 5        | **NA**   |
| pigs         | ,083,520 | ,961,889 | ,913,303 | ,930,193 |          |
+--------------+----------+----------+----------+----------+----------+
| Piglets      | 1        | 999,256  | 1        | 987,312  | **NA**   |
|              | ,061,922 |          | ,027,807 |          |          |
+--------------+----------+----------+----------+----------+----------+
| Under 30 kg  | 1        | 1        | 1        | 1        | **NA**   |
|              | ,795,175 | ,664,814 | ,734,710 | ,710,097 |          |
+--------------+----------+----------+----------+----------+----------+
| 30-60 kg     | 1        | 1        | 1        | 1        | **NA**   |
|              | ,632,069 | ,639,748 | ,582,556 | ,610,840 |          |
+--------------+----------+----------+----------+----------+----------+
| Above 60 kg  | 1        | 1        | 1        | 1        | **NA**   |
|              | ,594,394 | ,658,071 | ,568,230 | ,621,944 |          |
+--------------+----------+----------+----------+----------+----------+

Source: Council of Agriculture

##  

## Long-Term Trends

In the long term, the largely efficient Taiwan swine industry will
continue to produce pork for the local market, with imports mainly used
for processing or to supplement occasional shortfalls. Pork production
will likely eventually stabilize because of Taiwan's relatively
cost‑competitive structure, with current production costs estimated at
1.2 to 1.7 times North American and European levels. Although pessimists
feared that total herd size would quickly fall to 6.0 million, it seems
more likely to stabilize at 6.5 million in the next 3-4 years.

[]{.mark}

The decline of Taiwan's swine sector is expected to continue because
several factors:

1.  Realization that export markets lost because of Taiwan's 1997 Foot
    and Mouth Disease (FMD) outbreak will not recover fully in the near
    term.

2.  Continuing high feed prices, which have increased interest in
    importing feedstock from new origins (such as corn from the PRC).

3.  Increasing post-WTO accession import competition, especially from
    imported offals, which will be liberalized in 2005.

4.  Rising environmental pressures (especially waste disposal) that will
    increase costs of production. Note: Although Taiwan's Environmental
    Protection Administration relaxed Taiwan's pig wastewater standards
    at the request of COA, the long-term trend is still toward stricter
    regulation.

5.  Retirements of elderly farmers.

6.  Increasing pressure to divert land to more valuable uses.

The most serious problem facing Taiwan's swine industry is the loss of
export channels resulting from the 1997 FMD outbreak. Before 1997,
Taiwan was a net exporter of prime pork meat to Japan while the
remaining offal was consumed domestically. The FMD outbreak caused
massive losses from suddenly closed export markets and the costs of
depopulating 30 percent of the swine population (3.8 million head). The
number of swine farms fell by almost half from 25,300 in 1997 to 13,000
in 2002, with smaller farms failing the most often. Despite this
contraction, 43 percent of total farms still have less than 100 head
while 25 percent have less than 20. The large number of small farms and
aging farmers point to continuing consolidation in the swine sector.
Most swine production is concentrated in the southwest part of Taiwan in
Pingtung, Yunlin, Changhua and Tainan Counties.

[]{.mark}

Although Taiwan has been FMD-free since 2001 and was declared FMD-free
in 2003 with vaccination by the Office International des Epizooties
(OIE), exports are not likely to recover to pre-1997 levels. At the
earliest Taiwan might be able to export pork to Japan in 2006 if it can
avoid another FMD outbreak. Progress will be especially slow since Japan
will only accept imports from countries that are FMD-free without
vaccination, which can only come after a region has been FMD free for a
year without vaccination. Even if Taiwan does resume exports, it is very
unlikely that trade will return to pre-1997 levels because of the
disruption in marketing channels and a loss of positive consumer
awareness in Japan. The most optimistic estimate is that Taiwan will
export 80-100,000 mt by 2007 \-- which is down sharply from 270,000 mt
in 1996. In addition, hard-won access to foreign markets will remain
tenuous because of possible FMD or other disease introductions caused by
contraband imports of Chinese swine.

[]{.mark}

Pig farms have also suffered because of price competition. Post-WTO
offal imports have cut offal prices by as much as half, forcing pork
meat exporters to raise their prices, further reducing their
competitiveness. This has created a growing realization that exports
will not return to pre-FMD levels, which is causing farmers to stop
swine production. Farmers are also aging rapidly, which will also likely
reduce the number of farms, especially smaller facilities. After
consolidation, production costs should be even lower than at present,
leaving the remaining farms more competitive. This contraction in
domestic production and the ongoing consolidation of small farms will
likely result in increased long-term import demand for pork meat and
offal.

## Prices

Pig prices are expected to remain high through 2004 because limited
production of some minor substitution for beef (BSE) and poultry (bird
flu) in the face of limited domestic supplies. Pig auction prices rose
to a yearly high of NT\$6,000/100 kg (US\$179/100 kg) in July 2004.
Although high prices and an eventual reduction in PCV may boost herd
sizes in 2005, any production increase will likely be very limited.

Table 8. Taiwan Pig Auction Prices (NT\$/100 kg)

  ---------------------------------------------- ------------------------
  **Year/Month**                                 **Price**

  **CY 2001**                                    **3,982**

  **CY 2002**                                    **4,336**

  **CY 2003**                                    **5,317**

  Jan 2004                                       5,776

  Feb 2004                                       5,982

  Mar 2004                                       5,810

  Apr 2004                                       5,696

  May 2004                                       5,606

  Jun 2004                                       5,994

  ***July 2004 (est)***                          ***6,000***

  ***CY 2004 (Ave)***                            ***5,838***
  ---------------------------------------------- ------------------------

Source: Livestock Monthly & Other Industry Sources

*Exchange rate: approximately NT\$34.5=US\$1 in 2001, 2002 and 2003,
roughly NT\$33.5=US\$1 in 1-6/2004.*

In 2003 (the latest available data), the break-even point for hog
production was slightly more than NT\$4,720/100 kg live weight, the
highest level in years. The direct cost of hog production was
NT\$3,898/100 kg in 1999, NT\$3,676/100 kg in 2000, NT\$3,800/100 kg in
2001 and NT\$4,000/100 kg in 2002. (Source: Animal Technology Institute,
Taiwan) High feed and piglet prices resulting from PCV were responsible
for the high costs. Taiwan farmers tend to keep the pigs longer (about
6.5 months) on farm than their U.S. counterparts. The average weight for
slaughter pigs has remained at 110 kg/head for years. Profits per head
were equivalent to NT\$1,010 (US\$29.9), which is well above the NT\$358
(US\$11.0) per head in 2002.

**Table 9. CY2003 Production Cost of Hogs (NT\$ per head)**

+-------------------------------------------+------------+------------+
| **Category**                              | **NT\$ per | **NT\$ per |
|                                           | head**     | 100 kg**   |
+-------------------------------------------+------------+------------+
| Production cost                           | 5,192      | 4,720      |
+-------------------------------------------+------------+------------+
| ##  - Feeder pigs                         | 1,172      | 1,065      |
+-------------------------------------------+------------+------------+
| \- Feed                                   | 3,211      | 2,920      |
+-------------------------------------------+------------+------------+
| \- Other (labor, medicine, materials,     | 809        | 735        |
| rent, etc.)                               |            |            |
+-------------------------------------------+------------+------------+
| Gross income                              | 6,248      | 5,680      |
+-------------------------------------------+------------+------------+
| **Profits**                               | **1,055**  | **960**    |
+-------------------------------------------+------------+------------+

*Source: Council of Agriculture*

*Exchange rate: roughly NT\$34.5=US\$1 in 2003*

*Average Sale Weight is 110 kg*

# Consumption

The substitution of pork for beef and poultry, is expected to push
Taiwan's 2004 pork consumption to 973,000 tons, the highest level since
2001. Consumption in 2005 is expected to fall only slightly to 965,000
tons as beef consumption increases slightly. In most years, demand tends
to be stable, moving in a box between 940,000 to 970,000 tons. The very
limited (less than 3 percent) substitution of pork for other meats
indicates that they are not close substitutes in the Taiwan market.
Taiwan's pork consumption is around ten times as large as its beef
consumption. The latter also tends to be more specialized in the HRI
sector. Changes in relative prices or availabilities only slightly
affect beef demand relative to pork \-- or vice versa.

## 

# Trade

Spurred by continued high Taiwan prices, pork meat imports are expected
to reach 78,000 tons (CWE) in 2004 and 70,000 tons (CWE) in 2005. The
PCV outbreak kept prices high and stimulated imports totaling 54,000
tons (CWE) in 2003. U.S. market share is expected to increase slightly
to 42 percent in 2004 and remain around 40 percent in 2005.

Unlike beef, the vast majority (96 percent from 2002-3) of pork meat
consumed in Taiwan is produced domestically. Although post-WTO
liberalization and high Taiwan pork prices have sharply increased pork
meat imports in 2002-4, total volumes relative to consumption remain
low. Given the competitiveness of Taiwan pork production, trading
volumes and market shares are very sensitive to price and imports and
mostly exist on the margin. According to industry sources, imports can
rise above 3,000 tons per month if Taiwan pig auction prices rise above
NT\$5,000/100 kg, a situation expected to last into 2005. On the other
hand, high export prices can sharply cut trade -- even if Taiwan has
high prices. For example, if prices of imported products exceed 38
cents/pound, imports will fall by more than half, to around 1,400 tons
per month.

As another indicator of this market's extreme price sensitivity, U.S.
market share suffered major losses in 2003 because of high U.S. prices
and lower prices in Canada. During that time, Canada more than doubled
its market share over two years at the expense of the U.S. However, in
first half 2004, high Taiwan pig prices and low U.S. prices made U.S.
pork very competitive. In the latter half of 2004, Taiwan prices are
expected to remain high but U.S. prices have also risen sharply, making
it less competitive. For example, U.S. pork prices have risen to
US\$70/100 lb from US\$40 in early 2004.

[]{.mark}

In contrast, pork offal demand will likely remain strong in 2004 and
beyond as processors find new ways to utilize variety meats. The offals
TRQ will likely be fully utilized in 2004. As a result of high prices in
2003, the U.S. lost offals market share to Canada and European
suppliers. In 2004, the U.S. has regained market share as packers
modified their production specifications in order to restore their
dominant position in the Taiwan market.

**Table 10. Taiwan Pork Meat Imports, 2002 - 2004 (mt)**

  ------------- ------------ ---------- --------- --------- ----------- ------------
  Country       **U.S.**     Canada     EU\*      Hungary   Australia   **Total**

  2002          **11,470**   7,694      196       0         61          **19,421**

  *-'02 Share   ***59%***    *40%*      *1%*      *0%*      *\<1%*      
  (%)*                                                                  

  2003          **14,232**   15,621     1,354     1,074     364         **32,645**

  *-'03 Share   ***44%***    *48%*      *4%*      *3%*      *1%*        
  (%)*                                                                  

  2004          **13,662**   11,450     681       399       67          **26,258**
  (Jan-Jun)                                                             

  *-'04 Share   ***52%***    *44%*      *3%*      *2%*      *\<1%*      
  (%)*                                                                  
  ------------- ------------ ---------- --------- --------- ----------- ------------

Source: Directorate General of Customs, Ministry of Finance

-   \*Denmark/Sweden

-   Trade data do not distinguish between imports in and out the TRQs.
    However, out-of-quota imports are negligible.

-   The most recent World Trade Atlas (WTA) data are only until
    Oct. 2003. The COA data are from Customs data, the same as WTA but
    may differ slightly.

## Products Entering Under TRQs

Total 2003 TRQ imports were 10,104 tons for pork belly and 18,192 tons
for pork offal. (Source: Central Trust of China). Country breakdown for
TRQ imports are given below. High Taiwan pork prices and depressed
production points to high imports of both pork offal and pork bellies in
2004. Pork belly imports are expected to exceed 15,000 tons in 2004
while offals imports will reach likely 26,000 tons in 2004. However, the
TRQs may end up exceeding local demand, impeding TRQ fill in 2004
(especially for pork bellies) if Taiwan pig prices fall. COA estimates
demand for imported bellies at 10,000 tons and offals at 20,000 tons,
but this figure assumes lower pig prices than current levels.

Outside the TRQ, both pork bellies and pork offal are subject to special
safeguards (SSG), which allow higher (up to 33 percent) duties under the
WTO Agreement on Agriculture. The 2004 high out-of-quota duty (50
percent for pork bellies and 265 percent for pork offal) will strongly
discourage any imports after quota is filled, let alone the SSG duty
surcharge. However, in 2005, the high out of quota duties will be
replaced by a 15 percent duty.

**Table 11. Pork Belly Imports under TRQ**

  ----------- ----------- -------- ----------- --------- -------- --------- ------------ ------------
              **U.S.**    Canada   Australia   Denmark   Sweden   Hungary   **Total      **TRQ Size
                                                                            Imports**    (Annual)**

  2002        **2,431**   1,635    60          914       0        0         **5,040**    **6,160**

  2003        **4,217**   4,203    172         103       756      653       **10,104**   **10,780**

  2004        **4,727**   2,824    57          297       358      382       **8,645**    **15,400**
  (Jan-Jun)                                                                              
  ----------- ----------- -------- ----------- --------- -------- --------- ------------ ------------

Source: Directorate General of Customs, Ministry of Finance

The pork belly fill rate was 94 percent in 2003, with the US and Canada
each taking 42 percent market share. Because of high pork prices, the
pork belly TRQ will likely be completely filled in 2004.

**Table 12. Pork Offal Imports under TRQ**

<table style="width:100%;">
<colgroup>
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 7%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td><p>Year</p>
<p>/Country</p></td>
<td><strong>U.S.</strong></td>
<td>Canada</td>
<td>Australia</td>
<td>Denmark</td>
<td>Other</td>
<td>Sweden</td>
<td>Hungary</td>
<td><strong>Total Imports</strong></td>
<td><strong>TRQ Size (Annual)</strong></td>
</tr>
<tr class="even">
<td>2002</td>
<td><strong>7,703</strong></td>
<td>1,138</td>
<td>70</td>
<td>617</td>
<td>28</td>
<td>0</td>
<td>0</td>
<td><strong>9,556</strong></td>
<td><strong>10,000</strong></td>
</tr>
<tr class="odd">
<td>2003</td>
<td><strong>12,016</strong></td>
<td>3,483</td>
<td>507</td>
<td>1,244</td>
<td>22</td>
<td>155</td>
<td>765</td>
<td><strong>18,192</strong></td>
<td><strong>18,750</strong></td>
</tr>
<tr class="even">
<td>2004 (Jan-Jun)</td>
<td><strong>7,461</strong></td>
<td>3,788</td>
<td>246</td>
<td>1,150</td>
<td>47</td>
<td>220</td>
<td>560</td>
<td><strong>13,472</strong></td>
<td><strong>27,500</strong></td>
</tr>
</tbody>
</table>

####### Source: Directorate General of Customs, Ministry of Finance

In 2003, the demand for pork offal was very strong, resulting in almost
complete TRQ utilization (97 percent). Belly spare ribs (soft ribs)
continue to be the most popular item in the belly quota. The demand for
pork belly was lower but the fill rate was boosted to 94 percent by high
domestic pig prices. Pork offal imports are not included in the PS&D
table. In 2003, the fill rate for pork offal TRQ was 97 percent. The
U.S. share was 66.1 percent and the Canadians took 17.5 percent. Pig
stomachs continued to be the most popular offal item, although they are
processed differently than in the western world. U.S. suppliers should
remain competitive in this sector because they are more experienced than
other suppliers in meeting the Taiwan specifications. However, the trade
has been exploring other items, such as trimmings, hind legs, cheek meat
and rectum. Reportedly, European suppliers, especially Denmark, are very
price competitive in the non-stomach items.

Pork bone imports in 2004 are estimated at about 7,000 mt, the same
level as 2003. Pork bone imports from January to April 2004 have totaled
2,120 mt and include 653 tons from Canada, 690 tons from the U.S., 254
tons from Denmark, 71 tons from Sweden, 99 tons from Australia and 353
tons from Hungary. Trade in pork bones in 2003 of 7,129 tons was up
sharply from 2002 levels of only 943 mt. Imports included 3,437 tons
from Canada, 595 tons from Denmark, 296 tons from Sweden; 484 tons from
Australia, 510 tons from Hungary \-- and 1,807 tons from the U.S.

#  

# Policy

Upon Taiwan's WTO accession, the former global quotas for pork bellies
and pork offal were transformed into Tariff Rate Quota (TRQ). In 2004,
the quotas sizes are 15,400 mt for bellies and 27,500 mt for offal.
Tariff rates were also lowered with WTO entry. In 2004, quotas for pork
bellies and pork offal increased and tariff rates declined as detailed
in Table 12. In 2005, the TRQs will be phased out and duties bound at
12.5 percent for pork meat and 15 percent for pork offal. However, SSG
duties will come into effect when trigger levels are reached.

Table 13. Taiwan Pork Belly and Pork Offal TRQ

  ---------------- ----------- --------- ------------ --------- --------- ------------
                   **Pork                             **Pork              
                   Bellies**                          Offal**             

                   2002        2003      **2004**     2002      2003      **2004**

  **Tariff Rate    15          13.7      **12.5**     25        20        **15**
  (%)**                                                                   

  **TRQ Qty.       6,160       10,780    **15,400**   10,000    18,750    **27,500**
  (mt)**                                                                  

  **Out-of-Quota   60          55        **50**       310       287.5     **265**
  Rate (%)**                                                              
  ---------------- ----------- --------- ------------ --------- --------- ------------

All TRQ items have been moved to a new Chapter 98 of Taiwan's Tariff
Schedule. Pork products not subject to TRQ or enter outside of the TRQ
(and are subject to out-of-quota rates) are classified under the
original tariff classifications in Chapter 2 (for uncooked meat),
Chapter 5 (for animal offal) and Chapter 16 (for processed meat). TRQs
are open to all WTO members meeting Taiwan's quarantine requirements,
except products from the People's Republic of China, which are banned.

## TRQ Regulations

Taiwan 2004 TRQs total 15,400 mt for pork bellies and 27,500 mt for
offals. Unlike in earlier years, around half of the 2004 TRQ was
allocated to importers based on previous two years' import record. This
removed much of the uncertainty from the quota distribution process and
will help importers make better long-term plans. The remaining TRQ for
pork belly was allocated through an auction. Importers or exporters
registered with Taiwan's Board of Foreign Trade are eligible to apply.

Table 14. TRQ Allocations for Pork Products (mt)

+------------------+-----------------+----------------+---------------+
|                  | **Based on      | **Auctioned**  | # Total       |
|                  | Record**        |                |               |
+------------------+-----------------+----------------+---------------+
| # Pork Belly     | 8,470           | 6,930          | **15,400**    |
+------------------+-----------------+----------------+---------------+
| **Pork Offal**   | 14,375          | 13,125         | **27,500**    |
+------------------+-----------------+----------------+---------------+

Quotas are tradable. Under the terms of Taiwan's WTO accession
agreement, TRQ certificates are valid from January 1 to September 1 and
can be extended to December 31 upon presentation of a signed contract.
Arrival dates can be postponed to December 31, 2004 if a signed contract
is presented to the Central Trust of China (CTC) before the deadline
(application made to CTC from August 1 to 25, 2004). Unused TRQs will be
reallocated in September.

## Non-TRQ Duties

Effective January 1, 2002, Taiwan redefined "pork offals" to include
only hocks, feet, skirt, guts (including intestines and rectum) and
stomachs. Remaining pork variety meats were liberalized with WTO entry.
Items such as kidneys, tails and hearts no longer require a quota and
are effectively liberalized. []{.mark}

[]{.mark}

The out-of-quota rates for pork bellies fell to 50 percent in 2004 while
the out-of-quota rates for pork offal fell to 265 percent in 2004.
Imports for both products will be liberalized in 2005 and tariffs for
all pork offals will go down to 15 percent. A tariff comparison for
other pork products not subject to TRQ is listed below:

Table 15. Tariff Comparison for Pork Imports Not Subject to TRQs (%)

  ---------------------------- ------------- ------------- ---------------
  **Pork Category/Year**       2002          2003          **2004**

  **Carcass, Hams, Shoulders   15            13.7          **12.5**
  and Cuts**                                               

  **Other Pork Cuts**          14            13.2          **12.5**

  **Non-TRQ Variety Meats**    25            20            **15**

  **Pork Bones**               35            35            **35**

  **Pork Tendon\***            25            20            **15**
  ---------------------------- ------------- ------------- ---------------

\* Imports of pork tendon were liberalized in 2002 upon WTO entry,
meaning that quota certificates are no longer required. However, the
import duty for this item was raised from 15% to 25% in 2002. To Post's
knowledge, this is the only agricultural item dutiable at a higher rate
after Taiwan's WTO accession.

## Special Safeguards

Both pork bellies and pork offal are subject to a Special Safeguards
(SSG) regime, based on Article 5 of the WTO Agreement on Agriculture.
Under the SSG, Taiwan can add a 33 percent duty surcharge when import
volume surge above a trigger volume or if local prices fall below a
trigger price determined before WTO accession. Taiwan has calculated its
volume trigger levels at 125 percent of the TRQ. 2004 pork belly price
trigger remains NT\$30/kg. Note: SSG does NOT apply to any imports
entering under a TRQ.

Table 16. TRQ Volume Triggers (mt)

  ------------------- ----------- ---------- ----------- ----------- ----------
  **Pork              **2003      **2003     **2003      **2004      **2004
  Category/Year**     Trigger**   TRQ**      actual TRQ  Trigger**   TRQ**
                                             imports**               

  **Pork Belly**      13,475      10,780     10,104      19,250      15,400

  **Pork Offal**      23,437      18,750     18,192      34,375      27,500
  ------------------- ----------- ---------- ----------- ----------- ----------

*Source: Council of Agriculture*

Taiwan's demand for pork offal is strong and stable. The TRQ for pork
offal should be completely filled in 2004. With imports being
liberalized and TRQ removed in 2005, pork offal imports are expected to
continue increasing.

All most pork items currently entering under TRQs will be liberalized on
January 1, 2005 at tariff rate 12.5 percent. Simultaneously, all pork
offals will be subject to a 15 percent tariff. The tariff for pork
bones, fresh, chilled or frozen, will remain at 35 percent.

Although demand for pork offal is strong, the high out-of-quota duty
will strongly discourage imports above the TRQ level until it ends in
2005. Lower out-of-TRQ duties make it possible but still unlikely that
pork bellies will exceed SSG trigger levels in 2004. Although
liberalization in 2005 could trigger SSG duties, some industry sources
do not believe import demand will be strong enough to trigger this
response.

## Sanitary Regulations

In order to export meat to Taiwan, a country's meat quarantine
inspection and health certification system must be reviewed and found
acceptable by the Taiwan authorities. Taiwan currently allows imports of
pork/pork offal from the United States, Canada, Australia, New Zealand,
Japan, Hungary, Denmark, Finland and Sweden. A Dutch request to export
pork to Taiwan in 2001 was rejected after a European Foot-and-Mouth
Disease (FMD) outbreak although other EU countries have applied for
import permission. Korea's application for FMD-free recognition was also
denied in December 2001. South Korean pork offal could be potentially
very competitive if allowed entry. Paraguay was also disqualified in
2002 because of FMD.

Countries not currently approved to export meat products to Taiwan must
formally apply for approval. The approval process requires bilateral
negotiations and on‑site inspections of production and processing
facilities, which can take several years to complete. FMD concerns are
likely to keep competitive South Korean pork products off the Taiwan
market for at least two-to-three years. Disease problems complicated by
cross-strait political issues will likely keep PRC pork off the Taiwan
market for an extended period (see below).

## Cross-Straits Trade and Investment

Currently Mainland Chinese pork, pork offals, and pork products are
banned entry into Taiwan. Taiwan is expected to gradually relax these
administrative controls, but the Mainland will still face SPS hurdles in
exporting to Taiwan. Continuing animal disease problems in the PRC make
exports of most animal products to Taiwan very unlikely. Even if
permitted, imports from the Mainland would face other barriers such as
the lack of a working relationship between China and Taiwan's quarantine
services and the lack of direct shipping routes. Taiwan authorities have
also banned investment by Taiwan companies in Mainland livestock and
meat packing operations although there may well be covert investment in
these sectors.

# Marketing

Since pork meat demand in Taiwan depends so strongly on the prices of
locally produced pork, export prospects for pork meat can vary greatly
from year to year. When Taiwan does import, buyers prefer carcasses
because U.S. cuts are different from what is used in Taiwan. In
addition, competitors sometimes give rebates disguised as \"promotion\",
which can undermine U.S. competitiveness. Note: Offals for retail sale
mostly go through wet markets rather than supermarkets.

# Internet Resources 

Taiwan's tariff schedule is available at
[http://www.doca.mof.gov.tw.]{.underline} After Taiwan's accession to
the World Trade Organization (WTO) on January 1, 2002, a new chapter,
Chapter 98, was established in Taiwan's Customs Tariff Schedule to cover
all products that are permitted entry under Tariff Rate Quota (TRQ).
However, this chapter is used to tabulate current tariff rates and trade
restrictions for the TRQ items. Actual trade statistics are available at
[http://www.trade.gov.tw.]{.underline} Most Taiwan (.tw) domain websites
are only in Chinese, but the amount of English content is increasing.

[http://www.coa.gov.tw/english/index.htm]{.underline} for agricultural
statistics and general agricultural information (in English).

[http://www.baphiq.gov.tw]{.underline} for Taiwan quarantine
requirements (English version available).

[http://www.trade.gov.tw/english.index.htm]{.underline} for trade
statistics, trade rules, TRQ bidding rules and general trade information
(English version available).

[http://www.wto.org]{.underline} The WTO's website for information about
Taiwan's WTO accession.

[http://www.docamof.gov.tw]{.underline} for tariff reduction schedule
(soon in English) and TRQ implementation measures.

[http://www.ctoc.com.tw]{.underline} for Central Trust of China's TRQ
announcement (Chinese only).

[http://www.dgoc.gov.tw]{.underline} for Special Safeguards application
(Chinese only).

[http://www.naif.org.tw]{.underline} for pig auction prices and pork
retail prices (Chinese only).

#