Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. Since its accession to the WTO,  the Separate Customs Territory of Taiwan, Penghu, Kinmen 
and Matsu (Chinese Taipei) has continued to purs ue trade liberalization and structural reform, 
especially in the services sector, where shares in GDP and employment have continued to increase in 
recent years and labour productivity is substantially hi gher than the rest of the economy.  By contrast, 
there has been a relative decline in the contri butions of agriculture to GDP and employment. 
2. Labour productivity in agriculture is substantia lly lower than elsewhere in the economy, and 
the sector receives relatively high border protec tion and domestic support measures compared with 
other sectors.  In 2005, the average applied MFN ta riff on agricultural produc ts (WTO definition) was 
22.3% whereas that on non-agricultural products was about 5%.  The highest applied MFN rate in 
agriculture was 1,069.9% ( ad valorem  equivalent of a mixed tariff) for certain rice products.  The 
government of the Separate Customs Territory h as implemented a range of support and adjustment 
programmes for agriculture, including price stabiliza tion measures for rice and sugar, and income 
support programmes for elderly farmers. 
3. About 98% of energy demand in Chinese Taipei is met by imports.  The main suppliers in the 
petroleum and electric power generation industries include state-owned enterprises. 
4. The share of manufacturing in GDP was about 21% in 2005, down from around 23% in 2001.  
The government provides tax incentives and subsidie s for R&D and "newly emerging, important and 
strategic" industries, which mainly include mach inery and electronics.  Passenger cars and chassis are 
subject to tariff rate quotas.  Office machines, telecommunication equipment, and other electrical 
machines account for about 41% of Chinese Taipei 's merchandise exports (in value) in 2004. 
5. The services sector was the largest contributor to the economy, accounting for about 74% of 
GDP in 2005.  The government has pursued various  liberalization measures to facilitate domestic 
structural reform and provide better market acces s for non-Chinese Taipei firms;  such measures 
included the recent privatization of dominant carri er in telecommunications.  Postal and railway 
transportation services are fully owned by the govern ment.  The government intends to proceed with 
further reforms, such as the privatization of stat e-owned banks.  The postal savings system had the 
largest share of deposits among all financial instituti ons in Chinese Taipei in 2004.  Chinese Taipei's 
Schedule of Specific Commitments under the GATS covers about 120 of around 160 sectors.  MFN 
exemptions in Chinese Taipei's services commitments involve land acquisition and air transportation.   
(2) AGRICULTURE  
(i) Overview 
6. The share of agriculture in GDP continued to  decline until 2004, when it accounted for 1.7% 
of GDP;  the share increased slightly in 2005, to 1. 8% (Table I.2).  The trend in sectoral employment 
also shows a relative decline in agriculture, to 5.9%  of employment in 2005 (Table I.3).  Agriculture's 
shares in GDP and employment suggest that labour  productivity in agriculture is only about one-
quarter of the level in the rest of the economy.  This is presumably due in large part to the small 
average size of farms1, which prevents the achievement of scale economies, mechanization, and the 
use of new technology.  Crops, including fruit, vegeta bles, and rice, account fo r the largest share of 
total agricultural production (Table IV.1).  Exports  and imports of agricultural products accounted for 
                                                      
1 The average farm size is 1.1 hectares. WT/TPR/S/165/Rev.1 Trade Policy Review 
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2.5% and 5.4% of the respective totals in 2004 (T ables AI.1 and AI.2).  Corn and soybeans were 
among the main agricultural imports. 
Table IV.1 
Composition of agricultural production, 1999-04 
(NT$ billion and per cent) 
Percentage of total Year Total output value, 
NT$ billion Crops Livestock Fisheries Forestry 
1999 391.5 43.56 33.19 23.10 0.15 
2000 363.8 45.41 29.57 24.94 0.07 
2001 352.7 45.58 28.70 25.55 0.17 
2002 350.5 43.33 30.02 26.41 0.25 
2003 357.9 41.15 31.46 27.23 0.16 
2004 386.5 41.99 32.34 25.54 0.14 
Source: Council of Agriculture (2004), Agricultural Statistics Yearbook 2004 . 
7. The Council of Agriculture is the main authorit y in charge of Chinese Taipei's agricultural 
policies.  Adjustment policies in  agriculture are based on the Ag ricultural Development Act, which 
has been in force since 1973.2  The Act aims to achieve reasonable utilization of farmland and 
improve the living standards of farmers.3  The latest revision of the Act in 2003 was aimed at, inter 
alia, relaxing regulations on land use;   restrictions on farm land holdings were elim inated to encourage 
capital and technology-intensive agriculture.4  The Act also serves as the legal basis for the 
government's plans to establish agricultural technology parks.5  The government aims to balance 
demand for and supply of food in Chinese Taipei6;  to meet these objectives,  it has been encouraging 
farmers to switch from the production of rice, which te nds to be oversupplied, to that of other crops 
(section (iii) below). 
8. Chinese Taipei has signed bilateral cooperation agreements on agriculture with Australia, 
Canada, France, Indonesia, Israel, Japan, the Nether lands, the Philippines, Thailand, the United States, 
and Viet Nam to promote agricultura l cooperation and training for personnel.7 
(ii) Border measures 
9. The average applied MFN tariff for agriculture (WTO definition) was 22.3% in 2005.  Some 
7.5% of tariff lines applied to agricultural goods were non- ad valorem .  Many agricultural subsectors 
(particularly grains, vegetables, fruits, and oil seeds) benefit from relatively high levels of MFN tariff 
protection (Chart III.1);  several of these subsectors are also subject to a number of tariff peaks. 
                                                      
2 The Act was amended in 1980, 1983, 1986, 2000, 2002 and 2003.  
3 Various support schemes for agriculture have been provided in accordance with the Agricultural 
Development Act.  These include:  subsidies for the expansion of family farms;  exemption of farmers from 
stamp duties and business taxes when they sell self-produ ced agricultural products;  and refund of tariff duties 
and commodity taxes on raw and packaging materials for agricultural products destined for export. 
4 Previously, private entities had not been allowed to acquire more than 20 hectares of agricultural land 
with the exception of inherited land or land acquired pursuant to other laws.  This restriction was abolished 
in 2003. 
5 Five parks have been approved for establishment since 2003;  two of these have already been 
established.  The government provides the parks with public infrastructure  support, such as export inspection 
and quarantine stations and exhibition halls. 
6 In 2003, Chinese Taipei's food se lf-sufficiency ratio (calorie base d) was 34.6% (35.9% in 2002 and 
34.8% in 2001). 
7 The agreements do not contain any preferential market access provisions.  Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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10. Tariff rate quotas (TRQs) apply mainly to ag ricultural products, including rice, sugar, 
vegetable, fruits, and fish (Chapter III(2)(iii)).8  TRQs on chicken (and poultry offal) and pork belly 
(and pork offal) were removed in January 2005.  Rice is subject to state trading.9   
11. Special safeguards (SSGs) were triggered durin g 2002-05 for a number of products, including 
rice, peanuts, Asian pears, pomelos, persimmons, s ugar, betel nuts, dry shiitake mushrooms, dry day 
lilies, garlic, chicken products, liquid and fresh milk, poultry offal, and red beans.10 
12. Rice imports were subject to quantitative rest rictions until 2003, when these measures were 
"tariffied" and tariff rate quotas were introduced.11  In-quota rates were 0 to 25% for rice and 25% for 
rice products (Table AIII.1).  The out-of-quota rates in 2005 were NT$45/kg for rice and NT$49/kg 
for rice products.  Rice is the most protected crop in Chinese Taipei;  the ad valorem  equivalent for 
the out-of quota rate for certain rice products was 1,069.9% representing the highest applied MFN 
tariff in 2005.  The Agriculture and Food Agency  under the Council of Agriculture purchases rice 
from farmers for stocks;  the Agency also retain s exclusive rights to import 65% of rice under the 
TRQ.  The quota fill-in rate was 99.9% in 2004.12 
13. Import duty on raw materials (including agricultu ral products) used in manufacturing articles 
for export is refundable under the Customs Act.13  The authorities are of the view that the duty 
drawback system does not constitute an export su bsidy, since the amount of duty refunded on the 
finished product is less than th e duty paid on the raw materials. 
14. In 2002, the Council of Agriculture establishe d an Agricultural Import Monitoring and 
Warning System to monitor the import volumes and prices of major imported products.  Under this 
system, the government also provides support such  as marketing and promotion for domestically 
produced goods in case of a surge in imports.  The system aims to strengthen the implementation of 
various price stabilization measures and pr event damage to domestic industries. 
15. Inbound direct investment in agriculture and fi shing is "restricted" and requires prior approval 
from the competent authorities;  inbound direct investment in forestry and logging is prohibited. 
(iii) Domestic measures and support programmes   
16. Since its accession to the WTO, Chinese Ta ipei has implemented various support 
programmes for agriculture including price support, subsidized loans for the purchase of inputs, and 
income support for elderly farmers.  Agricultura l subsidies provided for price support in 2004 
amounted to about NT$2.9 billion (about 0.03% of  GDP).  Chinese Taipei's total current AMS 
                                                      
8 Vegetables and fruit subject to TRQs are:  pears,  bananas, red beans, peanuts, garlic, dried shiitake, 
dried day lily, coconuts, betel nuts, pineapples, ma ngoes, shaddocks, persimmons, and dried longans. 
9 According to the authorities, the state-trading regime for sugar, tobacco, salt, and banana has been 
abolished since their latest notification on state tr ading to the WTO (WTO documents G/STR/N/9/TPKM and 
10/TPKM, 4 August 2004). 
10 SSGs applied in 2005 can be found in WTO documents G/AG/N/TPKM/23, 24, 26, 28, and 29 of 
7 July, 7 September, 21 October, 22 November, and 14 December. 
11 Between 1974 and 2001, the government purchased rice through the Food Stabilization Fund, which 
was abolished due to large deficits in 2001 an d replaced by the Agricultural Development Fund. 
12 The government  purchases rice from farmers and retains rights and obligations to import 65% of rice 
under TRQs with a view to ensuring price stability for rice and food security.   The rice stock is released to 
regulate supply and demand on the market. 
13 Article 63. WT/TPR/S/165/Rev.1 Trade Policy Review 
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(aggregate measure of support) for 2002 was NT$7. 06 billion (latest available data), of which 
NT$5.5 billion was price support.14 
(a) Price support 
17. The government has been implementing price st abilization measures for certain agricultural 
products including rice, sorghum and feed corn, sweet potatoes, some types of beans, certain 
vegetables, tobacco leaves, and sugar.15  These products are purchased mainly by state-owned 
enterprises at "guaranteed prices"16;  the difference between the guar anteed price and actual market 
price constitutes a government subsidy.  Subsidi es granted in connection with such price-support 
measures totalled between 2001 and 2003 NT$13.6 bi llion;  33.6% was provided for rice, 25.7% for 
crops, 19.3% for tobacco leaves, 14.5% for sorghum and feed corn, 6.6% fo r sugar, and 0.4% for 
certain vegetables. 
18. In addition, the government has adopted short-term price stabilization measures for 
agricultural products (such as citrus fruit, chicken, ducks and geese, and garlic) in case the price falls 
below a certain threshold.  These measures incl ude sales promotion; purchase, processing and 
refrigeration of products;  and pr ovision of low-interest loans. 
19. The government also implements "supply and demand imbalance measures" for 
30 agricultural and fisheries products (lychees, mang oes, milkfish, hog, onion, staple vegetables and 
green plum) in order to monitor the production and ma rketing situation.  If there is imbalance in the 
supply and demand, the Council of Agriculture pr ovides marketing promotion, extension, and 
advisory services. 
20. In order to reduce the rice production, whic h tends to exceed demand, the government 
encourages farmers to switch to other crops.  If  farmers convert their rice paddies to areas producing 
sweet potatoes, adzuki beans, mung beans, and other miscellaneous crops, the government pays 
NT$22,000 per hectare of such "converted" area.17 
(b) Loans and income support 
21. In accordance with the provisions of the Agricultural Finance Act, promulgated on 
23 July 2003, the government established the Bureau  of Agricultural Finance under the Council of 
Agriculture in January 2004.  The Act's main objectives include strengthening credit facilities 
provided by farmers' and fishermen's associatio ns.  The responsibilities of the Bureau include 
planning and supervising the agricultural finance system;  it is also mandated to establish an  
"agricultural financial reporters register system" to  improve transparency in agricultural financing.  
The loans are mainly provided by the Agricultural Bank, which was established jointly by the 
government and the private sector, including farmers'  and fishermen's associations, on 26 May 2005.  
The Agricultural Credit Guarantee Fund, establis hed in 1984, assists farmers and fishermen by 
providing credit guarantees.  It consists of contribu tions by the government, banks, and farmers' and 
fishermen's associations. 
                                                      
14 WTO document G/AG/N/TPKM/32, 2 March 2006. 
15 WTO document G/SCM/N/123/TPKM, 3 August 2005. 
16 Guaranteed prices are determined on the basis of production costs:  for example, guaranteed prices 
have been set at NT$21/kg. for Japonica-type rice and NT$20 for Indica-type rice. 
17 WTO document G/AG/N/TPKM/32, 2 March 2006. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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22. The government implements policy-oriented loan  programmes to help farmers to obtain low-
interest credits.  The loans are intended to assi st farmers in technological upgrading, purchasing 
farmland, and repairing farm houses;  there are also loans for rural development.18    
23. Under the Agricultural Development Act, an Agricultural Product Import Damage Relief 
Fund was established in 1990 to facilitate structural ad justment in response to an expected increase in 
imports.19  Products covered by the fund include:  fruit,  tea, rice, peanuts, dairy cattle, hog raising, 
poultry, and aquaculture.  Disbursements from the fund were NT$749.4 million and NT$1.9 billion, respectively, in 2003 and 2004. 
24. The government granted monthly allowances of  around US$96 to farmers aged 65 years or 
older between 1995 and 2003.
20  About US$1 billion was allocated to subsidize elderly farmers and 
fishermen in 2005;  the aged farmers' monthly welfare payment was US$118 per person in 2004.   
(3) ENERGY AND UTILITIES  
(i) Overview 
25. As a result of insufficient domestic energy s upplies, Chinese Taipei relies heavily on 
imported energy.  In 2004, 98.2% of energy was imported, representing about 12% of total imports.  
In 2004, the share of oil in Chinese Taipei's prim ary energy supply was 51%;  coal accounted for 
32.5%, nuclear power 7.3%, natural gas 8%, and hydropower 1.2%. 
26. Mining plays a relatively peripheral role in the economy.  In 2004, small amounts of marble 
and limestone were produced domestically (appr oximately 23 million tonnes and 213,000 tonnes, 
respectively).  There is no coal production due to relatively high costs. 
27. The Bureau of Energy, formerly the Energy Commission, under the Ministry of Economic 
Affairs is responsible for formulating and implementing Chinese Taipei's energy policy.21  The main 
legislation governing the sector is the Energy Management Law and related regulations.  The 
government aims to establish a more liberal, efficient energy supply system.  In this context, it has 
been promoting the privatization of energy-related enterprises. 
(ii) Petroleum, petroleum products, and natural gas 
28. With the adoption of the Petroleum Administration Act in 2001, imports and domestic sales 
of petroleum products were liberalized.22  The sector's major supplier is a state-owned enterprise 
(CPC), particularly in respect to  exploring, producing, importing, refining, and marketing petroleum.23  
                                                      
18 Total outstanding agricultural loans rose from NT$50 billion in 2003 to NT$384 billion in 2004 and 
NT$335 billion as of the end of September 2005. 
19 Projects financed by the fund incl uded:  support for structural adju stment in selected industries;  
training for agricultural labour;  marketing; animal health inspection and animal products sanitation;  and plant 
pest management system. 
20 To be eligible, farmers have to be covered by the farmers' health insurance programme for more than 
six months. 
21 The Energy Commission was established under the Ministry of Economic Affairs in November 1979 
and reorganized into the Bureau of Energy in July 2004.  
22 The establishment of privately operated gas stations for the marketing of gasoline and diesel oil was 
allowed in 1987 and the establishment of private petroleum refinery enterprises was allowed in 1996.  The 
markets for fuel oil, jet fuel, and LP G were liberalized in January 1999. 
23 The major energy suppliers of Chinese Taipei in clude the CPC and a privat e company (FPCC).  The 
CPC operates three oil refineries with  a total refining capacity of 770,000  barrels per day.  The FPCC operates WT/TPR/S/165/Rev.1 Trade Policy Review 
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Prices of petroleum products have been determined by the market since September 2000;  the prices 
were previously regulated by the Ministry of Economic Affairs.24  Nonetheless, prices of petroleum 
products supplied by SOEs are regulated by the Bu reau of Energy, based on recommendations by the 
Oil and Power Pricing Consulting Commission.25  The government aims to further liberalize the 
petroleum sector, including the privatization of this state-owned firm. 
29. The Petroleum Administration Law is aimed at  strengthening the management of the local 
petroleum market and the production of petroleum products, as well easing regula tions on oil imports.  
Imports of all petroleum products , which had previously been imported solely by a state-owned 
company, were liberalized on 26 December 2001.  The applied MFN tariff for petroleum products in 
2005 was:  0% for crude oil and LPG;  5% for fuel oil and diesel oil;  and 10% for kerosene, jet fuel, 
and gasoline. 
30. Natural gas in Chinese Taipei is also supplied ma inly by the CPC;  it is the sole provider of 
gas, wholesale and transportation services to local  distribution companies, power generators, and 
industrial firms.  Natural gas is imported duty-free.  No taxes or fees other than VAT and the trade promotion fee are imposed on natural gas.  The market liberalization pr ogramme has led to the 
establishment of private LNG (liquefied natural g as) terminals.  Non-Chinese Taipei investors are 
allowed to own up to 50% of the shares of a gas distribution company. 
31. Wholesale gas prices are formulated by the CPC in accordance with the Natural Gas Pricing 
Formula based on the full-cost-recovery principle.  These prices need approval from the Ministry of 
Economic Affairs .  Retail gas prices are regulated by the Mi nistry and local levels of government, 
also based on the full-cost-recovery principle. 
32. Whereas gas is exempted from commodity (excise) taxes, petroleum products are not 
(Chapter III(4)(i)).  In addition, "air pollution c ontrol fees" and "soil and ground water pollution 
remediation fees" have been charged with a view to  remedying environmental damage;  the former are 
charged on gasoline and diesel fuels, and the latter on the manufacturers and importers of designated 
chemicals.
26  Contributions to a petroleum fund have b een imposed for the exploration or import of 
oil, and the production of petroleum by-products since 1 January 2002. 27  Imports of energy products 
are subject to a 5% business (value-added) tax;  impo rts and exports of energy products are subject to 
a trade promotion service fee (Table IV.2). 
                                                                                                                                                                     
an oil refinery with a capacity of 450,000 barrels per day.  The CPC was initially scheduled to be privatized by 
the end of 2003.  The privatization date and the plan for privatization of the CPC are being re-evaluated by the legislature. 
24 The Petroleum Administration Law authorizes the g overnment to control the price in the event of a 
state of emergency. 
25 Prices of petroleum products are set by suppliers based on the full-cost-recovery principle.  As one 
major supplier is a state-owned company, the government  regulates the prices this company charges, thereby 
influencing the market price. 
26 Article 16, Air Pollution Control Act and Article  22, Soil and Groundwater Pollution Remediation 
Act.  However, according to the auth orities, soil and ground water pollution remediation fees are imposed only 
on domestic production. 
27 The government has established a petroleum fund to, inter alia,  maintain a stockpile of petroleum for 
energy security.  Oil refinery operators and importers are also required to maintain an oil stockpile of at least 
sixty days of supply, based on average domestic sales and private consumption for the past twelve months. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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Table IV.2 
Taxes and fees on energy, 2005 
Item Trade 
promotion 
service fee 
(%) Excise tax 
(NT$/l) Petroleum funda 
(NT$/kl) Soil and 
groundwater 
pollution 
remediation fee 
(NT$/t) Air pollution 
control fee 
(NT$/l) Value-added 
tax (%) 
Crude oil 0.0415 0 303 0 0 5 
Fuel oil 0.0415 0.11 303 12 0 5 
Kerosene 0.0415 4.25 366 0 0 5 
Jet fuel 0.0415 0.61 366 0 0 5 
LPG 0.0415 0.69 549 12 0 5 
Gasoline 0.0415 6.83 371 12 grade 1:0  
grade 2:0.1  grade 3:0.3 5 
Diesel oil 0.0415 3.99 319 12 0.2 5 
Natural gas 0.0415 0 0 0 0 5 
Steam coal 0.0415 0 0 0  5 
Coking coal 0.0415 0 0 0  5 
Electricity  0  0  5 
a The Petroleum Fund is set up under the Petroleum Administrati on Law to promote R&D in substitute technologies.  In 2004, the 
 Fund's total revenue was NT$9.9 billi on and expenses were NT$12.7 billion. 
Source:  Information provided by the Chinese Taipei authorities. 
(iii) Electricity 
33. A state-owned company ("TPC") is entrusted with  the development, generation, transmission, 
distribution, and marketing of electrical power in Chinese Taipei.  According to the Electricity Law, 
TPC is granted the electricity business right, subject to the approval of the Ministry of Economic Affairs, for the exclusive operation of the bus iness in Chinese Taipei until 2008.  Since 1994, 
independent power producers operated by private cor porations have been encouraged to develop co-
generation systems and to sell their surplus power to TPC.  In 2004, about 16% of electricity supply 
was provided by independent power producers,  which operate on the basis of power purchase 
agreements  with TPC.  Inward direct investment is a llowed up to 100% of the total shares of a 
company.
28  TPC retains exclusive control over nuclear a nd hydropower plants.  The privatization of 
TPC was envisaged in 2006, but postponed for an inde finite period.  TPC is to retain its monopoly on 
transmission and distribution ne tworks after privatization. 
(4) MANUFACTURING  
(i) Overview 
34. Traditionally, manufacturing has been the driv ing force behind Chinese Taipei's economic 
development.  The sector's shar e of the GDP reached a peak of about 47% in 1986.  Since then, 
however, its share has declined gradually, to 21 .1% of GDP in 2005.  The manufacturing sector 
employed 2.7 million persons or 27.4% of total em ployment in 2005.  The main subsectors include 
electronics, chemicals, machinery, and consumer goods. 
35. The Industrial Development Bureau (IDB), within  the MOEA, is the main authority that  
formulates policies, strategies and measures for indus trial development, promotes industrial upgrading 
                                                      
28 To date, six non-Chinese Taipei private companies have invested in eight independent power 
producers. WT/TPR/S/165/Rev.1 Trade Policy Review 
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and manages industrial parks (Chapter III(3)(vii)).  The Statute for Upgrading Industries stipulates 
Chinese Taipei's main support measures for industries with a view to accelerating the development of 
manufacturing  (Chapter II(6(iii)). 
36. The development of manufacturing in Chinese Taip ei is to a great extent due to small and 
medium-sized enterprises (SMEs).  The government  plans to "guide" the development of SMEs 
towards higher-value-added industrial production, in  line with the economy's overall development 
objectives, such as those stated in "Challenge-2008".29 
(ii) Border measures 
37. The average applied MFN tariff on industr ial products (HS 25-97) in 2005 was 4.4%30;  the 
highest rates (60%) concerned certain transport equi pment.  The average applied MFN tariff rates for 
machinery and textiles in 2005 were 3.5% and 8.8%, respectively.31  Passenger cars and chassis are 
subject to TRQs (section (iv) below). 
38. Inbound direct investment into Chinese Taipei is prohibited in the manufacturing of 
hazardous chemicals and metals and equipment used for explosives and weapons.  In 2004, 
manufacturing attracted a total of US$2 billion of in bound direct investment, of which 64.5% was in 
electronic and electrical appliances. 
(iii) Domestic support measures 
39. The Statute for Upgrading Industries is the ma in legal instrument outlining support measures 
for Chinese Taipei’s manufacturing sector (Chapter  II(6)(iii)).  The Statute stipulates tax incentives 
for particular industries and provides for the establishment of a development fund, industrial parks, 
and operation headquarters. 
40. In 2004, the government's support for industr ial development was about NT$54.2 billion, 
equivalent to 3.4% of the government's annual bu dget.  The support measures included tax incentives 
under the Statute for Upgrading Industries (costing NT $5.1 billion in forgone taxes);  a tax exemption 
for enterprises in EPZs  (NT$0.64 billion);  and a tax exemption for enterprises in science-based 
industrial parks  (NT$48.5 billion).  The government's i ndustrial support measures include tax 
incentives directed at facilitating automation and "new ly emerging, important and strategic" industries 
(Chapter II(6)(iii)), R&D, pollution control, ener gy conservation, funding, operation headquarters, 
pollution control, and personnel training.  The government also provides subsidized loans for 
qualified SMEs, product marketing,  and construction projects. 
41. The government's current development plan (C hallenge-2008 Plan) is a six-year policy guide 
to develop the Chinese Taipei economy until the year  2008.  Within the framework of the plan, ten 
individual plans have been  developed targeting, inter alia , industrial development and R&D.32  The 
                                                      
29 The SME Development Act and the SME Standards Regulation define SMEs as registered 
enterprises with paid-up capital of NT$80 million or less and less than 200 employees in manufacturing, mining, 
construction, and quarrying, and NT$100 million or less than 50 employees in agriculture, fisheries, water, 
electricity and gas, finance, and ot her services.  In 2003, there were over one million SMEs, accounting for 
about 98% of all enterprises (including non-manufacturing sectors).  The SMEs provided employment for 
7.4 million persons (about 78% of all employment).  
30 The average applied MFN tariff rate for non-agricultural products (WTO definition) was 5% in 2005.   
31 In contrast, the average applied MFN tariff rate for processed foodstuffs was 20.3%, with a 
maximum rate of 205.2%. 
32 The ten plans concern human resources, cultural and creative industry, innovation and R&D, 
industrial value, tourism, electro nic commerce, operations headquarters, transportation, environment, and Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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Plan aims to increase investment in innovation and R&D to 3% of GDP within six years.  It also aims 
to develop "core" industries, including digital c ontent, semiconductors, colour-image displays, and 
biotechnology.  The government has been taking various  steps to achieve the stated goals, such as 
setting up task forces to promote those ten industries,  assisting them to develop core technologies, and 
constructing industrial parks.  It has strengthened the capacity of a government research institute.  The 
government plans to allocate NT$2.6 trillion for the implementation of the Plan for the whole period 
(2002-07). 
(iv) Main subsectors 
42. The two main manufacturing industries in Chinese Taipei are electronics/information 
products, which accounted for around 20% of value a dded in manufacturing in 2005, and machinery, 
with about 14%. 
(a) Machinery and equipment 
43. The machinery and equipment industry (inc luding electrical machinery and transport 
equipment) attracted US$157.7 million of inbound direct investment in 2004;  outbound direct 
investment in machinery and equipment was US$160.6 million. 
44. The motor vehicle industry in Chinese Taipei co mprises ten assembly plants employing about 
15,000 persons.  In 2004, about 422,000 cars were  produced, but only about 62,000 were imported, 
perhaps owing to TRQs.  The TRQs on passenger cars  and chassis are scheduled to be phased out by 
2011.33  The in-quota tariff rate for passenger cars and chassis in 2005 was 24.6% and the out-of-
quota rate was 60%.  The tariff quota in 2004 was 592,247 cars;  however, actual in-quota imports 
were only 53,720 (9.1% of the quota).  This may indicate that in-quota tariff rates are high enough to 
prevent more imports entering into the domestic market.  Local-content requirements in the car 
industry were eliminated upon Chinese Taipei's accession to the WTO. 
(b) Electronics and electrical machinery 
45. Electronics and electrical machinery accounted fo r about 41% of Chinese Taipei's exports in 
2004, and about 28% of imports.  Within the frame work of the Challenge-2008, the Ministry of 
Economic Affairs is promoting a Two Trillion and Twin  Star programme, a four-year project to drive 
the production value of Chinese Taipei's semico nductor and flat-panel display (TFT-LCD in 
particular) industries to NT$1.6 trillion (US$29.6 billion) each by the end of 2006. 
46. Electronic products are regulated under the Commodity Inspection Act and must be certified 
by the BSMI before importation. For most electr onic products, a dual-track approach is adopted to 
demonstrate their compliance with the mandatory requirements:  type-approved batch inspection 
(TABI), and registration of product inspection (RPC ).  Under the TABI, manufacturers or importers 
must have their products type-tested by the BSMI or  designated testing laboratories recognized by the 
BSMI.  Manufacturers then file an application fo r type approval with the BSMI.  Once manufacturers 
or importers have obtained a type -approval certificate, they must apply to the BSMI for inspection 
before each batch of products is released from the pr oduction premises or arrives at the port of entry. 
                                                                                                                                                                     
housing.  The Challenge-2008 Plan aims to promot e "key industries" including textiles, machinery, 
semiconductors, image display, digital content, and biotechnology industries. 
33 Chinese Taipei has committed to liberalize the industry in three stages:  in stage 1 – out-of-quota 
rates are 60% for 2002-06;  stage 2 – out-of-quota rates are to be reduced to 30% in 2007-10;  and in stage 3 – 
TRQs are to be replaced by a single tariff rate of 17.5%.  See WTO docu ments WT/ACC/TPKM/18/Add.1 
(5 October 2001), WT/MIN(01)/4/Add.1 (11 November 2001), and WT/L/433 (23 November 2001). WT/TPR/S/165/Rev.1 Trade Policy Review 
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The BSMI reviews the application and accompa nying documents;  additional samples may be 
required for further testing.  Under the RPC, whic h consists of a combination of different modules, 
manufacturers must:  have their products type-tested  by the BSMI or designated testing laboratories 
recognized by the BSMI before applying for registra tion of the products;  or establish a quality system 
complying with the requirements of ISO 9001 and obtain ISO 9001 certificates from the BSMI or 
certification bodies recognized by the BSMI;  or establish a quality system that complies with the requirements stipulated by the BSMI and obtain a factory inspection report issued by the BSMI or 
inspection bodies recognized by the BSMI. 
(c) Textiles and clothing 
47. Exports of textiles and clothing have been decr easing in recent years.  In 2004, it accounted 
for about 7% of Chinese Taipei's total merchandi se exports, down from about 10% in 2001.  Imports 
of textiles and clothing also decreased slightly between 2001 and 2004, from about 1.9% to 1.4% of 
the total imports.  The liberalization of textiles and clothing trade, as a result of the expiry of the WTO Agreement on Textiles and Clothing, left Chinese Taipei with various challenges, such as strong 
competition in export markets.  To help the i ndustry meet these challenges, the government has 
established a coordination centre to remove investment barriers and provided support for 
technological development. 
(5) S
ERVICES  
(i) Features 
48. The share of services in GDP was 73.6% in 2005, up from 72.7% in 2004 and about 47% in 
early 1980s.  The services sector is a significant employer with 58.3% of total employment or 
5.8 million persons.  The shares of GDP and employ ment indicate that labour productivity in the 
services sector is substantially higher than in manufacturing.  
49. Chinese Taipei has made commitments in about 120 of the 160-odd sectors;  it has retained 
MFN treatment exemptions concerning the acquisition of land and air transport services, which are to be regulated on the basis of reciprocal treatme nt and/or bilateral arrangements.  Market access 
limitations concern, inter alia , financial services (including banking, insurance, and asset 
management), telecommunications (including  satellite communications, land-based mobile 
communications, radio, and TV), and some prof essional services (such as legal services, accounting, 
and taxation).
34   
50. In respect of all measures affecting the supply of services, unless otherwise restricted services 
and service suppliers of any other Member receive treatment no less favourable than that 
Chinese Taipei accords to its own like services and ser vice suppliers.  Restrictions include those that 
are specified in horizontal commitments and incl ude exceptions under mode 3 (commercial presence) 
in telecommunications and mode 4 (presence of natural persons) in human health services. 
51. Commitments include a number of additional commitments concerning legal services, and 
financial services (insurance and banking).  With in the framework of the negotiations under the 
GATS, Chinese Taipei submitted its revised cond itional offer in services in June 2005, which 
concerns new and improved commitm ents on maritime transport, telecommunications, environmental 
services, and financial services.35 
                                                      
34 WTO document WT/ACC/TPKM/18/Add.2, 5 October 2001. 
35 WTO document TN/S/O/TPKM/Rev.1, 8 June 2005. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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52. Restrictions remain in various areas in servi ces.  There are restrictions on non-Chinese Taipei 
ownership in land transportation, pos tal, courier, savings and remittance services, passenger car rental 
and leasing, radio and TV broadcasting, and special recreational services.  Inbound direct investment 
is restricted (or approval is required) in water tr ansportation, air transportation (including air freight 
transportation forwarding services), harbour services,  Type I enterprises in telecommunications, 
financing and auxiliary financing, insurance,  legal and accounting services, architectural and 
engineering technical services, educational services, and radio and TV broadcasting. 
53. The government intends to treat the following services sub-sectors as "emerging industries" as 
defined under the Statute for Upgrading of Industrie s and to enable businesses in these sectors to be 
eligible for investment incentives under the Stat ute for the Development of SMEs:  finance, 
distribution, telecommunication and media, health care, training, tourism, cultural and creative 
services, design, information, R&D, environmental pr otection, and engineering consulting services.  
Chinese Taipei’s main laws regulating servi ces sectors are outlined in Table AIV.1). 
(ii) Financial services 
54. Financial services accounted for about 19% of GDP and employed about  0.4 million persons 
(about 4% of total employment) in 2005.36  The Financial Holding Company Act, the Banking Act, 
the Securities and Futures Law, and the Insuranc e Law are the main legal instruments regulating 
Chinese Taipei's financial market.  In addition, the Offshore Banking Act regulates offshore banking 
activities and the Credit Cooperatives Act regulates co mmunity financial institu tions.  The Financial 
Supervisory Commission (FSC), established on 1 July 2004, is the regulator for banking, insurance, 
and securities.37  The government has established various task forces, information and service centres, 
and funds for the purpose of structural adjustment.38 
(a) Banking 
55. The Banking Law, as amended on 18 May 2005,  governs banking business.  The Banking 
Bureau under the FSC is responsible for regula ting and supervising banks , including commercial 
banks, local branches of non-Chinese Taipei banks, and trust and investment companies;  the Bureau 
issues bank licences, establishes rules and regulations  governing bank lending, investments, and other 
related practices, and takes disciplinary actions agains t banks that fail to comply with relevant laws. 
56. Financial institutions involved in indirect fi nancing and money market activities include 
commercial banks, small and medium sized business banks, industrial banks, trust and investment 
companies, the postal savings system, financial holding companies, and local branches of non-
Chinese Taipei banks.  According to the Banking Law, only banks may accept deposits, manage trust 
                                                      
36 The sector employed about 368,000 persons in 2004. 
37 The FSC, composed of nine commissioners, has four bureaux (the Banking Bureau, the Bureau of 
Securities and Futures, the Bureau of Insurance and the Bu reau of Examination) and five departments.  The FSC 
examines financial institutions, previously conducted by the central bank and the Central Deposit Insurance 
Corporation;  and has absorbed supervisory roles previously assumed by the Ministry of Finance (the former 
Banking Bureau, Securities and Futures Commission, and Department of Insurance). 
38 These include:  the Financial Reform Task Force established in 2002;  the Joint Credit Information 
Center, approved by the Ministry of Finance, to create a credit information database;  Financial Information 
Service, a private company founded with capital contributions from the Ministry of Finance and various 
financial institutions, to create an information network for all financial institutions in Chinese Taipei;  and the 
Small and Medium Business Credit Guarantee Fund and the Agricultural Credit Guar antee Fund, which provide 
financial assistance in the form of credit guarantees to small and medium-s ized enterprises and to farmers and 
fishermen, respectively. WT/TPR/S/165/Rev.1 Trade Policy Review 
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funds or public property, or handle remittances.  Banks in Chinese Taipei may conduct stock broking, 
but not engage in insurance business. 
57. At the end of 2005, there were a total of 401 fi nancial institutions.  Of these, 42 (10.5%) were 
domestic banks;  307 (76.6%) commun ity financial institutions (e.g. cr edit departments of farmers' or 
fishermen’s associations and credit cooperatives);  36 (8.9%) branches of non-Chinese Taipei banks;  
14 (3.5%) "bills finance companies"39;  and two (0.5%) investment and trust  companies.40  In 2005, 
domestic banks held 73.5% of to tal deposits (NT$23,922 billion);  postal savings system 15.3%;  
credit departments of farmer's and fisherman's a ssociations 5.7%;  credit cooperatives 2.5%;  non-
Chinese Taipei banks 2.5%;  and investment and trus t companies 0.5%.  Interest rate spreads between 
deposits and loans have been narrowing;  the differe nces of these spreads among financial institutions 
have also been narrowing gradually (Table IV.3).   This may suggest intensified competition in 
financial services. 
Table IV.3 
Weighted average interest rate s on deposits and loans, 2001-04 
Year 2001 2002 2003 2004 
Domestic banks     
Deposits 4.09 2.38 1.47 1.17 
Loans 6.99 5.53 4.10 3.47 
Branches of non-Chinese Taipei banks     
Deposits 3.34 1.71 0.89 0.56 
Loans 9.14 7.27 5.70 4.36 
Credit cooperatives.     
Deposits 4.09 2.37 1.41 1.12 
Loans 7.70 6.39 4.64 3.59 
Credit department of farmers' and 
fishermen's association     
Deposit 3.71 2.11 1.23 1.07 
Loans 7.84 6.74 5.16 4.01 
Investment and trust companies     
Deposits 5.35 3.55 2.49 1.99 
Loans 7.30 6.55 5.01 3.96 
Source: Information provided by the Chinese Taipei authorities.  
58. Currently, the government holds more than 50% of total bank assets.  Four banks are fully 
owned by the government;  all of them are schedul ed to be privatized (i.e. reducing government 
shareholding to less then 50%).  A cooperative bank was privatized in April 2005;  the government 
currently holds about 48% of the bank's shareholding.41 
59. The postal savings system under the state-owned Po st (section (5)(iii)) had the largest share of 
deposits among all financial institutions in Chinese Ta ipei at the end of 2005, accounting for 15.3% of 
                                                      
39 "Bills finance companies" help enterprises raise fu nds in the primary market by issuing short-term 
bills, and further enhance the liquidity of short-term bills in the secondary market. 
40 Investment and trust companies manage trust funds  and trust properties for clients, as well as 
providing non-discretionary and discretionary account services .  They may also act as intermediaries to invest in 
capital markets on behalf of clients.  Investment and trust companies are being reorganized into commercial 
banks:  one of the three investment and trust companies sold its trust department to a domestic bank and 
reorganized into a land development company in 2005. 
41 One state-owned bank is to be privatized by December 2006, and another by June 2008. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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total deposits.42  The postal savings authorities are permitted to redeposit the deposits that they have 
accepted in certain banks or various financial instrume nts.  The Post is not permitted to provide loans, 
except for financing major public projects with th e approval of the MOTC.  Thus, deposits in the 
postal savings are used as an instrument of economic policy. 
60. The establishment of branches of non-Chinese Taip ei banks is subject to the regulations 
governing non-Chinese Taipei bank branches and re presentative offices.  Approval criteria include 
that applicants were ranked, in terms of capital or assets, among the top 500 banks in the world within 
the year prior to application;  conducted more th an US$1 billion of transactions with Chinese Taipei's 
banks in the three calendar years prior to the a pplication;  and allocate a minimum of NT$150 million 
of operating capital for the first branch and NT$120 million for each additional branch. 
61. In addition to the branches of non-Chinese Taipei  banks, eight domestic financial institutions 
have more than 20% non-Chinese Taipei equity pa rticipation.  The highest level of non-Chinese 
Taipei participation is 51% (January 2006).  Th e authorities state that these institutions with non-
Chinese Taipei equity participation are subject to  the same regulations as domestic institutions.  
62. Offshore banking is governed by the Offshore Ba nking Act.  At the end of 2005, there were 
70 offshore banking units (OBUs) in operation with  total assets of US$70.2 billion.  OBUs are 
exempted from income tax, business tax, stamp du ties, withholding tax for interest income on 
deposits, and loan loss reserve requirements.   
(b) Insurance 
63. At the end of 2005, there were 55 insurance companies in operation43;  they included 26 in 
non-life insurance, of which nine were non-Chinese Ta ipei affiliates, and 29 in life insurance, of 
which eight were non-Chinese Taipei insurers.  The presence of non-Chinese Taipei insurers has 
decreased from 27 in 2000 (11 non-life insurance a nd 16 life insurance companies).  Minimum paid-
up capital is NT$2 billion (approximately US$57 milli on) for the establishment of an insurance 
company and NT$50 million (US$1.4 million) for a br anch of insurers incorporated overseas. 
64. In 2004, total assets of the insurance industry in Chinese Taipei accounted for 16.7% of the 
total asset of financial institutions;  most assets in  the insurance sector were held by life insurance 
companies (Table IV.4). 
Table IV.4 
Insurance business assets, 2000-04 
(NT$ billion and per cent) 
 2000 2001 2002 2003 2004 
Total assets in all financial institut ions (NT$ billion) 24,760 26,215 28, 136 31,376 34,327 
Insurance business (% of total) 11.1 11.7 12.8 15.4 16.7 
Life insurance (%) 10.2 10.8 12.3 14.7 16.1 
Non-life insurance (%) 0.9 0.9 12.1 0.7 0.6 
Source:  Information provided by the Chinese Taipei authorities.  
                                                      
42 The postal savings are subj ect to the FSC supervision. 
43 There are also insurance auxiliaries:  insurance ag ents, brokers, and survey ors may practice insurance 
business in the form of individual or corporate organization.  They are governed by the Regulation Governing 
the Administration of Insurance Agents, Brokers and Surveyors.  At the end of 2005, there were 992 domestic and 14 non-Chinese Taipei auxiliary insurance affiliates. WT/TPR/S/165/Rev.1 Trade Policy Review 
Page 78 
 
 
65. The insurance industry is gove rned by the Insurance Law44, and regulated by the Insurance 
Bureau of the FSC.45  Under the law, life insurance co mpanies may not offer non-life insurance 
services and vice versa, nor may they engage in othe r types of financial services, such as banking.  
Nonetheless, under the Financial Asset Securitiza tion Act and Real Estate Securitization Act, 
insurance companies are allowed to invest in ass et-backed securities and in exchange-traded funds 
and purchase privately placed securities up to 5% of their equity (and various reserves).  
66. Chinese Taipei has recently adopted various po licy measures with a view to improving the 
business environment for the insurance sector.  For ex ample, an amendment to the Insurance Law in 
January 2003 raised the limitations on insurers ' overseas investment from 20% to 35% of their 
funds.46  Qualified insurers have been allowed to  engage in pension business since July 2005.47  
67. Chinese Taipei's reinsurance market was libera lized with the privatization of the Central 
Reinsurance Corporation in 2002 a nd abolition of relevant legislati on on 30 July 2004.  Currently, no 
reinsurance companies are fully owned by the gove rnment.  There was one branch office and five 
liaison offices of non-Chinese Taipei rein surance companies at the end 2005. 
(c) Securities 
68. The Securities and Futures Bureau of the FSC regulates securities and capital markets;  it 
administers and supervises securities issuance, and securities and futures trading;  and regulates 
certified public accountants.  The main legal inst rument governing the securities sector is the 
Securities and Exchange Law, which stipulates regula tions on public offering, issuing, and trading of 
securities.48 
69. Recent reform measures in Chinese Taipei's stock market included the adoption of the 
Securities Investor and Futures Trader Protection Act49, to strengthen the protection of investors.  
Under the Act, the Securities and Futures Investor s Protection Centre was established in 2003 to 
provide consultation, complaint f iling and mediation services, and to initiate class-actions on behalf of 
qualified investor groups.  In addition, the Centre is  required to set aside an "investor protection fund" 
to compensate investors that fail to regain their money from financially troubled securities and futures 
firms.50  Both non-Chinese Taipei and domestic investor s are covered by the investor protection fund. 
70. The regulation on securities investment by non-Chinese Taipei institutional investors, under 
which securities investment per company was limited to US$3 billion, was abolished on 30 September 2003.  Non-Chinese Taipei investors in Chinese Taipei's securities market are now 
classified into two types:  institutional investors and individual investors;  institutional investors are 
                                                     
 
44 The Insurance Law was last amended on 18 May 2005.  
45 The Department of Insurance, within the MOF was set up on 1 July 1991 based on the Insurance 
Section of the Department of Monetary Affairs, MOF.  With the establishment of the FSC, the Department of 
Insurance was reorganized as the Insurance Bureau of the FSC. 
46 Actual overseas investment by insurers increased  from 16.4% in 2003 to 30.3% in August 2005. 
47 The Labour Pension Act entered into force on 1 July 2005;  under the Act, an employer with more 
than 200 employees may purchase a qua lified annuity insurance policy instead of being obliged to contribute to 
the labour pension fund managed by the Bureau of Labour.  
48 The latest amendment, on 11 January 2006, mainly concerned the introduction of the system of 
independent directors, audit committees, and supervisors. 
49 The Act entered into force on 1 January 2003. 
50 All securities firms in Chinese Taipei contribute to the fund. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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subject to a US$5 million investment quota, while individual investors are not subject to quota.51  
Procedures for investors have also been simplified;  registration with the Stock Exchange is sufficient 
to make an investment whereas previously a permit was required from the Securities and Futures Bureau of the FSC.  Non-Chinese Taipei investors ma y invest in listed stocks and futures, depositary 
receipts, investment trust funds, various bonds, ass et-backed securities, and warrants.  The FSC 
allowed non-Chinese Taipei investors to engage in ce rtain futures/options trading as of 21 May 2004.  
They may invest in non-listed companies in Chines e Taipei with the permi ssion of the Investment 
Commission of the MOEA.  Non-Chinese Taipei inv estors are currently not allowed to invest in 
arbitrage and speculative tr ading in Chinese Taipei. 
(iii) Telecommunications and postal services 
(a) Telecommunications 
71. Revenue from telecommunications services totalled NT$369 billion (3.6% of the GDP) in  
2004.
52  The main legal instrument governing telecommunications in Chinese Taipei is the 
Telecommunications Act.53  The Ministry of Transportation and Communications (MOTC) is 
responsible for establishing policies pertaining to the sector and its Dictorate General of 
Telecommunications (DGT) is responsible for regulating the sector. 
72. According to the Telecommunications Act, there are two types of telecom operators:  Type I 
enterprises (facilities-based operators) and Type II en terprises (non-facilities-based operators).  Type I 
operations require franchising and licensing by the MOTC.  Type II operations require a licence from 
the DGT.  Non-Chinese Taipei direct ownership of  a Type-I enterprise may not exceed 49% of the 
total shares and the sum of non-Chinese Taipei direct  and indirect shareholding may not exceed 60%;  
there are ownership restrictions on Type-II enterprises.54  Services provided by Type I enterprises are 
subject to price-cap regulations by the DGT;  ta riffs determined by Type II enterprises must be 
notified to the DGT. 
73. Recent reforms in telecommunications include the liberalization of mobile communications 
services (specifically, radio paging, mobile phones, trunked radio, and mobile  data communications) 
(since 1997);  the opening of the satellite communica tions market (in 1998);  the easing of licensing 
conditions and the start of issuing licenses for fixed network services55;  relaxation of total direct 
shareholding for Type I enterprises from 20% to 49% (in 2002);  elimination of a restriction on non-
Chinese Taipei persons to be on the board of dir ectors (2002);  liberalization of domestic leased 
circuit services (2000);  introduction of submarine cable leased-circuit service (2000);  issuance of 
                                                      
51 Before 2001, non-Chinese Taipei institutional investors were subject to a restriction of US$3 billion.  
Currently, 18 listed companies on the stock exchange ar e subject to non-Chinese Ta ipei ownership limits.  
Restricted capitalization of these compan ies accounts for 3% of  the total market. 
52 Of the total revenue, NT$48.9 billion was generated by value-added services. 
53 Numerous amendments were made to the Act in 1977, 1996, 1998, 1999, 2002, 2003, and 2005 (the 
latest amendment was on 2 February 2005). 
54 Direct ownership refers to equity held directly by non-Chinese Taipei persons.  Indirect ownership 
refers to equity held by non-Chinese Taipei  persons through a Chin ese Taipei company. 
55 Three operating licences were issu ed to private providers in 2000 and licences have begun to be 
issued for integrated network and leased-line services in 2004.  Changes in licensing conditions include:  
(a) reduction of the minimum paid-up capital for an integrated network provider from NT$40 billion to NT$16 billion, and a reduction of the minimum domestic ne twork capacity from one million lines or subscriber 
ports to 400,000 lines or subscriber ports;  and (b) re laxation of regulations over leased-line services.  The 
Regulation Governing Fixed Network Telecommunications Businesses, amended on 20 September 2005, introduced new licensing rules for the local, lo ng-distance and overseas network markets.  WT/TPR/S/165/Rev.1 Trade Policy Review 
Page 80 
 
 
licences for 3G mobile telecommunications services;  and adoption of the universal 
telecommunications service (2001).56 
74. On 12 August 2005, a state-owned dominant ca rrier (Chunghwa Telecom) was privatized.57  
Chunghwa Telecom's market share in terms of re venues is 56.4% for overseas services and about 
78.8% for domestic long-distance services (Decem ber 2005).  The average tariff rate for overseas 
calls declined from NT$29.9 per minute in 1997 to NT$5.8 per minute in 2005.  By contrast, Chunghwa Telecom's share in total revenues from local network services is about 98% (2005).
58  
Consequently, competition in the local call and domes tic leased circuit appears sluggish;  the average 
tariff rate for local calls (peak period) dec lined slightly from NT$0.34 per minute in 1997 to 
NT$0.32 per minute in 2005.  To address this issue,  the Administrative Regulation Governing Tariffs 
of Type I Telecommunications Enterprises was amen ded on 11 January 2006.  Under the Regulation, 
a dominant Type I telecommunications enterprise must set a wholesale price for telecom services 
provided for other telecom enterprises. 
75. The first 2G (second generation)  private operators entered the mobile communication services 
market at the beginning of 1998.  To date, six 2G  and five 3G (third generation) mobile service 
providers have been licensed.  Number por tability was enabled for mobile services on 
13 October 2005.  Subscribers of mobile servic es have outnumbered those of fixed telephones since 
2000 (Table IV.5). 
Table IV.5 
Telecommunications market, 1997-04 
(Per cent and million) 
Market 1997 2000 2001 2002 2003 2004 
Penetration rate (%) 6.86 80.24 97.24 108.3 114.14 100.31 Mobile phone 
Subscribers (million) 1. 66 17.87 21.78 24. 39 25.8 22.76 
penetration rate (%) 49.96 56.76 57.34 58.17 59.08 59.63 Fixed 
telephone Subscribers (million) 10. 86 12.64 12.84 13. 10 13.36 13.53 
Penetration rate (%) 8.0 28.0 35.0 38.0 39.0 40.0 Internet  
Subscribers (million) 1. 49 6.26 7.82 8. 59 8.83 9.16 
Penetration rate (%) n.a. 4.2 14.88 24.63 34.47 40.96 Broadbanda 
Subscribers (million) n.a.  0.26 1.16 2. 12 3.04 3.75 
n.a. Not applicable. 
a First subscribers entered the market in 1999. 
Source: Directorate General of Telecommunications (2004), Annual Report 2004. 
76. In November 2005, a law was promulgated establishing a new regulator, and the new 
regulator was established on 22 February 2006.  According to the authorities, the DGT has been an 
independent regulatory authority for telecommunications since July 1996;  the establishment of the new regulator is aimed at combining existing regulatory authorities for telecommunications and 
broadcasting in response to recent technological developments. 
                                                     
 
56 A universal telecommunications service (UTS) system was implemented in Chinese Taipei in 2002 
and 2003.  In the two years,  UTS providers received subsid ies of over NT$4.4 billion. 
57 Currently, the government's share in the Chunghwa Telecom is 41.42%. 
58 The Chunghwa Telecom's sh are in terms of traffic hours was 29.4%, 83.2% and 57.0% for mobile, 
long-distance, and overseas services, respectively, in D ecember 2005.  Its market share in terms of subscribers 
was 36.8% for mobile, 97.4% for long-distance and 67.8% for broadband servi ces, in December 2005. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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77. According to the Cable Radio and Television Ac t, total direct ownership may not exceed 20% 
of the total shareholding of a relevant company, a nd the sum of direct and indirect ownership may not 
exceed 60%;  two thirds of directors and two thir ds of supervisors must be Chinese Taipei persons59;  
total shareholding of non-Chinese Taipei persons  in the satellite broadcasting business may not 
exceed 50% of all shares.60  
78. Under the APEC Mutual Recognition Arra ngement for Conformity Assessment of 
Telecommunications Equipment (APEC Tel MRA), Ph ase I, Chinese Taipei has exchanged lists of 
accredited testing laboratories with the United States;   Canada;  Australia;  Hong Kong, China;  and 
Singapore.61  The Taipei Economic and Cultural Represen tative in the United States and the American 
Institute in Taipei Office reached  agreements concerning the APEC Tel MRA in March 1999.  Under 
Chinese Taipei's MRA framework for Conformity Assessment of Telecommunications Equipment, 
13 testing laboratories designated by Australia , Canada, Singapore, and the United States are 
recognized. 
(b) Postal services 
79. In addition to providing postal  savings and simple life insurance, and managing postal assets 
(section (5)(ii) above),  the state-owned Post hol ds a monopoly in Chinese Taipei's postal services.  
The Post was established in 2003 by re-organizing th e Directorate General of Posts of the MOTC into 
a state-owned enterprise under the MOTC.  The Post al Law regulates postal services.  Although the 
Post is on the government's list of companies to be pr ivatized, no definite date for privatization has yet 
been determined.  As of the end of 2004, Ch inese Taipei had concl uded 65 bilateral postal 
cooperation agreements with 58 countries.62 
(iv) Transport 
(a) Air transport 
80. In 2005, total passenger volume in civil air tr ansport was 44.2 million, an increase of 0.34%  
over 2004.  Overseas passenger traffic increased by 8.3% to 24.9 million, while domestic passenger 
traffic decreased by 8.1% to 19.2 million in 2005.  Cargo volume (freight and mail) totalled 
1.8 million tonnes, close to the volume in 2004. 
81. Civil aviation (both domestic and overseas) is governed by the Civil Aviation Act.  The Civil 
Aeronautics Administration (CAA), under the MOTC, is the air transport authority.  There are nine 
carriers established in Chinese Taipei;  six are engaged in overseas air services,  five operate domestic air route service, and two operate helicopter passenger/cargo service.  There is an obligation for civil 
servants of the government of the Separate Custom s Territory travelling overseas on official business 
to fly with Chinese Taipei carriers except under certain circumstances.
63 
                                                      
59 Articles 19-20, Cable Radio and Television Law. 
60 Article 10, Satellite Broadcasting Law.  
61 APEC Tel MRA Phase I entails mutual recognition of  testing laboratories as conformity assessment 
bodies and mutual acceptance of test reports.  Phase II  entails mutual recognition of certification bodies as 
conformity assessment bodies and mutual acceptance of equipment certifications. 
62 The agreements aim to establish terms and conditions, including detailed regulations that govern the 
exchange of letter, parcel post, airmail and expr ess mail service (EMS) items between the parties. 
63 Civil servants are exempt from su ch an obligation when:  the seat s on Chinese Taipei carriers were 
sold out;  Chinese Taipei carriers do not fly to the desired destination;  the transfer ti me is over four hours;  no 
transit flights are available;  or  there are other special conditions. WT/TPR/S/165/Rev.1 Trade Policy Review 
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82. There are 18 airports in Chinese Taipei.  The main airports are operated by the government.  
The CKS airport in the vicinity of Taipei serv es 29 million passengers and 1.8 million tonnes of cargo 
annually;  and the Kaohsiung airport serves 6. 1 million passengers and 100,000 tonnes of cargo.  
There are 995 airfreight forwarders.  There are no state-owned carriers in Chinese Taipei. 
83. Airlines may freely decide the price for overseas flights.  Non-Chinese Taipei air carriers are 
not allowed to engage in cabotage in Chinese Taipei. 
84. Air transportation services are regulated on the basis of bilateral agreements between Chinese 
Taipei and its trading partners.  At end 2005,  Chinese Taipei had signed bilateral air services 
agreements with 47 countries or areas, and scheduled air transport services were provided to 
64 destinations in 30 countries.  There were  37 non-Chinese Taipei carriers providing scheduled 
passenger and cargo services to Chinese Taipei.64  Cross-strait traffic via direct routes is prohibited.  
According to the authorities, Chinese Taipei's airpor t slot allocation system for overseas civil aviation 
services is based upon guidelines issued by the Intern ational Air Transportation Association (IATA).  
Under relevant regulations, the Civil Aeronautics Administration of the Ministry of Transportation 
and Communications may commission a neutra l entity to coordinate slot allocation.65 
85. Inbound direct investment of up to one third of the equity is permitted in Chinese Taipei's 
airlines. 
(b) Maritime transport 
86. At the end of 2004, Chinese Taipei's shipping fleet totalled 220 Chinese Taipei ships of over 
100 gross tonnes, with total gross tonnage of 3. 7 million and deadweight tonnage of 5.9 million 
tonnes.  Chinese Taipei has 148 shipping carriers,  including three companies providing container 
transport services and two providing bulk transport services.  In 2004, abou t 235 million tonnes of 
overseas cargo was carried by maritime transport,  whereas about 1.3 million tonnes were carried by 
air transport. 
87. The Ministry of Transportation and Communicati ons is the main authority regulating Chinese 
Taipei's maritime transport sector, and the Shipping Law is the main legislation governing the sector.  
Under the Law, any person wishing to engage in sea  transport as a vessel carrier must obtain approval.  
Purchase of existing overseas vessels also requires approval.  Permits are required to engage in 
domestic liner services;  tariffs (cargo and p assenger) must be submitted to the authorities for 
"examination".  Certain minimum capital requirement s are set by the MOTC for any providers of 
maritime transport service.  Agreements between operators on freight rates or other conditions of 
transport, e.g., routes, must be filed with the MO TC;  if the authorities consider that an agreement 
impedes the "order of shipping" or economic deve lopment, they may issue an order to revise the 
agreement within a specific period.66  Cabotage is not permitted to vessels registered overseas, unless 
a franchise is granted.  As in air transport, cr oss-strait traffic via direct routes is prohibited. 
88. Non-Chinese Taipei companies wishing to estab lish vessel carriers, shipping agencies or 
freight forwarding branches require permission fro m the MOTC.  Three non-Chinese Taipei branches 
for shipping services were operating in Chinese Taipei as of September 2005. 
                                                      
64 These include:  Australia, Cambodia, Canada, Indonesia, Japan, Korea, Luxemburg, Malaysia, the 
Netherlands, Palau, the Philippines, Singapore, Tha iland, the United Arab Emirates, the United States, and 
Viet Nam. 
65 The current coordinator is Ta ipei Airlines Association. 
66 Article 40, Shipping Law. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
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89. Six ports handle most overseas traffic in Chinese Taipei's maritime transport.  These ports had 
a total of 249 wharfs and handled 270.2 million tonn es of exports and imports  in 2004.  Four have 
been made into harbour free trad e zones regulated by the Act for the Establishment and Management 
of Free Ports.  All commercial ports are operated by the government. 
90. The government was to partially privatize the CSC shipbuilding company by the end of 2005;  
about 99% of the CSC's shares are owned by the government.  Neither the CSC nor any other shipping company in Chinese Taipei has exclus ive rights, such as requiring civil servants or 
government services to use such a company. 
91. Chinese Taipei has concluded bilateral arrange ments on marine navigation with the Russian 
Federation, the Republic of Korea, and South Africa.  
(v) Tourism 
92. In 2004, visitor numbers to Chinese Taipei r eached 2.95 million, an increase of 31% over the 
previous year,  generating revenue of US$11.4 billion (3.7% of GDP).  About 100,000 persons are 
employed in the tourism sector:  about 42% as trav el agents, guides and managers, and the remainder 
in hotels. 
93. The Tourism Bureau, under the MOTC, is the tourism authority in Chinese Taipei.  The 
Bureau is responsible for policy formulation, the development and management  of scenic and tourist 
areas, and the promotion of tourism activities.  Th ere is also a Tourism Development and Promotion 
Committee within the government.  The Statute for the Development of Tourism and related 
regulations governing travel agents, hotel enterpri ses and tour guides are the regulatory basis for the 
industry.   
94. There appear to be no market access restricti ons on engaging in tourism business in Chinese 
Taipei;  it appears to accord to services and service suppliers of any other Member treatment no less 
favourable than that it accords to its own like services and service suppliers.  Exception to this 
concern the requirement that tour guide services ca n be provided only by a travel agency or a tour 
operator.
67 
95. Chinese Taipei has bilateral agreements on to urism cooperation with Abu Dhabi, Paraguay, 
Singapore, and the Central American Council of Tourism.  These agreements seek mainly to 
strengthen and develop two- way tourism and promote investment in the sector. 
(vi) Legal services 
96. According to the Attorney Regulation Act of Chinese Taipei, non-Chinese Taipei persons 
may take an attorney qualification examination and receive an attorney's li cence.  Licensed attorneys 
must be a member of the Bar Association and obtain the approval of the Ministry of Justice to practice law in Chinese Taipei.  At end October 2005, 42 atto rneys of non-Chinese Taipei legal affairs were 
approved to practice law in Chinese Taipei. 
 
                                                     
 
67 Non-Chinese Taipei persons applying for the tour-guide examination are required to have obtained 
resident certificates and been  resident in Chinese Taipei for more than six months. Separate Customs Territory of Taiwan, Peng hu, Kinmen and Matsu WT/TPR/S/165/Rev.1 
 Page 85 
 
 
REFERENCES 
   
Corden, W.M. (1971), The Theory of Protection , London:  Oxford University Press. 
 Council for Economic Planni ng and Development (2005), Four-Year Plan for 2005-2008 and Outlook 
for 2015 – Highlights , Taipei.  
 
WTO (2005), International Trade Statistics 2005, Geneva.