Proposal for a COUNCIL DECISION establishing the Community position within the Ministerial Conference set up by the Agreement establishing the World Trade Organization on the accession the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) to the World Trade Organization

(presented by the Commission)

EXPLANATORY MEMORANDUM

Overview of the Terms of Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) Accession to WTO

1. Introduction

Members of the World Trade Organisation (WTO) and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) have reached the concluding stage of agreement on the terms for Chinese Taipei 's accession to the organisation. This comes after eight years of negotiations, which began when Chinese Taipei applied to join the General Agreement on Tariffs & Trade (GATT) in 1992.

Before the EU, however, can formally support Chinese Taipei's membership in the General Council of the WTO, a Council Decision must approve the terms of its entry.

There follows an outline of the implications of Chinese Taipei's membership for the European Community and its Member States, the WTO system, and for Chinese Taipei's itself, and a summary of the terms themselves.

1.1 Chinese Taipei's legally binding commitment to open trade

By becoming a Member to the WTO, Chinese Taipei commits itself to abide by all WTO obligations, unless clearly specified otherwise in the terms of accession.

The terms of accession take two basic forms. First there are the schedules of commitments, which set out the full range of market access provisions which Chinese Taipei will be legally bound to grant to WTO Members when it enters the WTO. The schedules cover tariffs and non-tariff measures applicable to agricultural trade and industrial goods (commitments under the GATT), and services (commitments under the General Agreement on Trade in Services, or GATS).

Second there are the Protocol and Working Party Report on the accession of Chinese Taipei to the WTO. These documents, which also include legally binding commitments, essentially setting out Chinese Taipei's new WTO obligations in all remaining areas of WTO competence (e.g. Subsidies, TRIPs, TBT, Customs Valuation etc.);

1.2 One-way concessions - no new obligations for the EU

The entire negotiation revolved around the level of market opening Chinese Taipei was prepared to offer and to what extent it was prepared to commit itself to abide by existing WTO rules in all areas covered by the WTO, in order to be admitted to the WTO. This means that the process consisted in the WTO Membership securing "concessions" or improvements from Chinese Taipei, without themselves altering their obligations within the WTO.

For the EC, which ensured that the interests of European industries and firms were fully represented, Chinese Taipei's entry will therefore bring about an enormous gain in enforceable rights, with no significant change in our own commitments towards Chinese Taipei. The bilateral negotiations held between European Commission and Chinese Taipei's officials resulted in terms of accession which will substantially benefit those sectors and interests of greatest value to the all Member States of the EU (details provided below).

The only obligation for WTO Members is that they accord Chinese Taipei so-called permanent 'MFN' status, entitling it to be treated in the same way as every other WTO Member, unless exceptions are specified in the protocol of accession. As the EC already accords Chinese Taipei this status, there will be virtually no practical impact. The only notable consequence of according Chinese Taipei the same treatment as other WTO Members will be the requirements to phase out Chinese Taipei -specific quantitative restrictions (quotas) by 2005. This applies to the EU's remaining textile quotas applied to Chinese Taipei, which must be dismantled in line with the Agreement on Textiles and Clothing.

In 1999, Chinese Taipei was the 7th most important EU supplier and the 17th biggest export market for EU goods. The EU registered a negative trade balance with CT for 8 120 million Euro. The market access concessions agreed to by CT in the framework of its WTO accession will undoubtedly foster a rebalancing of trade flows.

The deal will secure vastly improved access for EU firms to Chinese Taipei's market. Import tariffs and other non-tariff restrictions will be sharply and permanently reduced. And investments by foreign companies will take place in a more attractive, and more predictable, business environment. And the WTO's legally binding dispute settlement system will enable both sides to resolve trade problems. In short, this agreement greatly enhances the climate for European companies to export to, and do business in Chinese Taipei.

1.3 Impact on the WTO system

The entry of Chinese Taipei into the WTO will mean that the organisation itself takes another significant step closer to becoming genuinely global. It has therefore long been the unanimously agreed policy of the EC and its Member States to support Chinese Taipei's entry bid on viable commercial terms.

As the world's 10th biggest trading entity (1998, excluding intra-EU trade), with a real GDP of $289bn in 1999 Chinese Taipei will immediately become a key player in the organisation.

Also important in this respect is the high standard of commitments given by Chinese Taipei to open its economy to foreign imports, investors and businesses. Chinese Taipei's trade regime will be significantly more liberal than many existing WTO Members of a comparable level of development. In many areas Chinese Taipei has agreed to concession going substantially beyond standard WTO commitments. The tariff average will be low, quotas will be phased out expeditiously, service providers in all sectors will benefit from excellent market access conditions, protection for intellectual property rights will be guaranteed in law. As explained below, the final results constitute an extremely substantial market-opening package and overall Chinese Taipei will have one the most liberal trade regimes in the world.

2. Overall assessment of Chinese Taipei's entry terms

Chinese Taipei will bring its weighted average tariff on industrial goods down to 4,81%. Chinese Taipei offers a comprehensive coverage of "zero-for-zero" tariff initiatives and its offer on chemicals is going beyond the Uruguay Round harmonisation requirements. It is already participating in the ITA and has actively participated in the negotiations on ITA II. More than two thirds of tariff reductions on industrial products will be completed on accession. The remainder will be achieved by 2002 with limited exceptions mostly to 2004 and 2008 (motor vehicles).

On services, Chinese Taipei's offer ranks amongst the 10 best sets of commitments in the WTO. Chinese Taipei's services schedule comprehensively covers a wide range of sectors including financial, telecommunication, professional, advertising, computer, construction and distribution services.

Chinese Taipei's agricultural offer provides for the opening of sensitive markets such as pork and poultry. In addition, Chinese Taipei's has agreed on offering tariff quotas on apples and citrus fruit ahead of accession.

2.1 Comments relating to specific areas

Industrial tariffs:

Chinese Taipei will bind tariffs on 6814 products, reduce its tariff protection, and eliminate tariffs on products covered by the Uruguay Round zero-for-zero agreements as well as the Information Technology Agreement. Most tariff cuts will take place upon WTO accession (68%). For 2217 (32%) tariff lines reduction/elimination will take place over specific time periods ('staging'). Most will be implemented by the year 2002, except for newsprint (year 2000), 29 chemicals products (year 2001), 405 products mainly in the chemicals, iron and steel, auto parts, and plywood sectors (year 2004), and 46 tariff lines in the motor vehicles sector (2008).

Wine and Spirits

In the framework of the EC-Chinese Taipei bilateral market access negotiations, Chinese Taipei has committed itself to eliminate tariffs on brown and white spirits (except on some oriental spirits) on 1 January 2000, thus in advance to WTO accession. In the same framework, CT has committed itself to protect European denominations of origin for wines and spirits. Chinese Taipei has already removed all fiscal discrimination vis-à-vis imported alcoholic beverages.

Motor vehicles

Tariffs will be gradually lowered to 17.5% by the year 2008. Chinese Taipei's tariff quota on car imports from the EU will be set at 159,220 units a year upon accession (well above twice as the EU current exports), increasing this by 20% a year towards full liberalisation to be achieved eight years after accession. Chinese Taipei will also remove its ban on diesel passenger cars and motorcycles above 150 cc no more than two years after accession, and will remove discriminatory tax incentives which encourage manufacturers to use domestically produced engines and bodywork.

Services

Chinese Taipei will remove foreign equity restrictions in all services sectors except in specific sectors such as telecoms, where European and other foreign companies will nonetheless be able to hold controlling stakes. In financial services, Chinese Taipei will substantially improve market access and treatment guaranteed to EU operators. In maritime services, Chinese Taipei will allow foreign shipping companies to set up wholly-owned subsidiaries arranging entering/leaving harbours for their own ships, solicit goods and/or passengers and operate their own sea-container terminals. Foreign-owned companies will also be able to provide maritime agency, freight forwarding, container station and depot services.

Government Procurement

Chinese Taipei will join the WTO GP Agreement upon WTO accession.

Civil Aircraft

Chinese Taipei will join the WTO Agreement on Trade in Civil Aircraft upon WTO accession.

3. Conclusions

In submitting the terms of Accession of Chinese Taipei to the WTO for approval by the Council, and for the opinion of the European Parliament, the Commission commends these terms as representing a balanced but ambitious package of market opening commitments, which will bring substantial benefits to Chinese Taipei and her WTO trading partners alike.

2001/0216 (CNS)

Proposal for a COUNCIL DECISION establishing the Community position within the Ministerial Conference set up by the Agreement establishing the World Trade Organization on the accession the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) to the World Trade Organization

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 37, 44, 47, 55, 71, 80(2), 95, 133 and 308, in conjunction with the first subparagraph of Article 300(3) thereof,

Having regard to the proposal from the Commission, [1]

[1]

Having regard to the opinion of the European Parliament, [2]

[2]

Whereas:

(1) Chinese Taipei applied to join the General Agreement on Tariffs and Trade (GATT 1947) in 1992 , maintaining that application following the entry into force of the Agreement establishing the World Trade Organization (WTO) on 1 January 1995.

(2) The Working Party on Chinese Taipei's accession to the General Agreement on Tariffs and Trade was established on 1 October 1992, and was transformed into a WTO Accession Working Party on 31 January 1995 in order to reach agreement on terms of accession acceptable to Chinese Taipei and all WTO Members.

(3) The Commission, on behalf of the Community and its Member States, negotiated a comprehensive series of market opening commitments on the part of Chinese Taipei which are of particular importance to the Community, provided for in the bilateral agreement between Chinese Taipei and the Community authentified by signature on 23 July 1998.

(4) These commitments are now embodied in the Protocol of Accession of Chinese Taipei to the WTO.

(5) The Chinese Taipei's accession to the WTO will also bring trade relations between Chinese Taipei and the Community into a stable and legally binding framework.

(6) The Protocol of Accession should therefore be approved.

(7) Article XII of the Agreement establishing the WTO provides that the terms of accession are to be agreed between the acceding Member and the WTO, and that the Ministerial Conference of the WTO approves the terms of accession on the WTO side.

(8) Accordingly, it is necessary to establish the position to be taken by the Community within the Ministerial Conference.

(9) For some of the objectives of the Community which accession of Chinese Taipei to the WTO will help achieve the Treaty does not provide powers other than those under Article 308.

HAS DECIDED AS FOLLOWS:

Sole Article

The position to be taken by the Community within the Ministerial Conference set up by the Agreement establishing the WTO on the accession of Chinese Taipei to the WTO, is to support the draft Decision of the Ministerial Conference which supports the accession (see attachment).

Done at Brussels,

For the Council

The President

ANNEX

ACCESSION OF THE SEPARATE CUSTOMS TERRITORY

OF TAIWAN, PENGHU, KINMEN AND MATSU

Draft Decision of [... November 2001]

[The Ministerial Conference,

Having regard to paragraph 2 of Article XII and paragraph 1 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization, and the Decision-Making Procedures under Articles IX and XII of the Marrakesh Agreement Establishing the World Trade Organization agreed by the General Council (WT/L/93),

Taking note of the application of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu for accession to the Marrakesh Agreement Establishing the World Trade Organization dated 7 December 1995,

Noting the results of the negotiations directed toward the establishment of the terms of accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu to the Marrakesh Agreement Establishing the World Trade Organization and having prepared a Protocol on the Accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (WT/ACC/.../...),

Has decided as follows:

The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu may accede to the Marrakesh Agreement Establishing the World Trade Organization on the terms and conditions set out in the Protocol annexed to this Decision.] [3]