IV. ECONOMIC POLICIES
Foreign Exchange Policies
9. In response to requests from members of the Working Party for information on the foreign exchange system prevailing in Chinese Taipei, the representative of Chinese Taipei stated that all current account transactions were free from foreign exchange controls. As for residents, any company or individual could freely settle foreign exchange with authorized banks up to an amount of US$50 million and US$5 million respectively per year. As for non-residents, any non-resident could open a NT dollar account with local commercial banks. However, foreign financial institutions outside the territory of Chinese Taipei could only deposit locally earned revenue of NT dollars into their accounts. There was no restriction when the remittance was related to an outward/inward investment project approved by the competent authority. The foreign exchange rate was determined by the market, and there were no discriminatory currency practices. In response to further questions, he said that enterprises established under the Company Law of Chinese Taipei could freely purchase the foreign exchange required for imports or for invisible trade settlements through the authorised foreign exchange banks without any restriction. There was no restriction on the use of foreign exchange for overseas investment provided that the investment had been approved by the authorities. Authorized foreign exchange banks and foreign banks were free to take part in the Chinese Taipei foreign currency call loan market. Since 1991, forward foreign exchange transactions had been permitted. The representative of Chinese Taipei said that these requirements would be gradually phased out as market conditions permitted. He expressed the view that Chinese Taipei's foreign exchange practices were fully consistent with Article XV of the GATT 1994.
10. Some members of the Working Party noted that Chinese Taipei was not a member of the International Monetary Fund (IMF) and thus would have to enter into a Special Exchange Agreement as provided for in Article XV:6 of the GATT 1994 incorporating obligations consistent with Fund Article VIII. Some members also expressed concern that elements of Chinese Taipei's foreign exchange system provided scope for practices that distorted trade flows. The representative of Chinese Taipei said that in the context of accession to the WTO, Chinese Taipei was prepared to comply with the provisions of Article XV of the GATT 1994 regarding its foreign exchange restrictions. He added that in order to comply with GATT 1994 Article XV, Chinese Taipei had negotiated a Special Exchange Agreement with the WTO.
- Pricing Policies
11. Some members of the Working Party noted that Chinese Taipei had price controls for the domestic prices of certain commodities and that there were no price controls applied exclusively to imports, they requested a full list of the products subject to price controls, and the plans to eliminate such price controls. In response the representative of Chinese Taipei stated that price controls applied primarily in the area of public utilities under control of the Public Utility Rate Commission. The products specified in the list reproduced in Attachment A to this Report were the only ones subject to price controls. In relation to the sale of tobacco and alcoholic beverages, the representative of Chinese Taipei stated that minimum profit or pricing of tobacco and alcohol products had been abolished. The regulation on the maximum retail margin would cease to be effective when the monopoly system was formally abolished. He further added that petroleum, natural gas and liquefied petroleum gas were subject to price controls in order to maintain stability in energy prices. Salt, sugar and fertilizer were subject to price controls to stabilize farmers' income and production costs. Chinese Taipei intended to phase out price controls as soon as possible, keeping in view the objectives noted above. Future liberalization of price controls would take into account the timetable for privatizing state enterprises which had been involved in exercising price controls, such as the Taiwan Fertilizer Company, and the Taiwan Salt Industrial Corporation The Chinese Petroleum Corporation's monopoly on activities had been phased out since 1996 and price controls on petroleum and liquified petroleum gas were removed in 2000. Fertilizer had also been removed from price controls in 1999 due to the privatization of the Taiwan Fertilizer Company. Some members of the Working Party noted that they could see no justification for price controls on sugar and salt. In response, the representative of Chinese Taipei stated that the price controls on salt were expected to be abolished by the end of June 2002. Domestic sugar prices were set by Taiwan Sugar Corporation, which was the sole supplier of sugar. The sugar price set by Taiwan Sugar Corporation took into account the price at which Taiwan Sugar purchased sugar cane from local growers (which was set 10 years ago according to the farmers' production cost at that time), and its own cost of production. The domestic sugar price had been decreasing, as the increase in import of sugar (the cost of which was lower), helped to bring down Taiwan Sugar's cost. Industrial users of sugar were consulted, in order to ensure that the price control would not seriously affect their competitiveness. There was no discrimination between cane and beet sugar. The price control system would be replaced by the implementation of a tariff rate quota system upon Chinese Taipei's accession. The private sector would be free to import sugar at out-quota rates. Upon accession, the private sector would have access to an annual sugar tariff quota. Therefore, importation of sugar would not be subject to monopoly. With the private sector free to import sugar, market prices would be determined by market forces. It was expected that the oil product market would be fully liberalized by the end of 2001. It was not Chinese Taipei's policy to add to the list of products subject to price control set out in Attachment A to this Report, unless the economy or a specific sector thereof was in serious difficulty or in a state of emergency.
12. The representative of Chinese Taipei stated that, from the date of accession, Chinese Taipei would ensure that price controls applied to the products covered in the list reproduced in Attachment A to this Report, and to any other product, would be applied in a WTO-consistent fashion, taking account of the interests of exporting WTO Members as provided for in Article III:9 of the GATT 1994. The price levels of the goods subject to price controls would be published in accordance with Article X of GATT 1994. The Working Party took note of these commitments.
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