Southern Taiwan Farmers Expect China's Fruit

UNCLAS SECTION 01 OF 02 TAIPEI 004405

SIPDIS

DEPT PASS AIT/WASHINGTON
DEPT FOR EAP/TC, INR/EAP

FROM AIT KAOHSIUNG BRANCH OFFICE

E.O. 12958: N/A
TAGS: PGOV PREL TW
SUBJECT: Southern Taiwan Farmers Expect China's Fruit
Import Policy to Have Scant Impact on the Farm Vote



1. Summary: Farmers' Association representatives in
Tainan and Pingtung Counties said that China's offer of
tax free importation of certain species of tropical fruit
from Taiwan is largely a political ploy. They point out
that Taiwan is a net importer for several of the fruits,
and already has a mechanism in place for exporting the
others. Since brokers on the mainland deal with all of
the import tax issues, any benefit from the scheme would
accrue to the brokers rather than to Taiwan's farmers.
Moreover, they fear that if the scheme is implemented,
mainland farmers who produce the same crops may demand
access to Taiwan's market. While they said while some
individual farmers might be swayed to vote for pan-Blue
candidates, most of their members see the ploy for what
it is and will continue to support pan-Green candidates.
End Summary.


2. Following visits to Beijing by pan-Blue leaders Lien
Chan and Soong Chu-yu, Beijing announced on July 28 a
plan to allow Taiwanese farmers a total import tax
exemption for certain species of tropical fruits exported
to China. The species include pineapples, papayas, star
fruits, mangos, guavas, grapefruits, coconuts, plums,
peaches, persimmons, loquats, Chinese dates, custard
apples, wax apples, pomelos, and betel nuts. China also
offered to streamline customs clearances to alleviate
difficulties of Taiwan farmers in overproduction and
distribution process.


3. Guantien Town Agricultural Association Secretary
General, Lin Cheng-jong, said Beijing's offering is
purely a trick, using import policy in an attempt to
manipulate Taiwanese farmers' votes, particularly in the
pan-Green's southern stronghold. Lin pointed out that
among the particular list of fruits selected for the tax
exemption, betel nuts, loquats, persimmons, and peaches,
are products that Taiwan does not produce in sufficient
quantities to meet domestic demand. There is no problem
with oversupply or distribution of these species. Lin
went on to say that export mechanisms already exist for
the other species on the list. He said that there is no
problem with accessing the China market, but that Japan
and Korea are the preferred markets, due to higher
prices.


4. President Chen Tai-neng, of Taiwan's Wax Apple
Development Association in Pingtung County, stated that
members have been selling wax apples to the China market,
as well as other foreign markets, for more than five
years. Pingtung County farmers produce approximately 82
percent of Taiwan's total wax apple crop. They currently
export approximately 100,000 kg of wax apples annually to
markets in Canada, Hong Kong, Singapore, Russia, and
China. They ship to China using the mini three links
from Kaohsiung to Xiamen via Kinmen.


5. According to Chen, the members sell their produce to
local brokers in Xiamen and the brokers deal with all
import, tariff and customs issues. Wax apple farmers
sell their produce at a 40 percent premium compared to
Taiwan's domestic market. The brokers deal with all
import related issues and assume all risk resulting from
government induced delays or irregularities in the China
market. Chen said Taiwan's Council of Agriculture (COA)
and Taiwan External Trade Development Council (TAITRA)
have helped promote exports to other markets and that the
members see no need for government assistance in
accessing the China market. The Association's members
said Beijing's offer would only benefit the brokers.
Further, they worry that the offer could disrupt the
market by inducing marginal producers of wax apples to
enter the market and adversely impact pricing.


6. Lin went on to point out that import duties are a
minor cost compared to locally imposed sales taxes of
13.5 percent currently levied on Taiwan fruit. These
taxes will not be affected by the new policy. Further,
doing business directly rather than through a broker
would make Taiwan's farmers assume risks currently
assumed by the brokers.


7. Lin said further that most of crops on the list are
also grown by Taiwanese farmers in China. Lin said those
Taiwanese Agri-business concerns in China are in fact
hoping that, once China's markets are opened to Taiwan's
produce, Beijing could request that Taiwan grant China
the same tax treatment on their produce. Lin worried
that such an outcome could do severe damage to Taiwan's
agriculture industry.


8. While farm groups remain wary of Chinese overtures,
Secretary General Huang Cheng-ching of Yujing Town
Agricultural Association said that his Association is
currently pursuing opportunities in Guangzhou and Fuzhou.
Huang said that Taiwan needs to seriously study any
opportunity to expand Taiwan's agricultural markets.


9. The Associations' executives uniformly agreed that
Beijing's overtures might sway some votes among their
membership. However, they went on to say that most of
their membership is sophisticated enough to see Beijing's
offer as a ruse designed to benefit pan-Blue candidates
rather than a genuine effort to aid Taiwanese farmers.
They said that if Beijing really hopes that such an offer
will shake farm support for pan-Green candidates in
Southern Taiwan, Beijing is in for a disappointment.


10. Comment: The arguments made by the Farmers'
Association were reflected repeatedly in visits by AIT/K
to DPP party offices throughout the south. Pingtung,
Chiayi, and Taitung DPP officials all called the fruit
export issue an "empty one" that will play no role
whatsoever in turning green votes into blue votes. While
this issue may have captured the attention of the press
and non-farming audiences, it is a non-starter for the
KMT in local elections where the voting population
includes a significant number of farmers. Historically,
the Associations have refrained from endorsing candidates
from either side. However, their membership, like most
other demographic groups in the South, has supported DPP
candidates in recent years. End Comment.
Thiele
Paal