TAIWAN CONSIDERS ANTI-DUMPING MEASURES ON CHINESE

UNCLAS AIT TAIPEI 001528

SIPDIS

SIPDIS

STATE FOR EAP/RSP/TC AND EB/TPP/MTA, STATE PASS USTR FOR


ALTBACH, WINELAND, STRATFORD

E.O. 12958: N/A
TAGS: ECON ETRD TW
SUBJECT: TAIWAN CONSIDERS ANTI-DUMPING MEASURES ON CHINESE
TOWELS

REF: A. TAIPEI 942

B. TAIPEI 1288


1. Summary: Taiwan is simultaneously pursuing anti-dumping
and safeguard investigations on towel imports from China.
The Ministry of Finance must announce its decision on
preliminary anti-dumping measures by May 29. Taiwan's ITC
has recommended a 65% tariff on Chinese towel imports, the
Minister of Economic Affairs must now decide whether to
request WTO safeguard consultations with China. MOF and MOEA
staff prefer anti-dumping over safeguard measures, but the
temptation for the Chen administration to simultaneously
appease domestic supporters and bolster Taiwan's
international profile by requesting safeguard consultations
with China may be too great to resist. End Summary.

=====================
The Anti-Dumping Case
=====================


2. Following the request of the Yunlin Towel Association
late in 2005, Taiwan's Ministry of Finance (MOF),Customs
Administration Department began a preliminary review of
Chinese towel exports in January and on March 1, 2006
announced that it would initiate investigations. This is the
first time Taiwan has initiated an anti-dumping investigation
against a Chinese-produced product. Taiwan regulations
establish a maximum 260 day timeline from initiation of a
review to final ruling. Taiwan's International Trade
Commission (ITC) announced March 20 its preliminary finding
that Taiwan manufacturers were suffering injury from
increased imports of Chinese towels (Chinese manufacturers
now account for 70% of Taiwan's market) and on April 17
recommended tariffs of 65% on Chinese towel imports.


3. MOF is now conducting its preliminary investigation on
whether Chinese towels are being dumped on Taiwan's market at
below market prices and has requested Chinese manufacturers
responses to detailed MOF questionnaires. According to MOF
Customs Administration, only two of nine Chinese exporters
provided the information requested. After consultation with
academics and trade policy experts, the Customs Tariff
Commission (CTC) declared China a non-market economy and
chose India as the reference country for computing production
costs.

===================================
Preliminary Dumping Decision May 29
===================================


4. Once the preliminary investigation is complete, the
decision on whether to recommend anti-dumping measures will
be referred to the CTC. This 13 member commission is
composed of MOF officials and academics and is chaired by the
Deputy Minister of Finance. Based on the results of the
investigation, the CTC can make a preliminary determination
on dumping and decide to take provisional measures, pending a
final determination of dumping. According to Taiwan Customs,
the CTC has previously declined to approve preliminary
findings on dumping for various reasons. Regulations
require the CTC decision to be announced by May 29. If the
preliminary finding is that dumping has occurred, MOF then
has 60 days to finalize its investigation. If the final
investigation shows dumping has occurred, MOF will transfer
the case back to the ITC for a final determination of injury.
The CTC then makes its final recommendation to the Minister
of Finance, who has authority to impose anti-dumping duties.


5. The tariff of 65% recommended by the ITC was well below
the Taiwan towel industry's request for a 189% tariff. The
industry request was reportedly based on information on
Chinese towel prices downloaded from Chinese search engine
Alibaba. Customs dismissed the industry submission as
unprofessional but, given the support of various legislators,
sufficient to begin an investigation. Customs officials
noted that most Taiwan towel manufacturers were hopeful that
the government would impose safeguard measures instead of
anti-dumping duties. Safeguard measures require only
evidence that the domestic industry is suffering from
increased competition, not evidence of anti-competitive
pricing, and can include direct support to the industry.

==================================
COMMENT: Safeguards Hard to Resist
==================================




6. MOF staff agreed with their colleagues in the Ministry of
Economic Affairs (MOEA) that anti-dumping measures would be
preferable to WTO safeguard measures in this case. Although
this would be Taiwan's first anti-dumping case directed at
Chinese exports, Taiwan currently has anti-dumping measures
in place directed at Japanese art paper and cement from the
Philippines and Korea. China has also filed anti-dumping
cases against Taiwan exports. The procedures for imposing
these measures are well-established and the bar for
implementation is relatively high.


7. Conversely, imposition of saeguard measures requires
only a finding of import-related economic injury to the
domestic industry. The Minister of Economic Affairs can then
request consultations in the WTO and ultimately has the
authority to impose safeguard measures. Taiwan manufacturers
of furniture and underwear are reportedly already considering
filing similar complaints if MOEA decides to pursue safeguard
measures. Other traditional industries are likely to follow,
leading to increasing trade friction between Taiwan and its
biggest trading partner.


8. It is unlikely China would agree to a request from Chinese
Taipei in the WTO for safeguard consultations. China has a
policy of refusing requests for product-specific safeguard
consultations, but more importantly would be likely to refuse
any request from Chinese Taipei for WTO consultations to
resolve what it would view as a domestic trade issue. Taiwan
officials may be tempted to see this case as an opportunity
to demonstrate Taiwan's sovereignty in the WTO. Requesting
safeguard consultations in the WTO would be a double-barreled
attempt to appease domestic supporters of the administration
and issue a challenge to Beijing. It is unclear whether the
Chen administration will be able to resist the temptation.
End Comment.
YOUNG