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