An Entity Sui Generis in the WTO: Taiwan's WTO Membership and Its Trade Law Regime

• Author: Liu, Han-Wei
• Pages: 252-261

Page 252

I Introduction

As one of the founding members of the General Agreement on Tariffs and Trade (GATT), Taiwan (the Republic of China or ROC) - the 17th largest economy,¹ was granted accession to the World Trade Organization (WTO) in November 2001 after its observer status of eleven years. Taiwan, classified by most commentators as an "unrecognized state" or an "entity sui generis",² has been excluded from most of the major international organizations. Taiwan's accession to the WTO, therefore, is considered to be an important breakthrough in diplomacy for the past decades.

Notwithstanding its WTO membership, the Taiwanese Government has employed numerous trade barriers vis-à-vis imports from Mainland China due to cross-strait tension. Some of these barriers have been criticized3 Page 253 and may be disputed under WTO's dispute settlement mechanism. In addition, given the diplomatic considerations, Taiwan is the only major trade partner within East Asia being excluded from the negotiations of the formation of ASEAN Plus ³ (China, Japan and South Korea) for years. While the issues of trade diversion and trade creation of preferential trade agreements (PTAs) remain hotly debated, the envisaged trade diversion effects resulting from being excluded from East Asian economic integration may become one of the striking examples demonstrating the negative impact of PTAs. The trade diversion would not only conceivably seriously undermines Taiwan's economy, but renders Taiwan's WTO membership much less useful.⁴ In light of Taiwan's special bilateral relation with China and its significant impact on the East Asia region, Taiwan's trade policy and relevant legislation present a special case under the WTO affairs.

While most existing literature, however, focuses on the implications of Taiwan's WTO membership under public international law,⁵ this article address an important pragmatic issue that what are Taiwan's main trade law instruments and how does WTO law effective in Taiwan's municipal courts. This article provides a comparative analysis of Taiwan's trade law framework and the rules of the WTO as well as an overview of relevant Taiwan's jurisprudence as regards WTO laws. The rest of the article is structured as follows. Section 2 explores the background of Taiwan's accession into the WTO. This article, in particular, points to the fact that Taiwan's participation in the WTO differs from that of Hong Kong, China's Special Administrative Region (SAR). Section 3 and 4 outline Taiwan's international trade authority and trade remedies whereas Section 5 examines how WTO law is effective under Taiwan's legal regime. Section 6 is the conclusion.

2. Background on Taiwan's accession to the WTO

In 1947, the ROC-then the only government on Mainland China became one of the 23 Contracting Parties of GATT by signing the Final Act of the GATT on 30 October 1947. Subsequently, the ROC became the party to the Protocol of Provisional Application (PPA) which came into force on 21 May 1948. After Chinese civil war, the ROC Government led by the Nationalist Party (Kuomingtan or KMT) fled to Taiwan in 1949. In 1950, in order to keep the People's Republic of China (PRC) from making use of the GATT, the ROC Government notified the United Nation Secretary-General of its decision to withdraw from the GATT.⁶ In general, this decision was based on the following concerns. First, the ROC Government was informed that GATT CONTRACTING PARTIES would not adopt the favorable tax rate for Taiwan.⁷ Second, most of the products benefited from GATT tariff reductions came from Mainland China, while only few were from Taiwan.⁸ Some commentators also suggest that Taiwan's trade volume in the 1950s was small and even without GATT membership; Taiwan still was able to obtain preferential tariff reduction through bilateral trade agreement.⁹ Above all, the ROC Government on Taiwan could no longer fulfill its GATT obligations on behalf of the mainland so it would be a big disadvantage for it to assume the responsibility for the territory which out of its control.¹⁰ It is worth noting that Czechoslovakia challenged the legality of ROC's withdrawal on China's behalf during ROC's withdrawal procedure.¹¹

In light of the importance of the membership of GATT, the ROC applied for observer status in 1965. The ROC's application was granted since it remained the only representative on behalf of China in the UN. In 1971, however, the ROC was deprived of its observer status following the UN Resolution 2758, which expelled the ROC Government from its UN seat.¹² Page 254

In 1990, Taiwan sought to rejoin the GATT.¹³ Taiwan's application was based on Article XXXIII of the GATT under the name of "Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu" (TPKM) on 1 January 1990. Here, there is an important distinction between accession to the GATT of Taiwan and Hong Kong. Three articles under the WTO regime govern the acquisition of the membership: Article XII:1 of Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) coupled with Article XXVI and Article XXXIII of GATT.

Article XII WTO Agreement provides that

"[a]ny State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto"

Apparently, WTO membership is not based upon statehood. While most of the WTO Members are "states", Taiwan is nevertheless eligible for the membership insofar as it is a "separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters" provided for under the WTO Agreement.

Hong Kong, on the other hand, acquired its membership by virtue of Article XXVI: 5 (a) and XXVI: 5(c) of the GATT. Article XXVI:5 (a) provides that

"[e]ach government accepting the Agreement does so intersect of its metropolitan territory and of the other territories for which it has international responsibility...", while Article XXVI 5 (C) stipulates that: "[I]f any of the customs territories, in respect of which a contracting party has accepted this Agreement, possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration.".

Under the above provisions, Hong Kong, the former British colony until the PRC's takeover in 1997 acceded to the GATT under the sponsorship of the United Kingdom on 23 April 1986.¹⁴

By contrast, as Article XXXIII GATT reads, Taiwan, being "a government acting on behalf of a separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for" under the GATT, shall and is entitled to the application for the membership on its own behalf or on behalf of its territory without the sponsorship of the PRC.¹⁵

Upon the request of the application for the GATT membership, a working party on "Chinese Taipei" was established in 1992 and Taiwan re-acquired its observer status.¹⁶ Meanwhile, the Chairman of the GATT Council declared that all parties had agreed that there was only one China and then Chairman's proposal that Taiwan's accession should not be finalized until after China's entry was accepted by other members.¹⁷ Because of this decision, therefore, Taiwan's accession was delayed for 11 years until China's accession could be negotiated.¹⁸China underwent a very difficult process to complete the negotiations in part because it was requested to accept special rules different from the normal WTO rules applying to all the member states generally.¹⁹ With the end of the Uruguay Round negotiations, WTO was created to embrace the GATT and other covered agreements on 1 January 1995. Since then, Taiwan changed its legal basis from Article XXXIII of the GATT to Article XII of the WTO Agreement.²⁰ Eventually, on 11 November 2001, the WTO Ministerial Meeting approved Taiwan's application. The effective date of Taiwan's accession was 1 January 2002, 21 days after China's entry. Page 255

In short, the reason why Taiwan was admitted into the WTO is that the WTO membership is not based upon statehood. Any separate customs territory satisfying the criteria provided for under Article XII: 1 of the WTO Agreement would be eligible for the application for the WTO membership. Taiwan is apparently the only "customs territory" ever admitted to the multilateral trading system from 1947 onward without direct sponsorship by a state exercising diplomatic relations for it.²¹

3. Where does international trade authority lie in Taiwan?

Article 107 of the Constitution of the R.O.C provides that Central Government shall have the competence to govern "foreign affairs", "foreign trade policies" as well as "financial and economic matters affecting foreigners and foreign countries".²² In Taiwan, thus, the...