VZCZCXYZ0191
RR RUEHWEB

DE RUEHIN #1528/01 1231053
ZNR UUUUU ZZH
R 031053Z MAY 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 9999
INFO RUEHBJ/AMEMBASSY BEIJING 5153
RUEHML/AMEMBASSY MANILA 9714
RUEHUL/AMEMBASSY SEOUL 7811
RUEHKO/AMEMBASSY TOKYO 7685
RUCPDOC/DEPT OF COMMERCE WASHDC

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