The Functions of Tariffs

Firstly of all, for most developing countries, the tariffs imposed on imports are one of their main financial sources. At this moment, for supporting the continuing output of Taiwanese Government, it become vital for us to implement our policy of enlarging internal trade.

Secondly, for some luxury items, governments may also impose higher tariffs on them, in order to decrease the volumes of domestic consumption.

Whilst, the most important point for tariffs is to protect domestic protection and to promote foreign direct investment. For instance, before enjoying the national treatment provided by Art. III of the GATT 1994, Member are free to impose tariffs on imported products, so long as the measures involved do not violate the commits they made.

Furthermore, the main cause of ITA litigation between the US, Japan, and Taiwan, on the one hand, and the EC, on the other hand, is due to the higher tariffs imposed on the newly innovating products containing IT elements. Whether the EC is bound for providing zero tariffs for these new products containing IT elements appearing has been the main issue between parties. However, even the final result is that the EC has to modify its measures to comply with ITA, a lot of plants producing those new products have moved to the Eastern Europe, and they will not move back to Taiwan and the other countries anymore, due to the concerns of manufacturing costs they have spent. Therefore, by changing Tariffs, the EC has not only gain lots of foreign direct investments from Taiwan, but it has also increased a lot of new working opportunities by attracting a lot of new foreign plants.

Until now, you may wonder why Taiwan still have to take an action against the EC before the Dispute Settlement Body of WTO, since those we lost would not come back again. The reasons I believe is that we cannot stand the same situation will occur in the future. Unlike the other countries, IT industry is our main sector. It is not easy to develop a newly profitable sector in the short time, nor is it possible to stand the further losses of jobs and investments by being imposed higher tariffs again, due to the same cause.