The Likely Economic Impacts of a Free Trade Agreement Between Taiwan and U.S on Taiwan Agriculture and Fisher Sectors

The purpose of this study is to estimate the economic impacts of a Free Trade Agreement (FTA) between Taiwan and U.S. on Taiwan agriculture and fishery sectors using Taiwan Agricultural and Fishery Sector Models. Simulation results show that there is a significant negative impact on Taiwan agriculture if U.S. agricultural products were allowed to be imported without any trade restriction. For instance, unempolyment rate in Taiwan agricultural sector will be increased by 4% while planting acreage is reduced by 55,000 hectare. However, the value increase in consumers’ surplus is larger than the decrease in producers’ surplus. Thus a total social welfare is increased. This result implies that reasonable compensation on farmers is acceptable. Moreover, domestic production in fishery is reduced insignificantly as the FTA between Taiwan and U.S. is implemented. This reduction in domestic fishery production comes from lower importing prices and no trading restriction policy. However, the impact on Taiwan fishery import is not significant because U.S. occupies only 9.11% of Taiwan total fishery import value.