US Killing Taiwan's Agriculture, Argues Taipei Times Editorial

A fairly well-written editorial in the Taipei Times argues that Taiwan's submission to US agricultural exports is destroying Taiwanese farming.

In 1971, Taiwan withdrew from the UN after China was admitted. Facing this adverse situation, then president Chiang Kai-shek (蔣介石) implemented a policy to purchase US agricultural produce, in order to maintain Taiwan-US relations. As a result, Taiwan's trade surplus of US$60 million in 1971 became a trade deficit of US$270 million in 1974.

The policy also affected the eating preferences of the Taiwanese and their animals over the past three decades, because grain and wheat were gradually replaced by livestock feed and flour imported from the US. For livestock products, the nation's agricultural production index was 4.7 in 1950, and had reached 24 in 1971. But after importing a significant amount of US grain crops, the agricultural production index rose sharply from 27 in 1975, to 114 in 1996.

It's nice to see a writer using facts and figures to support his argument, for a change. Full marks! Unfortunately his use of them is selective, and I'd like to highlight a few points.

For livestock products, the nation's agricultural production index was 4.7 in 1950, and had reached 24 in 1971. But after importing a significant amount of US grain crops, the agricultural production index rose sharply from 27 in 1975, to 114 in 1996.

Two things are happening here -- one is a bit of KMT propaganda trickery that makes the island's success look better than it really was, the other is numerical sleight of hand.

Note the first number. It dates from 1950 (bold). Why is that date used? KMT rule of Taiwan began in 1945, after all. The reason is because beginning in about 1943 Taiwan began a steep economic decline. In the late 1930s Taiwan enjoyed excellent agricultural production, encouraged by Japanese government subsidies. Incomes may have reached or even exceeded incomes in Japan, its colonial master. However, by 1943 effective torpedoes, better leadership, and above all, code breaking, enabled US submarines to strangle Japan's overseas trade. As a result, the economy of Taiwan, dependent on Japanese markets, began to spiral downward.

After WWII the KMT occupied Taiwan and the island was heavily looted (see the story in George Kerr's famous Formosa Betrayed or Douglas Mendel's The Politics of Formosan Nationalism). Inflation destroyed whatever financial reserves remained after Japanese companies and Japanese consumers pulled out. The economy went into a steep decline, reaching its nadir in 1949 when the KMT lost the mainland and roughly 1.5 million people moved to Taiwan.

In other words, using 1950 is a bit of statistical skullduggery: it compares all subsequent economic output with the absolute lowest depth of economic output in the island's modern history. Hence whatever follows afterwords looks especially good.

With that in mind, let's return to this sentence:

For livestock products, the nation's agricultural production index was 4.7 in 1950, and had reached 24 in 1971.

Douglas Mendel quotes a local economist working for USAID in the 1930s who in ~ 1965 noted that Taiwan had better per capita incomes in the 1930s under Japanese rule. We can quibble over the date, but it is obvious that at least for most of the 1950s, what was happening in Taiwan was not so much economic growth as economic recovery from the ravages of war, bombing, and looting. The furious growth of that era and the opening years of the 1960s was furious precisely in part because it was economic recovery. Not until the import substitution phase switched to export-led growth in about 1960 did something like real economic growth occur. Table 1 on page 68 of The Politics of Formosan Nationalism produces some numbers that show that for most agricultural goods production no more than doubled between 1937-9 and 1964-6. The biggest gains were in citrus fruit and fish production; rice production grew no more than 60% or so. In other words, given that the population had more than doubled by this time, per capita agricultural production had actually declined.

Hence, that rise in agricultural indices is deceptive; we are not looking at a roughly fourfold rise, but in fact a rise from earlier peaks that is much lower by comparison (Ho's Economic Development of Taiwan 1860-1970 gives even lower numbers for this period. 1971=100, 1951=38). The fact is that even by the 1960s Taiwan's agriculture was in a fairly serious crisis, one that necessitated the recall of a hitherto unknown agricultural expert whose PHD thesis had just won an award in the United States for best ag econ thesis that year: Lee Teng-hui.

Of course, one crucial reason for agricultural decline in this period was that industry was booming and capital and labor were being shifted there. This was driven by a government policy that ruthlessly extracted from the farmers to give to industry. Agriculture went from about 35% of the economy in 1952 to about 11% in 1971 (Ho, p130).

In sum, the writer's argument that the decline set in after 1971 due to the US cannot hold. Reality is that the 1950s and 1960s were a period of difficulties for Taiwanese farmers due to the policies of the colonial government and the changing economic structure of the island. As industry took off, farmers began to derive more and more activities from non-farm activities. Smaller farms derived proportionally more of their income from non-farm activities than larger. The result was a general problem of rising prices for agricultural inputs, low wholesale prices for farm goods, a move off the farms and out of farming, and a general feeling that farming was not doing too well in that period. The author neglects to mention that the years omitted from his comparison, 1971-1974, were tough years for the economy as the US wound down its commitment to the Vietnam war, decreasing spending in Taiwan, the oil shocks hit, and Taiwan resigned from the United Nations. Poor trade performance during this period is due to a number of factors, not US agricultural imports.

The writer of the Taipei Times went on to argue:

Taiwanese people do not necessarily dislike rice. Instead, they have been guided by the government's policies and have gradually adopted a western-style diet, which in turn created demand, with the government seemingly having no choice but to expand agricultural imports from the US to meet it.

Rank nonsense. As Mendel notes:

The black market in foreign foods, visible in all major cities during the 1960s, flourished despite the Nationalist regime's laws against smuggling or the sale of tax-free foods imported by American organizations. Milk powder, edible oil, and other gift foods imported by religious organizations and then sold by recipients on the local market prompted an investigation in 1962, but military commissary foods with their United States prices stamped on them could still be bought at a 150 percent markup in dozens of stores in Taipei, Taichung, and Kaohsiung. "Didn't you realize this is a yami no kuni [black market country] as much as a country of baishun [prostitution] and baishu [graft]" asked one of the shopkeepers.

The taste for American imports long predates the 1970s. As Ho observes, among the most significant imports in 1952 were milk and milk products.

But finally, let's take a look at those figures again:

For livestock products, the nation's agricultural production index was 4.7 in 1950, and had reached 24 in 1971. But after importing a significant amount of US grain crops, the agricultural production index rose sharply from 27 in 1975, to 114 in 1996.

Look carefully. Ag production rose fivefold by the author's figures, from 4.7 to 24 in the first period of 21 years. In the second period, it rose from 27 to 114, a four fold increase in 30 years. That's not bad at all, especially since the greatest rises would naturally come in the first period, when widespread use of chemical pesticides and large increases in capital inputs to agriculture took place. Growth will also be harder in the second period because the size of the increases, in absolute terms, are larger and therefore more difficult to attain.

In other words, the alleged decimation of Taiwan's agricultural has never taken place. Nor is the taste for US goods an introduction since the early 1970s. Rather than consulting conspiracies, the author should instead take a closer look at the way Taiwan's economy has changed due to government policy and the natural and inevitable progress of economic growth and development.

[Taiwan]