Taiwan Government needs to make stronger case for rice wine

It is always good to extend a hand across cultural barriers and to share one's unique lifestyle, and there is perhaps no easier way to do so than through the most primitive and immediate senses of smell and taste. As the clouds are gathering at the World Trade Organization over Taiwan's tax cut on its staple rice wine from NT$29.5 to NT$5.6 per 0.6-liter bottle, never has the island needed cultural outreach more. At the heart of the problem is the definition of “distilled spirit.” The WTO trends to classify liquor by its alcohol level. With 19.5 percent ABV (alcohol by volume), the “Red Label” rice wine belongs to the spirit family. A lower tax on the product, the United States and the European Union countries worry, would undercut the competitiveness of Western spirits such as whisky and brandy.

The Taiwanese government, on the other hand, attempts to define spirit by the way it is consumed. It maintains that the rice wine is a common cooking ingredient used in traditional Taiwanese cuisines such as common winter warmers sesame chicken with rice wine as well as ginger duck with alcohol and Chinese herbs. Sesame chicken is also a staple food for mothers during Chinese postpartum confinements (known in Chinese as 坐月子 or sitting through the month after childbirth).

In other words, although it contains alcohol and is named “rice wine,” the Taiwanese product is actually mostly not drunk in Taiwan but used as a cooking ingredient, and therefore should be exempted from the high taxes aimed for liquors, the logic goes. In the revision of the Tobacco and Alcohol Tax Act on Aug. 19, the Legislative Yuan reclassified rice wine as a cooking wine, rather than a distilled spirit. To prove its point, the government commissioned National Taipei University to conduct a study, which found that 96.4 percent of rice wine was consumed as cooking wine in Taiwan.

The U.S. and the EU are far from convinced. The Office of the United States Trade Representatives suggested Aug. 19 that Taiwan should abide by the regulations of the WTO, which it is a member of. While it does not expect litigation in the near future, the government knows it has a lot of convincing to do. The Ministry of Economic Affairs said Saturday that it is working on a presentation of evidence to prove to the worried parties that as mainly a cooking ingredient, the rice wine does not affect the sales of Western liquors like scotch and brandy.

It is a good sign that the government is trying to communicate with its fellow WTO members but it takes more than a couple of PowerPoint presentations to explain its tax cut. To better illustrate its point, Taiwan officials should consider, if circumstances allow, to appeal to their Western counterparts' more direct senses of taste and smell. A rightly done sesame chicken with rice wine is worth a thousand words.

On the other hand, the government should also consider the possibility that the U.S. and EU's objections to the rice wine tax cut are caused by reasons deeper and wider than their misunderstanding of Taiwanese culture. Japan and Korea failed in their attempts to obtain WTO settlements on tax cuts on Japanese sake and Korean soju, both of which are made from rice.

While Vice Premier Sean Chen said earlier in August that Taiwan's case is different as rice wine is a cooking ingredient and not an alcohol beverage like sake and soju, the U.S., EU or the WTO might see that as hairsplitting. More importantly, even if the foreign officials recognize rice wine as cooking ingredient, they might still be reluctant to give a green light to Taiwan's tax cut simply because they don't want to make Taiwan an exception.

To increase its odds of getting a WTO understanding on the rice wine tax cut, Taiwan should not only focus on proving the cooking use of its rice wine but to also ease the deeper worries of the U.S. and EU — that the Taiwan tax cut will not set off an Asian liquor tax cut spree.