US embassy cable - 05TAIPEI323

UNCLAS SECTION 01 OF 02 TAIPEI 000323 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND OES/IHA 
 
STATE PLEASE PASS TO AIT/W, USEPA AND USTR 
 
USTR FOR KI, USEPA FOR OIA/THOMPSON 
 
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/MBMORGAN 
USDOC FOR 3132/USFCS/OIO/EAP/ABACHER/ADESARRAN 
USDA/FAS/ITP/MEYER, FARINA 
USDA FAS FOR ITP/AAD 
USDA FAS FOR CMP/GFD, COTS 
 
E.O. 12958: N/A 
TAGS: ECON, KTDB, SENV, TW, ESTH 
SUBJECT:  TAIWAN PROPOSED PLASTICS BAN MAY OPEN WAY FOR U.S. 
BIOPLASTICS 
 
1. Summary. Taiwan's Environmental Protection Agency (TEPA) 
is considering banning the use of certain plastics for food 
packaging.  Costco and other food retailers are concerned 
about the potential impact of such a ban on costs and the 
availability of goods.  In meetings with AIT, however, both 
Costco and TEPA showed a marked willingness to work toward a 
regulation that might benefit the environment without 
harming trade.  This willingness to negotiate could present 
a major market opening for biodegradable plastics in Taiwan, 
which in turn could boost U.S. exports of corn to Taiwan 
(bioplastics are derived from corn).  End Summary. 
 
Costco Concerned about Draft Rule 
--------------------------------- 
 
2.  On Friday January 14, AIT Ag, Comm, and Econ officers 
met with Costco's General Merchandising Manager Beverly Ayre 
to discuss a TEPA proposed regulation banning the use of 
plastic food packaging using PET (polyethylene 
terephthalate), PVC (polyvinyl chloride), and Styrofoam. 
Costco informed AIT about the "suddenness" of the proposed 
ban, which it had only heard about a week or two earlier, 
but was supposed to be put into effect by February 2005. 
Costco was concerned that such a ban could significantly 
increase its costs and sharply reduce the availability of 
many Costco products.  Costco also had serious misgivings 
about the February 2 implementation date. 
 
3. AIT inquired whether it might be possible to adhere to a 
PET, PVC and Styrofoam ban by substituting those products 
with biogradable plastic (bioplastic) ones.  Costco was 
receptive to AIT's presentation on the potential of 
bioplastics.  At the meeting, AIT committed to work with 
TEPA to ensure that Taiwan follows the WTO process and that 
Costco and other affected parties are given adequate time to 
research alternatives to current plastic packaging and 
provide comments.  AIT also successfully facilitated an 
agreement that Costco would meet with the U.S. Grains 
Council and Wei Mon Enterprises, the only local bioplastics 
manufacturer, to determine whether bioplastic could be an 
effective substitute for Costco's current food packaging. 
 
TEPA Open to Bioplastic Proposals 
--------------------------------- 
 
4.  Following the January 14 Costco meeting, AIT Ag, Comm, 
and Econ officers met with TEPA Director General for Waste 
Management, Chen Hsiung-wen, on January 20.  TEPA confirmed 
that it had recently released an analysis of a ban on PET, 
PVC and Styrofoam food packaging based on a Legislative Yuan 
(LY) draft resolution.  The draft resolution was given to 
TEPA in October 2004 and proposed that TEPA implement such a 
ban by February 2005.  TEPA quickly acknowledged that it 
would be impossible to implement a ban by February.  TEPA 
also assured AIT it would not do anything until it has 
evaluated: 1) the availability of substitute products, 2) 
the economic impact of the ban, 3) the ban's effects on 
consumers, and 4) the ban's trade implications.  TEPA also 
committed to follow the WTO process and noted that it is 
under pressure from the traditional plastics industry not to 
take any action. 
 
5. When AIT raised the possibility of using a PET, PVC and 
Styrofoam ban as an opportunity to promote bioplastics, TEPA 
expressed a willingness to explore any suggestions less 
controversial than the ban envisioned in the LY resolution 
(which passed on January 21st).  TEPA also confirmed that it 
would give Costco and other affected parties sufficient time 
to research the feasibility of switching to bioplastics. 
Finally, AIT followed-up on a letter it sent to TECRO in 
December requesting that Taiwan repeal the 2.5 percent duty 
on polylactic acid (PLA)- the corn derivative used in 
bioplastics.  TEPA replied that it was planning to remove 
the tax when it revises Taiwan's overall Solid Waste 
Disposal Act next year. 
 
Costco Meets U.S. Grains Council and Bioplastics Firm 
--------------------------------------------- -------- 
 
6. On January 21, AIT arranged and participated in a meeting 
with Costco, the U.S. Grains Council and Wei Mon Enterprises 
to explore the possibility of Costco substituting its 
traditional plastic packaging with bioplastics.  Costco 
presented all of the plastic food containers it currently 
uses and explained its requirements for cost, strength, 
size, and heat resistance.  Wei Mon Enterprises and its 
packaging subsidiary agreed to bring its technicians to meet 
with Costco on Monday January 24 to further discuss Costco's 
exact specifications.  Wei Mon promised to provide samples 
and price quotes to Costco within the next few weeks. 
 
Comment - The Road has been Paved 
--------------------------------- 
 
7.  Costco was very open to exploring more environmentally 
beneficial alternatives to traditional plastics as long as 
the price differentials were not excessive.  Due to rising 
petroleum costs and consistent improvements in bioplastics, 
the cost difference between traditional and bioplastics has 
fallen dramatically in the last two years.  The U.S. Grains 
Council claims that many bioplastics are now competitive 
with traditional plastics and that the differential has 
fallen from 30 to 10 percent.  To further reduce the cost 
differential in Taiwan, AIT will also continue to push TEPA 
to remove the 2.5 percent PLA import tax.  Despite these 
efforts, it is expected that for some products such as hot 
foods, bioplastics might not work.  In that case, AIT would 
coordinate with industry and TEPA to ensure TEPA's plastic 
packaging rule accommodates the use of traditional plastics 
where necessary. 
 
8. If, however, there are products for which Wei Mon were 
able to provide bioplastic alternative packaging that would 
meet Costco's cost and quality requirements, it would 
represent a major market opportunitiy for bioplastics in 
Taiwan.  Should this be the case, AIT would follow-up with 
other food chains and the American and European Chambers of 
Commerce to enlist broad support for a TEPA plastic 
packaging ban that would promote bioplastics where feasible 
and allow for traditional plastics where necessary.  AIT 
will continue to provide updates as more information becomes 
available. 
 
Paal