Egg: A Taiwanese Story
An unlikely tale of an elderly egg entrepreneur had me trying to chase down the “smoking gun” for corruption, only to not get very far.
Hi Taipology readers: This is the English version of a story I wrote in Chinese for a Taiwanese audience. I know for most international folks, it might be a big ask to assume you’ll care about a breakfast-food-based scandal in Taiwan. Well, here’s my pitch to you: read this story, and you’ll understand the archetypal shape of so many stories happening on a local level in Taiwan.
Government interfering to keep market price down…check. Possible corruption…check. Pan-blue and pan-green sides screaming past each other…check. Economist pointing out the real source of the problem being ignored…check.
This is a story about eggs…but it is also the story of Taiwan:
They say “it’s never too late” to do something in life. That must have been the mantra an elderly lady by the name of Chin Yu-chiao (秦語喬). Reportedly in her seventies, she is listed as the principle of Ultra Source Ltd, an unbelievably tiny company that came up out of nowhere to score secured a massive contract from the Ministry of Agriculture, importing over 80 million eggs from Brazil through a special project, over three eggs for every person in Taiwan.
Inspirational tale of elderly entrepreneurship or a front company for corruption? Either way, those eggs have been arriving in Taiwan gradually from Brazil, undergoing reprocessing before being made available to consumers to address the egg shortage this year.
Sharp-eyed agricultural expert Lin Bay Hao You noticed that just a few days ago, eggs from Brazil were still on the shelves, labeled with a manufacturing date of September 5 and an expiration date of October 5. However, the last batch of eggs from Brazil should have left for Taiwan at the end of May. It turns out that imported eggs can have their "birthday" changed to the date of processing in Taiwan — now it’s a food safety issue.
Since then, the case has turned into a classic drip-drip scandal that engulfed the Taiwanese news cycle, panicked consumers and leading possibly to the destruction of more than 50 million eggs.
I won’t go follow the opposition lawmakers down every hysterical twist and turn, but I wanted to find out if there was some truth to their central contention: the way the Ministry of Agriculture awarded the contract was corrupt, Ultra Source is a fake front and profit from importing eggs from Brazil landed in the pockets of some crony.
I decided to interview someone I happened to know in the industry who was not Taiwanese, a European egg equipment dealer I am going to call “Peter.”
In the industry, we all know where the eggs are
Peter has been working in Taiwan's poultry industry for many years. Because there are very few Europeans in the industry, I won't provide too many details about him, and Peter is not his real name, of course. I wanted to ask him if it's really possible, as Agriculture Minister Chen Chi-chung (陳吉仲) said, that "eggs are not an ordinary commodity; you can't just import them.” He implied that as thin as Ultra Source’s balance sheet is, the company had unique connections that allowed them to secure the egg supply in Brazil in a hurry. In fact, he described the Ministry of Agriculture working with Ultra Source as “a prime example of a public-private partnership.”
I asked Peter if it's possible that only Ultra Source had the unique capability to import eggs from Brazil.
"Of course not! In the industry, we all know where the eggs are. And there's no need to import them from Brazil, especially while Brazil is going through a Bird Flu pandemic!"
According to Peter there were in fact many companies in Taiwan both more qualified and capable to import eggs than Ultra Source Ltd., which was established just last year with US$180,000 in capital only.
For example, one company specialized in importing breeder chickens from abroad to Taiwan. They couldn’t do this temporarily due to avian flu concerns in the exporting countries, so they were eager to import eggs to make up some of its business.
"Those are the experienced companies that the Ministry of Agriculture should be working with, but they didn't get the project. Why do you think? It's because the quota was already taken by preferred companies."
This was as much as I could get out of Peter. Understandably, he’s never heard of Ultra Source before the start of this news cycle and the process through which the Ministry of Agriculture awarded its contracts is as opaque to him as it is to everybody else.
Price control is not the solution
To get a better idea of why Taiwan was undergoing an egg shortage in the first place, I tracked down Professor Wu Tsong-min (吳聰敏) of National Taiwan University and the author of the book “The 400 Years of Taiwan’s Economy.”
The main reason Taiwan has been suffering chronic egg shortages and having to open its markets to imports at short notices is because the government have been violating “the most basic tenet of economics” by trying to artificially suppress the price of eggs.
“In the name of price stability, they hold down the price of eggs. Then they blame ‘black-hearted businesses’ for hoarding eggs. But let the price rise and egg farmers will very naturally want to invest in production!”
The opposition parties could bear some of the blame because they relentlessly attack the ruling Democratic Progressive Party for any upwards price fluctuation of commodities in Taiwan from eggs to gas to electricity.
“In other countries such as the United States, egg prices fluctuate over 100%. It’s accepted, and nobody would think to ask the government to intervene in the egg market.”
Even more concerning, Professor Wu doubts whether the ruling team truly understands economics.
"Price controls cannot solve the problem. I really don't know if they understand this."
Entrenched interests and the space for corruption
At the moment, people are more concerned about whether they might be consuming bad eggs than discussing how Ultra Source got the contract. This is understandable, I suppose, but I was still obsessed with the idea of finding something concrete that would link the Ministry of Agriculture award with impropriety (or the reverse, show that the Ultra Source deal is above-board.)
"Finding direct evidence for such matters is very difficult,” said Professor Wu, “Instead, we should ask why the ministry chose to open imports as ‘special projects.’”
The Ministry of Agriculture does not have the relevant professional capability to provide proper oversight to those special projects, which are allowed to circumvent the usual government bidding process, said Wu. Regardless of the reason, using the "special project" approach for imports gives companies with better relations with the Ministry of Agriculture a relative advantage.
"You can assume that in Taiwan, if there is room for entrenched interests to benefit, then those entrenched interests will indeed benefit."
Parallel worlds: Green vs. Blue
The egg story is sparsely reported in “pan-green” media. When it is, it tends to be from the perspective of Ministry of Agriculture denials, or maybe from the perspective of the egg importers who say things like “we’re only trying to help our country in its time of need.” Pan-green supporters on Twitter tend to blame the problem on egg-hoarding wholesellers and even accuse those concerned about this issue of “falling for cognitive warfare.”
Meanwhile, it is also undeniable that the pan-blue side, having seized on a juicy topic, are not worried at all about balance. They’ve already decided that the DPP is corrupt through and through and is just looking for ammo to push though their perspective.
Unfortunately, the partisan split on this issue is bad for Taiwan. Neutral arbiters are hard to find. It’s not healthy in a democracy to have two sides who doesn’t have different opinions, but inhabit entirely different realities.
> Even more concerning, Professor Wu doubts whether the ruling team truly understands economics.
> "Price controls cannot solve the problem. I really don't know if they understand this."
Do you agree with Wu's take that they don't understand economics?
In the US, some progressives tend to consider more market-oriented solutions as "neoliberal" and be skeptical of them. I feel like most economics professors would also criticize market-skeptical people as not understanding economics, which sometimes I think is fair, but other times I think people have more sophisticated reasons for not wanting the market solution. What do you think?
Great writeup, thanks!