This paper examines how government price support policy interrupts the incentives and weakens the competitiveness of rice production in Taiwan. WTO accession has created pressure to lower rice prices in the domestic market. Therefore, we propose a policy alternative to gradually phase out the existing price support through lowering the intervening price and introducing an income safety net for rice farmers. The new policy scheme will send correct price signals to rice farmers and transform the rice sector into a market-oriented production structure so that the long-run competitiveness of domestic rice against foreign imports can be strengthened.