economics

December 15, 2009

Taiwan’s Détente Gamble

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By Leslie Hook

Taipei

Taiwan knows better than most countries what it’s like to lie in the shadow of a rising China. Just 100 miles off the mainland’s coast—where 1,500 missiles stand aimed and ready to fire—the island is home to a vibrant democracy whose 23 million cast their ballots last March for a president promising détente with Beijing.

That man is Ma Ying-jeou, a Hong Kong-born, U.S.-educated lawyer belonging to the same Kuomintang that lost the civil war to Mao Zedong’s army 60 years ago. Mr. Ma has taken a conciliatory approach to Beijing, playing down the differences (technically each side claims the other is part of its territory) and emphasizing their common culture, while trying to sell his constituents on the benefits of economic opening with China.

When I met him at the presidential office last month he had a crisp handshake and dark circles under his eyes—he had been jetting around on Air Force One to stump for KMT candidates in the Dec. 5 local elections. But he brightened when he talked about engaging Beijing. “To defend Taiwan, military means is one of the means we are going to use, and it may not be the most important means. We also depend very much on the soft power of Taiwan to engage the Chinese mainland.”

For Mr. Ma, “soft power” has meant direct flights between Beijing and Taipei, direct postal links and cargo shipments, and making it easier for mainland tourists to come visit. Next week delegations from Beijing and Taipei will meet in Taichung, in central Taiwan, for a fourth round of official cross-Strait talks, and they are expected to sign agreements on double-taxation, certification standards, fishing crews, agricultural quarantines and the like. There’s a lot to be proud of.

“I don’t know whether you have taken a cross-Strait flight before? No?” he asks with a slight grin. “If you did then you would probably see how convenient it is compared to barely a year and a half ago [when travelers had to stop over in Hong Kong or Macau]. Also everybody feels relaxed, people even on the other side of the Strait. And we’ll continue the current state of affairs, easing tension across the Taiwan Strait, and trying to forge a closer relationship in economic and other fields.” He’s not kidding about the relaxed atmosphere in Taipei—earlier I strolled into the presidential office without even a cursory bag inspection or ID check.

Terry ShofferMa Ying-jeou

winterhook

winterhook

Mr. Ma has built his diplomacy around what he calls the “three no’s”—no unification during his term in office, no pursuit of de jure independence, and no use of force to resolve differences across the Strait. This has been successful in large part because it contrasts with the policies of his predecessor Chen Shui-bian, who fought tooth and nail for Taiwan’s acceptance as a regular member of the international community. Mr. Chen’s relations with Beijing were full of spats, some petty, some not. At one point he rolled out postmarks promoting Taiwanese membership in the United Nations; Chinese post offices promptly returned any mail bearing those postmarks.

While the “three no’s” have eased tensions significantly, Mr. Ma still grapples with the question of where the relationship is going long-term. “Whether there will be reunification as expected by the mainland side depends very much on what is going to unfold in the next decade. This is a question no one can answer at this stage. But as the president of this country, I believe that the 23 million people of Taiwan want to secure one or two generations of peace and prosperity so that people on either side of the Taiwan Strait can have sufficient time and freedom to understand, to appreciate, and to decide what to do.”

Which is where the U.S. comes in. Mr. Ma’s critics charge him with jeopardizing Taiwan’s democratic integrity and underestimating the lengths to which the mainland is willing to go to “reclaim” the island. But on one score at least he’s clear-eyed on the threats facing Taiwan, particularly as China pumps money into a rapid military buildup. “The relaxed tensions [across the Strait] depend very much on the continued supply of arms from the United States to Taiwan,” Mr. Ma explains. “Certainly Taiwan will not feel comfortable to go to a negotiating table without sufficient defense buildup in order to protect the safety of the island.”

Under the terms of the 1979 Taiwan Relations Act, the United States is obligated to come to Taiwan’s defense if the island is attacked—a scenario that used to dominate threat assessments of the region, but now seems unlikely. With President Obama in the White House, does Mr. Ma ever worry about the U.S. commitment to security in the Asia-Pacific region?

He is quick to dismiss any differences, saying that “we feel quite at ease” with Mr. Obama’s November visit to the region. “I think his policies toward this part of the world have not deviated from those of the past President of the United States,” he explains. “And he also told his [Chinese] host that he would continue to sell arms for the defense to Taiwan.”

It will soon be clear whether Mr. Obama will deliver on that: Taiwan is waiting for the State Department to notify Congress about a pending arms package that includes Black Hawk helicopters, submarine designs and an upgrade to the Patriot missile defense system—items first announced under the Bush administration in 2001. Mr. Ma seems in no hurry: “They are already in the pipeline. A few years is not unreasonable.”

The more urgent task, as far as Mr. Ma is concerned, is opening up Taiwan’s economy to China so that the two sides can strengthen their trade ties—and Taiwanese voters can enjoy the economic benefits of the rapprochement. Mr. Ma’s signature project is the Economic Cooperation Framework Agreement, an all-encompassing treaty that would cover tariff reductions, market access and economic cooperation in areas like intellectual-property enforcement.

The ECFA, as it is known, has proved a tough sell: The opposition Democratic Progressive Party says the deal will “steal” millions of Taiwanese jobs and flood Taiwan with cheap Chinese imports—arguments that resonate deeply in Taiwan’s agricultural south. This is part of the reason the Democratic Progressive Party saw solid gains in the Dec. 5 local elections. Their arguments are bolstered by the fact that so far, despite the cross-Strait flights and the new, “relaxed” atmosphere, Taiwan’s exports to China have actually fallen as a share of China’s total imports this year as compared to last year. That’s not necessarily Mr. Ma’s fault—demand for Taiwan’s exports plummeted during the global financial crisis—but the timing is not helpful politically.

Mr. Ma is not exactly a free-trader. He boasts that he has maintained all restrictions on agricultural imports and kept Chinese workers out of the country—two key voter concerns. But he understands Taiwan will suffer badly if it doesn’t open up. “As the pace of regional economic integration continues to increase, we are afraid that Taiwan might be left in the cold and marginalized.”

He’s on a tight deadline, too. “In our case there is an urgency in the sense that when the Asean-mainland China [free trade agreement] comes into existence [in January] it will affect some of our exports to the mainland,” because certain goods from the 10-member Association of Southeast Asian nations will enter China tariff-free. He cites petrochemicals, machinery, auto parts and some textiles as items of particular concern to Taiwan.

The ECFA is not only about trade with China; Mr. Ma hopes it will solidify trade ties with other countries as well. Taiwan wants to sign free-trade agreements with major economies like the U.S., Japan and Korea, he explains, but can’t because “the mainland has always obstructed our efforts to make such an agreement.”

Taiwan is also trying to figure out how to benefit from China’s growing economy without getting stung by its political system, or flooded with RMB. Mr. Ma says it is important to open up to China in a “very cautious fashion.” “We have already allowed mainland business to invest in Taiwan, but only in roughly 100 items or so.”

In terms of opening the financial sector, he says the two sides have “by and large” agreed to let each other’s banks come in, “but under different conditions.” The ECFA will contain some provisions to “make sure the financial order in this country will not be disrupted as a result.”

He is also confident Taiwan’s institutions will prove resilient in the face of any untoward influence from Beijing. “We have more than 70,000 business firms investing on the Chinese mainland, employing millions of Chinese workers. They could have used that to, you know, interfere in our politics or whatever, and so far that’s not that prominent. This is a very democratic and transparent society. Anything of that sort would certainly be reported and affect the cross-Strait relations.”

Ultimately Mr. Ma thinks opening up will develop its own momentum—and repercussions for China. “We have already transformed Taiwan from a poor, agricultural, relatively not-so-free society into a modern economy, with model democracy. And that has tremendous impact on the Chinese mainland, when they are also struggling to have more economic freedom and possibly political freedom.”

Chinese tourists who visit Taiwan are a central part of his vision. “Not everyone is so impressed with the scenery,” he begins modestly. “But they are very impressed by the society. It’s really a free society. It’s a society [where] individuals respect each other’s rights and privacy, and the right to freedom of speech, and all that. And they also admire some of our democratic institutions, although sometimes they may feel that it’s a little bit chaotic.”

He sees this as a historic opportunity: “I want to create a situation where the two sides could. . . see which system is better for the Chinese culture, for the Chinese people.” It’s a dream his counterparts in Beijing don’t share: China’s leaders are a long way from embracing Taiwan’s democratic experiment, and they have proved quick to grasp the potential threat of democratic influence from Taiwan, placing specific restrictions on Chinese tourists who go there.

As with any country grappling with China’s rise, the success of engagement will turn on how well Mr. Ma knows China. In Taiwan he is seen as being quite Chinese—he speaks Mandarin better than Taiwanese dialect, for example. But critics say he’s too naive about the country he is dealing with. All of the various engagement efforts are, in essence, a bet that Beijing will turn out to be a reliable negotiating partner—a partner that can be trusted to, say, move its missiles away from the coast, or allow the full quota of mainland tourists to leave the country.

Mr. Ma is open to the idea that both sides have a lot to learn about each other. “The people on the Chinese mainland do not quite understand my policy,” he muses as our interview goes into overtime, referring to his “three no’s.” “Sometimes they don’t understand why we don’t want unification. I said, well, it’s quite obvious that conditions for unification are not ripe. And we don’t even know each other that well.”

Ms. Hook is an editorial writer for The Wall Street Journal Asia

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