Retrospective and Prospective Views on the Cross-Strait Relations

I.Increased Economic Integration with Political Impasse

“Peaceful cross-strait relations will allow the next generation to enjoy freedom, democracy and prosperity”, President Ma Ying-jeou said on Jan. 2. “The value of peace is meaningful, especially after decades of cross-strait confrontations,” Ma said. “Creating peace will be our strategy, and peaceful cross-strait relations will lead Taiwan to another victory in the new wave of global competition as a small country.”Surely it is.

Relations between mainland China and Taiwan has significantly improved since the inauguration of the Ma government, especially in terms of economic cooperation and integration. According to China Times poll released last week, more than 60 percent Taiwanese are satisfied by the performance of Ma’s cross-strait relations policy. China-Taiwan economic relations have flourished in the recent past, however, this has little impact upon political relations.

The central problem lies in the fact that no mutually acceptable formula for a long-term or interim political relationship has yet been found. The PRC insists that Taiwan must accept the one country, two systems formula, with the proviso that the system for Taiwan can allow greater self-governance than that applicable to Hong Kong or Macao.

Taiwan authorities, however, have rejected that formula under any condition, and in this position they have the support of a strong majority of the Taiwan citizens. Most polls indicated that approval of the one country, two systems concept had gained some ground, but the favorable vote ranged much lower than the opposite. In contrast, between 70 percent and 80 percent supported the status quo, broadly defined. Thus, the central Ma’s thesis that the Taiwan people want to maintain status quo ( no unification and no independence) rests on solid political ground domestically.

Certain individuals have advocated the principal of federation or confederation as a means of building a political bridge, leaving the issue of sovereignty for the future. Beijing has thus far made it clear that this approach is not acceptable. Thus, the political chasm between the two parties appears unbridgeable for the present, with both sides legitimately claiming that their respective policies have the firm support for their people.

In the very beginning of 2009, the statement of Hu’s six points demonstrates a flexible strategy of Beijing’s policy toward Taiwan, which is replacing peaceful unification with “peaceful development”. The primary goal of peaceful development stage is to increase economic cooperation first and to skip political controversy across the strait.

However, after the WHA and APEC meeting, PRC’s think tanks signaled a changing tone with regards to political agenda at the “Conference on Cross-Strait Relations for 60 years” held in Taipei. Behind these messages lies the fact that Beijing has put pressure on the Ma government to resume a politicaldialogue. Beijing’s push for political agenda certainly would make things more complicated and yield difficulties to the cross-strait relations. From Taiwan’s side, it is premature to assume political negotiation at this point, considering profound differences between pan-blue and pan-green domestically. More creative and flexible thinking is needed if there is to be progress.

II.Retrospective Views on 4th Round Talks across the Strait

In December of 2009, Taipei and Beijing signed three agreements and agreed to place the economic cooperation framework agreement (ECFA) on the agenda at the next round of cross-strait talks next year. The deals signed at the 4th round cross-strait talks — on the fishing industry, quality checks of agricultural products, and standardizing inspections and certification — bring to 12 the number of pacts inked by the two sides across the strait since President Ma Ying-jeou assumed power in Taiwan in May last year.

The two sides had planned to sign four agreements, but a pact on tax matters such as avoiding double taxation was dropped at the last minute because of “technical” problems following a preparatory meeting. The official of Mainland Affairs Council said the Chinese demands raised “technical” problems pertaining to tax matters and not sovereignty.

Both sides initially agreed that income tax on China-based Taiwanese businesspeople should be levied according to where they reside, but the Chinese side later demanded imposing tax based on income sources, which is identical with “Hong Kong Model”. After considering the demands, the Taiwan government concluded they were not in Taiwan’s best interest. Most importantly, Taipei can not accept the “Hong Kong Model”.

At a first glance, it looked like technical problems, but substantially, I believe, it has implications of sovereignty. Legislators from across party lines agreed it was better not to sign the deal at this point, voicing concerns about differences between the tax systems in Taiwan and China and the need to protect personal information.

This deadlock over the tax agreement has two implications. On the one hand, the postponement showed that the government had the public’s best interest in mind and that the Democratic Progressive Party (DPP) was wrong to accuse the Ma’s government of selling Taiwan out. On the other hand, it means the negotiation of ECFA will be tougher and more complicated than we expected, although Chen Yun-lin said that ECFA is purely economic and has nothing to do with politics.

In general, the three pacts signed in last December reflected the goal of cross-strait negotiations, which is benefiting the public and protecting their rights. Chairman Chiang Pin-kung said that the agreements signed with China may benefit certain industries, but eventually the economic and social benefits would reach the public. However, the outcomes perceived by the Taiwan people mainly depend on the monitoring of implementation of 12 agreements between Taipei and Beijing.

III.The Pivotal Challenges for the Ruling Party: The ECFA Effects on Five Metropolitan Elections

The ECFA issue would be a pivotal challenge for the ruling party this year. There were different opinions in Taiwan regarding the ECFA, but many Taiwanese businesses were worried about coming economic integration in the region and wanted to see both sides sign an accord. For Ma government, ECFA is the most important strategy to bridge Taiwan economy with global economy.

Many in the Democratic Progressive Party argue that Ma’s China-friendly push is setting the stage for an eventual Chinese takeover of Taiwan. The DPP says signing an ECFA would flood Taiwan with cheap Chinese products, prompting massive job losses and making Taiwan overly dependent on China. While the DPP focused on the threats and negative effects of ECFA, the Ma government emphasized the opportunities and benefits pertaining the urgency of ECFA.

President Ma Ying-jeou said that the government would continue its efforts to seal free trade agreements (FTAs) with other countries after signing ECFA. This means that, once an ECFA is signed, other countries will be more willing to sign FTAs with Taiwan because China’s opposition will be less.

However, if Beijing were to yield anything after an ECFA, it can be assumed that it would have to be under its “one China” principle — in other words, with terminology clearly stating that Taiwan is part of China, just as the trade pacts signed between Hong Kong and, say, New Zealand, were achieved under the ambit of the closer economic partnership agreement between China and the special administrative region.

For the first time, Taiwan could indeed find itself in a position where it can sign FTAs with other countries. But the rules and conditions would be dictated by Beijing, and however desirable those may be, Taiwan would be forced to enter into FTAs under the condition that it accepts the notion of one China principle.

The ECFA negotiation, initiated in 2010, would have impacts on the election of five special municipalities in December of 2010. The Executive Yuan approved a plan last June to merge Taichung City and Taichung County, Tainan City and Tainan County, and Kaohsiung City and Kaohsiung County into special municipalities, as well as upgrade Taipei County into a special municipality. The new municipalities will be formed on Dec. 25 this year and their mayors will be elected along with the mayor of Taipei City.

The KMT’s frustration in the local election of 2009 has turned the election of five special municipalities into key indicators of 2012 presidential election. Is ECFA going to be a panacea or a poison to the ruling party? It mainly depends on the attitude of Beijing.

Compared with the pro-independence party, DPP, China seems to have no choice but KMT in terms of the preference of 2012 presidential election. The rational option for China is to add credits to Ma government with the ECFA issue. At least two things can be done by Beijing: first, Beijing may vow that China will not oppose Taiwan to sign FTAs with other countries after signing ECFA with China; second, China may promise that Chinese labors will not be allowed to enter into Taiwan’s labor market.

IV.The Role of the United States in the Cross-Strait Relations

Written by Abraham Denmark, head of the Asia-Pacific Security Program at CNAS, and Richard Fontaine, former foreign policy adviser to Senator John McCain, the policy brief stresses that while President Ma Ying-jeou’s cross-strait policies could bring new stability and prosperity they also contain elements of risk. Increased economic integration will necessarily challenge Taipei’s autonomy and hand China a potent “instrument of influence” over Taiwan. By reducing trade and investment, restricting Chinese tourists from visiting Taiwan, or eliminating cross-strait flights, Beijing could significantly disrupt Taiwan’s economy without threatening its own. In this sense, ECFA and other agreements, could hand Beijing a potent non-military tool of coercion”.

Helping Taiwan reduce the risk of cross-strait policies is consistent with the long-term interests of the United States. I would suggest, therefore, at least two actions the U.S. should take into account.

First, the U.S. should expand trade relations with Taiwan and foster diplomatic support to countries (such as ASEAN nations) seeking to do the same. As Taiwan’s economy becomes increasingly interconnected with that of mainland China, the U.S. should encourage Taiwan’s emergence as an important regional and international trading partner. The first step that U.S. can adopt is to resume the negotiation of TIFA (Trade and Investment Framework Agreement) with Taiwan.

Second, the White House needs to continue arms sales to Taiwan and help analyze its defense posture in a changing military and diplomatic environment. Arms sales have an importance beyond their military utility — they demonstrate a tangible American political commitment to Taiwan. The agenda of TIFA and arms sales should not be disrupted by the ban on the import of American beef.

As Beijing improves its ties with Taiwan, the United States will have to play a delicate game, balancing interests in constructive relations with a rising China with the desire to remain on good terms with the small democracy in Taiwan. Keeping an autonomous Taiwan democratic and prosperous is not only beneficial to the U.S. interests in East Asia, but also positive for the peaceful development across the strait.

（本文刊載於99.01.07亞太和平研究基金會舉辦之「和平論壇」研討會，本文代表作者個人意見）