The Political Economy of Cross-strait Relations: A Taiwanese Perspective * Chun-Yuan Lin ** Abstract Improvements in transportation and shipping and advancements in telecommunication technology have greatly lowered the cost of international trade and services in the age of globalization. Following changes in the international system that occurred alongside the development in Cross-strait (Taiwan-China) relations from confrontation to open reforms in China to increased bilateral exchange in recent years, currently, China serves as the largest trading partner of Taiwan. However, history and politics continue to play a corrosive role in relations across the Taiwan Strait and spillover into the development of economic relations. In March 2014, student activists took over Taiwan s legislative assembly in an effort to stall the passing of the Cross-strait service trade agreement, a move that once again halted the progress of institutionalization across the Strait. In light of the Sunflower student movement in 2014, this paper seeks to address the following issues: (1) what is the position of anti-service trade activists and the effect of the Sunflower Movement on Cross-strait relations? (2) What is the implication of party politics in Taiwan on Cross-strait economic development? (3) Are there any reasons for the continued expansion of economic relations between Taiwan and China? Keywords: Cross-strait Relations, Globalization, Economic Relations, Political Economy * This draft is prepared for presentation at the International Studies Association Asia-Pacific (ISA AP) Conference, Hong Kong, June 25-27, 2016. ** PhD Candidate, Graduate Institute of International Politics, National Chung Hsing University
Globalization and Cross-strait Relations Since the end of WWII, the world witnessed a rapid expansion in interstate trade. Douglas Irwin highlights the phenomenon as globalization trade expansion accompanied by the increase in capital flow, tourism, migration and interstate engagement. Perhaps the biggest effect of globalization came in Asia, where its distribution as a portion of total world trade increased steadily, increasing from approximately 16% in 1980 to nearly 30% in 2016. In the region, China stands out in the ranks of exporting countries. 1 Robert Keohane and Joseph Nye think that interdependence and globalization are both multilayer phenomena. While a major aspect of globalization relates to economics, the phenomenon also includes several important forms. First, in terms of economic globalization, goods, services and capital travel across long distances while information is also exchanged alongside trade. Meanwhile, economic globalization is also concerned with the organization of production networks. Asia s low wage production chains hold vast influences over the US and European markets. Second, military globalization relates to the interdependence of military power, threats and compromises over long distances. The balance of terror between the US and the Soviet Union during the Cold War is a good demonstration of military globalization. The superpowers shared a tense strategic relationship. Not only did both powers establish mutually exclusive transnational alliances, enough fire power was available on both sides to carry out mutually assured destruction. Third, environmental globalization focuses on the influence of materials on human health and welfare in the long distance traveling process in the atmosphere or at sea. Examples of environmental globalization include damages to the atmosphere caused by chemicals and spreading of the AIDS virus from Africa to the world in the 1970s. Such phenomena are mostly cased by transnational human activities. Fourth, social and cultural globalization pertains to intellectual thought, imagination and information including religious movement and the communication of scientific knowledge. An important aspect of social globalization is social realization and the imitation and learning of institutions, what the sociologists term as isomorphism. The flow of ideals and information often follow the flow of military and economic globalization and influence developments in the society and the market. On a deeper level, social globalization strongly affects the individual and his cultural and political identities. In short, globalization expanded commerce and deeply influenced the development of the world. Not excluded to political, economic, military, social and 1 Douglas Irwin, Trade and Globalization, in Michael Weinsten ed., Globalization: What s New? (New York: Columbia University Press, 2005), pp.19-35. 1
cultural aspects, globalization integrated the world into a system of complex interdependence. 2 The Chinese economies Taiwan and China developed amidst rapid changes in the global system. In the 1970s, reaping benefits from US trade concessions as a result of Washington s competition with Moscow, Taiwan rose to the fore of the Asian Tigers in terms of economic development and rapidly accumulated foreign reserves. On the other hand, following open reforms in 1979, China became a global manufacturing ground that attracted torrents of investments from across the world. In contrast with trade making up merely 8% of China s GDP under Mao Zedong, by 2008, the figure has surged to 59% of the domestic economy. Real export increased 500% between 1993 and 2008, which allowed China to edge out Japan as the top exporter in Asia. In 2010, China became the largest exporting country in the world. In 2014, after surpassing Germany in 2007 and Japan in 2010, China overtook the US as the largest economy in the world. Meanwhile, with a foreign currency reserve that exceeds 3 trillion USD, China has already become the richest country in the world. 3 Trade across the Taiwn Strait: Developments and Dilemmas The Developments After more than six decades of separation, Taiwan and China have been locked into a security dilemma while parting ways in economic and political development. Although exchange visits on the personal level have been open for many years, mutual trust between Taipei and Beijing remains short and continues to be the biggest challenge between the two governments. While Taiwanese citizens have been allowed to visit their families in China since 1987, frequent interactions that further led to more economic activities across the Strait are no match for ideology, giving rise to the phenomenon of cool politics and hot economics (zhenglengjingre). Somewhat irrevocably, in the large context of globalization, market forces gradually increased Taiwan s level of dependency on the Chinese market and caused an asymmetric shift towards China in terms of Cross-strait economic relations. 4 Since May 2008, under the KMT, the Strait Economic Foundation (Taiwan) and the Association for Relations Across the Taiwan Strait (China) recommenced talks on the foundation of the 1992 Consensus. Until August 2015, through the SEF-ARATS talks, Taipei and Beijing settled on 23 agreements and 2 consensuses spanning tourism, postal service, shipping, investment and financial cooperation. Through 2 Robert Keohane and Joseph Nye, "Globalization: What's New? What's Not? (And So What?)" Foreign Policy, Vol. 118 (Spring 2000),pp.104-120 3 Edward Steinfeld, "Playing Our Game: Why Chinas Rise Doesn t Threaten the West " (Oxford:Oxford University Press, 2010),pp.70-73 4 張亞中, 全球化與兩岸統合 ( 臺北 : 聯經出版事業股份有限公司,2003 年 3 月 31 日 ), 頁 70-79 2
non-political cooperations, Taiwan and China seek to move away from realpolitik and economic interests towards the establishment of shared rules and institutions that may have potential cultural spillovers in the future. Figure one shows trade figures between Taiwan and China from 1978-1991. The figures are taken from Hong Kong custom service, as it was a time when relations across the Strait have just commenced. As China and Taiwan strictly observed no engagement policies before the 1990s, Hong Kong served as a testing ground for bilateral trade. Even though trade across the Strait expanded, in 1991, net trade between China and Taiwan came to merely 6 billion USD with Taiwan achieving a surplus trade of 3.5 billion USD. Figure 1: Cross-strait Trade (1978-1991) Unit: billion USD Year Volume of Trade Export to Taiwan Import from Taiwan Taiwan Trade Sum Proportion Sum Proportion Sum Proportion Surplus 1978 0.5 0.5 0.0-0.5 1979 0.8 67.4 0.6 21.7 0.2 41900.0-0.4 1980 3.1 303.9 0.8 35.7 2.4 1019.1 1.6 1981 4.6 47.6 0.8-1.3 3.8 63.4 3.1 1982 2.8-39.4 0.8 12.0 1.9-49.5 1.1 1983 2.5-10.8 0.9 7.1 1.6-18.6 0.7 1984 5.5 123.0 1.3 42.2 4.3 169.0 3.0 1985 11.0 99.1 1.2-9.4 9.9 131.8 8.7 1986 9.6-13.3 1.4 24.1 8.1-17.7 6.7 1987 15.2 58.7 2.9 100.7 12.3 51.3 9.4 1988 27.2 79.5 4.8 65.7 22.4 82.7 17.6 1989 34.8 28.0 5.9 22.5 29.0 29.2 23.1 1990 40.4 16.1 7.7 30.4 32.8 13.2 25.1 1991 57.9 43.3 11.3 47.1 46.7 42.3 35.4 Figure two shows trade figures between Taiwan and China from 1992-2015. 5 The figures are taken from the Mainland Affairs Council (MAC) an important fact to note, as MAC began recording official statistics on China affairs. Under the 1992 Consensus, trade increased annually. In 1993, Chinese export to Taiwan totaled 1.46 billion USD and witnessed a 30% increase compared to the previous year. In terms of import from Taiwan, the volume of import totaled 12.9 billion USD, a figure that grew 5 兩岸經濟統計月報 264 期, 2015 年 9 月 28 日下載, 行政院大陸委員會, http://www.mac.gov.tw/public/mmo/mac/268_1.pdf 3
105.6% from the previous year. Even though political relations dipped across the Strait when Taiwan was under the DPP government from 2000 to 2008, bilateral trade continued to expand, with Taiwan achieving surpluses in the range of 50 to 70 billion USD. Year Figure 2: Cross-strait Trade (1992-2015) Volume of Trade Export to Taiwan Import from Taiwan Growth Growth Growth Sum Sum Sum Rate Rate Rate Unit: billion USD Taiwan Trade Surplus 1992 74.1 23.9 11.2-0.6 62.9 34.7 51.7 1993 144.0 94.3 14.6 30.5 129.3 105.6 114.7 1994 163.2 13.4 22.4 53.2 140.8 8.9 118.4 1995 178.8 9.5 31.0 38.4 147.8 5.0 116.8 1996 189.8 6.1 28.0-9.6 161.8 9.5 133.8 1997 198.4 4.5 34.0 21.2 164.4 1.6 130.5 1998 205.0 3.3 38.7 13.9 166.3 1.1 127.6 1999 234.8 14.5 39.5 2.1 195.3 17.4 155.8 2000 305.3 30.1 50.4 27.6 254.9 30.6 204.5 2001 323.4 5.9 50.0-0.8 273.4 7.2 223.4 2002 446.7 38.1 65.9 31.7 380.8 39.3 314.9 2003 583.6 30.7 90.0 36.7 493.6 29.7 403.6 2004 783.2 34.2 135.5 50.4 647.8 31.2 512.3 2005 912.3 16.5 165.5 22.2 746.8 15.3 581.3 2006 1078.4 18.2 207.4 25.3 871.1 16.6 663.7 2007 1244.8 15.4 234.6 13.1 1010.2 16.0 775.6 2008 1292.2 3.8 258.8 10.3 1033.4 2.3 774.6 2009 1062.2-17.8 205-20.7 857.2 17.1 652.2 2010 1453.6 36.8 296.7 44.7 1156.9 35.0 860.2 2011 1600.3 10.1 351.1 18.3 1249.1 8.0 898.0 2012 1689.6 5.6 367.8 4.8 1321.8 5.8 954.0 2013 1972.8 16.7 406.5 10.6 1566.3 18.4 1159.8 2014 1983.1 0.55 462.8 13.8 1520.3-2.9 1057.5 2015 1882.06-0.05 448.98-0.028 1433.06-0.573 984.08 Total 20218 4057 16160.6 12103.6 Overall, in 2015, trade between China and Taiwan reached 188.2 billion USD with Chinese export to Taiwan totaling 44.9 billion USD and import from Taiwan totaling 143.3 billion USD. The numbers show that China is Taiwan s biggest export market and source of trade surplus. At the same time, the numbers also entail that Taiwan s economic dependence on China continues to grow. 6 6 郭彩萍, 大陸成臺灣最大貿易夥伴和貿易順差來源地 2009 年 8 月 26 日, 2015 年 5 月 28 日下載, 中國經濟網, 4
The Dilemmas Due to China s vast population, low wage level and large market, cost and market considerations drove many Taiwanese corporations towards the Mainland. Following the gradual migration of Taiwan s small and medium enterprises and high tech industries to China, job opportunities on the island and the level of unemployment increased. As dictated by the factor-price equalization theory, Taiwan s westward lean also has the effect of equalizing its wages to a comparable level with China. According to a report released by the Director General of Budget, Accounting and Statistics in February 2016, in 2015, the monthly income of Taiwanese citizens averaged 48,490 NTD, slightly lower than the mean of 48,774 NTD in 1998. 7 The reason for the curse over Taiwan s low wage stems from an economic structure that remains unable to effectively respond to industry flight and calls for restructuring. March 2014, the Sunflower Movemovent broke out in Taiwan, an event that witnessed student protest against the Cross-strait service trade agreement and occupation of the legislative building. The movement had a direct impact on domestic politics, as eight months later, the majority KMT party suffered a massive defeat in the nine-in-one election. Meanwhile, the service trade agreement remains stagnant, which undermines the institutional building process for trade between Taiwan and China. In January 2016, DPP candidate Tsai Ing-wen defeated KMT candidate Eric Chu in the presidential election, which endowed the DPP with the final piece in the party s quest for a all ruling majority government. The new government intends to neglect the 92 Consensus and distance itself from trade with Beijing, a move that may risk the eventual severance of institutions across the Strait that has been gradually established since 2008. Conclusion In short, in terms of economic development, Taiwan cannot avoid China. Globalization offers an opportunity for Taiwan to enter the global market and strengthen its vulnerable security situation through interdependence. Meanwhile, economic interactions across the Strait have brought about many opportunities for Taiwan and China. In the age of globalization, Cross-strait relations have gradually shifted from confrontation to cooperation. Nonetheless, many issues continue to challenge the future of trade between Taiwan and China. Domestically, Taiwan s leadership needs to place more efforts in generating national consensus on important issues beyond partisan or personal interests. On the other hand, in terms of http://big5.ce.cn/gate/big5/intl.ce.cn/specials/zxgjzh/200908/26/t20090826_19870722_1.shtml 7 行政院主計總處, 薪資及生產力統計, 2016 年 3 月 19 日, 2016 年 3 月 19 日下載, 行政院主計總處, http://www.stat.gov.tw/lp.asp?ctnode=527&ctunit=1818&basedsd=29 5
developments in regional integration, Taiwan needs to make active efforts for participation in order to avoid further marginalization from the world. Institutional establishments between Taiwan and China may provide opportunities for Taiwan to finally set foot in regional integration in the near future. 6