Brookings: Series - Taiwan-U.S. Quarterly Analysis

Taiwan Economy: Near-term Uptick, Longer-term Challenges

Don Shapiro — Mon, 11 Mar 2013 00:00:00 -0400

Understanding Taiwan’s economic prospects at any given time starts with consideration of the state of the world economy. With export value equivalent to more than 60 percent of Gross Domestic Product, Taiwan is among the world’s most trade-dependent economies. Although its population of 23 million ranks 51st worldwide, Taiwan’s trade volume – an estimated $572 billion last year according to Taiwan’s customs statistics – is the 19th largest. Possessing scant natural resources, the island economy imports virtually all its energy needs and raw materials; on the export side, its manufacturing operations satisfy a large proportion of global demand for semiconductors, flat panel displays, precision machine tools, high-end bicycles, and a wide range of other products. Massive additional production is carried out by Taiwanese-owned factories in China, strengthening the parent companies’ bottom line.

When the world economy is in good shape, Taiwan invariably enjoys boom conditions. In periods of uncertainty such as the international economy has been experiencing recently, the impact is quickly seen on the order books of Taiwan’s exporters.

Last year’s economic performance demonstrates the connection. Before the year began, the leading forecasting organizations were projecting quite healthy economic growth for Taiwan in 2012, in the range of 4-5 percent. But the prolonged European debt crisis, lackluster pace of recovery in the United States, and slowdown in China’s growth combined to cut heavily into overseas sales for Taiwan’s goods – especially for the computers, components, and other information-technology products that represent the core of Taiwan’s manufacturing strength.

Throughout the year, the forecasters kept revising their projections for Taiwan’s growth downward. The latest calculations put final GDP growth for last year at an anemic 1.26 percent, and even that level was achievable only because of a much stronger than expected 3.72 percent growth registered in the fourth quarter. On the trade ledger, Taiwan’s year-end customs figures show a 2.3 percent drop in export value in 2012 from the previous year, to reach $301.1 billion, and a 3.8 percent decline in imports to $270.7 billion. The outlook for 2013 appears far brighter – subject of course to unforeseen changes in conditions in major markets around the world (so far, at least, economists do not view the effects of the sequestration in the United States as likely to put much of a crimp in U.S.-Taiwan trade). The Taiwan government’s Directorate General of Budget, Accounting and Statistics (DGBAS) is currently projecting 3.59 percent economic growth for this year, and most forecasts from think tanks and financial institutions have been within a similar 3.4-3.6 percent band. Where there have been exceptions, the difference has been on the high side, including a 4.2 percent projection by HSBC and 4.23 percent by Taiwan’s Cathay Financial Holding. “Taiwan starts 2013 on a firmer footing on the back of China’s recovery and better-than-expected U.S. growth,” HSBC Greater China said in a report.

Taiwan, in fact, seems poised to be among the best performing economies in the East Asian region this year after China. The International Monetary Fund is forecasting 3.6 percent growth for South Korea, 3.5 percent for Hong Kong, 2.9 percent for Singapore, and 1.2 percent for Japan.

For Taiwan, a current bright spot is its mounting trade with Southeast Asia. Last year when Taiwan recorded decreases in its export shipments to every other major market, its sales to the ASEAN-6 countries of Thailand, Malaysia, Indonesia, Singapore, the Philippines, and Vietnam jumped by an impressive 9.8 percent. The $55.7 billion total equaled 18.5 percent of Taiwan’s overall exports, up from a 16.5 percent share in 2011. Continued expansion of trade with a flourishing ASEAN is expected to reinforce the positive outlook for 2013.

The once rapid growth in trade with China, in contrast, may begin leveling off, due to an import-substitution effect as the PRC develops more of its own sources of supply for goods like petrochemical intermediates and industrial machinery and equipment. In 2012, direct shipments to China accounted for nearly 27 percent of Taiwan’s total export value, but an even more telling figure is the almost 40 percent share taken together by China and Hong Kong, since many of the items sold to the former British colony are later transshipped to the mainland proper.

At the same time as the import-substitution factor plays out, however, some Taiwanese products may gain attractiveness in the China market as a result of cross-Strait trade agreements now being negotiated. The Economic Cooperation Framework Agreement (ECFA) signed by representatives of Taiwan and China in 2010 has so far had limited impact, since only an “Early Harvest” portion covering 539 Taiwanese commodities and 267 products from China has gone into effect. The tariff concessions for the Early Harvest items were also phased in over three years, and only this year reach the zero-tariff level. But the ECFA framework calls for additional agreements – with a pact on trade in services reportedly close to completion, and one covering a broad range of goods due to follow next year.

The trade relationship with the United States, after being eclipsed for a time by the dramatic rise in cross-Strait commerce, now appears to be coming in for greater attention. After a long period of soured government-to-government trade relations due to Taiwan’s restrictions on the import of American beef products on alleged food-safety grounds – regulations that the U.S. side contended were blatantly protectionist and without scientific merit – Taiwan last fall dropped its prohibition on beef containing traces of the leanness-enhancing feed additive ractopamine. That step opened the way for resumption of high-level negotiations under the 1994 bilateral Trade and Investment Framework Agreement (TIFA). Once held routinely on an annual basis, those talks had not taken place since 2007 due to the beef dispute – but they are being conducted this week in Taipei despite continuing U.S. dissatisfaction that the market for pork was not opened at the same time as beef.

The TIFA talks themselves will deal mainly with fairly technical regulatory matters, but some bigger-picture topics are also likely to be raised. Taiwan is known to be interested in discussing the possibility of the two sides entering into a bilateral investment agreement or even a free trade agreement, a goal for which some influential members of the U.S. Congress have recently expressed their support.

A few decades ago, the United States was by far Taiwan’s largest market, at one point taking close to half of all its exports. Now it is second after China (or third if ASEAN is treated as a single market), last year directly absorbing $33 billion worth of Taiwan products for an 11 percent share. Not to be overlooked, in addition, is that many of the Taiwanese goods shipped to China are components and materials that wind up in finished products – mainly made in Taiwan-invested factories – destined for American buyers.

For the United States, Taiwan is the tenth largest trading partner and the sixth largest market for agricultural products. Taiwan’s total imports from the United States came to $23.6 billion last year.

Composition of GDP

Besides the contribution of exports, the primary momentum behind Taiwan’s GDP growth this year is expected to come from improved levels of private domestic investment. After negative growth in that category in both 2011 (down 1.26 percent) and 2012 (minus 1.35), DGBAS forecasts that private investment will rebound by 5.51 percent this year as companies increase capacity to take advantage of the better export opportunities.

The Taiwan government is also optimistic about the potential for attracting China-based, Taiwan-owned enterprises to “come home” with new investments on the island. So far only a handful of such cases have been announced, including projects by Catcher Technology, a leading maker of metal housings for computers, and Eminent Luggage. But a number of large companies are known to be discussing investment opportunities with the Taiwan authorities.

“The differential in production cost between China and Taiwan has narrowed and in some cases disappeared, especially when factored for productivity,” says Gordon Sun, director of the Macroeconomic Forecasting Center at the private Taiwan Institute of Economic Research (TIER). He notes that in Shanghai and some other coastal areas of China, labor and property costs may be even higher than in Taiwan. Rather than move to less-costly locations in the Chinese interior, which may present logistical challenges, some operations may prefer to place more of their resources in Taiwan. Sun says the machinery industry is one of the most likely to select Taiwan as the site for expansion projects.

To induce China-based businesses to return, the government is offering help with land acquisition in special economic zones where investors will be free of certain regulatory restrictions. The benefits will include the right to employ larger quotas of less-expensive foreign labor for the first two years of operation.

Foreign direct investment (FDI) is expected to make up only a small part of the overall private-investment equation. Last year Taiwan’s Investment Commission approved a total of $5.5 billion in foreign investment projects, an improvement over the $3.8 billion in 2010 and $4.9 billion in 2011. Taiwan’s FDI totals, however, continue to be well below the levels attracted by other countries in the region. One reason may be the reluctance of large private equity funds to propose new projects in Taiwan after several highly publicized cases in recent years in which investment applications from PE companies were not approved. Although the reasons for the lack of approval were never explained to the satisfaction of the applicants, the authorities appeared uneasy about the possibility that prominent companies might be delisted from the Taiwan Stock Exchange.

Another segment of the economy expected to do better this year is the banking sector, long plagued by low profit margins due to over-competition within a relatively small market. Recent cross-Strait agreements permitting Taiwan banks to start doing business in renminbi – mainly offering loans to Taiwanese companies with manufacturing plants in China – should present Taiwan’s financial institutions with new and more remunerative lending opportunities.

Other than exports and private investment, strong drivers of GDP growth are likely to be absent in 2013. DGBAS expects private consumption, for example, to see only modest 1.45 percent growth this year. After a disappointing 2012, both private companies and the government were more frugal than usual in handing out annual bonuses this Chinese New Year, and there was no pay raise for civil servants and many private-sector employees this year. In addition, notes TIER’s Sun, at least a million Taiwanese – mostly relatively high-income technical and managerial personnel – are currently living and working in China. “That means they’re making the bulk of their purchases on the mainland rather than adding to local consumption,” he says.

Although the fiscal situation in Taiwan has not been as dire as in many countries that have felt obliged to adopt stringent austerity measures, rising budget deficits are a serious concern. As a result, increased public spending on infrastructure and services to help provide economic stimulus has been ruled out. Instead, government investment is set to decrease this year – dropping by 8 percent on top of a 10.8 percent decline in 2012. Even for many construction projects already approved, the schedule appears to have been slowed down.

As a proportion of GDP, tax revenue in Taiwan is an extremely low 12.8 percent – about half the level in the United States, which is already well below that of Europe. Budgetary pressure has further heightened following the decision in 2010 to lower the top rate for corporate income tax from 25 percent to 17 percent to bring Taiwan more in line with regional competitors for investment Singapore and Hong Kong. In an effort to respond to criticism that a disproportionate amount of the tax burden falls on the salaried class, the government last year reinstituted a capital gains assessment on securities, but the legislature passed only a watered-down version, leading to the resignation of the finance minister, a leading economic reformer.

Other key indicators, however, have contributed to a sense of optimism about 2013. The unemployment rate, which in 2010 stood at more than 5 percent, an unusually high level for Taiwan, has continued to decrease; it is now 4.16 percent and economists consider that it may fall below 4 percent by the end of this year. At the same time, Taiwan has been enjoying relative price stability. Despite hikes in electricity and gasoline prices as the government reduced what were in effect subsidies to consumers by state-owned enterprises, as well as higher vegetable prices following a spate of typhoons, the consumer price index in 2012 rose by a still-modest 1.93 percent and is expected to be even lower this year.

New directions

Since coming into office in 2008, the administration of President Ma Ying-jeou has put much of its emphasis on fostering better cross-Strait relations, looking to closer ties with the booming Chinese market to help spur economic growth in Taiwan. The result has been most evident in the tourism sector. For years, Taiwanese travelers flocked to China for business and sightseeing, but barriers on both sides blocked traffic in the other direction. Now Chinese visitors – mainly in tour groups but recently individual travelers as well – are helping to balance the tourism flow, bringing welcome business to Taiwan’s hotels, restaurants, shops, and tour-bus operators. Of the 7.3 million foreign visitors to Taiwan last year, 2.5 million were mainland Chinese.

Inbound tourism in general, long neglected in favor of manufacturing, is now being promoted more heavily as a non-polluting industry that contributes to easing the over-reliance on exporting. Although Chinese tourists are the most numerous at popular sights such as Sun Moon Lake, Taroko Gorge, and the Taipei 101 skyscraper, Taiwan is also attracting increasing numbers of visitors from Japan, Korea, Hong Kong, and Southeast Asia.

Looking longer-term, the Ma administration has identified a series of objectives as necessary to set the groundwork for Taiwan’s continued prosperity, referring to them as key pillars of future economic development. The most important among them are Trade Liberalization, Industrial Innovation, and Energy Security – each designed to overcome what could otherwise be a serious obstacle to Taiwan’s economic viability.

For Taiwan, trade liberalization is less a matter of lowering tariffs – most of which have been at reasonable levels since Taiwan’s 2002 accession to the World Trade Organization – than of eliminating protectionism in the form of regulatory barriers such as inadequate transparency. As a result of Beijing’s efforts to isolate Taiwan internationally, Taiwan has largely been left out of the wave of trade liberalization that has taken place over the past decade as countries have increasingly entered into bilateral free trade agreements or worked to set up multilateral trade blocs such as the Trans-Pacific Partnership (TPP) that the United States is currently negotiating with 10 other governments. Another such nascent bloc is the Regional Comprehensive Economic Partnership (RCEP) centering around ASEAN and China. If Taiwan remains excluded from such arrangements, it risks seeing its exports become increasingly uncompetitive in other markets.

With its ECFA agreement with Taiwan already in place, China now seems to have less objection to Taiwan concluding trade pacts with other countries. Taiwan expects to complete an FTA with Singapore in the coming months, and another with New Zealand is under negotiation. But those are small economies, and it is unclear whether China’s more open attitude would extend to Taiwan signing free trade agreements with larger trading partners such as the United States or to participating in the TPP and/or RCEP. Also uncertain is whether Taiwan is willing to adopt major regulatory reforms at this stage to demonstrate its readiness to join such undertakings, or whether it would be reluctant to give up any chips before actually engaged in negotiations.

The need to foster more industrial innovation stems from Taiwan companies’ longstanding reliance on contract manufacturing for other corporations. That business model served Taiwan well for many years, but it offers much lower profit margins than marketing unique products under one’s own brand. The government is encouraging companies to engage in more R&D, and the huge government-backed Industrial Technology Research Institute provides support to companies in the private sector. Still, with some exceptions such as the highly successful Taiwan Semiconductor Manufacturing Co., Taiwanese firms are facing an increasing challenge in competing against industrial giants like Korea’s Samsung.

The issue of energy security may be coming to a head later this year as the government has agreed to the opposition party’s calls for a national referendum on whether Taiwan should continue with nuclear-power development. The vote will determine whether a fourth nuclear plant, construction of which is nearing completion after numerous delays, would be allowed to become operational. Japan’s Fukushima disaster of 2011 lent added momentum to what was already a strong anti-nuclear movement in Taiwan.

Risks regarding nuclear safety will need to be weighed against the risk of serious power shortages and substantially higher electricity costs if Taiwan abandons the nuclear option. Nuclear power currently accounts for about 17 percent of the electricity generated in Taiwan, and President Ma has already stated that the existing three nuclear plants will be decommissioned when their authorized 40-year lifespans expire between 2018 and 2025. Without a new nuclear plant or extension of the old ones, it is questionable whether Taiwan has feasible options for meeting its energy needs. Renewable sources such as solar and wind energy are not sufficient to take up that slack, coal-fired plants face opposition on environmental grounds, and heavy reliance on liquefied natural gas (LNG) – which is highly expensive to transport and store – could be so expensive as to undermine Taiwan industry’s competitiveness.

Besides the energy challenge, the new cabinet of Premier Jiang Yi-huah, who took office last month, will have to overcome resistance from various quarters to seek to push through some needed reforms. Among the most pressing:

Overhaul of the pension system, especially for civil servants, who currently receive far more generous terms than available to private-sector employees. Given the current fiscal crunch, the government finds it difficult to maintain those conditions, but reform risks alienating some of the staunchest backers of the ruling Kuomintang (Nationalist Party).
Adjusting the rates charged for water usage, which are among the lowest in the world, leading to wastage and providing no incentive for conservation. Scientists say Taiwan may be in for one of its periodic droughts later this year, exacerbating the problem, but consumers are likely to complain vociferously about higher prices, especially after last year’s increases in electricity tariffs.
Encouraging another round of consolidation in the banking sector, considered to be one of the least efficient areas of the economy and a drag on Taiwan’s development. Of the 38 domestic banks, some of the largest are government-owned, but suggestions about selling off those assets trigger criticism that instead of serving the public interest, the result would be only to increase the power of Taiwan’s large business groups.

Assuming that Taiwan finds answers to its energy and other challenges, however, it has the potential to develop into a prosperous commercial hub for multinational business operations in Asia, a recent American Enterprise Institute study concluded. “Taiwan Inc.: A Home for Global Business,” a paper co-authored by Dan Blumenthal, Rupert Hammond-Chambers, Michael Mazza, Gary Schmitt, and Derek Scissors, noted Taiwan’s many advantages, including its central geographic location, technology manufacturing prowess, skilled labor force, and respect for the rule of law. It urged the U.S. government to find ways to encourage the Taiwan economic reform process for the sake of economic and strategic benefits for both parties.

Authors

Don Shapiro

Image Source: © Pichi Chuang / Reuters

Diplomatic Impetus and Altruistic Impulse: NGOs and the Expansion of Taiwan's International Space

Wei-chin Lee — Mon, 16 Jul 2012 00:00:00 -0400

When Taiwan’s President Ma Ying-jeou of the Nationalist Party (Kuomintang, KMT) succeeded former President Chen Shui-bian of the Democratic Progressive Party (DPP) in Taiwan’s democratic regime change in May 2008, it signaled some deep and profound shifts in Taiwan’s cross-Strait relations with the People’s Republic of China (PRC). Ma’s proclamation, in his first inaugural address, of “no unification, no independence, and no use of military force” under the “framework of the Republic of China Constitution” represented a departure from the cross-Strait policy of two former presidents, Lee Teng-hui (1988-2000) and Chen Shui-bian (2000-2008). Both former presidents’ politically charged and fiery rhetoric, and pursuit of elements of de jure statehood status for Taiwan, exacerbated China’s fear of Taiwan’s creeping but eventual split from the “Chinese motherland.” The Ma administration’s policies have helped increase cross-Strait exchanges in areas with low political tension, such as business transactions, tourism, and cultural visits.

However, the terrain of high politics remains full of sensitivity and controversy, and neither Taiwan nor China has healed as easily or in the same ways as in those arenas of low politics. For example, since 2008 President Ma has sought to take advantage of improved relations with China to expand Taiwan’s participation in inter-governmental organizations (IGOs). Although China has accepted the diplomatic truce for the time being, its unyielding adherence to its self-defined “one China” principle has continued to be an insurmountable barrier for Taiwan’s IGO participation.

Consequently, an active push for enthusiastic engagement in international activities through non-governmental organizations (NGOs) has surged as an alternative approach to the expansion of Taiwan’s international space. NGOs have long been cherished as an avenue through which Taiwan can navigate the turbulence of globalization, the rapid revolution of information technology, and the high degrees of complexity and interdependence in numerous transnational and interconnected issue areas across which various powers and interests compound and compete. By complementing the role and function of states, NGOs are an international venue for the representation and articulation of Taiwan’s public interest in areas such as the promotion of human rights, environmental sustainability, local community infrastructure construction, public health advancement, agricultural assistance, and humanitarian reliefs. They also represent an important forum in which Taiwan can share its experiences, learn from the experiences of others, and develop networks of connections.

The proliferation of Taiwanese NGOs stems from Taiwan’s democratization in late 1980s, the dwindling number of Taiwan’s IGO memberships, an increase of domestic social wealth, a desire to return favors to the international community for its previous good deeds to Taiwan, and human altruism. According to governmental registration records, currently there are more than 40,000 NGOs in Taiwan, and more than 2,000 of them have conducted cross-national activities or are affiliated with international NGOs (INGOs).[1] Firm commitment, specific missions, impartiality and independence in political stands, and budgetary efficiency have given some of Taiwan’s NGOs access to issue areas in which China has prevented Taiwan’s government from participating. Therefore, in order to help these cross-national NGOs’ work, and to augment Taiwan’s international participation and visibility without being bogged down by the political obstacles of Taiwan’s statehood status, Taiwan’s Ministry of Foreign Affairs (MOFA) set up a NGO Affairs Committee in October 2000.

Features of Taiwan’s Transnational NGOs

Taiwan’s NGOs exhibit several distinctive characteristics in their external endeavors.

A supplementary role for Taiwan’s diplomacy

While NGOs are usually autonomous and self-reliant in agenda setting and implementation, the government is eager to partner with NGOs by offering needed financial assistance and logistical support to NGOs to host international conferences in Taiwan or attend activities abroad. The government also authorizes specific NGOs to work in certain issue areas that are better tackled through unofficial channels. MOFA allocated US$ 12.7 million for NGO activities in 2008 with approximately three quarters of the budget slated for several major government-sponsored NGOs such as the Taiwan Foundation for Democracy (TFD) for parliamentary diplomacy, academic exchanges, and collaboration with foreign think thanks; and the Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) for matters related to external business and trade.[2]

Thus, as an unofficial connection with other advanced democracies, the TFD actively participates in the World Forum for Democratization in Asia and the World Movement for Democracy, a global network initiated by the Washington, DC-based National Endowment for Democracy. The same applies to CACCI, which serves as a link to other national chambers of commerce in 27 Asian and Western Pacific countries and holds an NGO consultative status in the UN.

The rest of the MOFA budget for NGOs in 2008, more than US$ 3 million, helped facilitate cross-national engagement by other socially organized domestic and international NGOs.[3] In addition to hosting workshops and seminars for future NGO talents to learn more about the intricacies and operations of international NGOs in global affairs, MOFA has launched an annual program to sponsor several domestic NGO administrators for two-month self-sought internships at reputable international NGOs such as Mercy Corps and the American Council for Voluntary International Action (InterAction). The purpose is not only to acquire knowledge and gain experience, but also to broaden access to NGO transnational advocacy networks. The government-organized and -funded International Cooperation and Development Fund (TaiwanICDF) hosts workshops for both transnational and Taiwanese NGOs for multilateral exchanges of experiences and expertise. TaiwanICDF also works with domestic NGOs on a wide range of overseas development projects.

Naturally, encouragement and subsidies from public coffers raise concerns about NGOs’ independence and functional impartiality. Amazingly, in light of Taiwan’s lively and noisy media coverage and critical legislative scrutiny, there has been no report of serious governmental interference or impropriety in NGOs’ agenda setting or operational autonomy. Rather than directing and monitoring NGOs’ processes and behaviors, the government cares more about the diplomatic outcomes these NGOs could generate—enhanced status, image, and visibility in the international community of a compassionate, democratic, and pro-active Taiwan.

NGOs’ supplementary role in diplomacy is best illustrated by the campaign to end Taiwan’s exclusion from the global public health network through the World Health Organization. Taiwan’s inability to receive urgent international consultation and assistance during the 2003 SARS public health scare, a situation condemned by Taiwanese officials as “medical apartheid,” led public health NGOs such as the Foundation of Medical Professionals Alliance in Taiwan and the Taiwan International Medical Alliance (TIMA) to lobby consistently for years for Taiwan’s participation in the global health network. Along with the government, these health NGOs exerted pressure and highlighted the danger of excluding Taiwan from a globalized society in which transnational epidemic crises may occur. Taiwan was finally granted annual observer status in the World Health Assembly after Ma Ying-jeou’s election. Another example is in the area of climate change, an issue about which Taiwan’s government is deeply concerned. Government agencies were excluded from participation in the UN Conference on Sustainable Development (Rio+20) in Brazil in June 2012, so Taipei had to rely on domestic environmental NGOs, one of them nicknamed “Taiwan Action NGO” (TANGO), to represent Taiwan in the People’s Summit alongside the UN Conference.[4]

Altruistic impulses

A substantial majority of Taiwan’s socially-organized NGOs has focused on development assistance, poverty reduction, voluntary medical service, and humanitarian relief. Some well-known NGOs include: World Vision Taiwan, which operates a Child Sponsorship Program in 40 countries and 78 Area Development Programs in a number of countries, designed to raise standards of living over the long term; the Tzu Chi (Ciji) Foundation, for its extraordinary relief efforts in 70 countries; the Buddha’s Light International Association, which has a global reach and conducts relief work; the Taiwan Root Medical Peace Corps, with voluntary missions in numerous countries; and the Field Relief Agency of Taiwan, for aid specifically in Cambodia. Many began by addressing local and regional humanitarian needs due to geographic proximity, historical linkage, cultural affinity, and financial affordability have broadened their scope of service. Through the years, their large-scale systematic disaster relief operations have been well noted, as in the severe earthquake in China’s Sichuan province (2008), the combination of earthquake and tsunami disasters in Japan (2011), and the similar disaster in the Indian Ocean (2004). Following the Indian Ocean tsunami, when Taiwan’s official pledge of US$ 50 million (higher than the amount of either New Zealand or India) encountered difficulties in timely transport of relief goods because of recipient countries’ concerns over possible Chinese diplomatic protests, NGOs like Tzu Chi became a convenient, expedient channel of relief delivery.[5] In this case, NGOs perform as “the nexus of the global and the local,” free from international political constraints.[6] They serve as a societal response to Taiwan’s ambiguous non-nation/non-state status in the international community by expanding their global reach. “Time for Taiwan to feed back its love to the world,” a slogan of the Taiwan Root Medical Peace Corps, best captures these NGOs’ humanitarian missions and altruistic efforts. These NGOs’ altruistic activities have won widespread recognition and admiration.

NGOs as stealth cross-Strait peacemakers

With their presumptive neutrality in political orientation, some of Taiwan’s NGOs reach across the Taiwan Strait to conduct cultural exchanges, business advancement, and relief efforts. Despite the rise of a Taiwanese indigenous identity in recent decades, which has engendered occasional domestic criticisms against these Taiwanese “do-good” organizations for their non-governmental works in China, Taiwanese NGOs remain committed to their humanitarian efforts in China. At the same time, government-organized NGOs, such as the Prospect Foundation, have offered a non-governmental platform for political entrepreneurs and policy analysts from both sides to dialogue, explore the feasibility and impact of new ideas, converge mutual differences subtly, and minimize the possibilities of miscommunication. These government-organized NGOs also inform, explain, examine, and explore various issues of cross-Strait relations to other countries with interests and concerns.

The continuing challenge of nomenclature

Although the issue of statehood is less relevant to NGOs’ mission and functionality than it is for Taiwan’s participation in IGOs, China’s “one China” principle still constrains Taiwan NGOs from a full range of international participation. After the People’s Republic of China (PRC) replaced the Republic of China (ROC) in the UN, in 1973 Beijing requested that UNESCO notify all of its 319 affiliated NGOs to terminate any institutional linkage with Taiwan.[7] By July 1975, only 20 of the 37 International NGOs with institutional associations with Taiwan had replied, and an overwhelming majority of them flatly rejected the demand by arguing that political considerations should not interfere in the self-governing principle of non-political NGOs.[8] Surely, China’s adamant stance on its one China principle had become an obstacle to Taiwan’s international participation. However, the Taiwan government’s self-claimed representation of the whole of China during the two Chiangs’ era (Presidents Chiang Kai-shek and Chiang Ching-kuo) might have inhibited its chance for flexible diplomacy to better serve Taipei’s foreign policy interests then.

Even so, Taiwan has been pressured to accommodate to the new international reality. Taiwan boycotted the 1980 Winter Olympics in Lake Placid, New York in protest of a decision by the International Olympic Committee (IOC) that it could compete only under the name “Chinese Taipei”; in 1981 Taiwan accepted this name and has participated ever since. Another compromise was China’s adoption of “The China Association for Science and Technology, Beijing” and Taiwan’s acceptance of “The Academy of Sciences Located in Taipei, China” for both governments to participate in the International Council of Scientific Unions in 1982. In 1993, China further tightened its policy by permitting Taiwan’s international participation only under the name “Taipei, China” or “Taiwan, China,” both of which imply that Taiwan is a mere sub-unit within China’s political domain. Since then, the choice of proper nomenclature for Taiwan’s international participation has become a perennial cross-Strait issue; China sees this as an opportunity to block what it sees as attempts at “Taiwan independence,” and Taiwan refuses to be considered as a subjugated entity under China’s authority.[9]

Stated differently, despite the fact that NGOs are usually less controversial than IGOs in international participation, China also imposes harsh restrictions on name representation and participation for Taiwan’s transnational NGOs. Even as recently as March 2012, Taiwan’s NGO delegates with Taiwan IDs were prohibited from attending the session hosted by the UN Commission on the Status of Women until they improvised by showing foreign IDs to join the session.[10] In the 2010 Tokyo International Film Festival, a Chinese representative’s insistence that Taiwan’s delegation be placed under “Taiwan, China” quickly provoked a media sensation and public debates about China’s unreasonable demands in international non-political settings. Similar kinds of naming controversies have continued to occur in recent years.[11]

Implications and Suggestions

NGOs offer Taiwan visibility and a voice for diplomatic sustainability as well as a sense of dignity, respect, and self-worth for an associational life in the global community. Participation in them is an important part of Taiwan’s “huolu waijiao” (活路外交) or “flexible diplomacy.” They do represent a bit of a detour, as they are used in part to accomplish what the government is blocked from accomplishing in the world of IGOs. Active NGO participation is a bottom-up, gradualist, slow, and supplementary approach that can be accomplished without railing about sovereignty in a noisy manner. Conversely, international society can benefit from the expertise, compassion, and resources that Taiwan’s NGOs bring to the table. Also, frankly, engaging Taiwan in the NGO arena is a low-cost way for the international community to alleviate some criticisms about a democratic deficit and fairness deficit in global governance that result in part from the exclusion of Taiwan from so many international issue areas.[12]

Of course, in a world of power hierarchy and status asymmetry, Taiwan is unlikely to achieve a great leap forward in international participation by relying on its NGOs’ altruistic acts. Since President Ma’s calls for a diplomatic truce and expansion of Taiwan’s international space in 2008, by October 2011 Taiwan had become either a full member or an observer in five international organizations and four NGOs.[13] The record shows a slight improvement in the quantity of Taiwan’s international participation, but as noted above the naming controversy remains. More seriously, China continues to refuse to loosen its restrictions on Taiwan’s participation, even for NGOs; surely, one should not expect that China will make any concessions other than for self-interest and apparently Beijing does not yet perceive a reason to allow Taiwan to represent itself. Even in Taiwan, however, national identity remains a politically contested issue, and society has not reached consensus on a list of non-objectionable names for Taiwan’s IGO and NGO participation.

Even when NGOs operate in areas which are frequently the domain of states, they are not an effective substitute for the crucial role of state authority in multilateral diplomacy because states remain the legitimate authorities to arbitrate and resolve dispute. [14] However, NGOs’ positive impacts depend on the acceptance and appreciation of their “recipients.” The presumable political neutrality of NGO activities usually implies that the act is a goodwill gesture without political strings attached, and that there is no expectation of favors in return. This naturally undercuts the value of NGOs’ political influence in the overall achievement of Taiwan’s diplomacy.[15] Any political rewards for Taiwan’s offers of developmental assistance and humanitarian aid can only be rendered by recipients who have the will, capability, and autonomy to reciprocate in concrete political terms.

A survey of Taiwan’s past NGO practices shows some interesting implications for Taiwan to explore every available and favorable political opportunity in the future.

Continue NGO diplomacy

Regardless of the challenges, Taiwan should continue NGO diplomacy with its multilateral partners. In short, NGOs in themselves provide important public goods as they help identify and solve new global issues and strengthen the global public engagement apart from the system of states[16]; they also provide a crucial link for Taiwan’s local civil society with its international counterparts on a wide range of global issue areas related to Taiwan’s future sustainability and growth.[17] China’s usual assertion that Taiwanese people’s interests and welfare have been incorporated into China’s representation and articulation in the international society neglects the fact that Taiwan remains out of China’s governance, and thus China is unable to meet domestic needs in Taiwan. Nevertheless, China’s staunch subscription to its “one China” principle has rendered Taiwan’s IGO membership efforts a difficult challenge. Consequently, NGOs are a viable option for Taiwan to reach out for the supply and demand of global public goods. Conversely, the connection with transnational networks offers leverage to Taiwanese NGOs to be government watchdogs for policy improvement and to deepen Taiwan’s civil society and democracy.

Strengthen government’s NGO policy

With the multiplicity of NGOs in numbers, function, and operation, it has been a daunting task for Taiwan to realize full diplomatic benefits of the rise of NGOs at home and abroad. There is no “one-size-fits-all” formula for governmental NGO policy. It is also difficult to assess the impact of Taiwanese governmental assistance to domestic NGOs. As noted above, MOFA helps facilitate NGO administrator internships in international NGOs and supports workshops for NGO knowledge exchange and experience sharing. Whatever policy is adopted, the primary goal of any government NGO policy should be to help Taiwan NGOs navigate the dense webs of networks, interactions, and interrelations in an increasingly tight-knit global society well beyond the confines of sovereign states.

Expand cross-Strait NGO engagement

Taiwan should advocate for and expand the interaction of its government-organized NGOs and socially organized NGOs with their Chinese counterparts for further exchanges and collaboration in non-political areas. Although NGOs operating within China must avoid sensitive issues like human rights, they can serve as stealth agents for the diffusion of Taiwan’s democratic ideas, social values, and good governance in China. As predicted by functionalist integration theory, repeated bilateral interactions reinforce political commitments among elites across the Strait, cultivate shared principled values, and recalibrate mutual interests for spillover effects from low-politics issues to high-politics areas. Over time, quantitative changes in cross-Strait interactions may bring up some subtle qualitative transformation in perspectives and reciprocal relations. At a minimum, one wishes that NGO movements can quietly de-territorialize political barriers for the emergence of an institutional framework of stable peace across the Taiwan Strait, as envisioned by scholars like Kacowicz, Boulding and Deutsch.[18]

China must compromise

China can and should do more to minimize diplomatic discord over Taiwan’s international NGO participation and nomenclature. Following Taiwan’s active drive for an independent identity prior to 2008, Ma’s moves for peaceful reconciliation since 2008 and his explicit reconfirmation of “one ‘Republic of China,’ two areas” in his 2012 inaugural speech are significant steps in Taiwanese politics, which has been tormented by national identity division for decades, and fall within the spirit of the 1992 Consensus which China seems to hold as a baseline for reconciliation. China could consolidate Ma’s proclamations with positive reinforcements by actively accommodating Taiwan’s requests for more international space through IGO and NGO participation. In fact, Taiwan’s NGO approach is a risk-free opportunity for China. With its steadily increasing global prominence, China effectively holds quasi-veto power over any diplomatic attempt by Taiwan for sovereign recognition. As long as the representative title of Taiwanese NGOs does not seriously deviate from the apparent 1992 Consensus, China should take this golden opportunity to conceptualize, contextualize, and construct the broadly and loosely defined “one China” concept. China’s conciliatory move to loosen up the confines of “one China” in naming would help “self-educate” and socialize each side’s domestic constituencies and international audiences. Unnecessary disputes and disruption on the nomenclature issue will only add fuel to the fire of Taiwan’s domestic politics, and will simultaneously strengthen the uncompromising stand of Chinese nationalists and promote the continued suppression of Taiwanese NGOs in transnational forums. Moreover, China’s firm stand, its foreign ministry’s rigid interpretation and application of the “one China” principle, and the consequent denial of Taiwanese public aspirations for international participation do not help China win the hearts and minds of Taiwan’s citizens. Rather, China’s failure to adjust its “one China” principle simply perpetuates the tensions between the two sides.

If meaningful participation is the objective, both sides should reach a tacit understanding on a list of non-objectionable names for Taiwan’s international participation. In an asymmetric relationship, a feasible deal usually requires the strong party (i.e., China) to give extra latitude for a better chance to convince the weak party (i.e., Taiwan) to reach a solid institutional commitment because the strong party has abundant resources to spare and the weak party often harbors overwhelming fear of future losses in any institutional deal. The strong party’s concession signals a powerful commitment to be bound by an arrangement which may not be beneficial for the short term, but fruitful in the long run. China’s concessions in the recent Economic Cooperation Framework Agreement (ECFA) provide a useful example. A similar approach to Taiwan’s NGOs activities―and later IGO participation―can be quite appealing and may defuse anti-China opponents’ rhetorical power and sentiment in Taiwan and help Beijing win the hearts and minds of the Taiwanese people. China could also improve its global image as a benevolent power and pragmatic actor in regional and international affairs, which would in turn boost its constant aspiration for a “peaceful rise” in the world arena.

Fight the good fight

Finally, a successful NGO campaign requires acknowledgement and appreciation from international society. The restrictions placed on Taiwan’s international NGO participation literally deny Taiwan a salient societal voice and undercut the democratic mission of international institutions. The United States, other major powers, and INGOs could assist Taiwanese NGOs’ endeavors without affecting the implementation of their “one China” policies. While Taiwan’s NGOs have shown unwavering conviction, effort, and competence in humanitarian reliefs, it is about the time for the world to reciprocate the same to Taiwanese NGOs by giving them due recognition and a proper role to contribute to the international community without political obstacles.

[1] Shen Zewei, “Taiwan NGO kunjing zhong tui zhan waijiao”(Taiwan’s NGO efforts to expand diplomacy amid difficult circumstances), Nov. 8, 2010. <www.zaobao.com/special/china/Taiwan/pages13/taiwan101108.shtml>. As for the complexity of NGO categories, please see Bob Reinalda, “Private in Form, Public in Purpose: NGOs in International Relations Theory.” In Bas Arts, Math Noortmann, and Bob Reinalda, ed., Non-State Actors in International Relations, Aldershot, UK: Ashgate, 2001, 11-40. This study focuses primarily on Taiwanese NGOs with cross-national activities.

[2] Wu Jianguo, “Jiji fudao Taiwan NGO kuozhan guoji kongjian” (Actively Assist Taiwanese NGOs to Expand International Space), Xin shiji zhiku luntan (New Century Foundation Forum), no. 48, Dec. 30, 2009, 51-52. <www.taiwanncf.org.tw/ttforum/48/48-11.pdf>.

[3] Shen Zewei, “Taiwan NGO kunjing zhong tui zhan waijiao” (Taiwan’s NGO efforts to expand diplomacy amid difficult circumstances), Nov. 8, 2010. <www.zaobao.com/special/china/Taiwan/pages13/taiwan101108.shtml>; Wu Rongquan, “Woguo feizhengfu zuzhi guoji canyu zhi xiankuang yu zhanwang” (The current status and prospect of Taiwan’s NGOs’ international participation), March 19, 2012. <www.taiwanngo.tw/files/15-1000-16913,c104-1.php?Lang=zh-t>.

[4] “Taiwan TANGO tuan qianjin lianheguo yongxu fenghui” (Taiwanese TANGO team advances to UN Conference on Sustainable Development”, May 24, 2012. <www.taiwanngo.tw/files/15-1000-17407,c167-1.php?Lang=zh-tw>.

[5] Rhoda Margesson, “Indian Ocean Earthquake and Tsunami: Humanitarian Assistance and Relief Operations,” CRS Report for Congress, February 10, 2005, Order Code RL32715, CRS-3; “Indonesia: Tzu Chi Helps Tsunami Victims Fleeing Aceh to Medan,” December 31, 2004 <reliefweb.int/node/161588>. Other reports of Tzu Chi’s relief works in recent years can be found in <reliefweb.int/organization/tzu-chi>.

[6] C. Julia Huang, “Genealogies of NGO-ness: The Cultural Politics of a Global Buddhist Movement in Contemporary Taiwan.” Positions: East Asia Cultures Critique, 17(2), Fall 2009, 366.

[7] UNESCO, “Resolutions and Decisions Adopted by the Executive Board at Its 93^rd Session, Paris, 12 September-11 October 1973,” UNESCO Executive Board, 93 EX/Decisions, Paris, November 9, 1973, 40; UNESCO, “Report of the Director-General on the Application of 93 EX/Decision 6.9,” UNESCO Executive Board, 94 EX/33, Paris, February 20, 1974. Also see “Volume 1, Resolutions,” Records of the General Conference, Eighteenth Session, UNESCO, Paris, October 17 to November 23, 1974, p. 84.

[8] UNESCO, “The Question of International Non-Governmental Organizations Maintaining Relations with UNESCO and in Which Bodies or Elements Linked with Chiang Kai-shek Still Participate, Having Illegally Usurped the Name of China,” UNESCO Executive Board, 98 EX/20, Paris, August 29, 1975. NGOs’ refusal to follow UNESCO’s request also appeared in the 1976 UNESCO Director-General’s report to the Executive Board. Please see 100 EX/25 Paris, August 26, 1976.

[9] Semantic differences of nomenclatures signify various identity perspectives and political implications. For example, “Taiwan, China” and “Taipei, China” imply that Taiwan is part of China (the PRC). “Chinese Taipei” will be a better choice because the word “Chinese” carries a broader implication beyond politics, should Taiwan’s official title, “Republic of China,” be unattainable. Still, the translation of “Chinese Taipei” in Chinese should be “Zhonghua Taipei” (中華台北), not “Zhongguo Taipei” (中國台北), because the Chinese translation of “Zhongguo Taipei” still implies China’s authority over Taiwan. See David W. F. Huang, “Shitan liangan hejiexia Taiwan canyu guoji zuzhi zhi fali jichu” (Exploring the Legal Bases of Taiwan’s Participation in International Organizations in the Contest of 2008 Cross-Strait Rapprochement), Taiwan guojifa jikan (Taiwan International Law Quarterly), 5(4), 2008, 81-83.

[10] “Tai minjindang : zhonggong daya yi cong guanfang yanshen dao feizhengfu zuzi” (Taiwan’s Democratic Progressive Party: China’s suppression has extended from governmental organizations to NGOs), Radio Free Asia (Chinese), March 28, 2012. <www.rfa.org/mandarin/yataibaodao/mjg-03282012095152.html>.

[11] For instance, according to Taiwan’s Ministry of Foreign Affairs, there were 85 cases reported in 2010 for mislisting Taiwan’s NGO as China’s regional member in transnational NGO websites under Chinese NGO’s demand. <www.taiwanngo.tw/files/15-1000-6330,c88-1.php>.

[12] For a discussion of “fairness deficit,” please see Susan Marks, “Democracy and International Governance.” In The Legitimacy of International Organizations, ed. Jean-Marc Coicaud and Veijo Heiskanen, Tokyo and New York: United Nations University Press 2001, 47-68.

[13] According to Bonnie Glaser and Brittany Billingsley, Taiwan joined 6 additional international organizations by October 2011, though the website of Taiwan’s Ministry of Foreign Affairs in 2012 shows only five after 2008. See Taiwan’s Ministry of Foreign Affairs, <www.mofa.gov.tw/Official/Home/RelatedLink/?opno=be23c3a0-2e22-4fe3-b37c-3599074880f4> and Bonnie Glaser and Brittany Billingsley, Taiwan’s 2012 Presidential Elections and Cross-Strait Relations: Implications for the United States. A Report of the CSIS Freeman Chair in China Studies, Washington, DC; Center for Strategic and International Studies, November 2011, 3.

[14] Joel M. Podolny and Karen L. Page, “Network Forms of Organization.” Annual Review of Sociology, 24, 1998, 59.

[15] Alexander Cooley and James Ron, “The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action.” International Security, 27 (1), 2002, 5-39.

[16] John Ruggie, “Reconstituting the Global Public Domain: Issues, Actors, and Practices.” European Journal of International Relations, 10, 2004, 499-531.

[17] Margaret Keck and Kathryn Sikkink, Activists beyond Borders: Advocacy Networks in International Politics. Ithaca, NY: Cornell University Press, 1998.

[18] Arjun Appadurai, Modernity at Large: Cultural Dimensions of Globalization, Minneapolis, MN: University of Minnesota Press, 1985, 188-189; Arie M. Kacowicz and Yaacov Bar-Siman-Tov, “Stable Peace: A Conceptual Framework,” in Arie Marcelo Kacowicz, Yaacov Bar-Siman-Tov, Ole Elgstrom, and Magnus Herneck, ed., Stable Peace Among Nations. Lanham, MD: Rowman and Littlefield, 2000, 11; Kenneth E. Boulding, Stable Peace. Austin, TX: University of Texas Press, 1978; Karl W. Deutsch, Political Community at the International Level. Salt Lake City, UT: ECKO House Publishing, 2006, first published in 1954.

Authors

Wei-chin Lee

Image Source: © Erik de Castro / Reuters

Taiwan’s UN Dilemma: To Be or Not to Be

Sigrid Winkler — Wed, 20 Jun 2012 00:00:00 -0400

Taiwan is not a member of the United Nations (UN) or its suborganizations, but it aspires to participate. China opposes this. It argues, correctly, that only sovereign states can enjoy membership in the UN; any state that manages to enter into the UN system as a full member in its own right is seen by the other member states as a fully-fledged independent country. China also claims Taiwan as part of its territory and denies that Taiwan is a sovereign state. China is adamant about preventing recognition of Taiwan as a sovereign state and its membership in the UN system. So far China has been successful in this endeavor. Membership – the highest form of participation – in the United Nations is inextricably linked with the question of sovereignty. Both China and Taiwan are highly aware of this problem, therefore for both sides the question of UN membership and other forms of participation for Taiwan has never lost its sensitivity. However, over time the nature of the question has changed: from a fight about which government – the People’s Republic of China (PRC) with its seat in Beijing or the Republic of China (ROC) with its capital in Taipei – was the sole legitimate representative of China in the world, it has since the early 1990s evolved into consideration of whether the UN would not be able to accommodate both in some way. While Taiwan, since the early 1990s, would favor such a solution, although not necessarily on the basis of full membership status, China adamantly refuses to move away from its position that Taiwan is part of China and thus cannot be represented on its own in the world’s most prestigious and important state-based international organization. China has the advantage in that it is a member of the United Nations, and is one of the five permanent members of the Security Council; it also enjoys increasing international clout outside the UN system.

This article looks into the past of Taiwan’s UN engagement leading to the end of its participation in 1971, traces the development of Taiwan’s UN campaign since 1993, and considers the prospects of Taiwan’s UN drive in the current relatively amiable climate in cross-Strait relations. It also sketches the links between Taiwan’s attempts to participate in the UN and their implications for its sovereignty.

1971 in the UN: What Was at Stake?

With the withdrawal of the ROC government from the Chinese Mainland to Taiwan starting from 1947 and the establishment of the PRC in Beijing in 1949, two rival governments claimed their status as the rightful international representative of China. Both followed a so-called “one China” policy, meaning that diplomatic relations with China by third parties could only be maintained with one of the two governments. The same was true for representation in international organizations, especially the UN. The question was therefore which government should represent China in the United Nations?

With the support of the United States, the ROC government of Chiang Kai-shek upheld its claim and retained the Chinese seat in the UN as well as its permanent seat in the UN Security Council for more than two more decades after its arrival in Taiwan. However, with an increasing number of countries choosing to recognize Beijing instead of Taipei, it was a battle against time, and Taiwan was on the losing side.

Dual representation, either as a divided country or even a two-China or two-state (one China, one Taiwan) solution, was on the table more than once during the years before the fateful UN General Assembly Resolution 2758 was passed in 1971. The United States in particular tried to broker a compromise, but without success. While Beijing was opposed to such solutions, Chiang Kai-shek was likewise inflexible in his claim that the ROC government was the legal representation of the whole of China. Chiang was particularly afraid that in a two-state solution he would lose the UN Security Council seat of China to the PRC, the enemy of the ROC. Chiang had already in 1961 for the first time put forward the infamous statement that “There is no room for patriots and traitors to live together” (hanzei bu liang li).[1]

However, in the beginning of the 1970s, the United States saw the geopolitical opportunity to move closer to China in a strategic move against their by then common adversary, the Soviet Union. The United States eventually broke formal relations with the ROC only in 1979, but the strategic shift in the early 1970s, combined with a large number of newly-independent former colonies that had some ideological solidarity with Beijing, turned the tide once and for all against Taipei. Still, it was a combination of Taipei and Beijing’s longstanding opposition to proposals for both PRC and ROC representation in the UN, together with the global strategic changes, that led to the end of the ROC representation in the UN, and in consequence also to the ROC’s expulsion from all other major international organizations.

When the crucial UN General Assembly resolution’s adoption seemed already unavoidable on 25 October 1971, the ROC delegation under orders of Chiang Kai-shek walked out of the UN to prevent further humiliation.[2] Resolution 2758 “to expel forthwith the representatives of Chiang Kai-shek from the place which they unlawfully occupy at the United Nations and in all the organizations related to it”[3] was adopted by 76 against 35 votes with 17 abstentions by the other UN members. The U.S. voted against the resolution, but was in a minority position,[4] and Taiwan found itself isolated and excluded from many international organizations – especially those affiliated with the United Nations.

Taiwan's UN Drive Since 1993

Lee Teng-hui took over as president of Taiwan in the late 1980s. He pursued “pragmatic diplomacy,” in which one strategy was maintaining Taiwan’s international existence through participation in various international and especially intergovernmental organizations. UN participation alongside China eventually became a viable policy option, even under continued rule by the Kuomintang (KMT), the Chinese Nationalist party.

Taiwan started its renewed UN campaign in 1993. The UN bids of 1993-1995 focused on the “[c]onsideration of the exceptional situation of the Republic of China in Taiwan in the international context, based on the principle of universality and in accordance with the established model of parallel representation of divided countries at the United Nations.”[5] This first approach aimed at establishing Taiwan as a sovereign state next to China, at least as long as no solution could be found between the two sides. It followed the model of divided states like East and West Germany or North and South Korea. However, China’s opposition, in combination with the “one China” policy of the majority of the UN member states, prevented the Taiwanese bids from even being treated properly in the UN. Apart from a few of Taiwan’s diplomatic allies, no country was ready to give consideration to Taiwanese representation in the UN.

Not having had any success in several consecutive years, in 1996 Taiwan attempted a new, vaguer and lower-profile approach by asking for the “[c]onsideration of the exceptional situation of the inability, resulting from General Assembly Resolution 2758 (XXVI), of the 21.3 million people on Taiwan, Republic of China, to participate in the activities of the United Nations.”[6] This approach did not necessarily target full membership, but rather focused on a right to representation and participation in imprecisely defined UN activities. The main argument was that the population of Taiwan could not be unfairly excluded from issues being dealt with in the UN only because of a conflict over sovereignty, while the Chinese government that claimed sovereignty over Taiwan’s territory was not involved in policy-making on Taiwan’s territory. This attempt also failed. China was not ready to yield even on more flexible terms of Taiwanese UN participation.

During the last years of the 1990s and in the beginning of the rule of the Democratic Progressive Party (DPP) starting in 2000, Taiwan’s strategy continued at a similarly low-profile level, stressing the right of the people of Taiwan to be represented in the UN without explicitly defining what kind of status Taiwan should have in the organization.

However, in 2007, Taiwan’s approach changed radically, by asking the UN to process its application for full membership. This new strategy did not leave any doubt that Taiwan, and not the Republic of China, wanted to have its sovereignty legitimized by becoming a new member of the United Nations. UN Secretary-General Ban Ki-moon refused to accept the application on the grounds that “[i]n accordance with [General Assembly Resolution 2758], the United Nations considers Taiwan for all purposes to be an integral part of the People’s Republic of China.”[7] Before this statement UN headquarters had been careful to remain vague on the issue of Taiwan’s status, but this statement opened a legal Pandora’s box, as it could be taken as the basis for the argument that China should be allowed to decide on matters concerning Taiwan in international organizations – which thus far had been avoided. Therefore, although Taiwan’s UN bid was frustrating even to its major international partner, the United States, Washington protested Secretary-General Ban’s statement, arguing that “while this assertion is consistent with the Chinese position, it is not universally held by UN member states, including the United States.”[8]

After this setback, the DPP called for a referendum on the issue of Taiwan’s UN membership in 2008, asking the people of Taiwan to vote on whether the government should apply for UN membership under the name “Taiwan,” therefore actually replicating the UN bid of 2007. This move was mainly regarded as a tactic in Taiwan’s 2008 presidential campaign, in which Taiwan’s international status and participation in international organizations were hotly discussed topics. The KMT therefore saw the need to follow suit by proposing a referendum of its own, however posing a much less controversial question. The KMT inquired among Taiwan’s voters, “Do you approve of applying to return to the United Nations and to join other international organizations under the name ‘Republic of China,’ or ‘Taiwan,’ or other name that is conducive to success and preserves our nation’s dignity?”[9] Both referenda failed to pass.

The issue of the two UN referenda in 2008 highlights that debates also continue on Taiwan’s domestic level about the fundamental objectives for Taiwan’s sovereignty to be reached through UN participation and what strategies should be employed to achieve these goals. At the same time this debate is largely decoupled from the international reality of chances for potential success. The viewpoints of the DPP and the KMT, especially under current President Ma Ying-jeou, differ fundamentally on what implications UN participation for Taiwan should have, how the entity is represented in the world, what amount of provocation toward China can be afforded in this question. Furthermore, these debates do not only take place on the level of political elites’ strategic international considerations, but activities such as the above referenda have also led to the politicization of the general public in Taiwan, coupled with attempts to instrumentalize this politicization for domestic political gains. The question of international participation has become increasingly complex in Taiwan.

Throughout these different efforts to participate in the UN, Taiwan’s government was aware that in reality its UN bids had only minimal chances for success due to China’s staunch opposition and the power it yielded in the UN to convince other members that there was no place for Taiwan in the state-based organization. Simply put, China feared that Taiwan’s participation in the UN would bring the island one decisive step closer to achieving independence. The undercurrent or open independence aspirations during the rules of Lee Teng-hui and Chen Shui-bian especially gave rise to such Chinese fears. In order to clarify that there is no space in the UN for an entity that constitutes a part or even a province of China, Beijing refused to leave any room for interpretation and also thwarted Taiwan’s more pragmatic approaches to the UN, let alone its bids for full membership. Only a handful of countries that still have diplomatic relations with the ROC challenged the Chinese perspective, while the rest of the member states and the organization followed China’s lead – either silently or in an outspoken manner.

Undeniably, for at least some in Taiwan, independence aspirations played a role in Taiwan’s early pragmatic UN approach although it stopped short of full membership. In this regard, looking at the situation from a Chinese perspective, China’s fears are understandable. Objectively speaking, however, China’s reluctance to accommodate solutions below the level of full membership is not necessarily justified. From the perspective of international law, observer status or flexible ways of pragmatic cooperation would not in any way improve Taiwan’s formal international status. Rather, such arrangements, while they allow for Taiwan to benefit from and contribute to the international system, would confirm the PRC view that Taiwan is not a sovereign entity.

According to Michael Kau, a former deputy minister of foreign affairs, the main aim of Taiwan’s UN campaign, beyond the futile desire that it could eventually achieve some form of participation in the organization, was to raise international attention to the issue of Taiwan’s unfair exclusion paired with the hope that maybe Taiwan would eventually be allowed to enter at least a number of functional UN agencies, such as the World Health Organization (WHO).[10] For this reason, Taiwan had already in 1997 started a parallel campaign targeting specifically the WHO, which was perceived as having a more realistic prospect for success. Taiwan’s UN bid has never even entered the UN General Assembly agenda, it never managed to get past the hurdle of the UN General Committee.[11]

It came as no surprise, given the differences between the DPP and the KMT on the question of UN participation, that in 2008, the new government of Ma Ying-jeou shifted Taiwan’s UN strategy, pursuing the clearly stated but undefined status of “meaningful participation” in UN specialized agencies, specifically the WHO, the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO).[12] This new policy followed up on PRC President Hu Jintao’s announcement upon Ma’s inauguration as ROC president that “Taiwan compatriots’ participation in international activities would be discussed with priority given to participation of the World Health Organization's (WHO) activities after the cross-strait consultations were resumed.”[13] This effort resulted early on in observer status for Taiwan in the WHO’s World Health Assembly (WHA), the annual high-level meeting of the WHO. Since 2009, Taiwan has shifted its focus to the ICAO and the UN Framework Convention on Climate Change (UNFCCC),[14] but it has not yet achieved meaningful participation in these bodies.

WHO - A Success Story?

As early as 1997, the government of Taiwan launched its bid for participation in the WHO. Taiwan’s WHO strategy evolved over the years. Different avenues were explored, both in terms of name and status for Taiwan’s participation. Possibilities concerning status included Taiwan participating as an observer in the WHA, or the even less controversial “meaningful participation in WHO activities.” In 2002, Taiwan presented itself as a “health entity,” analogous to its status in a number of fisheries management organizations, where it could enter as a so-called “fishing entity.” Under Chen Shui-bian’s government, Taiwan applied for full WHO membership in 2007 and 2008. Not only did the status Taiwan aspired to have in the organization change over the years, Taiwan also altered its name designation, from “Republic of China” to “Taiwan” or combinations thereof as a reflection of the build-up of a Taiwanese identity and of how Taiwan’s government wanted to portray the island to the international community.

Certain events gave rise to the hope that Taiwan’s WHO bid could eventually be successful. The World Health Assembly, apart from long debates about the feasibility of Taiwan’s bids, held several votes on whether Taiwan’s attempts to apply for participation in the WHO should enter the WHA agenda. Just the fact that these votes took place represented a step further than Taiwan had managed to go in the UN system since 1971. But all of these votes – held in 1997, 2004, and 2007 – resulted in failure,[15] mainly due to Chinese opposition and because many other countries in the international system saw Taiwan as a trouble-maker with its continued bids.

The crisis caused by the outbreak of severe acute respiratory syndrome (SARS) in 2003, which spread to Taiwan, corroborated Taiwan’s claim that its exclusion from the WHO placed its population at particular risk in the case of a severe epidemic. Taiwan was third hardest hit by SARS – after China and Hong Kong[16] – but its calls to the WHO for help remained long unheard. Eventually, after Chinese consent,[17] the WHO sent several observers to the island. The SARS crisis induced the U.S. and Japan to support WHA observer status for Taiwan, while the European Union and Canada, for instance, called for flexible mechanisms for Taiwan’s participation in the organization’s activities.[18]

Therefore, SARS opened a window for direct contact between Taiwan and the WHO. However, in 2005, the WHO Secretariat and Beijing took the unconventional step of signing a secret Memorandum of Understanding (MOU) that elaborated the rules for such contact. Taiwan neither had a part in the negotiations of this MOU, nor was it ever informed about the exact contents of this document that determines its status in the WHO, though an implementation document outlining the specific rules was leaked.[19] The bottom line of this implementation document was that any interaction between Taiwan and the WHO, other than in a case of acute emergency, was subject not only to approval by the WHO Secretariat but also by the Chinese Ministry of Health in Beijing. Apart from leaving it to China to decide whenever Taiwan could enter into contact with the WHO and thereby putting Taiwan’s government into a place of de facto subordination to Beijing, the MOU also entailed long and cumbersome procedures which created administrative obstacles for Taiwan’s participation in WHO technical meetings and other interactions with the organization. The MOU has been guiding the relations between Taiwan and the WHO ever since.

Diplomatic cables leaked in 2011 on wikileaks show that the United States was supportive of the MOU while it was negotiated in 2005, perceiving it as a “step forward” in facilitating interaction between Taiwan and the WHO. In the negotiation process, the U.S. also tried to discourage protests from Taiwan over the terminology “Taiwan, China” used in the MOU and over the requirement for the WHO to notify the Chinese representation in Geneva before interacting with Taiwan. Furthermore the U.S. urged Taiwan not to make the MOU public in case it obtained a copy, as secrecy would be in Taiwan’s best interest.[20]

Following the inauguration of Ma Ying-jeou’s government in May 2008 and Hu Jintao’s overture on the issue of Taiwan’s participation in international organizations, a number of developments occurred in the WHO case in 2009. In January, Taiwan’s Centers for Disease Control (CDC) were invited to join the new WHO International Health Regulations (IHR), thus giving Taiwan access to updates about infectious diseases.[21] In May, Taiwan was eventually invited as an observer to the World Health Assembly. Preceding this invitation, Taiwan and China had held secret bilateral consultations about Taiwan’s WHO participation[22] – a first-time event in the framework of Taiwan’s attempts to accede to international organizations. Already in his inaugural speech in 2008, Ma Ying-jeou had announced his plans to “enter into consultations with Mainland China over Taiwan’s international space.”[23] The WHO talks were the first incident of such consultations. As a result of these talks, Taiwan was invited to observe the WHA as “Chinese Taipei,” which was subject to annual renewal. The invitation was issued explicitly to “Chinese Taipei’s” Minister and the Department of Health, but the address in the letter of invitation did not contain a country specification.[24]

Through this observership, Taiwan’s health ministers could address the WHA plenary,[25] and the health ministers from Taiwan and China used these occasions to meet personally on the sidelines of the WHA in 2009 and 2010[26] – all of these developments had been unprecedented before observership was achieved. In 2012, Taiwan was invited for the fourth consecutive year to observe the WHA, which was held in Geneva from May 21 to 26.[27]

However, the political opposition in Taiwan criticized this outcome, especially because in their interpretation the name “Chinese Taipei” did not portray Taiwan as a sovereign state, and also because the consultations between the governments of Beijing and Taipei could be interpreted as Taiwan asking for China’s permission.[28]

Further criticism has emerged since. Despite the achievements of WHA observer status and Taiwan’s inclusion in the IHR in January 2009, Taiwan’s experts were still excluded from many WHO technical meetings, while Taiwan was listed as “Taiwan, province of China” or “Taiwan, China” in official WHO documentation.[29] In May 2011, another internal WHO document was leaked in Taiwan, this time outlining how the WHO should treat Taiwan in the framework of the IHR.[30] In many respects this new document goes even farther than the 2005 MOU in curtailing Taiwan’s status and its rights for participation in the IHR.

This new memorandum on the “Procedures Concerning an Arrangement to Facilitate Implementation of the International Health Regulations (2005) with Respect to the Taiwan Province of China” was circulated within the WHO in September 2010, with an emphasis on distribution only “as needed,” while it should not fall into the hands of WHO outsiders.[31] This memorandum, which explicitly mentions WHO Director-General Margaret Chan’s wish that it should be fully and correctly implemented, is based on a so-called “IHR Arrangement” with respect to Taiwan’s IHR participation that the Permanent Mission of China in Geneva had communicated to the Director-General.[32] In other words, also in matters pertaining to Taiwan’s IHR participation, the WHO allowed China to dictate the ground rules for how the WHO had to arrange its contact with Taiwan. Considering that the current WHO Director-General, Margaret Chan, is from China’s Hong Kong Special Administrative Region, one is induced to speculate whether she is particularly receptive to such suggestions from Beijing.

Citing the resolution WHA25.1, which in 1972 expelled the ROC from the WHO, the 2010 memorandum emphasizes “the consequent obligation for the [WHO] Secretariat of refraining from actions which could constitute or be interpreted as recognition of a separate status of Taiwanese authorities and institutions from China.”[33] This provision constitutes Beijing’s bottom line for Taiwan’s participation in the IHR: in the WHO, for all purposes, Taiwan is part of China. Or rather, as the text specifies, the proper terminology to be used regarding Taiwan is “Taiwan Province of China.”[34]

With the official instruction to call Taiwan “Province of China,” this document even goes beyond Ban Ki-moon’s above statement, that for the UN, Taiwan is an integral part of the People’s Republic of China. Needless to say, for Taiwan, being called explicitly a province of China is an important setback in its WHO participation. The Taiwanese government launched an immediate protest to the WHO Secretariat. In addition to filing a formal protest letter with the WHO Secretariat, the Taiwanese Health Minister Chiu Wen-Ta also used his speech at the 2011 WHA to request the WHO to use the so-called “WHA model” for Taiwan’s general WHO participation.[35] This would essentially mean to stick to the wording “Chinese Taipei” for identifying Taiwan, and to refrain from presenting Taiwan and China as one entity in the WHO. In May 2012, Minister Chiu filed another letter with the WHO Secretariat to explain Taiwan’s stance on the name issue. So far, however, none of these attempts to urge the WHO to reconsider its policy toward Taiwan have received an official response.[36]

Related to the question of proper terminology is another provision in the IHR memorandum which states that, “Taiwan, as a province of China, cannot be party to the IHR.”[37] This may come as a surprise, as Taiwan’s CDC was officially included in the IHR. The WHO replied to this contradiction that, “‘Taiwan, China’ is part of the globally binding health regulations [author’s italics].”[38] The technical explanation appears to be that the IHR, as an international agreement, only knows states as contracting parties. Hence Taiwan cannot be a party. This does not prejudice the fact that Taiwan works with the IHR, therefore is part of it, to which even the 2010 memorandum pays testimony.

Finally, the IHR memorandum specifies that it only applies to matters concerning the implementation of the IHR, and refers to the 2005 Memorandum of Understanding for issues concerning Taiwan’s work in the WHO that are unrelated to the IHR.[39] This provision gives evidence that the restrictive framework of the earlier MOU is still in place, even after Taiwan was invited to the IHR and to observe the WHA. It may well be that this explains why the number of permissions granted to Taiwanese health experts to participate in WHO technical meetings remains conspicuously low. In interviews with the author, officials in Taiwan’s Department of Health and its Ministry of Foreign affairs refused to give clear responses on whether, in their opinions, the 2005 MOU is still valid.[40] Their official explanation was that since they had never actually seen the MOU, they were in no position to know whether it had been abandoned. However, it appears likely that an official admission that the much-criticized MOU is still in place, after the Taiwanese government has celebrated the success of joining the IHR and observing the WHA, would amount to a considerable loss of face.

According to statistics presented by Taiwanese health officials during an interview in November 2011, health experts from Taiwan applied for 16 technical meetings in 2010, but initially WHO headquarters granted permission for attendance at only four of these meetings. Taiwan’s health experts eventually managed to attend 10 of these activities, however, by using other channels for contact with the WHO: for instance by contacting the technical unit responsible for the meeting directly, instead of going through the WHO Secretariat.[41] According to Taiwanese newspaper reports citing a U.S. State Department report to Congress, in 2011, Taipei applied for 21 WHO working panels and technical activities. Approval was given in eight cases. Nine applications were rejected while the WHO did not respond to four applications.[42] Officials interviewed at the Department of Health saw the strict criteria pertaining to the level of expertise of invited participants as the reason for the WHO’s reluctance to grant permission to Taiwan’s health experts, rather than continued application of the MOU. The WHO’s time frame for answering requests from Taiwan remains long, but again the health officials in the interview put the blame on the generally busy schedules of the responsible WHO officials rather than on the MOU. They presented themselves as not aware that the WHO was still seeking consent from Beijing, while stating that after all, these were internal WHO procedures to which they did not have insight.[43]

In contrast, according to Peter Chang, former director-general of the Department of International Cooperation at Taiwan’s Ministry of Health, the MOU is still in place, which explains the problems Taiwan is facing in its participation in WHO technical meetings. With the MOU, Taiwan is disadvantaged in comparison to other observers in the organization in obtaining information and participating in meetings other than the WHA. A further explanation is, in his opinion, that since Taiwan has achieved extended WHO participation, for various reasons the issue ceased to be a priority in the agendas of both Taiwan’s Ministry of Foreign Affairs and the Ministry of Health and therefore its opportunities are not exhausted to their full potential. He claims, however, that Taiwan’s health experts are still active in a number of meetings, which are not organized by the WHO directly, but rather by individual countries or organizations in association with the WHO. The MOU was not able to control Taiwan’s participation in such events where Taiwanese participants had already been admitted before the MOU was established.[44]

What is Taiwan currently doing to overcome the constraints it is facing in its WHO participation due to China’s involvement? After the 2012 WHA, a statement by Health Minister Chiu surfaced, in which he claimed that “the Taiwan delegation is trying very hard to fight for a full membership of the WHO despite pressure from China.”[45] Taiwan has not given up its hope and desire to join the WHO as a full member at some point in the future. However, while this might be a long-term goal, the short- and mid-term focus lies on expanding Taiwan’s “meaningful and dignified participation” in the WHO. “Dignified” here highlights that Taiwan continues to fight against belittlement by terminology like “Taiwan Province of China,” while also protesting that in the IHR Authorized Ports List, the Taiwanese ports are listed under China.[46] At the same time it seeks the expansion of its meaningful participation to other WHO activities.[47] The United States joined Taiwan’s protest in the name dispute, advocating the use of “Chinese Taipei” instead of “Taiwan Province of China,” and showed itself supportive of expanding Taiwan’s meaningful participation in the WHO beyond the WHA and the IHR, for instance through Taiwan’s inclusion in the International Food Safety Authorities Network (INFOSAN).[48]

Does Taiwan have a Future in UN-Related Agencies?

The mixed results from Taiwan’s WHO participation raise the question of whether Taiwan’s other bids for UN-related specialized agencies will receive a positive answer in the near future. As Taiwan’s bids for meaningful participation in the ICAO and UNFCCC, modeled after Taiwan’s WHO participation, have already been on the agenda for several years, progress has yet been conspicuously absent. Taiwan’s participation in the UN, even in its functional sub-organizations, remains an international hot potato, and China does not appear ready to yield as long as Taiwan’s international status is not settled. Taiwan’s sovereignty will remain a core concern with respect to its UN participation.

Taiwan’s WHO campaign benefitted from a number of circumstances which eventually tilted the balance in Taiwan’s favor. Taiwan could claim, based on empirical evidence, that its exclusion from the WHO created a life threat for its population. This claim induced a number of countries, including the U.S., to step up their support for Taiwan’s participation, which was expressed toward both China and the organization itself. In the ICAO and UNFCCC, this argument is harder to make. Taiwan, based on its own domestic interests, is already a relatively responsible player in the matters addressed by these organizations, so not much obvious harm is done by leaving Taiwan excluded from the two bodies. If the organizations’ member states were to push hard for Taiwan’s participation, in contrast, they would only alienate China. In both organizations this would imply a substantial loss for the effective establishment of international rules and undermine the organizations’ goals. China is too important to be provoked.

Furthermore, China also used Taiwan’s WHO participation as an attempt to boost Ma Ying-jeou’s domestic popularity, who is by far the most attractive ROC president from a Chinese perspective. Beijing thought that granting WHA observership to Taiwan would increase support for Ma in the Taiwan electorate. After all, Beijing reasoned, he would have managed to achieve what his predecessors failed to do―give Taiwan a voice in a high-profile state-based international organization―and Taiwan’s voters should respect this achievement. However, it remains unclear whether Beijing anticipated all the repercussions its WHO concession would produce in Taiwan’s democratic society once the details of deal became known to the public, or whether the Ma government was aware of the terms China was to impose on the WHO with respect to Taiwan’s participation.

In any case, the WHO arrangements China dictated for Taiwan allow for conclusions about China’s current willingness to open up for Taiwan’s participation in the UN system. China will only be pushed to loosen its stance if there is an important level of international pressure to give Taiwan limited rights to take part in any specific UN agency. Yet, even then, China will not allow such participation to become a precedent to be emulated freely by other organizations. Furthermore, even when China consents to let Taiwan take part in certain organizations, it will dictate the framework of such participation, namely that Taiwan despite its presence is still a part, or even a province, of China. From Beijing’s viewpoint, Taiwan’s participation must not lead to the conclusion that Taiwan is a sovereign state independent from China, and for that reason China feels entitled to yield the penultimate power of decision of how much participation is granted to Taiwan and acts accordingly. As the WHO case shows, international governmental organizations are ready to comply with such Chinese demands.

China does have other, more accommodating options available, which it could pursue if it changes its legal theory on the implications for Taiwan’s international status for methods of UN participation short of membership. Such a policy change would require from China’s side more confidence about the long-term intentions of Taiwan’s leaders (such as no independence, and no “two Chinas”). Moreover, China would need to realize that it is only hurting prospects for achieving its fundamental objective by alienating Taiwan and its voters through its heavy-handed approach to UN organizations.

As noted above, Taiwan’s current drive for meaningful participation in the UNFCCC and the ICAO remains low-profile. In 2010, Taiwan tried to formally apply for observer status in the UNFCCC, but has not submitted an application to ICAO; its UNFCCC application was rejected with reference to the UN General Assembly resolution 2758. Since then, Taiwan has concentrated on an issue-oriented approach, by attempting to participate in side events or public meetings of both organizations in order to make a positive contribution through sharing Taiwanese expertise and experience. This issue-oriented approach is intended to familiarize the organizations with Taiwan’s presence and to prove that Taiwan is willing to work positively on the international level. The main aim is therefore to create some momentum in the international community that would lead to positive reactions by the organization and its member states, if and when Taiwan eventually submits formal applications for observer status again.[49]

The government in Taipei currently does not engage in consultations with Beijing on its participation in international organizations, while Beijing continues to openly reject the possibility of expanding Taiwan’s presence in international organizations.[50] However, the question remains as to how much momentum Taiwan is actually able to generate as long as China remains opposed to any expansion of Taiwan’s participation in the UN system. In other words, how likely is it that other members of the organizations in question will support Taiwan, if China opposes Taiwan’s participation? Furthermore, Taiwan’s pragmatic and issue-oriented approach inadvertently proves that it already has the means to take part in some activities of the organizations, albeit on the lowest possible level. This could potentially discourage international pressure to accommodate Taiwan’s rights to participation. Finally, even if China were to consent to an expanded Taiwanese participation in UN specialized agencies, it is equally questionable whether Taiwan’s government would again agree to a deal with Beijing after the disillusioning experience of its WHO participation.

Therefore, further progress in Taiwan’s agenda to take part in functional UN specialized agencies will remain an open issue in the future, dependent on the outcome of a settlement of the question of Taiwan’s status. When and how the question of Taiwan’s status will be resolved is impossible to predict at this point in time. Ongoing cross-Strait talks have not yet touched upon the issue of sovereignty, nor will they in the foreseeable future. For the time being, Taiwan will have to make the best out of its participation in the UN system and show that it is able to work constructively with the UN’s specialized agencies, while a combination of active opposition from China and inertia in the international community continue to block its aspirations for a formal expansion of its participation.

[1] Richard C. Bush, At Cross Purposes: U.S.-Taiwan Relations Since 1942 (Armonk, N.Y.: M. E. Sharpe, 2004), 103–117.

[2] Dennis V. Hickey, Foreign Policy Making in Taiwan: From Principles to Pragmatism (Abingdon, Oxon: Routledge, 2007), 11.

[3] UN General Assembly, “Resolution 2758 (XXIV),” October 25, 1971.

[4] Walter Rosenberger and Tobin, eds., Keesing’s Contemporary Archives: Weekly Diary of Important World Events, vol. XVIII (Bristol: Keesing’s Publication Limited, 1971), 24943.

[5] Information retrieved from the Ministry of Foreign Affairs, Republic of China (Taiwan).

[6] Ibid.

[7] John J. Tkacik Jr., “Taiwan’s Status Remains ‘Unsettled’,” Heritage Foundation, October 1, 2007, http://www.heritage.org/press/commentary/ed101607e.cfm.

[8] Ibid.

[9] Government Information Office, Republic of China, “March 22, 2008 Presidential Election and Referendums - Press Kit: Fact Sheet No. 6,” n.d., http://www.gio.gov.tw/elect2008/kit_06.htm.

[10] “Interview with Michael Kau, Former Deputy Foreign Minister, Republic of China (Taiwan), Taipei Taiwan,” April 20, 2012; also see: Chien-pin Li, “Taiwan’s Participation in Inter-governmental Organizations: An Overview of Its Initiatives,” Asian Survey 46, no. 4 (2006): 611.

[11] Pat Gao, “The UN Bid Goes On,” Taiwan Review 57, no. 10 (October 1, 2007), http://taiwanreview.nat.gov.tw/ct.asp?xitem=24693&CtNode=128.

[12] United Nations General Assembly, “Request for the Inclusion of a Supplementary Item in the Agenda of the Sixty-third Session: Need to Examine the Fundamental Rights of the 23 Million People of the Republic of China (Taiwan) to Participate Meaningfully in the Activities of the United Nations Specialized Agencies, A/63/194,” August 22, 2008, 194.

[13] “Hu Says Opportunity for Cross-Strait Relations Should Be Cherished,” Xinhua.net, May 28, 2008, http://news.xinhuanet.com/english/2008-05/28/content_8272634.htm.

[14] Ministry of Foreign Affairs, Republic of China (Taiwan), “政府決定推動有意義參與「聯合國氣候變化綱要公約」 (UNFCCC) 「國際民航組織」(ICAO)，外交部籲請各國支持,” September 21, 2009, http://www.mofa.gov.tw/webapp/content.asp?cuItem=39793&mp=1.

[15] WHA, “Fiftieth World Health Assembly, Provisional Verbatim Record of the Third Plenary Meeting, A50/VR/3”, May 5, 1997, esp. 6 and 21–22; WHA, “Fifty-seventh World Health Assembly, Second Plenary Meeting, A57/VR/2,” May 17, 2004, esp. 40–42; WHA, “Sixtieth World Health Assembly, Second Plenary Meeting, A60/VR/2,” May 14, 2007, esp. 104–106.

[16] Susan Maloney, Babatunde Olowokure, and Cathy Roth, “Taiwan, China: From Control to Outbreak,” in SARS: How a Global Epidemic Was Stopped, ed. WHO Western Pacific Region (Geneva: World Health Organization, 2006), 109–112.

[17] Dennis V. Hickey, “The High Cost of Excluding Taiwan from the WHO,” in China’s Rise, Taiwan’s Dilemma and International Peace, ed. Edward Friedman (Abingdon, Oxon: Routledge, 2006), 73.

[18] WHA, “Fifty-seventh World Health Assembly, Second Plenary Meeting, A57/VR/2,” 32–33 and 42–43.

[19] WHO, “Implementation of the Memorandum of Understanding Between the WHO Secretariat and China”, July 12, 2005.

[20] Hsiu-chuan Shih, “Cables show US’ role in WHO-China MOU,” Taipei Times, September 12, 2011, 1.

[21] Ellen Ko, “Island to Join Health Alert System,” Taiwan Journal XXVI, no. 5 (2009), http://taiwanjournal.nat.gov.tw/ct.asp?xItem=47654&CtNode=122.

[22] Yan-chih Mo, “Taipei, Beijing to Discuss WHA, Ma Says,” Taipei Times, March 14, 2009, 1.

[23] Ma Ying-jeou, “Full text of President Ma’s Inaugural Address: Taiwan’s Renaissance,” The China Post, May 21, 2008, http://www.chinapost.com.tw/taiwan/national/national%20news/2008/05/21/157332/Full-text.htm

[24] WHO, “World Health Assembly (WHA) Letter of Invitation,” in A Century of Resilient Tradition: Exhibition of the Republic of China’s Diplomatic Archives, ed. National Palace Museum, Taiwan (Taipei: National Palace Museum, 2011), 254.

[25] Ching-chuan Yeh, “The 4-minute Speech of Minister Yeh at a Plenary Session of the 62nd World Health Assembly, 19 May 2009,” Department of Health, Executive Yuan, R.O.C. (Taiwan), May 26, 2009, http://www.doh.gov.tw/EN2006/DM/DM2_p01.aspx?class_no=387&now_fod_list_no=9073&level_no=1&doc_no=71564; Chih-Liang Yaung, “Statement by Dr. Yuang (sic) at 63th (sic) WHA,” Ministry of Foreign Affairs, Republic of China (Taiwan), May 18, 2010, http://www.mofa.gov.tw/Organizations/News/Detail/a0555ca9-5029-46e4-b1d6-8064d0c52988?arfid=3ea175ea-0f1d-497b-81ec-40d17e8a33ab; “Health Minister Chiu Urges WHO to Adopt ‘WHA Model’,” Government Information Office, May 20, 2011, http://www.gio.gov.tw/ct.asp?xItem=89350&ctNode=2463&mp=807; “Taiwan Delegation Returns from Fruitful WHA,” Taiwan Today, May 28, 2012, http://www.taiwantoday.tw/ct.asp?xitem=191319&CtNode=414.

[26] Y.C. Jou, Ching-fang Chen, and Sofia Wu, “Taiwan, China Health Ministers Meet at WHA,” The China Post, May 19, 2009, http://www.chinapost.com.tw/taiwan/china-taiwan-relations/2009/05/19/208788/Taiwan%2DChina.htm; “Taiwan, mainland China health ministers meet at WHA,” Taiwan Today, May 18, 2010, http://taiwantoday.tw/ct.asp?xitem=103536&CtNode=414.

[27] “WHA Observer Status Pays Global Dividends,” Taiwan Today, April 22, 2012, http://taiwantoday.tw/ct.asp?xItem=189512&ctNode=425.

[28] For instance: Jimmy Chuang, Flora Wang, and Shelley Huang, “Protesters Defend Taiwan Sovereignty at WHA Meet,” Taipei Times, May 20, 2009, 1.

[29] Formosan Association for Public Affairs, “World Health Assembly: More Form Than Substance,” Taiwan Communiqué 128 (July 2010): 14–15; Chris Wang and Hsiu-chuan Shih, “WHO’s Terminology Like a ‘slap’: DPP,” Taipei Times, September 21, 2011, 1.

[30] Vincent Y. Chao, Hsiu-chuan Shih, and Shelley Huang, “WHO memo sparks outrage in Taiwan,” Taipei Times, May 10, 2011, 1.

[31] WHO, “Memorandum: Procedures Concerning an Arrangement to Facilitate Implementation of the International Health Regulations (2005) with Respect to the Taiwan Province of China,” September 14, 2010, esp. p. 1 and Art. 3, http://www.scribd.com/doc/57152017/WHO-Memo-on-Taiwan-Status.

[32] Ibid., p. 1 and Art. 1

[33] Ibid., Art. 4

[34] Ibid., Art. 13

[35] Government Information Office, “Health Minister Chiu urges WHO to adopt ‘WHA model’,” May 20, 2011, http://www.gio.gov.tw/ct.asp?xItem=89350&ctNode=2463&mp=807.

[36] “Taiwan again urges WHO over name designation,” The China Post, May 25, 2012, http://www.chinapost.com.tw/taiwan/foreign-affairs/2012/05/25/342213/p1/Taiwan-again.htm.

[37] WHO, “Memorandum: Procedures Concerning an Arrangement to Facilitate Implementation of the International Health Regulations (2005) with Respect to the Taiwan Province of China,” September 14, 2010, Art. 14

[38] Vincent Y. Chao, “Memo says Taiwan not a party to the IHR,” Taipei Times, May 10, 2011, p. 3.

[39] Ibid., Art. 5.

[40] “Interview with Officials at the Department of Health R.O.C. (Taiwan), Taipei, Taiwan,” November 16, 2011; “Interview with Officials at the Ministry of Foreign Affairs, Republic of China (Taiwan), Taipei, Taiwan,” June 6, 2012.

[41] “Interview with Officials at the Department of Health R.O.C. (Taiwan), Taipei, Taiwan,” November 16, 2011.

[42] Hsiu-chuan Shih, “US questions WHO’s name for Taiwan,” Taipei Times, May 18, 2012, 1.

[43] “Interview with Officials at the Department of Health R.O.C. (Taiwan), Taipei, Taiwan,” November 16, 2011.

[44] “Interview with Peter Chang, Professor and Vice-Dean, Department of Public Health and Nutrition, Taipei Medical University, Former Director-General of the Department of International Cooperation, Ministry of Health, Taipei, Taiwan,” April 16, 2012.

[45] “This year’s WHA represents diplomatic victory for Taiwan,” Want China Times, June 1, 2012, http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20120601000002&cid=1501.

[46] See: WHO, “IHR Authorized Ports List,” April 24, 2012, http://www.who.int/ihr/training/ihr_authorized_ports_list.pdf, 23-30.

[47] “Interview with Officials at the Ministry of Foreign Affairs, Republic of China (Taiwan), Taipei, Taiwan,” June 6, 2012.

[48] Hsiu-chuan Shih, “US questions WHO’s name for Taiwan,” Taipei Times, May 18, 2012, 1.

[49] “Interview with Officials at the Ministry of Foreign Affairs, Republic of China (Taiwan), Taipei, Taiwan,” June 6, 2012.

[50] Ibid.

Authors

Sigrid Winkler

Image Source: © Denis Balibouse / Reuters

Taiwan in the Global Economic Landscape

Mignonne Man-jung Chan — Mon, 12 Mar 2012 16:15:00 -0400

INTRODUCTION

Ma Ying-jeou won a second four-year term as president of Taiwan in January 2012, with 51.6 percent of the votes cast in the election. This result signifies, among other things, a solid endorsement of President Ma’s first-term leadership of navigating through challenges of economic stress and natural disasters in the midst of global crises. As a trading nation―and lacking the formal political relationships of most nations―active participation in the international economy is especially important to Taiwan. This article aims (1) to examine the current state of play of Taiwan’s global economic participation; (2) to evaluate the strengths, weaknesses, opportunities, and threats Taiwan is now facing; and (3) to propose a “maxi-min” approach to enhancing Taiwan’s role in the world.

Global Efforts to Promote Economic Growth and Sustainable Development

In order to ensure economic security in a turbulent and interconnected world, a measured dose of liberalization is essential. Taiwan, like other economies, must act quickly to keep up with emerging trends, but must also undertake prudent cost-benefit analysis. On the one hand, the innovative competitiveness of the private sector must not be stifled; on the other hand, the public sector must promote economic growth and social equity by formulating comprehensive policies, including structural reform, lest changing circumstances or external shocks work to our detriment. In a globalized world, economies will neither be spared the ripple effects of others, nor can they escape the responsibilities of being a stakeholder in the global community.

The Ma Ying-jeou administration has identified six emerging industries in Taiwan―namely biotech, eco-tourism, green energy, medical and healthcare, organic farming, and cultural innovation―for which the government and private enterprises are seeking to boost competitiveness through a variety of means such as innovation and branding. In addition, four intelligence industries are to be promoted―cloud computing, smart electronic automobiles, IPR commercialization, and smart green buildings. The government plans to develop new visions and forward-looking policies in these industries. Development in these areas will forge structural change for economic growth, which will in turn contribute to the much-needed innovative and sustainable growth.

But these efforts to strengthen certain key industries could not exist in a vacuum, and interaction with the outside world is necessary. As late as 2009, Taiwan faced at least four specific external challenges to its competitiveness: (1) a relative lack of institutionalized trading mechanisms with mainland China, which is Taiwan’s neighbor, the home of more and more of its manufacturing, and a giant potential market; (2) the volatile financial situations and depressed economic climate in the United States and Europe; (3) a lack of free trade agreements with most economies; and (4) perceived political opposition from China to establishing such agreements with third parties.

In order to solve or mitigate these challenges, and to both enhance opportunities for near-term trade and boost mid-term international competitiveness, the Ma administration pursued an Economic Cooperation Framework Agreement (ECFA) with China. The ECFA was signed on June 29, 2009 and became effective as of September 12 of that year. The Early Harvest provisions are to be completed in three years starting in January 2010; China is removing tariffs on more than 500 products from Taiwan to the benefit of the island’s bicycle, petrochemicals and machinery industries. China will cut import tariffs on $13.84 billion worth of items including petrochemicals and vehicle parts, and Taiwan will cut tariffs on $3 billion worth of goods including parts for baby strollers and bicycles, and raw materials for textiles. This year more segments of ECFA, including goods and services, investment protection and dispute settlement are in the pipeline for further negotiation. Open sky (for air transport liberalization) and cloud valley (for high-tech information network clustering) are also identified as items of future collaboration.

Taiwan has been actively seeking bilateral economic cooperation pacts with other like-minded partners, including a revival of Trade and Investment Framework Agreement (TIFA) talks with the United States and a possible FTA with the European Union (termed as Trade Enhancement Measures by the European Chamber of Commerce). Sequentially, Singapore and Taiwan have initiated the negotiation of ASTEP (Agreement of Singapore-Taiwan Economic Partnership). Japan and Taiwan signed a landmark investment pact in September 2011. Feasibility studies on cooperation or partnership agreements with the potential partners of the Philippines, Indonesia, and India are now being undertaken. Other economies in the region, notably South Korea, are pursuing and implementing trade liberalization agreements; if Taiwan is excluded from broader regional economic integration, trade and investment will be diverted away from it.

Tables 1 and 2, below, illustrate Taiwan’s changing trade and investment portfolios with key partners and reflect the shifting global economic landscape.

Since 2002 Taiwan has also increased its international economic participation in multilateral fora, complementing the bilateral efforts noted above. In APEC, Taiwan has made great strides in collaborating on initiatives in Emergency Preparedness, Paperless Trade, and Crisis Management Center for Small & Medium Enterprises. Furthermore, public-private joint partnership has been highlighted by Taiwan’s initiation and participation in projects such as the Supply-chain Connectivity Framework and the Food Emergency Response Initiative.

In the World Trade Organization, Taiwan acceded to the Government Procurement Agreement in 2009. It continues to work and find ways to promote next-generation issues, including a potential extended Information Technology Agreement (known as ITA2), and regulatory cooperation. Taiwan’s commitment to a successful conclusion of the Doha Development Round remains firm and it stands ready to share its development experiences with emerging and developing economies.

Challenges Ahead for Taiwan: A SWOT Analysis

Strengths: Competitiveness, Competence, and Policy Mix

President Ma has put forth his vision of a Golden Decade featuring innovative approaches to stimulate economic growth and sustain competiveness. President Ma’s re-election and the KMT majority in the Legislative Yuan should increase the chances for policy reform and development, and initial signs are encouraging. Reputable international rating agencies, including IMD, WEF and BERI, have rendered high rankings for Taiwan’s competitiveness and network readiness for the year 2011. President Ma’s new Cabinet lineup, announced after the January 2012 election, is composed of prominent technocrats with financial and technological expertise who will be expected to steer Taiwan through the ripple effects of global financial storms.

The Ma administration has provided the foundation for prosperity and stability with continuous liberalization and cross-strait policies designed to benefit Taiwan. ECFA and 16 other agreements have institutionalized cross-strait economic relations, and reversed the harmful trend of run-away businesses and capital flight. Stability and mutual prosperity – not only across the Taiwan Strait, but in the region as well – will be mutually reinforcing.

President Ma’s cross-strait policy rubric of “sideline confrontations, create win-win situations” has taken us as far as the implementation of the Early Harvest provisions in ECFA. ECFA could well serve as catalyst for deepening regional economic integration, intensify the regional supply chains, and contribute to regional peace and prosperity.

Weakness: Politics

Taiwan’s domestic politics, as in many countries, could easily disrupt an otherwise rational policy choice—a case in point was the U.S. beef import case that has flared up in 2009 and continues today. After much deliberation and nearly 12 months of field investigations, research on international health standards, inter-agency coordination, and public outreach, a U.S.-Taiwan beef import agreement was signed in 2009. However, given the partisan atmosphere that prevailed at the time in the run-up to Taiwan’s municipal elections, the Legislative Yuan weakened the agreement with an amendment to limit the scope of import.

But this uncertainty though is no more severe than the fact that the U.S. president’s trade promotion authority has not yet been extended by the U.S. Congress, nor is it more dangerous than the farmers’ riots in South Korea and Japan. A solution to the beef impasse – which continues to hold up other advances in Taiwan-U.S. trade relations – will require mutual understanding and concerted efforts in consensus building.

Opportunities: ECFA as Catalyst to Regional Integration

While Asia continues to be the engine of global economic growth, Mainland China’s 12th Five-Year Plan (2011-2015) highlighted that nation’s attempts to ease the double-digit growth and avoid over-heating, open more domestic markets, and enhance the services industry. Taiwan's “golden decade” blueprint (2011-2020) has some overlapping interests and both sides seem ready to further improve economic cooperation and seek common development and prosperity.

The value of ECFA as a catalyst for regional harmony and prosperity is most evident when Taiwan’s global official and non-official partners expressed their welcome sentiments after the inking of ECFA, including Singapore, Japan, the E.U. and the U.S. It was dubbed a “landmark,” with value of the pact extending beyond the immediate economic cooperation between Taiwan and China. Foreign chambers of commerce were pleased with the reduction of business transaction costs, and the potential for a wider scope of operation. The win-win-win potentials are enormous and are firing the imaginations of entrepreneurs and business executives. Integration rhythms of vertical, horizontal and criss-cross sorts are being widely explored at an unprecedented tempo.

Indeed, ECFA helped create a sense of urgency in the regional business community about speedier efforts in forging integration, such as South Korea’s call for faster negotiation with early harvest of sorts to avoid losing competitive advantages, and the U.S. urge for reviving TIFA (Trade & Investment Framework Agreement with Taiwan). ECFA will not only dissipate the risk of Taiwan being marginalized – a threat Taiwan faced as regional integration began to take place without it – but will also bring about sequential economic linkages with other economies in the region. ECFA will add much value to regional integration via vertical and horizontal integrations of regional and global supply chains. The stakes of ensuring the stability of economic linkages will in turns strengthen incentives for regional collaboration in facilitating ease of flows for goods, services, manpower, and technology.

ECFA will facilitate more cross-strait exchanges and collaboration in capital, work force, management style, technological innovation, and business culture, and hence could contribute to transforming mainland China into a milder, not tougher, hegemony.

As President Obama has made remarks supporting increased economic ties and reduced tension across the Strait, and is committed to providing Taiwan with most of the needed defense capability, the U.S. is playing an indispensable role in ensuring that the resurging China continue to be a responsible stakeholder. This balancing act of engaging and putting a check on the mainland China is not only good for Taiwan, but also good for the mainland. In each and every step of the paradigm shift, the emerging multilateral world should see a more harmonious international system, a much better structured world and a more humane approach to integration.

Taiwan could well serve as a catalyst for Mainland China’s evolving development. It may be constructive as a reference point in the creation and strengthening of the various fabrics of political, legal, economic, social and cultural development in China. As the world’s 18th largest economy and a creditable guardian of Chinese traditional culture, Taiwan has much to offer in the wake of global re-balancing and structural reform in her own right.

So far, the world has appreciated Taiwan’s aspiration to extend the benefits of ECFA and the peace dividend to others by joining other regional and global international organizations. As a trading island, Taiwan is well geared for exploring integration schemes, such as ASEAN + X, the Trans Pacific Partnership, the International Civil Aviation Organization, the United Nations Framework Convention on Climate Change, and the South Pacific Fishing Management Organization, among many others.

Lacking membership in these and other international regimes, Taiwan could neither contribute to the international community, nor fulfill the global citizen’s responsibility in good governance. In the schemes of liberalization, facilitation, standardization, regulatory reform, and development assistance, Taiwan should not be absent. The growing confidence in Taiwan as a “responsible stakeholder” rather than a “trouble maker” should enhance Taiwan’s expanded international participation and contribution.

Taiwan will continue to apply for international participation for practical reasons that will benefit both it and the international community. Taiwan does not need to be an open gap for health or environmental security. Taiwan has a lot to contribute to economic security with the efforts in establishing a SME Crisis Management Center in APEC, for instance.

Threats: Delicate Balance between Expectations and Feasibility

China’s approach to ECFA, especially the proportional – not absolute – equilibrium in Taiwan’s favor in the Early Harvest negotiations, further enhance the image of China as capable of being a reasonable and responsible stakeholder. On the other hand, China’s expectations may or may not match the feasible pace of change in Taiwan, and vice versa.

The sensitive issue of Taiwan’s de facto, if not de jure, sovereignty will require wisdom in the domestic, cross-strait and international arenas. Any oversight or misstep by either side could easily backfire and ignite tension of various intensities in the region. Cross-strait dialogues on the sovereignty issue must take place sooner or later and should be “sensible, reasonable and legal” (合情、合理、合法). International reactions and appropriate treatment of this critical issue remains a possible threat to the landmark breakthroughs elaborated thus far.

As to the pressure on the bilateral Trade and Investment Framework Agreement (TIFA) between the United States and Taiwan, a strong sense of mutual good-will is in order. The United States has over time come up with various “pre-conditions” for initiation or revival of TIFA—first intellectual property rights, then the pharmaceutical industry, and now beef. What might be next? The expectation of “preconditions” certainly differs greatly from expectations for the “TIFA Agenda” per se.

Taiwan has always been in a delicate position in U.S.-China-Taiwan triangular relations. The shifting paradigm of the current geo-political and geo-economic landscapes has created a sense of mutual distrust between the insurmountable U.S. and the inevitable Mainland China, shall we say. The undercurrents of the Trans Pacific Partnership led by the U.S. vis-à-vis the “ASEAN+X” schemes actively participated in by Mainland China cannot be a blessing for the region or the world, even though healthy “competitive liberalization” in the pure economic sense could be persuasive.

A Maxi-Min Approach for Economic Integration

Given the positive and negative factors in both the internal and external environments identified in the SWOT analysis above, Taiwan is striving for a viable approach to sustainable development in the global financial and economic environment. Taiwan does not want to be – and cannot afford to be – left out of the regional integration process. This is most evident in the current cross-strait economic relations. Nevertheless, Taiwan needs to diversify its risks, and avoid becoming overly reliant on China. A maxi-min approach, proposed here, is geared towards maximizing common interests and minimizing conflicting interests. In other words, Taiwan aims to maximize the internal strengths and external opportunities on the one hand, and to minimize the internal weakness and external threats on the other.

ECFA could serve as an example for conflict resolution with a maxi-min approach. With concerted efforts and open communication, we could alleviate the weaknesses and threats identified above. Political will for high-level communication is indispensable for dissipating potential or perceived weaknesses and threats. The strengths and opportunities should be firmly grasped and modified behaviors should be rewarded in a mutually reinforcing confidence-building mechanism. Regional security is manifested in our maxi-min deliberations. It is of no avail if we simply moan and groan over the unsettling yet unavoidable dynamics in the shifting paradigm. We ought to exert joint wisdom with strong political will for conflict resolution.

Some may question Taiwan’s will and capability to fulfill its commitments. It is not difficult to realize that adapting to the challenges of globalization is a great challenge for most nations, including Taiwan, given different levels of development. Good governance in the areas of policy formulation, consensus building, bipartisan collaboration, public outreach, domestic restructuring, and adapting to international standards will continue to be the challenges for most developing economies. The global trade system is at an impasse not because most do not have the political will, but because in a given time, we are facing the tough issue of good governance. It may be helpful for trade partners to render more empathy than suspicion, more capacity building than finger pointing.

Taiwan will continue to resist the possibility of being marginalized, and to strive for an environment conducive to joint collaboration and healthy competition. We would like to build on what we have accomplished and broaden our participation in the international community. Relations with our trade partners could be explored bilaterally, regionally and globally. As a member of the World Trade Organization, Taiwan is entitled to explore free trade agreements with all other WTO members. Taiwan’s free trade agreements with others need not be seen by third parties as a dangerous threat, part of a zero-sum game, or a winner-take-all trap. In due course, they could prove to be engines of growth, catalysts for regional integration, and models for mutual learning in the process of globalization. With a maxi-min paradigm for implementation, we could ensure that regional peace and prosperity are here to stay.

The geo-economic challenges in the Asia-Pacific region are inseparable from the overall global economic landscape. The global imbalance and structural reform are the key issues of concern. Whereas the United States and European Union are currently experiencing varying degrees of economic distress, the surging of the emerging markets has become a new source of hope for economic growth. Global institutional arrangements, such as the G20, have attempted to address the global imbalance and construct a global economic order for the post-crisis era. Taiwan, though ranked as the world’s 18th largest economy, has not had the pleasure of contributing to the G20. However, Taiwan has undertaken bold endeavors in unilateral reform, bilateral trade agreements, plural endeavors in APEC, and multilateral efforts in the WTO. Taiwan stands ready to continue its efforts in ECFA with China, and some potential bilateral and plural deliberations in the region, including the U.S.-Taiwan TIFA, ASEAN++, and TPP. The spirit of open regionalism, which underlines the construct of APEC, should be a good reminder for us all when we are building toward well-managed cross-Pacific relations.

Authors

Mignonne Man-jung Chan

Image Source: © Pichi Chuang / Reuters

Biding Time: The Challenge of Taiwan's International Status

Sigrid Winkler — Thu, 17 Nov 2011 12:22:00 -0500

INTRODUCTION

Taiwan’s international status has been in limbo for decades. The government in Taipei, which formerly represented China in the United Nations Security Council (UNSC), is today left with only approximately 20 diplomatic allies and struggles against long odds to gain access to international organizations. At present Taiwan is not widely recognized as an independent state, but it has been effectively self-governed by the government of the Republic of China (ROC) for over 60 years and has boasted a democratic government for the last 15 years. In its relationship to China it enjoys what is commonly referred to as status quo, an equilibrium which allows for much flexibility but which also curtails Taiwan’s possibilities to become a full-fledged international actor.

Currently, Taiwan’s international situation does not appear to be too dire: relations with China are more constructive than they have ever been before. A “diplomatic truce” has stabilized the number of countries that formally recognize Taiwan. Taiwan has also established informal relations with a large number of other countries. Moreover Taiwan participates in a number of international organizations: for instance, in 2002 it became a full member of the World Trade Organization (WTO) alongside China, and also in 2009 it obtained a seat as an observer in the World Health Organization’s (WHO) highest decision-making body, the World Health Assembly (WHA).

This article provides a long-term overview of the development of Taiwan’s international status as a background for an analysis of current problems and suggestions of policy choices in light of the upcoming presidential election in 2012. A fundamental question is, how much longer can Taiwan uphold its ambiguous status quo in the international arena, and what are the government’s options?

The Development of Taiwan’s International Status

The historic events that led to Taiwan’s ambiguous international status today are commonly known. A civil war in the 1940s between the ruling Kuomintang (KMT) and the rebel forces of the Chinese Communist Party (CCP) on the Chinese Mainland ended in the retreat of the government of the Republic of China to Taiwan. The island could only be held due to a military intervention of the United States (U.S.). Taiwan, a Japanese colony from 1895 until 1945, had been returned to China after World War II, but controversy broke out in the early 1950s over which of the two governments represented China: the newly founded People’s Republic of China, or the Republic of China that had erected its “wartime capital” in Taipei and was waiting for an opportunity to “reconquer the Mainland.”

Although the ROC upheld its claim to be the only legitimate government of the whole of China for a while longer, and even managed to retain the permanent Chinese seat in the UN Security Council until 1971, throughout the Cold War a growing number of states abandoned Taipei in order to establish diplomatic relations with Beijing. Decolonization and Beijing’s close ties to an important number of emerging states helped to eventually tip the balance in the UN against Taiwan. With this, Taiwan lost its seat in most international organizations, until its government decided in the 1980s to attempt to return to many of them.

The idea of “one China,” which is understood and espoused by different countries in different ways, is a major source of Taiwan’s dilemma. Chiang Kai-shek, KMT leader during the Chinese Civil War and president of the ROC until his death in 1975, refused to accept dual representation of the ROC and the PRC in the UN on the grounds that he did not want “to coexist with bandits” – not that Mao Zedong would have been more forthcoming. Chiang believed that the ROC was the only legitimate representative of the Chinese people.

A second element of the “one China” principle was that no country could recognize the ROC and the PRC at the same time, as both claimed to represent China and would break relations with any third state that approached the other side. Therefore, the establishment of the PRC in 1949 and the expulsion of the ROC from the UN in 1971, together with the U.S. reorientation toward Beijing in the early 1970s, resulted in a majority of countries switching allegiance and establishing diplomatic relations with the PRC.

With the realization that diplomatic allies, the more the better, were a precondition for its claim to sovereignty,[1] Taiwan engaged in so-called “dollar diplomacy,” seeking to buy opportunistic states’ loyalty with development aid. As China did the same, a diplomatic war broke out over who could pay more for retaining diplomatic allies.

Today Taiwan is left with 23 diplomatic allies, most of them small developing countries on Pacific islands, in Africa, or in Latin America. This number could finally, for the time being, be stabilized. In 2008 new President Ma Ying-jeou saw that Taiwan was fighting a losing battle with more and more states drawn into China’s orbit as a fast rising power. He proposed a “diplomatic truce” with the Mainland, meaning in part that both sides would stop stealing each other’s diplomatic allies. Since then, no country has switched sides, although Beijing had to actively turn down the approaches of a few.

Taiwan’s options for how to deal with its ambiguous international status in the future are limited and they vary as to their degree of realistic attainability: independence, unification with China, or the maintenance of the status quo, at least until a better opportunity opens up.

Democratization and the Issue of Independence

A new dynamic has developed since the early 1990s: Taiwan’s democratization raised questions about the national identity of the Republic of China. It opened the political spectrum for parties that do not perpetuate the myth that the ROC is in fact China’s government, but which insist that Taiwan has a separate national identity and hence a claim to independence. In short, domestically the consensus in the political system about what Taiwan was or should be in the future disappeared. This development has brought Taiwan to the brink of public referenda on its status, which could have resulted in a declaration of independence.

However, even if Taiwan declared its independence, whether as the Republic of China or as Taiwan, it would still not solve the issue of Taiwan’s international status, as only with recognition of its statehood by other states could it become a full player in the international system of recognized states. A declaration of independence would not substantially increase the number of countries that recognized the government in Taipei, and it might actually harm relationships with a number of friendly states that now entertain informal but close relations.

Most international powers have made statements to express their opposition to such a unilateral change in the cross-Strait relations. The United States and others have vested interests in good relations with China, therefore their long-standing policy is to discourage Taiwanese independence aspirations even when they come in a (barely) disguised form, as in the 2008 referenda on Taiwan’s UN membership. Instead, the United States and other influential powers, such as the EU, support only a peaceful solution in form of a mutually agreed outcome resulting from talks between China and Taiwan. The economic rationale behind this stance is becoming increasingly powerful: China is the biggest foreign creditor of the United States, the EU is looking to China to save the Euro, and most other countries also have intensive trade relations with China.

Moreover, China in 2005 passed the so-called “Anti-Secession Law” where it laid down in writing that “the state [the PRC] shall employ non-peaceful means and other necessary measures” if Taiwan‘s formal secession from China becomes imminent.[2] The security argument is therefore equally important: who would come to Taiwan’s support if it were attacked by China after declaring independence? The United States not only opposes unilateral change in the current status quo, but a large portion of its military capacities are tied up on other battlefields. Furthermore it has been argued that the Taiwan Relations Act gives the United States only the option to defend Taiwan, not a strong commitment.[3] The EU does not possess the necessary military capabilities to intervene in a conflict in the Taiwan Strait, and is anyway more focused on its own neighborhood. And who would come to Taiwan’s help in Asia and willingly enter a confrontation with China? Japan may have the necessary military power but would it want to put it to a trial for the sake of Taiwan’s independence? Risking a war would certainly be a losing option for Taiwan.

In short, while Taiwan is struggling to remain on the international map, the door to formal independence to become a full-fledged member of the international system should be closed for the time being. Its only option to attain such a status, it appears, is with prior consent from China – highly unlikely in the foreseeable future.

Nevertheless, in Taiwanese opinion polls independence receives support from roughly a quarter of respondents.[4] Support for independence rises significantly in the hypothetical case that it would not entail the risk of an attack by China.[5] Domestic political actors have to cater to the sentiments of the large parts of the population that have strong feelings about independence. Thus in Taiwan’s democratic society the issue will remain present, and it will continue to be used and abused for political gains in the domestic context.

Unification: Not an Option – Right Now?

Unification with China, which would definitely clarify Taiwan’s status in international relations, is currently also not a viable option. Among different options for Taiwan’s status, unification with China receives the least amount of support in Taiwan, at the moment coming in around or below the 10 percent mark.[6] In a democratic society, a step like unification could only be taken with the support of Taiwan’s population, which largely prefers to review the question in the future, under changed circumstances.

Unification cannot be ruled out as a possibility for the distant future, in case Taiwan comes under yet stronger pressure from the Chinese side and under the precondition that Taiwan can uphold its autonomy. However, currently there is no proposal on the table which would satisfy both sides, and circumstances would need to change drastically in order to reverse the trend of increasing opposition in Taiwan’s population to the idea of unification. The Chinese offer of “one country, two systems,” which would preserve large portions of Taiwan’s current autonomy and would potentially also allow for Taiwan’s separate participation in certain international organizations, albeit not as a state member, is not acceptable to the Taiwanese voters, at least as long as Taiwan is able to defend its de facto independence.

Some commentators have argued that unification, even if willingly performed by both sides, would not be in the interest of the world. Taiwan and China together would be an even stronger economic powerhouse, and if the Chinese military were no longer focused on Taiwan, it may be free to project its military power more strongly elsewhere in the world.[7]

Status Quo as the Way Forward?

By the late 1980s, having lost most of its diplomatic allies and having been ousted from the bulk of international organizations, Taiwan’s government needed to become creative in order to remain on the political map. Lee Teng-hui’s government introduced the idea of “flexible” or “pragmatic diplomacy” which stipulated that, first, if formal relations with other countries were not possible, then Taiwan should make an effort to entertain substantial relations – meaning close relations without diplomatic recognition. Second, Taiwan should attempt to participate in international organizations while being flexible on name and membership status issues.

As for the substantial relations with other countries, according to the website of the ROC Ministry of Foreign Affairs (MOFA), Taiwan currently has its own informal representations in 57 countries,[8] while 49 countries maintain offices in Taiwan.[9] The names and levels of competence of these representations vary considerably both on the Taiwanese as well as on the foreign side, and they all stop short of being formal embassies, although many of them fulfill similar functions.

MOFA’s website also lists 32 international organizations in which Taiwan is a member. Taiwan joined three quarters of them after 1987, when it started its policy of overture to international organizations.[10] This statistic highlights the flexibility that Taiwan has applied to its pursuit of international participation: in most of these organizations Taiwan has not entered as a state member, but for instance as a separate customs territory, a fishing entity or a non-sovereign regional member. Also, some of these organizations are not actually intergovernmental but admit research institutes or sector-specific interest associations.

As indicated above, Taiwan only rarely has been able to join or retain its membership under the name “Republic of China.” It therefore sports a wide variety of names, such as “Chinese Taipei,” “China (Taiwan),” or “Taipei, China,” many of which were only grudgingly accepted by Taiwan for the sake of staying in the organization. Notably, China is also present in only some of these organizations. China’s entry into an organization, if Taiwan was previously a member, has mostly resulted in a change of name and/or membership status for Taiwan.

Some of the most prominent organizations in which Taiwan is a member are the WTO, the Asian Development Bank (ADB) and the Asia-Pacific Economic Cooperation (APEC). But it has been relatively easier for Taiwan to enter organizations which follow a functional logic and deal with a particular issue-area of international relations, for instance international trade or fisheries management. In these cases, Taiwan can plausibly argue that its absence from the respective organizations hurts not only Taiwan itself but is also detrimental to the optimal functioning of the organization and therefore undermines the concerted efforts of the other members. In other words, Taiwan sometimes manages to appeal to a very specific and important interest of the other members to allow for Taiwan’s participation.

While this argument about the cost of excluding Taiwan is certainly convincing, the cost of excluding China when it refuses to exist side by side with Taiwan in a specific international organization is even larger. In other words, when faced with the choice of either including China or Taiwan―with the latter being by comparison the smaller economic power, the less important polluter, a defender of human rights and democracy, and an entity that tries to live up to international standards so it will be acknowledged as a responsible stakeholder―other states or international organizations will pick the side whose absence would have a much greater downside: China.

However, Taiwan and other international actors have tried to circumvent this situation of mutual exclusivity by creatively searching for compromise formulas for Taiwan’s participation. Therefore the MOFA website also lists 19 organizations in which Taiwan participates “as observers [sic] or other status.”[11] In the WHO, for instance, Taiwan is an observer to the meetings of the WHA, although its invitation has to be renewed annually.[12] “[O]ther status” refers to associate membership, corresponding membership and cooperating non-membership.

Participation in international organizations has the advantage that, in the fields of competence of the organization in question, Taiwan has access to information, can learn to adhere to international standards and solve disputes, and can also contribute with its own input. In terms of genuine benefits it is a win-win situation both for the organization and for Taiwan. Taiwan can also increase its visibility as an international actor, portray itself as being cooperative, especially in comparison to China, and strengthen its contacts with other countries through networking within the organizations. Furthermore, Taiwan’s participation in international organizations creates a venue, although still limited, for high-level contacts with China. On the highest level, Chinese President Hu Jintao and former KMT chairman Lien Chan have had several exchanges in APEC meetings. In the WHA the health ministers of both sides have met, which is not possible in a bilateral context.

At the same time, China still tries to curtail Taiwan’s participation by insisting on name changes and by refusing to compromise in most cases; it does not accept the idea that Taiwan’s participation in one organization can be a precedent for similar participation in another. Instead China emphasizes that any decisions concerning Taiwan’s participation in international organizations have to be taken in a case-by-case approach.

Downsides of Reliance on Flexibility

While Taiwan’s flexible approach to maintain a certain level of international presence has been successful, it also has had the negative consequence of cementing Taiwan’s ambiguous international status. Other countries have become comfortable dealing with Taiwan on a less-than-formal basis. While Taiwan placed its hopes on the idea that its incremental approach would help other countries to become accustomed to Taiwan’s presence as a positively contributing member of the international system so that they eventually step-by-step fully accept Taiwan as a peer, in reality such relations do not seem to have any prospect of resulting in statehood recognition. Relations with Taiwan on an informal basis or its participation in international organizations with less-than-state membership fulfils other states’ objectives sufficiently so that in a cost-benefit calculation they do not consider it necessary anymore to argue with China about the need to establish better relations with Taiwan.

More specifically, Taiwan’s approach to international organizations appears to have carried Taiwan into a cul-de-sac. Taiwan’s achievement of being invited to the WHA as an observer seems to have created a precedent for other countries on how to deal with Taiwan’s attempts to participate in international organizations, namely to leave any decisions to bilateral consultations between Taipei and Beijing.

This is an important change from earlier policies: in the WTO the other members decided themselves about how to integrate Taiwan in the organization and only partly responded to China’s concerns; China was not given an explicit say in the matter of Taiwan’s accession. In the case of Taiwan’s accession to the WTO’s Government Procurement Agreement in 2008, other members helped to broker a deal between Taiwan and China, China’s concerns about implications of sovereignty for Taiwan were thoroughly taken into account. In the WHO, on the other hand, other members merely expressed their desire for a better inclusion of Taiwan in the workings of the organization, but it was left to Taiwan and China to work out a compromise. As this has produced a relatively satisfying outcome in the WHA, other international actors show little interest in pushing for Taiwan’s participation in, for example, the state-based International Civil Aviation Organization (ICAO) and the UN Framework Convention on Climate Change (UNFCCC). So far the U.S. government and the U.S. Congress have shown limited support,[13] in the EU only the European Parliament has explicitly endorsed the Taiwanese campaigns.[14]

What appears to be forgotten is that such a stance makes any progress for Taiwan’s participation dependent almost entirely on China’s goodwill. In the WHA case Taiwan held good cards: the 2003 epidemic of the Severe Acute Respiratory Syndrome (SARS) had made the need for Taiwan’s integration pressing, China had been under much international pressure for its mishandling of the epidemic and needed to show a more progressive attitude about public and global health issues, and Beijing appears also to have wanted to boost Ma Ying-jeou’s domestic reputation by throwing him the bone of WHA observer status. These motivating factors are absent in Taiwan’s new efforts to join ICAO, UNFCCC, and others.

Outlook on Policy Choices

The KMT and the Democratic Progressive Party (DPP) have to navigate between difficult choices concerning Taiwan’s international relations. Their policy options are contingent upon Taiwan’s international environment, the quality of cross-Strait relations, and Taiwan’s domestic context. Maintaining the status quo through expanding Taiwan’s contacts with other countries and its presence in international organizations is still Taiwan’s best option for the time being. However, time has become Taiwan’s enemy. With growing economic interdependence and the military balance tipping in China’s favor, while the world’s major economies are in debt to China, China’s power to force an outcome to its liking is growing. Taiwan can only bide its time and increase its international standing in the hope that future leadership generations in China will be open to a better compromise than what is already on the table.

If it hopes to increase Taiwan’s participation in international organizations, Taiwan’s government should seek to again internationalize this issue. The government should continue to highlight to states that maintain friendly relations with Taiwan that the reliance on China’s goodwill alone does not promise rapid progress and might lead to suboptimal results, as China is currently under no concrete pressure to offer a good deal to Taiwan. At the same time, the government can also intensify its efforts to emphasize that the trans-border problems it is targeting - air traffic and emissions - are only growing while Taiwan is prohibited from contributing to their solution. If a compromise on Taiwan’s participation in the respective international organizations were reached before the presidential and legislative elections in January 2012, it would potentially help the KMT to remain in power and help assure four more years of relatively harmonious relations with China, a development that other states have seemed to welcome since President Ma’s inauguration in 2008.

In the international context, it is important that the United States show more convincing support for Taiwan’s participation in certain international organizations. After all, Taiwan’s recent attempts have been moderate and reasonable, but China does not have much incentive to budge if there is not a certain level of international pressure. Moreover, the United States remains Taiwan’s best friend in the international arena and the largest global power, and its actions set the benchmark for the level of support of others. A supportive U.S. stance has the potential to push others to emulate the U.S. policy, above all the EU, which comprises a growing number of countries and has a wide sphere of influence in its neighborhood.

[1] One of the conditions for statehood in the Montevideo Convention for the Rights and Duties of States is the ability to conduct external relations, which is better done formally than informally.

[2] The full text of the Anti-Secession Law is posted on the website of the Taiwan Affairs Office of the State Council of the PRC; see “Anti-Secession Law adopted by NPC,” http://www.gwytb.gov.cn/en/Special/OneChinaPrinciple/201103/t20110317_1790121.htm; accessed November 10, 2011.

[3] See for instance: Dennis V. Hickey, “Rapprochement between Taiwan and the Chinese Mainland: implications for American foreign policy,” Journal of Contemporary China 20, no. 69 (2011): 233. The full text of the Taiwan Relations Act is posted on the website of the American Institute in Taiwan; see “Taiwan Relations Act,” http://www.ait.org.tw/en/taiwan-relations-act.html; accessed November 10, 2011.

[4] See for instance: Global Views Survey Research Center, “Survey on President Ma Ying-jeou’s Approval Rating and People’s Views on the Unification-Independence Issue”, April 25, 2011, http://www.taiwansecurity.org/2011/GVMaApproval_Independence-042511.pdf; accessed November 1, 2011; for a more detailed analysis refer to: Election Studies Center, NCCU, “Trends in Core Political Attitudes among Taiwanese: Changes in the Unification - Independence Stances of Taiwanese as Tracked in Surveys by Elections Study Center, NCCU (1994~2011.06),” 2011, http://esc.nccu.edu.tw/english/modules/tinyd2/content/tonduID.htm; accessed November 2, 2011.

[5] Yuan-kang Wang, “China’s Growing Strength, Taiwan’s Diminishing Options,” Taiwan-U.S. Quarterly Analysis, The Brookings Institution, November 2010, http://www.brookings.edu/papers/2010/11_china_taiwan_wang.aspx?p=1; accessed November 2, 2011.

[6] See for instance: Global Views Survey Research Center, “Survey on President Ma Ying-jeou’s Approval Rating and People’s Views on the Unification-Independence Issue.”

[7] Nancy Bernkopf Tucker, “If Taiwan Chooses Unification, Should the United States Care?,” The Washington Quarterly 25, no. 3 (2002): 21 and 24.

[8] Ministry of Foreign Affairs Republic of China (Taiwan), “List of Embassies & Missions Abroad”, n.d., http://www.mofa.gov.tw/webapp/lp.asp?ctnode=1864&ctunit=30&basedsd=30&mp=6; accessed November 1, 2011.

[9] Ministry of Foreign Affairs Republic of China (Taiwan), “Foreign Missions in the ROC (Taiwan)”, n.d., http://www.mofa.gov.tw/webapp/lp.asp?ctNode=1868&CtUnit=30&BaseDSD=30&mp=6, accessed November 1, 2011.

[10] Ministry of Foreign Affairs Republic of China (Taiwan), “Intergovernmental Organizations (IGOs) in which we participate”, n.d., http://www.mofa.gov.tw/webapp/ct.asp?xItem=51335&CtNode=2254&mp=6, accessed November 1, 2011.

[11] Ibid.

[12] See “Taiwan in the World Health Assembly: A Victory, With Limits,” Jacques deLisle, Brookings Northeast Asia Commentary, No. 29 (May 2009), The Brookings Institution, http://www.brookings.edu/opinions/2009/05_taiwan_delisle.aspx; accessed November 10, 2011.

[13] William Lowther, “US, PRC discussing ways for Taiwan to join world bodies,” Taipei Times, December 9, 2010, http://www.taipeitimes.com/News/front/print/2010/12/09/2003490463; accessed November 2, 2011; Rachel Chan, “Taiwan thanks US Senate for backing ICAO bid,” Taiwan Today, September 23, 2011, http://taiwantoday.tw/ct.asp?xItem=176714&CtNode=436, accessed November 1, 2011.

[14] For instance: European Parliament, “European Parliament resolution of 11 May 2011 on the annual report from the Council to the European Parliament on the main aspects and basic choices of the Common Foreign and Security Policy (CFSP) in 2009, presented to the European Parliament in application of Part II, Section G, paragraph 43 of the Interinstitutional Agreement of 17 May 2006 (2010/2124(INI)), P7_TA-PROV(2011)-227,” May 11, 2011, Art. 79.

Authors

Sigrid Winkler

Image Source: Â© Gil Cohen Magen / Reuters

Mainland China's Military Development and Taiwan's Countermeasures

Andrew N.D. Yang — Wed, 17 Aug 2011 00:00:00 -0400

INTRODUCTION

With the efforts of the Republic of China (ROC) to improve cross-Strait relations and expand cross-Strait economic and cultural exchanges, the tensions between the two sides of the Taiwan Strait have apparently been eased. Since May 2008, the two sides have resumed institutionalized negotiations and have thus far signed 15 agreements including the "Economic Cooperation Framework Agreement (ECFA)." As the two sides head toward a more pragmatic and mutually beneficial direction, the likelihood of a cross-Strait confrontation has been reduced.

Nevertheless, even with the relaxation in cross-Strait tensions, mainland China has up until now never renounced the use of force against the ROC, and the military stand-off across the Strait remains as the People’s Liberation Army (PLA) continues to modernize its forces, actively upgrade its armaments, and enhance its operational training and readiness capabilities. Some of these actions are aimed exclusively at the ROC. The rapid improvement of mainland China’s military strength is not only a part of its broad national security and defense strategies, but also illustrates its “carrot-and-stick” strategy toward the ROC.

Driven by its booming economic growth during the past decade, mainland China has invested heavily in its defense and aggressively developed long-range force-projection capabilities and a new generation of weaponry, such as missiles, submarines, carriers, anti-satellite weapons, stealth fighters, and large air and sea delivery vehicles. Additionally, mainland China has been attempting to construct “anti-access/area-denial (A2/AD)” capabilities in the Asia-Pacific region.

Generally speaking, the rapid growth of mainland China’s overall military strength has exceeded the need for self-defense. In spite of its claims of following the “defensive national defense” policy and the “active defense” military strategy, mainland China’s increasingly visible military activities in the Asia-Pacific region, combined with its unclear strategic intention and defense budget, has caused concerns among its neighboring countries. Moreover, the fast growth of PLA forces has rapidly resulted in military imbalance across the Strait, seriously threatening the ROC’s national security and undermining the strategic balance and regional stability of Asia-Pacific.

The PLA’s Military Threats against the ROC

(I) Major Military Build-ups

1. The Second Artillery: The PLA has been zealously developing and deploying new types of short- and medium-range missiles as well as intercontinental and cruise missiles. It also continues to improve the accuracy of its missiles and their ability to penetrate the missile defense system. The PLA has stationed over 1,400 tactical ballistic and cruise missiles along mainland China’s southeastern coastlines, creating the ability to launch multiple salvos of precision strikes against Taiwan. Meanwhile, as an attempt to fortify its A2/AD capabilities, the PLA continues to develop the DF-21D anti-ship ballistic missile and increase the number of new types of medium-range ballistic missiles, demonstrating its notable missile strike capabilities.

2. Air Capabilities: Mainland China also continues to introduce high-performance fighters and bombers, including the J-10, Su-27, Su-30, JH-7, and H-6. It has also developed the J-20 stealth fighter. Moreover, it has been deploying early-warning aircraft and air refueling tankers to strengthen its grasp of situations in the battlefield, enhance its air command-and-control, and extend its striking distance. Through the combination of its S-300PMU-2 surface-to-air missiles and HQ-9 air-defense missiles, which are deployed along the southeastern coastlines and can cover the entire Strait, the practice of an “offensive air defense” strategy, and the missile striking power of the Second Artillery, the PLA has the capability to seize partial air superiority over the Strait.

3. Naval Capabilities: China has manufactured and deployed new types of guided missile destroyers, guided missile frigates, stealth fast attack boats, and nuclear-powered and diesel-electric submarines. Along with its surveillance and reconnaissance systems such as reconnaissance satellites, maritime patrol aircraft, and over-the-horizon radar (OTHR), mainland China is now equipped with strong surface and underwater capabilities to partially blockade the ROC’s sea lines of communication (SLOCs), thus helping to facilitate its anti-access operations. Moreover, mainland China is currently building carrier battle groups, seeking to reinforce its blue water operation capabilities, escort operations, and the control over SLOCs.

4. Ground and Amphibious Capabilities: China is moving toward mechanization and informationalization by researching and developing new types of main battle tanks, amphibious tanks, and long-range multiple rocket launchers and outfitting them to troops in the Nanjing, Guangzhou, and Jinan Military Regions. The aforementioned armaments, in combination with new types of large amphibious vessels, help to improve the PLA’s mobility, fast assault abilities, and landing operations effectiveness. Moreover, mainland China is capable of projecting forces to and occupying islets and reefs in the disputed East and South China Seas when necessary.

5. Aerospace Capabilities: Mainland China, thus far, has over 60 satellites in orbit for military navigation and positioning, scientific research, meteorological purposes, and reconnaissance and communications. Among these are more than 20 military reconnaissance satellites, allowing mainland China to grasp the military dynamics of the ROC and other regional countries in all weathers. Additionally, the deployment of the positioning and communications satellite “Beidou (Compass)” has granted China initial positioning and global communications capabilities in the Western Pacific and has advanced the accuracy of its precision-guided weapons.

6. Cyber and Electronic Capabilities: Mainland China has established a “Cyber Force” and several information warfare centers exclusively in charge of developing computer viruses and cyber techniques and constructing the ability to attack adversaries’ computer systems and networks. By integrating military and civil resources and incorporating civil networks and IT talents, mainland China is highly capable of launching cyber attacks. In terms of electronic warfare, the PLA is equipped with new types of communications jammers and has deployed long-range jammers, various types of anti-radiation unmanned aerial vehicles (UAVs), and anti-radiation missiles. Hence, it has obtained the capabilities of electronic soft-kill disruption and hard-kill destruction.

(II) Major Threats to the ROC’s National Defense and Security

1. Around-the-Clock Surveillance and Reconnaissance: In combination with surveillance and reconnaissance facilities such as reconnaissance satellites, OTHR, early-warning aircraft, maritime patrol aircraft, UAVs, and electronic support measures, the PLA is able to monitor Taiwan around-the-clock and will be capable of effectively grasping the force deployment and military dynamics of the ROC Armed Forces.

2. Disrupting SLOCs or Blockading Taiwan: The operational range of the PLA’s new types of vessels and aircraft has been significantly expanded, and the PLA Navy continues to strengthen its ability in trans-regional long-range cruise training. Along with its shore-based long-range anti-ship and surface-to-air missiles, it is estimated that the PLA is now able to partially blockade air and sea domain around Taiwan, disrupt its SLOCs, and deny foreign forces accessing to the waters west of the First Island Chain. Upon the deployment of its carrier battle groups, the PLA will be even more capable of sealing off Taiwan.

3. Precision Strike: By upgrading the accuracy and effectiveness of its ballistic and cruise missiles and continuing the deployment of precision-guided weapons, anti-radiation weapons, long-range air-defense missiles, and anti-ship missiles, the PLA has significantly improved its joint strike firepower. In addition, it is capable of launching precision strikes against underway ships and aircraft as well as important political-military-economic facilities such as C4ISR systems, air force bases, government agencies, and key infrastructures.

4. Occupying ROC’s Outlying Islands: Mainland China continues to ameliorate its operational training and exercises for airborne assault and amphibious landing specifically for blockading the ROC’s outlying islands. It has also been aggressively acquiring new types of large landing ships and hovercraft in an attempt to upgrade its lift capacities and the speed of force projection. In tandem with the Second Artillery and air-sea war-fighting capabilities, mainland China has the potential to occupy the ROC’s outlying islands and even to invade Taiwan island.

The Impacts on the Strategic Situation in the Asia-Pacific Region

(I) Mainland China’s Military Expansion Draws Concerns from Its Neighboring Countries: Mainland China’s rapid military expansion in the past decade has exceeded the need for self-defense. Its defense spending lacks transparency, its strategic intention is unclear, and its military activities in the First Island Chain, the West Pacific, the South China Sea, and even the India Ocean have become more active in recent years. In 2010, mainland China even claimed the South China Sea as its “core interest” in a statement to U.S. officials. All of these actions have concerned its neighbors.

(II) Beijing Tries to Water Down the Notion of a “China Threat” through Befriending Neighbors and Military Exchanges: As an effort to pacify neighboring countries, mainland China has taken over leadership of the “Shanghai Cooperation Organization,” encouraged the “Six-Party Talks,” operated “ASEAN plus One,” and performed UN peacekeeping operations and escort missions in waters around Somalia. By undertaking these measures of “befriending neighbors” and “military exchanges,” mainland China attempts to demonstrate its status as a major power and ease neighboring countries’ concerns over the regional security threats caused by its military expansion.

(III) Neighboring Countries’ Reactions: In response to the potential challenges of mainland China’s military development and the tensions on the Korea Peninsula, Asia-Pacific countries such as Japan, South Korea, Vietnam, India, and Australia have recently strengthened their military cooperation with the U.S. or with each other. The U.S. has adjusted its force deployment in the Asia-Pacific, increased the number of nuclear-powered attack and guided missile submarines in the region, expanded the military base in Guam, and dispatched F-22 stealth fighters and various types of strategic bombers.

In conclusion, the threats of mainland China’s military expansion along with the issue of national defense and security have become the focus of attention among Asia-Pacific countries. In consideration of international politics, economic interests, and the maintenance of regional stability and peace, Asia-Pacific countries sustain a close economic and diplomatic relations and a certain extent of military exchanges with mainland China. However, as much as a source of opportunities, a rising China is in the meantime regarded by its neighbors as a potential threat.

The ROC’s Responses

Considering the huge gap between the ROC and mainland China in terms of overall national power and military strength, the ROC must exert its “smart power” and properly manage U.S.-China-ROC relations. It should also take advantage of cross-Strait exchanges to advocate ideas of democracy and encourage mainland China’s democratic transformation. In the aspect of national defense, the ROC must, based on the concepts of preventive defense and asymmetric warfare, actively fortify its “Hard ROC” Armed Forces to credibly safeguard the homeland, deter wars, and be a solid buttress in pursuit of cross-Strait peace, regional stability, and national prosperity. The efforts are as follows:

(I) At the National Strategy and Defense Level:

• On Cross-Strait Relations: The ROC should maintain cross-Strait political mutual trust and stability and consolidate its defense to discourage Beijing’s intention to use force against the ROC. In an active manner, the ROC should take advantage of cross-Strait exchanges to encourage mainland China to move toward political reform and democratic transformation.

• On International Relations: The ROC needs to maintain a good relationship with the U.S., enhance military exchanges with the U.S., and urge the U.S. to sell it advanced defensive weapons. In response to a rising China and for common security and strategic benefits between the U.S. and the ROC, it should smartly and properly resort to diplomatic measures to build exchange and cooperation relations in various fields with Asia-Pacific countries.

• On Defense Strategies: The ROC needs to build “Hard ROC” defense forces through the promotion of a volunteer culture for the Armed Forces, and defense transformation. By doing so, the ROC can fulfill its three major defense tasks, which are: defending the ROC, deterring enemy threats, and defeating enemy attacks. The ROC should also perfect its all-out national defense mechanism, reinforce its strategic sustainability, and improve the mobilization of reserves and materials.

(II) At the Military Strategy Level:

The ROC will never provoke or launch attacks. However, it must possess the ability to defend itself and counterattack the enemy after sustaining the first strike. To implement the military strategy of “resolute defense and credible deterrence,” the ROC Armed Forces must carry out the following tasks in an effective manner:

1. Resolute Defense: The ROC Armed Forces have to be able to sustain the enemy’s first strike, avert a decapitation strike, mount a counterattack, and sustain its warfighting capabilities in order to achieve the goal of “strategic sustainability and tactical decisiveness.”

2. Credible Deterrence: The ROC Armed Forces should effectively improve the interoperability of weapon systems across all armed services, increase the effectiveness of joint operations, and strengthen defensive countermeasures capabilities to make the enemy aware of the costs and risks of invasion and then rationally give up on any hostile intention of aggression.

3. Anti-Blockade: The ROC Armed Forces need to ensure the security of its air and sea domain in peacetime. During wartime, the Armed Forces need to coordinate joint warfighting capabilities and counter the enemy’s blockade operations, open up aerial and maritime safety lanes, and maintain communications to the outside world to ensure the continuity of the government and the social system.

4. Joint Interdiction: After the enemy launches an attack, the ROC Armed Forces need to take advantage of favorable situations to exert defensive countermeasures and attack military objectives important to the enemy as well as amphibious forces staging and embarking at ports. Subsequently, the Armed Forces need to focus on joint interdiction operations and joint anchorage attack in order to stop and annihilate the enemy at the phase of crossing the Strait.

5. Ground Defense: If the enemy forces its way ashore, the ROC Armed Forces must build up an in-depth defense system with its all-out defense capabilities and implement a multi-layered interdiction to annihilate the enemy’s landing and airborne troops before it is able to gain a foothold.

(III) Fighting against the Enemy’s Overwhelming Strength with Smart Power-The ROC’s Asymmetric Strategy:

The ROC’s asymmetric strategy is an innovative way of thinking. It aims to effectively exert other operational capabilities in addition to conventional warfighting capabilities, incorporate regular and irregular operational methods for flexible application, and develop low-cost, high-performance, and easy-to-establish asymmetric / innovative forces. The intention is to maximize the ROC’s strength, attack the enemy’s vulnerability, and hold down the enemy’s operational capabilities and actions, so as to obtain greater freedom of action and achieve the goal of fighting against the enemy’s overwhelming strength with smart power.

Conclusion

With the insistence on the value of democracy, the ROC is now proceeding toward volunteer forces and defense transformation in an attempt to build modernized “Hard ROC” defense forces and demonstrate its determination to safeguard national security and maintaining the stability in the Strait. In terms of international politics, economics, and strategic consideration, the ROC is an indispensable member of the Asia-Pacific region. It is hoped that the United States and the international community will continue to support the ROC and expand exchanges and cooperation so as to create a multi-win and mutually beneficial situation. Eventually, it is expected that United States will sell advanced defensive weapons to the ROC for self-defense and contribution to the safety and stability in the Asia-Pacific region.

Authors

Andrew N.D. Yang

Image Source: Â© POOL New / Reuters

A Midterm Assessment of Taiwan's First Quadrennial Defense Review

Dr. Alexander Chieh-cheng Huang — Tue, 08 Feb 2011 10:25:00 -0500

Nearly two years ago, on March 16, 2009, Taiwan’s Ministry of National Defense (MND) submitted the first Quadrennial Defense Review of the Republic of China (QDR) to the Legislative Yuan and became the second country, after the United States, to issue such a defense strategy and planning document every four years.

Taiwan’s first QDR is half way through its implementation, and a midterm assessment is warranted and useful.[1]

Inception

Since 1992, Taiwan’s MND has published 10 volumes of its National Defense Report of the Republic of China (NDR), commonly known as the defense white paper, as an effort to promote transparency in defense affairs alongside the process of rapid democratization in Taiwan politics. The practice was codified in the National Defense Act of 2000, requiring the defense ministry to issue the NDR regularly.

Modeled on the concept and rationale of the U.S. Quadrennial Defense Review, in July 2008, Legislators Lin Yu-fang (KMT), Liu Sheng-liang (KMT), and Tsai Huang-lang (DPP)—the three conveners of the Foreign and Defense Affairs Committee of the Legislative Yuan (LY)—cosponsored an amendment to Article 31 of the National Defense Act. The amendment requires the MND to submit a QDR to the legislature within 10 months after every presidential inauguration—in other words, every four years at the most. The objective of this amendment, according to Lin Yu-fang, was to ask each newly-elected President to “thoroughly review the defense policy of the past four years” with the Ministry of National Defense “and lay out major issues for the next four years.”[2]

The advent of the QDR process in Taiwan is significant, as it will enhance civilian control over defense affairs, advance parliamentary oversight of defense policies and programs, and better connect defense strategy with available resources.

Conceptual Clarification

There was some confusion, if not tacit suspicion, within policy circles when the idea of a QDR for Taiwan was first introduced. First, some questioned the term “review” (jiantao) itself, which in Chinese does not suggest a future-oriented policy planning, as the QDR intends, but instead implies evaluation of the past policy practice and execution.

Secondly, some have insisted that the long-practiced biannual publication of defense white papers already covers all major areas of defense affairs. In addition, the LY already required quite a few annual MND reports on topics such as policy planning and implementation, and military capabilities of the People’s Liberation Army. The necessity of yet another policy document was brought into question.

Thirdly, and more importantly, was that for decades Taiwan’s defense planning has been built upon a trinity of rolling review cycles: 10-year modernization planning (jianjun gouxiang), 5-year force planning (bingli zhengjian), and annual policy planning (shizheng jihua). The introduction of a 4-year cycle of defense planning like the QDR would have to match up with existing planning practice to ensure smooth implementation.

The Integrated Assessment Office (IAO) of the Office of the Minister of National Defense was designated the task of drafting the first QDR. The IAO’s initial draft was then circulated among departments, bureaus, and the Joint Staff for comments. External civilian subject matter experts were also involved in the deliberation process. Finally, consensus was reached that the QDR is defined as future-oriented, provides principal policy guidance, and will govern the regular review of the abovementioned planning trinity.

The Main Themes

Taiwan's first QDR has two main themes: prevention and transformation. The overall modernization of the nation's defense is necessary to prevent military conflict in the Taiwan Strait, as it will raise the threshold and the cost for Chinese aggression. This will complicate China’s operational plans and can therefore deter potential intentions to use force. Transformation of the armed forces and the national defense strategy is necessary to enable the military to deal with the changing nature of modern warfare, advanced weapons systems, demographic change, an aging society, and limited financial resources.

For prevention, the Ma Ying-jeou administration does not rely solely on modernizing and building up its forces, but also strives to build manageable cross-strait relations—as well as closer defense collaboration with friends and allies in the Asia-Pacific region. The peaceful and stable environment that has prevailed across the Taiwan Strait for the past two-plus years under this strategy has allowed Taiwan to focus more on revitalizing it economy after the recent financial and economic crises, and to begin to undertake its military transformation.

For transformation, the ministry emphasizes reorganization, force restructuring and the need for jointness. The most ambitious reform program is revolutionizing Taiwan’s nearly 60-year-old conscription system and moving to an all-volunteer force capable of meeting the demands of high-tech warfare. The first QDR calls for the armed forces to cut 60,000 personnel and integrate the military police, reserve force, and joint logistics commands. In short, the Taiwanese military intends to build a smaller, more professional force with joint combat capability.[3]

Implementation of the QDR

In early April 2009, two weeks after the QDR was delivered to the LY, the MND issued an executive order requiring all subordinated agencies and commands to follow the QDR as guiding principles for every policy, program, and readiness planning. To ensure that the QDR mechanism will parallel the 4-year presidential terms and will function as a regular policy review, on July 1, 2009 the MND put in place the “QDR implementation and evaluation mechanism” to manage and control the pace and effectiveness of defense programs highlighted in the QDR.

According to the author’s conversations with senior MND officials, the mechanism requires series of internal working progress and review sessions chaired by a vice minister (Under Secretary-equivalent) every 3 months, and by the minister every 6 months.

The mechanism evaluating the implementation of the current QDR traces the 18 items listed in Chapters 3 and 4 of the document. The following are key developments that have taken place since the first QDR was released:

· The MND has incorporated the policy guidance of the QDR into the “National Military Modernization Planning for FY 2011-2020” in October 2009.

· In January 2010, the MND issued “Force Structuring Planning for FY 2011-2015,” aimed at the reduction of military manpower down to 215,000 personnel as indicated in the QDR.

· For the transformation of military service from the “dual-track of conscript and volunteer” to “full volunteer” system, the MND has submitted to the LY its proposed amendments to the “Military Service Act,” “Provision on Service of Military Officers and Non-Commissioned Officers,” “Provision on Service of Volunteer Enlisted Soldiers,” and “Provision on Military Medical Insurance”; the latter two were passed by the LY in 2009.

· The MND has decided to build military capability focusing on joint operations requirements, with emphasis on four areas: basic warfighting capability, asymmetric capability, sustainable capability, and disaster relief and crisis response.

· Since the QDR was issued, the LY has not yet called for hearings or special reports to monitor the progress and implementation of the QDR. The MND, however, has included its undertakings in its regular policy reports, volunteer force planning reports, and force restructuring reports to the LY.

Financial Challenges

When the MND started drafting the first QDR, there were known factors that would make four-year planning difficult, such as China’s growing access denial capability, the beginning of the global financial crisis, the financial burden of the volunteer military system, and uncertainty about a modernization program based on foreign acquisitions.

But the primary challenge to the defense modernization plans laid out in the QDR is the lack of financial resources. Taiwan’s economy has been significantly damaged by the global financial crisis that began roughly with President Ma Ying-jeou’s term in office. The bad economy brought fewer revenues and more deficits: Taiwan’s national debt has risen from NT$ 4.32 trillion in 2009 to NT$ 4.47 trillion (approximately US$ 154 billion) at the end of 2010.[4] For FY 2011, Taiwan’s central government budget deficit and special budget deficit are anticipated to be NT$ 363 billion, approximately US$ 12.5 billion or 2.63% of Taiwan’s estimated GDP.[5]

With the recent cross-strait rapprochement, an unspoken public sentiment expecting a “peace dividend” has placed the MND in a politically difficult position when it comes to asking for its needed share of national revenue. Although the MND tries to propose an expanded annual defense budget up to 3 percent of the national GDP, the approved official MND budget dropped from NT$ 325.6 billion (2.51% of GDP) in FY 2009 to NT$ 297.2 billion (2.15% of GDP) in FY 2011.[6]

The transformation the armed forces to an all-volunteer force is another cash-draining program highlighted in the QDR. Even as the military continues to cut the number of personnel, it is estimated that the gradual introduction of a total volunteer force will require approximately US$ 5 billion per year in personnel costs in the next five years from FY 2012 to FY 2016, almost 1 percent of GDP and almost half of the official defense budget.[7]

In addition, according to Legislator Lin Yu-fang’s preliminary estimate, the funding required for the U.S. approved and executable arms procurements from 2011 to 2014 is around NT$ 201.1 billion. Procurements that Taiwan hopes to make, but which have not yet been approved, add significant additional costs. For example, costs for an “F-16 A/B upgrade”– the request that is most likely to be approved by Washington in the short term – and 3 other hoped-for items including new F-16C/Ds, Newport-class tank landing ships, and a feasibility study of diesel-electric submarines, are estimated at NT$ 182.8 billion. In Lin’s assessment, given that military investment funding for 2011 to 2014 is planned at NT$ 330.7 billion, there would be a budget shortfall of NT$ 53.2 billion (US$ 1.78 billion) in the coming 4 years if both the existing approved procurements and desired procurements are budgeted.[8] It is inconceivable that all four major new requests will be approved at once, but even the most likely procurement, the F-16A/B upgrade, will entail a considerable financial burden.

Consequently, there is a need for senior civilian leaders to give serious attention to the funding requirements that will enable implementation of the strategy laid out in the first QDR. Of course, a better economy and expanded national wealth, i.e. making the pie bigger, would be the best solution to this dilemma. But more realistically, difficult choices will likely have to be made, and all sides in the debate should be prepared to compromise, in order to find the combination of policies and expenditures that will best enable Taiwan to strengthen its economy, society, and defense.

China's Military Rise

Taiwan clearly faces external threats that require modern self-defense capabilities. Since the rapprochement across the Taiwan Strait began in mid-2008, the Chinese intention of using force against Taiwan has seemed to recede, but there has been almost no sign that the pace of Chinese military modernization has slowed down.[9] On the contrary, evidence has shown significant progress of PLA capability in force projection capability, enabling it to enforce its anti-access and area denial strategy against possible foreign forces operating in the Western Pacific. In the past 2 years, the Chinese military inventory, as well as activities has expanded. New, or newly publicized, capabilities include:

· the deployment of short and medium range ballistic missiles along the southeast coastal provinces continue to grow;

· the development of the DF-21 anti-ship ballistic missile (ASBM);

· the open display of Chang Jian/CJ-10, or Dong Hai/DH-10 long range cruise missiles were in open display,

· improved avionics for ground attack capability for the J-10B jet;

· the open promotion of the construction of aircraft carriers by PLA senior officials and the development of carrier-based J-15;

· the test flight of the J-20, a prototype of China’s first stealth fighter;

· newly commissioned submarines, underway replenishment ships, and landing ships;

· penetration of the first island chain by a PLA Navy squadron which cruised a long distance to the Japanese-claimed Okinotori Islands deep in the Pacific; and

· implementation of PLA Navy exercises within the entire first island chain from the Yellow Sea to the South China Sea, areas considered by the Chinese “core interests.”

Foreign Military Acquisition

President Ma Ying-jeou has stated more than a dozen times that Taiwan is striving for a military capability to defend itself, but that it has no intention of engaging in a competitive arms build up. However, the Taiwanese military is encountering tremendous challenges simply trying to maintain a self defense capability. There are both political and administrative reasons for these difficulties, which include the lack of assured security assistance from democratic allies, and the difficulties in securing timely supply for the replacement of obsolete systems.

President Ma echoed the Pentagon’s views that Taiwan should focus its modernization along the concepts of “innovation” and “asymmetry.” Foreign military and technological assistance, especially from the U.S., is essential to developing such capabilities, which will help support Taiwan’s strategy of preventing conflict across the Taiwan Strait. In his recent conversation with Raymond Burghardt, chairman of the American Institute in Taiwan (AIT), President Ma stressed the growing gap in military power across the Taiwan Strait has become a common concern of Taiwan's citizens, and would be a challenge to cross-strait ties and regional stability. President Ma reiterated: "We have long hoped to acquire F-16 C/Ds and diesel-electric submarines . . . The purpose of Taiwan's weapons acquisition plans was not to pursue a military buildup but rather to replace aging aircraft and submarine fleets."[10]

Renewing Security Relationships

Taiwan’s security and defense planning is closely tied with China’s economic and military rise, and with U.S. reengagement in the Asia-Pacific region in the 21^st century. In addition to a smart Mainland policy and careful management of cross-strait relations, a strong and sustainable Taiwan military can contribute to peace and stability in the Taiwan Strait and the Western Pacific. In a more direct sense, the future of the long standing Taiwan-U.S. security cooperation and American strategic interests in Asia would be better served if both sides communicate more frequently in articulating their strategic thinking and defense planning.

Countries in the Asia-Pacific region, as well as Taiwan, welcome a normal military-to-military relationship between the U.S. and China, but they believe it should not be pursued at the expense of common security relationships between the U.S. and long term friends and allies. Taiwan’s military can best contribute to the region with enhanced capabilities in intelligence, surveillance, reconnaissance (ISR); integrated air and missile defense (IAMD); and joint anti-submarine warfare (ASW). Regular sales of defensive systems to Taiwan and the strengthening of U.S.-Taiwan security ties do not necessarily weaken China’s “core interests,” as all three parties prefer cooperation over confrontation, and all will benefit from security in the region.

Taiwan’s adoption of the quadrennial defense planning guidance reflects not only its commitment to a better civilian control and parliamentary oversight over the military, but to a better convergence of national resources and strategic planning. In about 15 months, in May 2012, when Taiwan holds its next presidential inauguration, the Taiwan military will begin to work on the next QDR. Within this framework, both Taipei and Washington, if desired, will have sufficient time to work together and pursue a better common agenda toward their future defense planning.

[1] “Quadrennial Defense Review 2009,” Ministry of National Defense, March 2009, http://www.mnd.gov.tw/qdr/.

[2] Huang Ming-xi, “Tai liyuan chushen: Guofangbu shunxiang liyuan ti sinianqi zong jiantao,” Da Ji Yuan (Epoch Times), July 14, 2008 http://www.epochtimes.com/b5/8/7/14/n2190657.htm. Taiwan’s presidential inaugurations normally take place on May 20, two months after the presidential election every four years. The last inauguration, of President Ma Ying-jeou, took place on May 20, 2008.

[3] See Alexander Chieh-cheng Huang, “The Road Ahead for the ROC Military,” Taipei Times, March 20, 2009, P. 8.

[4] Lin Yi-feng, “Guozhai qiaozhong: meiren qian 20.4 wan yuan,” Zhongyangshe (Central News Agency), January 7, 2011, http://www.cna.com.tw/SearchNews/doDetail.aspx?id=201101070060&q=%e5%9c%8b%e5%82%b5.

[5] Chen Jin-ji, “Jianshi yibainiandu zhongyang zhengfu zong yusuan an,” Taiwan Brain Trust, October 17, 2010, http://www.braintrust.tw/print.php?article_id=522.

[6] The “official” defense budget refers to the actual funding for MND’s operations. “Expanded defense budget” includes reconstruction funds for old barracks and old residence quarters of military relatives, and funds generated from military productions and services.

[7] Private studies show that an all-volunteer army is financially affordable if the government commits 3% of the GDP to the actual official defense budget. See, Liu Li-lun, “Quan mubingzhi tuidong yu guofang yusuan – zhanli jujiao de guofang zhuangxing,” at Legislator Shuai Hua-ming’s webpage: http://www.ans.org.tw/detail_page.php?category=04&tid=172#_ftn5.

[8] See Legislator Lin Yu-fang’s personal blog: http://tw.myblog.yahoo.com/lin-yufang/article?mid=2694&prev=2772&next=2674&l=f&fid=6; and related news report: http://www.ewdefense.com/poman.asp?pno=480.

[9] See Richard Bush, “Taiwan Faces Growing Threat: Communist China Undermines Rapprochement,” The Washington Times, September 8, 2010, http://www.brookings.edu/opinions/2010/0908_taiwan_bush.aspx; and Yuan-Kang Wang “China’s Growing Strength, Taiwan’s Diminishing Options,” Taiwan-U.S. Quarterly Analysis, The Brookings Institution, November 2010, http://www.brookings.edu/papers/2010/11_china_taiwan_wang.aspx.

[10] “F16 C/D Fighters Needed to Redress Military Imbalance: Ma,” Want China Times, January 25, 2011, http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1101&MainCatID=11&id=20110125000140.

Authors

Dr. Alexander Chieh-cheng Huang

Image Source: © Pichi Chuang / Reuters

China’s Growing Strength, Taiwan's Diminishing Options

Yuan-kang Wang — Tue, 09 Nov 2010 14:21:00 -0500

Editor's Note: In the third installment of the Taiwan-U.S. Quarterly Analysis, Yuan-kang Wang explains why, despite the improved atmosphere in cross-strait relations, strong Taiwan-U.S. military ties are important and can serve as a hedge against a change in Chinese intentions in the future.

As China grows stronger, its weight is felt increasingly around the world. In particular, China's growing military, economic, and political capabilities are limiting strategic options for Taiwan, whose main security threat comes from the mainland. Strengthening Taiwan-U.S. relations can help the island better protect its security.

The Taiwan Strait, often considered one of the most dangerous flashpoints in international politics, appears stable at present. The last crisis took place some fifteen years ago in 1995-96, when China launched missiles which landed off Taiwan's coast in an attempt to intimidate politicians and voters and sway the island’s presidential election. Cross-strait relations have improved significantly since President Ma Ying-jeou took office in 2008. The two sides have signed a series of agreements on direct flights, financial cooperation, crime fighting, tourism promotion, and reduction of trade barriers. People-to-people contacts have intensified and economic links have strengthened. Beijing ceased to actively oppose Taiwan’s participation in some international organizations that do not require statehood for membership, such as the World Health Assembly. The infamous “checkbook diplomacy” in which each side tried to outbid the other in stealing diplomatic partners has been put on hold, replaced by a tacit “diplomatic truce.”

In Beijing, the Hu Jintao leadership has shown remarkable skill in dealing with Taiwan. Hu and other Chinese officials seemed to realize that the hardball tactics and harsh rhetoric of the past had driven Taiwan further away from China. To remedy this, they embarked upon a “hearts and minds” strategy aiming to win over Taiwan's voters. The focus of this new strategy was on preventing Taiwan from drifting toward independence. Beijing muted the unpopular “one country, two systems” formula for unification and avoided reminding Taiwan that the use of force to deter independence or compel unification was still an option. To bring the island closer, Chinese leaders promised the benefits of closer economic, cultural, educational, and other ties for the Taiwanese people. For instance, Beijing opened the mainland market to agricultural products from southern Taiwan, an area traditionally unfriendly toward China; mainland universities meted out preferential treatment to Taiwanese students; academic scholars from both sides regularly held joint conferences; Taiwanese businesses received low-cost loans for investing on the mainland; daily direct cross-Strait flights helped revitalize Taiwan’s ailing airline industry and airports; and the influx of mainland tourists provided tangible gains to Taiwan's domestic economy.

Enhanced military coercive capabilities

Despite the thawing of cross-Strait tensions, China passed an Anti-secession Law in 2005 and continues to deploy missiles targeted at Taiwan. The Pentagon’s 2010 annual report on Chinese military power estimates that China has deployed between 1,050 and 1,150 short-range ballistic missiles,[1] the same number as last year. This apparent pause, however, runs counter to China's deployment of cruise missiles, which has increased by roughly 100 over the last year, totaling between 200 and 500. Quantity aside, the quality and accuracy of China’s missiles have consistently improved, thus enhancing Beijing’s coercive capabilities against the island.[2] Even more worrisome is China’s naval buildup that increases its anti-access and area-denial capabilities. The Chinese navy now boasts the largest force of principal combatants, submarines, and amphibious warships in Asia. The PLA Navy has constructed a new naval base on Hainan Island and has shown substantial interest in building aircraft carriers. Growing Chinese seapower can be used to deny foreign access to the “first island chain” off the East Asian mainland, which includes Taiwan. Overall, the 2010 Pentagon report reiterates the conclusion of past years that the balance of military forces in the Taiwan Strait continues to shift in China's favor. Beijing’s sustained military buildup opposite Taiwan and its refusal to renounce the use of force demonstrate the high value it places on the utility of coercion in achieving unification. The fact that China is acquiring these capabilities does not mean it will necessarily use them; but it certainly creates unprecedented opportunities to do so. It seems that, in Beijing’s calculation, fear of war with the powerful mainland is the best deterrent against Taiwan independence. Polls in Taiwan suggest that an overwhelming majority would choose independence if it would not cause a war with China.[3]

But China’s military buildup opposite Taiwan strikes an inharmonious chord in the ongoing cross-Strait rapprochement. Contrary to China’s overarching strategy, the buildup is not winning the hearts and minds of the Taiwanese people. It also makes military confidence-building measures, which would be a major accomplishment in further stabilizing the situation, even more difficult, given the lack of trust between the two militaries.

The shifting cross-Strait military balance in China’s favor has negative consequences for Taiwan’s security. First, though unlikely at present, should Beijing decide to use military coercion in the future, Taiwan could be forced to sacrifice its interests and accommodate Beijing's demands. Second, China's increased anti-access and area-denial capabilities could delay or frustrate U.S. attempts to support Taiwan in case of conflict, raising the costs of U.S. intervention. Taiwan's heightened sense of vulnerability and the increased uncertainty of U.S. support have the effect of reducing the island’s bargaining power with the mainland. In addition, China's overall military rise might lead Taiwan’s allies to question the necessity of support. For instance, U.S. Senator Arlen Specter, describing Taiwan as “an irritant to mainland China,” suggested that Washington should revise its arms sale policy to Taiwan because even a reasonable increase in armaments sold to Taiwan “would not be sufficient to stem the tide” if China decided to invade the island.[4] The rising difficulty of defending against a mainland attack is likely to raise doubt about the utility of coming to Taiwan's defense. Compounding the problem is the decline in Taiwan’s defense budget as a percentage of GDP over the years, leading some analysts to question Taiwan's determination to defend itself.

A reassessment of U.S. arms sales to Taiwan, however, would have tremendous implications for Taiwan’s security. Over the decades, U.S. support has been the indispensible factor for the survival of the island. The U.S.-ROC Mutual Defense Treaty, in effect from 1954 to 1980, provided an alliance that guaranteed Taiwan’s security. U.S.-Taiwan security relations continued after Washington switched diplomatic recognition to Beijing, and sustained arms sales to Taiwan helped strengthen the island's defense. The Taiwan Relations Act, enacted by U.S. Congress in 1979, stipulates that “the United States will make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability.” The arms sales, in addition to strengthening Taiwan’s defense, also indicate the level of political support from Washington. Beijing sought to restrict U.S. arms sale to Taiwan in the August 17, 1982 Communiqué. But before he formally agreed to the communiqué, President Reagan secretly sent an envoy to deliver what became known as the Six Assurances to Taipei affirming that Washington would not “set a date for ending arms sales to Taiwan.”[5] The pledge not to set a termination date, however, may be meaningless if Washington does not sell Taiwan the equipment that it needs.

Rising economic might

In 2010, China officially surpassed Japan as the world's second largest economy, after the United States. China has become the largest trading partner of many countries in the world; in South Korea, trade with China is larger than the country's trade with Japan and the United States combined. China is now ASEAN’s largest trading partner, bolstered by a free trade agreement. Chinese investments in Africa, Latin America and other parts of the world are gradually changing the international landscape. The Chinese model of development—economic liberalization with tight political control—has a certain appeal to autocrats of the world, as it provides an alternative to the Western model. The size of the Chinese economy has made it one of the key economic locomotives in the world. China quickly emerged from the economic slump following the 2008 global financial crisis, growing at 8.7 percent in 2009, and played a pivotal role in pulling the world economy out of the recession.

As Taiwan’s economy faced rising employment and sluggish growth in much of the first decade of the 21^st century, the economic opportunity presented by China had a magnet effect on the island. Taiwanese businesses have invested heavily in China, and more than half a million Taiwanese people now live there permanently. Nonetheless, as East Asian countries pursued free trade agreements with each other, there were concerns that Taiwan risked being marginalized in the movement toward the region's economic integration. The China-ASEAN Free Trade Agreement, which went into effect on January 1, 2010, expedited Taiwan's decision to negotiate the Economic Cooperation Framework Agreement (ECFA) with China. For its part, Beijing hoped to use the lure of economic benefits to tie the island closer to the mainland. In the agreement signed on June 29, 2010 in the Chinese city of Chongqing, the “early harvest” list of tariff concessions covered 539 Taiwanese products, valued at $13.8 billion, and 267 mainland Chinese products, valued at $2.9 billion. Taipei hopes that the ECFA will help Taiwan negotiate free trade agreements with other countries. Of late, Singapore has shown interest in such an agreement.

Beijing’s strategy for engaging Taiwan’s leaders is to start with the supposedly easier area of economic issues, hoping that the benefits of economic integration will lead to political negotiation on the future status of Taiwan. The dynamics of Taiwan’s domestic politics, however, complicates the matter. The opposition Democratic Progressive Party (DPP) views the ECFA with suspicion, worrying that the trade deal will push Taiwan into China's orbit and make the island vulnerable to economic coercion. The ruling KMT party, on the other hand, argues that the ECFA will help revitalize Taiwan's sluggish economy and avoid being marginalized in the economic activities of East Asia. The dynamics of “Blue” and “Green” politics will likely create gridlock and constrain any movement toward cross-Strait political talks. Today, no leader in Taiwan can start political negotiations with China without first forming a consensus among the Taiwanese voters.

China’s rising economic capabilities also give Beijing extra leverage in its dealings with other countries, though it is not always used wisely. The recent fracas over the Diaoyu/Senkaku Islands, where a Chinese fishing trawler collided with a Japanese patrol boat, is a case in point. Beijing reacted angrily to the arrest of the Chinese captain, issuing a series of official denunciations. More importantly, China suspended shipment of rare earth minerals to Japan. Even when the Japanese government appeared to back down and released the captain, Beijing upped the ante by demanding an apology. Beijing’s hard-line tactics sent shockwaves throughout the region, prompting a rethinking of China's role in Asia.

Increased diplomatic leverage

As a rising great power, China enjoys considerable diplomatic leverage in the world and is sought after as a partner in conflict management, climate change mitigation, economic cooperation, and other world affairs. On the Korean peninsula, China, the largest supplier of North Korea's energy, was the host and a crucial actor in the Six-Party Talks attempting to denuclearize the country. In the Middle East, China is a key player in the international effort to monitor and to impose sanctions on Iran for its nuclear program. China is now an active participant in the G-20 summit meetings of leading economies. In the 2009 Copenhagen summit on global climate change, China illustrated how it can use its clout to counter initiatives of the U.S. and other countries as it helped derail a tougher accord to limit greenhouse gas emissions.

On the Taiwan issue, Beijing has successfully made most countries accept, recognize, or acknowledge its “one-China” position. Today only 23 out of the 194 countries in the world recognize the Republic of China on Taiwan. China is a permanent member of the UN Security Council and in the past Beijing has used its veto power to block, or threaten to block, UN peacekeeping operations in Haiti (1996), Guatemala (1997), and Macedonia (1999), ostensibly because of their diplomatic relations with Taiwan (Macedonia severed diplomatic ties with Taipei in 2000). Pressures and threats from Beijing force many countries not to have official contact with Taiwan and to oppose the island’s participation in international institutions. At one point, European officials commented that they would welcome Taiwan's participation in international organizations once Beijing dropped its opposition.[6] This international deference to Beijing's position on cross-strait issues reflects the power asymmetry between China and Taiwan: in most cases, the benefits of deferring to Beijing far outweigh the costs of shunning Taiwan.

As a result, there is a high correlation between Chinese acquiescence and Taiwan’s international space. When the DPP was in power from 2000 to 2008, disagreement over the “One China” position prevented both sides from negotiating, and China blocked Taiwan’s international activities. When the KMT came to power in 2008, the spirit of the “1992 Consensus” allowed China and Taiwan to resume dialogue, based on the tacit understanding that neither side would publicly challenge the other’s interpretation of what “One China” means. To maintain the momentum of reconciliation, Beijing relaxed its opposition to Taiwan’s participation in some international organizations that do not require statehood for membership. The risk for Taiwan, however, is that because of the cross-Strait power asymmetry, Beijing can easily take back what it gives out. Intentions can change.

Implications for Taiwan-U.S. relations

Recently, China has struck a more assertive tone in its foreign policy. The call to replace the dollar as the international reserve currency, Chinese resistance to a tougher climate change accord in Copenhagen, the reassertion of Chinese sovereignty in the South China Sea, and the hardball tactics against Japan in the East China Sea are all indications of an increasingly assertive China on the world stage. China had kept a low profile when it needed a stable international environment to accumulate economic and military power. Now, with the world's second largest economy and increased military capabilities, China is in a better position to pursue its foreign policy interests.

China’s growing military, economic, and political capabilities make it ever more important for Taiwan to strengthen its relations with the United States. As the weaker power in cross-Strait relations, it makes good strategic sense for Taiwan to have the support of Washington in case Beijing changes its intentions. In truth, Taiwan cannot rest its security on the goodwill of China. Taiwan needs allies. To deter China and to preserve Taiwan’s political autonomy and survival, Taiwan must strengthen its self-defense capabilities. In the midst of cross-Strait dialogues, Taiwan should negotiate from a position of strength rather than from a position of weakness. With strengthened defense capabilities, Taiwan would more likely get favorable terms in cross-Strait negotiations and not be forced to accommodate Beijing’s demands. In early 2010, the Obama administration authorized a $6.4 billion arms sale to Taiwan. As the cross-Strait military balance continues to shift in Beijing's favor, the arms sale can help Taiwan beef up its defense and boost confidence on the island. There is still room for growth in Taiwan-U.S. military exchanges and defense cooperation. Building strong military to military ties with the United States is the best hedge against a change in Chinese intentions in the future.

[1] Office of the Secretary of Defense, “Military and Security Developments Involving the People’s Republic of China 2010,” U.S. Department of Defense Annual Report to Congress, (August 2010).

[2] Richard Bush, “Taiwan Faces Growing Threat: Communist China Undermines Rapprochement,” The Washington Times (September 8, 2010).

[3] Brett V. Benson and Emerson M. S. Niou, “Public Opinion, Foreign Policy, and the Security Balance in the Taiwan Strait,” Security Studies 14, no. 2 (April-June 2005): 274-289.

[4] William Lowther, “US Senator Not Convinced on F-16 Bid,” Taipei Times (September 23, 2010).

[5] Nancy Bernkopf Tucker, Strait Talk: United States-Taiwan Relations and the Crisis with China (Cambridge, Mass.: Harvard University Press, 2009), 148.

[6] Dennis V. Hickey, “Beijing’s Evolving Policy toward Taipei: Engagement or Entrapment,” Issues & Studies 45, no. 1 (March 2009): 31-70 at 48.

Authors

Yuan-kang Wang

Image Source: © POOL New / Reuters

Strengthening People-to-People Relations: The Cornerstone of Taiwan-U.S. Ties

Da-jung Li — Thu, 13 May 2010 11:00:00 -0400

A strong and stable relationship with the United States is undoubtedly at the center of Taiwan’s overall foreign relations. Taipei has been greatly dependent on Washington’s political support, security commitment, arms sales, and—especially since 1979—many non-governmental (or “people-to-people”) interactions such as trade and cultural exchanges. This dependence is expected to remain unchanged in the foreseeable future.

President Ma Ying-jeou and his government therefore took office in May 2008 with the goal of repairing strained relations with the United States and, two years later, the Ma government has managed to develop a surprise-free relationship with the U.S. Taipei clearly understands that Washington’s policy guideline has been consistent over the past three decades: adherence to a one-China policy, observance of the three U.S.-China communiqués, and implementation of the Taiwan Relations Act (TRA). Washington supports Taiwan’s democratic development, pursuit of greater international space, and wishes for a peaceful resolution of the cross-strait issue. For its part, the Ma administration believes that, within this framework, Taiwan and the United States can and should develop into an alliance (not aimed against any specific third party) with shared values and great interdependence. Because the political relationship has improved under President Ma, the non-governmental relationship can play a much stronger role in enhancing overall ties, with the most potential perhaps in the commercial relationship discussed below.

The cornerstone of Taiwan-U.S. people-to-people relations

Non-governmental interaction is an important part of international relations, and is perhaps more important in the Taiwan-U.S. relationship than in most other bilateral connections. Taiwan and the United States enjoy a deep, friendly, and mutually beneficial relationship, but they have lacked formal government-to-government relations with one another since 1979. Therefore the two nations must rely heavily on non-official interaction – even to conduct official business. Section 2(b) of the TRA states that “It is the policy of the United States to preserve and promote extensive, close, and friendly commercial, cultural, and other relations between the people of the United States and the people on Taiwan…”[1] Thus by definition—at least from the U.S. perspective—the contemporary relationship is centered on non-governmental relations, even if the two governments have contrived various methods through which they can interact.

Since the abrogation of official relations, Taiwan and the United States have maintained close and extensive non-governmental ties in three major categories: business, tourism, and education. (There is also a substantial security relationship, of course, but it is outside the scope of this essay.)

Trade statistics show that Taiwan’s economy has been very dependent on the American market. In 2009, for instance, Taiwan exports to the United States totaled US$23.6 billion, or 11.6% of Taiwan’s overall US$203.7 billion trade amid the global economic downturn.[2] Taiwan’s 2009 imports from the United States reached US$18.2 billion, or 10.4% of Taiwan’s total imports of US$174.7 billion.[3] The United States is Taiwan’s fourth largest trading partner, with total bilateral trade in 2009 amounting to US$41.8 billion; Taiwan’s top three trading partners are Mainland China (including Hong Kong and Macao), US$78.7 billion; Japan, US$50.7 billion; and ASEAN states (Vietnam, Singapore, Thailand, Malaysia, Indonesia and the Philippines), US$50 billion. In 2009 Taiwan was the tenth largest trade partner of the U.S.[4]

This commercial relationship generates significant interpersonal contact and travel, and the United States is one of the top destinations for Taiwan businessmen as well as tourists. In 2009, Taiwan people paid 515,465 visits to the United States, following the 2.26 million visits to Hong Kong, and 1.52 million visits to China.[5] Americans made 369,258 visits to Taiwan in 2008, trailing only Japanese (1 million visits), Mainland Chinese (972,123 visits), and Hong Kong and Macao Chinese (718,806 visits) among foreign tourists visiting Taiwan. American visits represented 8.4% of the overall foreign tourists traveling to Taiwan that year.[6] A largely overlooked and underappreciated fact is that about two-thirds of the 50 American states have sisterhood relationships with Taiwan, and 17 state governments have representative offices on the island, promoting business interests and tourism.

Taiwan businesses have been very ambitious, flexible, and viable in the world marketplace, but Taiwan has remained quite isolated and, due to external political reasons, has lagged behind the ongoing Asian regional and multilateral economic integration. Taiwan so far has reached only five free trade agreements (FTAs) with its diplomatic allies in Central America. It is generally believed that in the long run the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China will help Taiwan in signing FTAs with ASEAN countries, Japan, the United States, and the European Union. Reaching an FTA agreement with the United States has been the most significant long-term goal for Taiwan. More generally, a reorientation of Taiwan’s economy toward the mainland will benefit the Taiwan-U.S. economic relationship because it will help more American companies choose Taiwan as a gateway into the Chinese market. The lowered tariffs on both sides of the Taiwan Strait will enhance the competitiveness of Taiwanese companies in the mainland and help industries continue to invest in Taiwan. Such a situation will offer some opportunities for Taiwanese-American joint ventures.

The third indicator of Taiwan’s close non-official ties with the United States is the number of Taiwan students in the United States. Because of their sound, professional, and advanced systems and international esteem, American institutions of higher education have been the first choice for Taiwan students, far more attractive than Canadian, Japanese, Australian, European, and Mainland universities. A considerable number of Taiwan elites and opinion leaders were educated and built up their professional track records in the United States, and this is a very important factor in facilitating mutual understanding. In 2009, Taiwan sent 28,065 students to the United States, the sixth largest source of foreign students in the United States, following India, China, South Korea, Canada, and Japan[7]; Taiwan sends more students to the U.S., on a per capita basis, than any other. In the year 2009/2010, the U.S. sent 2,505 students to Taiwan and the number of American students in Taiwan between 1988 and 2010 totaled 25,598, behind only South Korean (33,972) and Japan (31,407).[8]

Taiwan ’s major goals in developing Taipei-Washington ties

President Ma has stated that his priorities for developing relations with the United States include participation in the U.S. Visa Waiver Program, enhancement of the Trade and Investment Framework Agreement (TIFA), and the conclusion of an extradition agreement. In a meeting with the chairman of the U.S. House of Representatives Subcommittee on Asia, the Pacific, and the Global Environment earlier this year, President Ma stated that “ROC-U.S. ties will center on these three issues,”[9] again reflecting the importance of non-governmental interaction in the bilateral relationship.

Taiwan into the Visa Waiver Program

Winning participation in the Visa Waiver Program, which would allow holders of Taiwan passports to visit the United States without first obtaining an expensive and time-consuming visa, would be a major victory for Taiwan. But Washington has moved slowly—not because of any touchy cross-strait issues, but because of homeland security considerations. The U.S. administration has considered the following aspects before qualifying Taiwan for this program. (A) The issuance of passports containing microchips in Taiwan, which is related to passport security; such “chip passports” can reduce the risk of fraud. (B) Substantial results in anti-terrorist cooperation. (C) The rejection rate of applications by Taiwan citizens for American visas. (D) Taiwan’s change of policy requiring children under 14 years old to interview for an ROC passport, which also reduces opportunities for fraud. The Taipei government understands that only by meeting these criteria will the chance of obtaining participation in the American visa waiver program increase.

Taiwan is also bidding for similar treatment from the European Union, and in recent years it has made some breakthroughs in gaining visa free treatment from a number of countries. Beginning July 2009, New Zealand granted ROC passport holders visa-free status for three months for a non-working stay. From March 2009, Taiwan visitors have not needed a visa for a non-working stay of six months in the United Kingdom. Japan began to give Taiwan visitors three-month visa-free stays in September 2005. Such visa-free treatment, normally reciprocal, certainly facilitates travel convenience and boosts tourism and commerce for both countries. For instance, after Japan implemented visa-free treatment, Taiwanese tourists surged to account for one-sixth of Japan’s inbound tourist market. Conversely, Japanese tourists coming to Taiwan increased to represent about one-quarter of Taiwan’s incoming tourist market. It is expected that when Taiwan joins the U.S. Visa Waiver Program, Taiwan’s visitors to the United States for both sightseeing and business purposes will boom.

Bilateral Extradition Agreement

The United States has extradition treaties with over 100 nations. It does not have extradition treaties with roughly 70 countries with which it maintains diplomatic relations, though Taiwan arguably has more exchanges with the U.S. than any of these nations except China. In the absence of an extradition treaty, some felony offenders from Taiwan have escaped Taiwan and have gone to either the United States or mainland China to avoid judicial proceedings and punishment. As Taipei and Beijing are developing closer anti-crime cooperation, major Taiwan economic criminals have begun to consider the United States their major haven and remain at large there to enjoy their illegal gains. However, public opinion in Taiwan has urged the government to expedite the process of concluding an extradition agreement with the United States. Taiwan’s diplomatic and judicial apparatus is actively pushing for a breakthrough in such negotiations, which would benefit bilateral judicial cooperation and mutual trust.

Renewing TIFA Talks

The American Institute in Taiwan (AIT) and the Council for Coordination of North American Affairs (CCNAA) signed a Trade and Investment Framework Agreement (TIFA) in September 1994, establishing a deputy minister-level communication platform for trade and investment promotion and consultations to resolve disputes pertinent to both sides. Such consultations broke down in 2008. Under TIFA, a bilateral investment agreement (BIA), e-commerce cooperation, a double taxation avoidance agreement (DTA), and green energy are the priorities of the Taiwan side; the DTA is especially important in professional exchanges, as it would make it more economically feasible for professionals from one country to work in the other. The United States is especially concerned about drug pricing in Taiwan under the national health insurance program there, restrictions on agricultural imports, a rice import quota, on-campus protection of intellectual property rights, and barriers to entering the telecommunications market.

While many of these issues fall within the purview of government policy, they depend upon private citizens and organizations for both advocacy and implementation. Taiwan’s business community, the American Chamber of Commerce in Taipei, and the US-Taiwan Business Council hope to re-open the TIFA talks[10] to gradually remove bilateral trade barriers, and they have also voiced support for the eventual signing of a free trade agreement with the United States. Regular TIFA consultations, scheduled to start early this year, were postponed due to the controversy surrounding restrictions that Taiwan’s legislature placed on the import of certain types of American beef after the Ma administration had agreed with Washington to liberalize imports. A smooth resumption of TIFA talks would be a win-win outcome for both sides, not only strengthening bilateral economic relations, but also benefiting American firms through the increased business opportunities resulting from the ECFA and cross-strait peace.

Other initiatives

In addition to these three priorities, two other aspects of people-to-people relations deserve attention. First of all, the U.S. government should allow its cabinet-level officers to visit Taiwan. The level of visits by U.S. cabinet officials is an indicator of Washington-Taipei relations and while they are by nature official contacts, they can also be considered an important type of personal interaction and public diplomacy. In December 1992, U.S. Trade Representative Carla Hills visited Taiwan to attend a conference of the US-Taiwan Business Council, which marked the first cabinet-level visit since Washington severed diplomatic relations with Taipei 13 years earlier. After the Clinton administration took office in early 1993 and conducted a Taiwan policy review, it also allowed high-level officials in charge of commerce and technology to visit Taiwan. During the eight-year Clinton administration, the administrator of the U.S. Small Business Administration, Secretary of Energy and two Secretaries of Transportation visited Taiwan, but during the subsequent eight-year Bush administration, no cabinet-level official made the trip.

In March 2008, candidate Barack Obama wrote in a message congratulating Ma Ying-jeou on his election victory that “[t]he U.S. should reopen blocked channels of communication with Taiwan officials,”[11] and despite rumors about a Cabinet-level visit to Taipei in autumn 2009, none has taken place yet. Washington is urged to first allow cabinet-level officials to visit Taiwan with those in charge of commerce and technological exchanges to further dialogue, exchanges and cooperation in related fields. Exchanges of visits of legislative delegations should also be an area for promotion.

Secondly, Taiwan’s cultural diplomacy to the United States should be strengthened. Cultural flows between Taiwan and the United States have laid a solid foundation for social interactions between the two countries. Culture—including language, food, art, literature, music, films, and television—is also a major element of a country’s soft power. Given its diplomatic isolation and its rich cultural heritage, Taiwan should be devoted to outreach in this arena. President Ma addressed this issue during his presidential campaign, proposing the establishment of a “Taiwan Prize,” envisioned as the equivalent of a Nobel Prize for Chinese-language literature, and the development of “Taiwan Academies” around the world to teach Chinese language and promote Taiwan’s culture, which could compete with the Confucius Institutes now being established by Beijing. President Ma also proposed the endowment of an NT$5 billion (US$152 million) cultural diplomacy fund to support these activities.[12] In February this year, he reiterated his plans and instructed the Council for Cultural Affairs (CCA) and the Overseas Compatriot Affairs Commission (OCAC) to develop plans and schedules.[13]

To be successful, the idea of the Taiwan Academies will require much detailed study and planning, including locations, positioning, and operations, and whether these academies should be merged with the existent Chinese- language schools in Latin America and Japan, including Osaka and Okinawa. Some of these “Chung-Hwa schools” run by OCAC have operated for some time, and up to one-third of their enrollment is by local people. They could possibly be upgraded to Taiwan Academies in the future. Overall, the establishment of Taiwan Academies is clearly a direction for Taiwan to allow Americans to gain more understanding of the art, culture and society of Taiwan, and more American tourists could be attracted to Taiwan for either sightseeing or for cultural and academic exchanges.

Conclusion

Since the Ma administration took over in May 2008, cross-strait relations have advanced toward apparent normalization and relaxation, under an atmosphere dramatically different from previous tensions. A healthier and more positive cross-strait relationship is undoubtedly the wish of the Taiwan people. But the government’s approach does not imply a degradation of the sovereignty of Taiwan or neglect of its relations with other countries; indeed, President Ma has reiterated that cross-strait ties and international relations are equally important. His government has adopted a strategy in its foreign relations to “reconcile with China, pursue a special partnership with Japan, and ally with the United States” Such a strategy is intended to strike a balance. To construct a stable and positive triangular relationship among Taiwan, China, and the United States is in Taiwan’s best interests. However, a robust relationship with the United States remains at the center of Taiwan’s overall foreign relations and, especially because of the special nature of Taiwan-U.S. ties, non-governmental interaction forms an important pillar in that relationship.

Washington’s political support and security commitment are irreplaceable and are built on close economic relations, frequent social exchanges, and smooth interactions between the two peoples. At the current stage, joining the U.S. Visa Waiver Program, signing a bilateral extradition agreement, renewing the TIFA talks, resuming visits by U.S. cabinet-level officials, and promoting Taiwan culture in the U.S. are high on Taipei’s agenda, and deserve serious consideration and the real commitment of the both sides in order to consolidate and deepen this important relationship.

[1] See Section 2 (b) of the Taiwan Relations Act (TRA).

[2] “Trade Statistics (Bureau of Foreign Trade, Ministry of Economic Affairs, R.O.C.)” http://cweb.trade.gov.tw/kmi.asp?xdurl=kmif.asp&cat=CAT319 .

[3] Ibid.

[4] “U.S. Trade Balance, by Partner Country 2009,” United States International Trade Commission, http://dataweb.usitc.gov/scripts/cy_m3_run.asp.

[5] “Yearly Statistics (Tourist Bureau, Ministry of Transportation and Communication, R.O.C.)”. http://admin.taiwan.net.tw/indexc.asp.

[6] Ibid.

[7] “Yearly Statistics (Department of Statistics, Ministry of Education, R.O.C.).” http://www.edu.tw/files/site_content/B0013/overview73_1.xls.

[8] “Foreign Students in the R.O.C. (Department of Statistics, Ministry of Education, R.O.C.),” http://www.edu.tw/statistics/content.aspx?site_content_sn=886.

[9] “Ma Sees 3 Focal Points Defining Future ROC-US Ties,” Taiwan Today, April 1, 2010.

[10] See American Chamber of Commerce in Taipei, “Editorial: Boosting U.S. Exports,” Topics, Vol. 40, No. 3 (March 2010), http://www.amcham.com.tw/content/view/2962/446/; and Rupert J. Hammond-Chambers, “President’s Report: The US-Taiwan Business Council and U.S.-Taiwan Relations – 2009,” US Taiwan Business Council, December 31, 2009, http://www.us-taiwan.org/reports/2009_december_31_state_of_the_council.pdf.

[11] “Obama Statement Congratulating Taiwanese President-Elect Ma Ying-Jeou,” Organizing for America, March 22, 2008, http://www.barackobama.com/2008/03/22/statement_congratulating_taiwa.php.

[12] “Taiwan Academy to be Founded in US Next Year,“ Taiwan Today, June 22, 2009.

[13] “Gov't to Set up Taiwan Academies around the World: President,” Taiwan Today, February 16, 2010.

Authors

Da-jung Li

The United States and Taiwan’s Defense Transformation

Dr. Alexander Chieh-cheng Huang — Tue, 16 Feb 2010 16:22:00 -0500

Editor's Note: In the second installment of the Taiwan-U.S. Quarterly Analysis, former CNAPS Visiting Fellow Alexander Chieh-cheng Huang describes the long-term nature of the U.S.-ROC security relationship. Dr. Huang describes how the relationship, which has weathered strategic changes over the past 70 years and up to the present, plays important roles both in Taiwan’s defense transformation and in U.S. strategy in East Asia.

In light of the rise of Chinese economic and military might and the increasing importance of U.S.-China cooperation in global affairs, Taiwan may be seen as a small island too close to the Chinese continent. It may appear to carry little weight on the grand chess board of great powers. But it is a beacon for a future democratic China, and it is also a critical piece in the security structure of the Asia-Pacific region. Despite its relatively small size, Taiwan is worthy of protecting and must be defended.

The United States has long been a guarantor of Taiwan’s security, and will continue to play a pivotal role in Taiwan’s defense transformation in the 21^st century.

A long-standing security partnership

The security relationship between the Republic of China (Taiwan) and the United States is built on a strong foundation with a long history reaching back as early as World War II. The American Volunteer Group (the celebrated Flying Tigers) led by General Claire Chennault, the U.S. Naval Group China (Sino-American Cooperative Organization, SACO) led by Admiral Milton Miles, and the cooperation in land operations between Chinese, British and American forces in South Asia against the Japanese in the China-Burma-India (CBI) Theater in the early 1940s are the most famous and commemorative episodes of cooperation between the two countries.

Sixty years later, when the Service Coordination Division (the defense attaché’s office) in the American Institute in Taiwan (AIT) Taipei Office combined the “CBI patch” and the “flying tiger” graphic as its logo, the heritage of U.S.-ROC security cooperation was seen as revived and consolidated, and the long lasting military-to-military relationship between Taiwan and the U.S. was given a new spirit.

In addition to the historical linkage that extends from the Second World War, U.S.-Taiwan security cooperation has been built upon a convergence of strategic interests: namely, in containing Communist expansion in the Asia-Pacific during the Cold War era. The signing of the U.S.-ROC Mutual Defense Treaty in late 1954, and the establishment earlier that decade of the U.S. Military Assistance Advisory Group (MAAG) in Taipei not only assured the security and continuity of the ROC government in Taiwan, but also enabled a more complete network of military alliances between the U.S. and Asian-Pacific democracies.

Under the mutual defense treaty, which remained in effect until January 1, 1980, the depth and width of cooperative arrangements greatly assisted the Taiwan military in its paths toward modernization. In addition to supplies of advanced weapons systems, the U.S. provided Taiwan with considerable software support, from opportunities to study in American staff and war colleges to doctrinal reform through joint training and exercises.

The Taiwan Relations Act & Six Assurances

Washington’s decision to begin to normalize relations with the People’s Republic of China, President Richard Nixon’s visit to Beijing, and the joint communiqué in Shanghai in 1972 greatly changed the strategic equation in Asia-Pacific, and undermined the diplomatic relationship between Washington and Taipei. Although military-to-military cooperation continued in the 1970s, the magnitude and depth of the relationship gradually deteriorated. The Carter administration formalized diplomatic relations with the PRC in January 1979, the U.S.-ROC Mutual Defense Treaty terminated one year later, and the security relationship between the United States and Taiwan consequently turned into a unique – and unofficial – one.

The U.S.-Taiwan security relationship found its new legal base when the U.S. Congress passed a domestic law – Taiwan Relations Act (TRA) – governing U.S.-Taiwan relations after 1979. According to the TRA, the U.S. would “consider any effort to determine the future of Taiwan by other than peaceful means, including by boycotts or embargoes, a threat to the peace and security of the Western Pacific area and of grave concern to the United States; . . . the United States will make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability.”[1]

The latter clause expresses the strong commitment of the United States to sell arms to Taiwan to enable it to defend itself. But to Beijing, U.S. arms sales to Taiwan were (and remain) an important unresolved issue that made the U.S.-PRC diplomatic relationship somewhat incomplete. The U.S. government was pressured by China to address this issue, which led to the signing of the August 17 Communiqué in 1982. The communiqué cites earlier statements of the Chinese government declaring its “fundamental policy of striving for peaceful reunification of the motherland.” The U.S. government stated that, “having in mind” China’s policy of peaceful resolution of the Taiwan issue and its own respect for China’s territorial integrity, it “does not seek to carry out a long-term policy of arms sales to Taiwan, that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan, leading over a period of time to a final resolution.”[2] Fortunately for Taiwan, nearly one month before the 1982 Communiqué was signed the Reagan administration quietly provided Taipei with “Six Assurances,” in which Washington guaranteed, among other promises, that it “would not set a date for termination of arms sales to the Republic of China,” and “would not consult with the PRC in advance before making decisions about U.S. arms sales to the Republic of China.”[3]

The Taiwan Relations Act and the Six Assurances therefore provided Washington and Taiwan with profound bases on which to sustain their bilateral security relationship after the diplomatic and alliance relations were terminated. Though the U.S. government has continued its security assistance to Taiwan through a network of non-official arrangements, the essence and quality of the relationship did suffer a significant setback. Taiwan’s military has since experienced great isolation, and suffered not only in terms of policy dialogues and consultations, but also in terms of exchanges necessary for the advancement of military thinking and knowledge. The security relationship was in a general sense confined only to the areas of defense procurement. From early the 1980s to mid-1990s, the annual Hwa-Mei Arms Sales Talks became the most important – and possibly the only – occasion for senior military exchanges.

Transformation after crisis

The relationship received a boost in the mid-1990s, in the wake of the 1996 missile crisis in the Taiwan Strait which also initiated Taiwan’s current defense reform and transformation. In the same period, the U.S.-Taiwan security assistance and cooperation has been upgraded to an unprecedented level. In 1997, Taiwan carried out the “Jing-Shi” force streamlining and defense reorganization program; and in the same year, the first “Monterey Talks” – an institutionalized senior-level strategic security dialogue – were held in California.

Taiwan’s defense transformation since 1997 originated from a combination of three developments: emerging new organizational and operational concepts in military affairs; the growing imbalance of military strength across the Taiwan Strait; and democratization in Taiwan domestic politics. The objective of Taiwan’s defense transformation is to dissuade a possible Chinese use of force, and so to prevent an armed conflict in the Taiwan Strait, through maintaining adequate and affordable armed forces and sustainable defense capability.

Taiwan’s defense transformation, of course, has been based on its own assessment of its strategic environment and defense modernization planning. But it also has been closely associated with U.S. security strategy in the Asia-Pacific region, and there are at least nine specific areas of U.S.-Taiwan security cooperation that are distinct from the years before the 1996 missile crisis. These new developments reflect a combination of Washington’s extended strategic interests in the Asia-Pacific, Taipei’s quest for defense modernization and balance in the Taiwan Strait, and, probably more importantly, the shared concerns over China’s growing military power. The nine areas are:

1. High-level Visits: Taiwan’s defense ministers and deputy ministers have been able to pay visits to the U.S. through the venue of annual Defense Industry Conference and other senior-level meetings.

2. Defense Reorganization: With the encouragement of the U.S., two national defense laws passed in 2000 – National Defense Act & Ministry of National Defense Organization Act – reflected Taiwan’s efforts to reorganize its defense institutions to better communicate and cooperate with their U.S. counterparts.

3. Strategic-Level: Monterey Talks: Beginning in late 1997, the annual strategic-level dialogues have enabled senior national security staff to share their threat perceptions and defense planning concepts in a full-spectrum dialogue.

4. Policy-Level: Defense Review Talks: Dialogues between Taiwan’s Ministry of National Defense and the Pentagon are no longer limited to debates on military procurement items, but focus more on the policy and planning issues.

5. Professional-Level Exchanges: U.S. Department of Defense assessment teams have been sent to Taiwan to review defense requirements and key operational capabilities. Professional military education and exchanges has been expanded from National Defense University in Washington, DC to the Asia Pacific Center for Security Studies in Hawaii.

6. Exercise Observations: The U.S. has sent retired and active duty observers to Taiwan’s annual Han Kuang Joint Operations Exercise, in which senior defense leaders verify doctrinal changes, examine operational concepts, and evaluate warfighting performance.

7. Military Liaison: Taiwan created the defense attaché position to head its military mission to the U.S. in 1997. The U.S. decision in 2005 to send its own active duty officers to the American Institute in Taiwan can be regarded as a new trend of normalization of security relationship between Taiwan and the U.S.

8. Arms Sales Procedures: The Bush administration in 2001 changed the way that arms sales decisions had been made since the termination of the U.S.-Taiwan Mutual Defense Treaty. Going forward, arms sales decision would not be confined to an annual review of Taiwan’s requests through the Hwa-Mei Arms Sales Talks, and for arms sales purposes Taipei was granted the status of a normal ally, for whom arms sales requests and approval can be managed whenever necessary.

9. Arms Sales Packages: The Bush administration also approved a robust arms sales package for Taiwan, including Kidd-class destroyers, Patriot missile defense systems, maritime reconnaissance airplanes and diesel submarines. Although some of the items are yet to be delivered, arms sales continue to be the most obvious symbol of the U.S. security commitment to Taiwan.

All of the above-mentioned security cooperation between Taiwan and the United States has played a vital role in facilitating Taiwan’s defense reform in the past decade. The most recent arms sales notifications to the Congress on January 29, 2010, with items including utility helicopters, ballistic missile defense systems and mine sweeping ships, might be seen as the completion of a security cooperation agenda set by the Clinton and the Bush administrations. However, more difficult challenge lies ahead for a new phase of Taiwan defense transformation.

Paradigm shift & new challenges

The upgrade of the U.S.-Taiwan security cooperation in the past decade has been a response to the rapid modernization of the People’s Liberation Army. Today, ironically, the relationship experiences great challenges due to the same trend. The rise of China’s economic and military power has fundamentally changed the global power balance and brought about the re-assessment of strategic posture in the Asia-Pacific region.

Consequently, Taiwan’s defense transformation in the coming years will be deeply affected by two general developments: the Obama administration’s management of U.S.-China relations and the evolving cross-strait relationship between Taipei and Beijing.

The Obama administration came into office at a time when the American economy was experiencing a significant downturn, when the American image and popularity in the world were suffering, and when American influence in international politics was (and still is) challenged by other powers. In his speech at the United Nations in September 2009, President Obama stated: “No one nation can or should try to dominate another nation… no nation should be forced to accept the tyranny of another nation...”[4] The December 14, 2009 issue of Newsweek characterized Obama as the “Post-Imperial President”; the sharp difference of Obama’s foreign policy concept from that of the Bush administration testifies that a doctrinal shift in U.S. foreign policy is taking place.

Short of an official national security strategy document and based on his various public statements around the world, President Obama’s foreign policy guidelines can be generally summarized as “multilateralism” and “cooperation.” But one would worry: If multilateralism is to be seen as giving away leadership, and if cooperation gives other powers opportunities to contend against Washington, what defines the Obama Doctrine?

Due to the rapid rise of China’s global influence, or maybe because China is now the largest creditor of the United States, Beijing’s attitude toward Washington has also changed. President Hu Jintao’s repetitive reminders that the U.S. must observe China’s “core interests,” i.e. sovereignty and territorial integrity; Premier Wen Jiabao’s manipulating tactics in the summit meetings in Copenhagen; and the unprecedented public threats made by Chinese generals against U.S. arms sales to Taiwan all have shown a more belligerent Chinese behavior in the U.S.-China relations.

How the United States government defines and manages its relations with China will have a direct impact on the scope of future military-to-military relations between Taiwan and the United States, as well as on the momentum of Taiwan’s defense transformation.

The shift in the U.S.-China strategic equation comes at a time when relations across the Taiwan Strait have gained positive ground after nearly a decade of tension and distrust. Taiwan President Ma Ying-jeou has adopted a new policy of rapprochement based on the “1992 consensus” in which both Taipei and Beijing accept the notion of “one China” but agree to disagree on the interpretation of that term. On the other side of the Taiwan Strait, President Hu Jintao stated that Beijing will do whatever necessary to improve the relationship and to win the hearts and minds of the Taiwan people.

Since mid-2008, Taiwan and China have reached 12 agreements and 1 joint statement in four rounds of bilateral negotiations. The new détente in cross-strait relations has brought a significant relaxation of tension in the Taiwan Strait. This relaxation has presented Taiwan’s military with both opportunity and danger. It provides the military with a long-awaited window to focus on full-range transformation with much less pressure on military alertness. However, the relaxation has in a way mitigated the Taiwan public’s vigilance regarding existing Chinese military threats and the growing imbalance of military capability in Beijing’s favor. Rapprochement has also softened domestic support for defense modernization. Many in Taiwan advocate a “peace dividend” and further reduction of defense spending; others believe that the possibility of war between China and Taiwan is either too remote or too horrible to be contemplated.

The increase of Chinese global influence and the new adaptive and cooperative approaches to China taken up by both Washington and Taipei may reflect the beginning of paradigm shift from the past or they may simply be tactical adjustments. But these changes will definitely affect the future of defense transformation in Taiwan.

Innovative security cooperation

The current defense reform undertaking in Taiwan is crucial to enable the ROC armed forces to acquire necessary capability for new missions in the 21^st century. Its success will not only defend Taiwan’s democracy but also common security interests in the Asia-Pacific region.

In his first major address to senior military leaders, in October 2008 President Ma promised that there would be no military conflict across the Taiwan Strait under his presidency, and asked the Ministry of National Defense to shape a “new and effective” strategy for defending Taiwan.[5] However, the next phase of defense transformation would face even greater challenges, as the Taiwan military must:

Develop new asymmetric warfighting capabilities to deal with the growing military imbalance across the strait;
Fight for continued U.S. arms sales in light of the warming Washington-Beijing relationship;
Maintain pride and discipline in a social condition of less appreciation of strong armed forces;
Increase new roles and capabilities in disaster relief and humanitarian assistance missions;
Keep up with regular training and exercises under growing national debts and financial difficulty;
Continue force streamlining while retaining capable personnel and maintaining high morale; and more importantly,
Manage a smooth transition from a conscript military service to a new all-volunteer force.

All of these challenges require considerable degrees of cooperation with and assistance from the United States, and how both Washington and Taipei innovatively advance their security relationship would have significant impact upon not only the success of Taiwan’s defense transformation and the sustainability of its warfighting capability, but also the U.S. strategic posture and security commitment in the Asia-Pacific region.

In November 2009 address to the senior officer corps, President Ma Ying-jeou urged the Ministry of National Defense to “apply the concepts of innovation and asymmetry in defense modernization.”[6] Ma’s remarks paralleled the concepts raised by U.S. Assistant Secretary of Defense Wallace “Chip” Gregson in his speech in the 2009 Defense Industry Conference. More interestingly, the Center for a New American Security issued a policy brief in December 2009, recommending that Taiwan and the U.S. to “establish a joint analysis group” to discuss asymmetric capabilities and new doctrines.[7]

Based on a more than half-century security relationship and closer cooperation in the past decade, it is imperative that Taiwan and Washington work together to find new and innovative approaches to Taiwan’s defense transformation in dealing with the mixture of cross-strait rapprochement and Chinese military expansion, and in coping with future transnational and non-traditional security threats together.

Taiwan is no Finland, nor Hong Kong, but a democracy centrally located between Yokosuka and Cam Ranh Bay, and between the Sea of Okhotsk and the Strait of Malacca. Security in the Taiwan Strait is not an issue of bilateral rivalry between China and Taiwan but an essential part of regional peace.

The rise of Chinese influence may empower the leaders in Beijing to be more assertive in their conduct of foreign policy, but only successful defense transformation in Taiwan, through continued U.S.-Taiwan security cooperation, will ensure the peace and stability of the Taiwan Strait and in the much wider Asia-Pacific region.

[1] “Taiwan Relations Act: Public Law 96-8, 96^th Congress,” January 1, 1979, full text available on the website of the American Institute in Taiwan (AIT), http://www.ait.org.tw/en/about_ait/tra/; accessed February 8, 2010.

[2] “Joint Communiqué of the United States of America and the People’s Republic of China,” August 17, 1982, full text available on the website of the American Institute in Taiwan, http://www.ait.org.tw/en/keydocs/joint_communique_1982.aspx; accessed February 8, 2010

[3] According to Harvey Feldman, then-director of AIT James Lilley delivered the Six Assurances orally to ROC President Chiang Ching-kuo. See Harvey Feldman, “President Reagan’s Six Assurances to Taiwan and Their Meaning Today,” The Heritage Foundation Web Memo, October 2, 2007, https://www.policyarchive.org/bitstream/handle/10207/13096/wm_1653.pdf?sequence=1; accessed February 8, 2010.

[4] “Remarks by the President to the United Nations General Assembly,” The White House Office of the Press Secretary, September 23, 2009, http://www.whitehouse.gov/the_press_office/remarks-by-the-president-to-the-united-nations-general-assembly/; accessed February 8, 2010.

[5] Highlights of the speech can be found at the official website of the Office of the President, ROC: “Zongtong canjia guojun 97 nian zhongyao ganbu yanxihui,” http://www.president.gov.tw/php-bin/prez/shownews.php4?Rid=14588; accessed February 15, 2010.

[6] Taiwan’s Military News Agency (junshi xinwen tongxunshe 軍事新聞通訊社), carried the full text of President Ma’s speech immediately after it was delivered on November 25, 2009 at http://tw.news.yahoo.com/article/url/d/a/091125/60/1vo1u.html; accessed December 28, 2009.

[7] Abraham M. Denmark and Richard Fontaine, “Taiwan’s Gamble: The Cross-Strait Rapprochement and its Implications for U.S. Policy,” Center for a New American Security Policy Brief, December 2009, http://www.cnas.org/files/documents/publications/Taiwan_Denmark_Dec2009_code502_policybrief2.pdf; accessed February 8, 2010.

Authors

Dr. Alexander Chieh-cheng Huang

Taiwan's Economy: Recovery with Chinese Characteristics

Merritt T. Cooke — Wed, 11 Nov 2009 11:13:00 -0500

Editor's Note: In the inaugural installment of CNAPS’s Taiwan-U.S. Quarterly Analysis series, Terry Cooke explores the causes and effects of Taiwan’s pursuit of economic normalization with China. Articles in this series will be written by leading experts on the U.S.-Taiwan relationship and will contain in-depth analysis of bilateral and multilateral policy challenges for Taipei and Washington.

The past year has brought "once in a lifetime" upheaval to the Asian regional economy and to world markets. As a result of systemic failure in global financial markets, the post-World War II pattern of interdependent growth between Asian exporters and Western consumers is under strain and is changing. Taiwan, one of the region's preeminent beneficiaries of this arrangement over the past sixty years, finds its economy at an important cross-roads. Its globally integrated "sub-economy" (electronics and IT) has been deeply affected by the global credit squeeze at the same time that its domestic economy has been battered by Typhoon Morakot. Its hopes for an economic shot-in-the-arm from possible bilateral Free Trade Agreement (FTA) discussions with the United States or from a breakthrough in the World Trade Organization’s (WTO) multilateral Doha Round hold little promise for success in the near term.

The bright spot for Taiwan's economy over the past ten months has been rapid progress in "economic normalization" with China built on an ad-hoc framework of high-level cross-strait meetings. The current direction of these talks points to a formal agreement between Taipei and Beijing—the Economic Cooperation Framework Agreement (ECFA)—to be substantively worked out by the end of 2009 and signed in early 2010. As these milestones approach, key questions for Taiwan and the region are whether the ECFA will put Taiwan's economy on a more sustainable track of stable growth in a new, rebalancing global economy and, if so, whether political benefits—such as China's recent acquiescence to Taiwan's observer status at the World Health Assembly—will continue to follow. In the global arena, a key question is whether Taiwan's contribution to regional economic stabilization through pursuit of the ECFA will lead to shored-up political support from Washington as the Obama administration continues to focus on the Korean peninsula and other competing claims on its attention in East Asia.

The Impact of Global Recession

The 2008/2009 financial crisis originated in U.S. sub-prime markets but quickly spread world-wide. Following the dissolution of Lehman Brothers on September 15, 2008, the heaviest effects of the crisis were soon felt in the world's oil- and commodity-producing economies and in the export-led economies of Asia. In effect, the global recession represented a reverse gear of globalization. Sudden loss of confidence led to a seizing-up of global credit markets which in turn undercut global demand for manufactured goods from Asia’s export juggernaut (as well as for the oil and resources required to manufacture these goods). A feature of this "globalization-in-reverse" recession was that relatively insulated economies such as that of Bangladesh experienced milder dislocation while newly emerging markets such as Eastern Europe and highly integrated markets such as Singapore underwent wrenching dislocation.

Against this backdrop, it is easy to understand the degree of challenge which the global recession has posed for Taiwan's economy. With a small internal market of only 23 million, fully 70 percent of Taiwan's gross domestic product is accounted for by exports. The lion's share of these exports consists of electronics and information technology products. Already suffering from commoditization pressures, this sector was rocked in the early days of the recession by uncertainty in the final assembly market of China and by wide-scale cancellations and downscaling of purchase contracts in North America, Europe, and Japan.

As a result of its dependence on the IT sector and its high degree of integration with global supply chains, Taiwan took a stronger hit—and is taking a longer time to recover—from the impact of the global recession than its regional competitors. Following an alarming 41.9 percent drop in exports in January, Taiwan's exports continued to fall off more precipitously than those of the other "Little Dragon" economies in Asia over the next six months of 2009:[1] off 32.8 percent compared to declines in exports of 17.2 percent in Hong Kong, 22 percent in South Korea, and a roughly comparable 31 percent in Singapore.

As a result of the dismal international trade environment in the first half of 2009, the Taiwan government is now facing a revenue shortfall largely attributable to falling corporate profits, government debt approaching legally-mandated limits, and all-time highs in unemployment. The first harbinger of improvement came in the year's second quarter, with an improving trade surplus with China as Beijing's stimulus took hold and inventories for Taiwan intermediate goods were restocked.

Entering the fourth quarter, it is evident that Taiwan's economic contraction for the 2009 full-year will be greater than anticipated. This is despite the government's fiscal stimulus for business and consumers and a significant reduction of almost 250 basis points in its benchmark lending rate. In late September, the Asian Development Bank adjusted its 2009 forecast for Taiwan downward to predict a full-year contraction of the economy of 4.9 percent in 2009. Looking forward to 2010, the Asian Development Bank predicts a GDP uptick[2] of 2.4 percent. Forward indicators and various measures of business confidence are now trending upwards. This anticipated growth for Taiwan's economy in 2010 is based largely on growing Asian-led demand and tightened commercial links with China.

So, with traditional markets in North America, Europe, and Japan still sluggish and China's economy for the moment leading the pace of global recovery, in what direction does Taiwan's economy need to move?

Immediate Issues

The first and most immediate obstacle for Taiwan's economic recovery is the still-clouded outlook for the broader recovery of the global tech industry, the most globalized part of Taiwan's economy. Early indications are for a broad-based but modest recovery from the global tech sector's second major downturn this decade. While stock markets are signaling investor confidence in a return to robust corporate spending on technology, industry executives themselves are far more cautious. Rather than a classic V-shaped recovery, industry executives are expecting at best a slow rebound with 2010 capital spending budgets comparable to the depressed levels of 2009.

A second issue for Taiwan's economic leaders is to improve trade relations with the United States. While a weak global economy and a new U.S. administration mean that immediately achievable goals in this area will fall short of a U.S.-Taiwan FTA, there is still much for Taiwan to accomplish in this area. Beyond the current controversy over U.S. beef imports into Taiwan, there is an opportunity for Taiwan to build on recent policy advances in the retail, tax, and transport sectors to jump-start the resumption of the U.S.-Taiwan Trade & Investment Framework Agreement talks (TIFA). The TIFA Framework, initially established in 1994 as a high-level governmental forum for U.S.-Taiwan consultation on a broad range of trade, investment and economic issues, has been stalled repeatedly due to U.S. dissatisfaction, first, with Taiwan's slow progress in protecting intellectual property rights and, more recently, with resolving an array of sector-specific concerns (including agricultural licensing and import requirements; pharmaceutical testing, labeling and certification; telecommunications market barriers; and financial service constraints).

Despite domestic controversy, Taiwan's lifting of its partial ban on U.S. beef products and its new U.S.-Taiwan beef protocol represent a positive step toward TIFA resumption. So, too, do three recent technical adjustments in trade policy announced by Taiwan in response to lobbying by the American Chamber of Commerce in Taipei: (1) liberalization of retail imports of China-sourced kitchenware and porcelain; (2) clarification of the scope of "Taiwan-sourced income" for corporate tax purposes; and (3) improved customs clearance procedures for digital invoicing of express consignments. If these steps can translate to meaningful progress under the TIFA Framework, it then becomes possible for the U.S. Trade Representative to consider Taiwan as a potential candidate for future Free Trade Agreement (FTA) talks with Taiwan, provided the Obama administration throws its weight behind that process and pushes for ratification of the FTAs with South Korea and Colombia which have already been negotiated.

The Challenge of Global Rebalancing

Beyond these immediate uncertainties, a broader challenge lies on the road ahead for Taiwan's economy.

The more fundamental, long-term challenge for Taiwan's economy relates to its adjustment to an on-going rebalancing of the global financial system. In the United States —Taiwan's largest traditional trading partner—these changes are already proceeding apace. While the U.S. consumer and financial markets were strong enough to support on a deficit basis the dramatic expansion of world trade from 1972 until 2000, those conditions manifestly no longer exist. At the consumer level in the United States, there are already some signs of consumer attitudes shifting from the high-consumption pattern of recent decades back to more balanced, historically-grounded pattern with a meaningful savings component. At the government level, cornerstones are being put in place to reinforce these attitudinal changes through revamped tax and monetary policy.

The rebalancing of China's economy is likely to take place more gradually through the elevation of the G2O and other venues. For China, this portends some degree of shift away from "neo-mercantilist," export-focused growth strategies led by heavy investment in "hard" infrastructure. It signals a gradual transition toward a more sustainable economic model[3] where growth is less dependent on Western consumer pockets, where profits from growth reach more Chinese consumer (and small business) pockets, and where investment flows more readily to the "social infrastructure" of education, health care, and pensions.

These tectonic shifts in global markets, particularly in the United States and China, represent a fundamental challenge for Taiwan's economy. Any long-term softening of end-user demand for Taiwan's core products as a result of changed patterns of consumer and corporate spending in Western markets will not be easily recouped in China[4] or elsewhere. Facing these global trends and on-going marginalization in the regional trade arena, Taiwan needs a game-changer, both to offset these weaknesses in its economic posture and to encourage closer cooperation with regional trade partners. To withstand commoditization pressures in the fast-moving IT industry, Taiwan manufacturers will need to stay close to consumers in China and other key markets to maintain their recent pace of innovation in mobile handsets and netbook computers. To tap regional markets more effectively through trade agreements, Taiwan needs to overcome concerns about possible Beijing displeasure among potential trade partners. (While the recent warming of relations between Taiwan and China has largely ended "checkbook diplomacy" and "recognition tug-of-war" in the political sphere, Taiwan has been a wall-flower in the bilateral and regional trade agreement "speed-dating" that has cropped up as the Doha Round has dragged on inconclusively and risks being left out of the blooming regional and global trade relationships.) Formalizing closer trade links with China would in one sweep help boost Taiwan's economy and its access to other economies around the world.

The ECFA as a Path Forward

Mired in a weakly rebounding tech sector and retrenching Western markets, Taiwan is counting heavily on economic rapprochement with China. The Economic Cooperation Framework Agreement (ECFA) put forward by Taiwan's President Ma Ying-jeou in February 2009 has now been taken up in earnest by Taipei and Beijing as the main harness for moving bilateral relations forward. In essence, the ECFA amounts to a bilateral preferential or "free" trade agreement between Taiwan and China, adjusted technically to account for sovereignty concerns on both sides. The three preceding high-level rounds of meetings between Taiwan and China, mediated by the Straits Exchange Foundation (SEF) in Taiwan and the Association for Relations Across the Taiwan Strait (ARATS) in Beijing, have already produced a series of significant economic gains for Taiwan: a doubling of direct flights between China and Taiwan to the level of 270 per week; a further boosting of mainland tourism to Taiwan beyond the recently achieved level of 3000 visitors per day; a Financial Framework Agreement to create a supervisory mechanism for financial service companies operating in both markets; a partial opening of Taiwan's economy to direct investment in select industries by mainland firms; and regulatory agreements governing food safety inspections and cross-strait anti-fraud cooperation.

The objective now in Taiwan is to begin substantive talks on institutionalizing the ECFA by the end of the year and to sign a formal agreement with China in early 2010. Pressure is on in Taiwan to adhere to this timeline, even as its politically-polarized public straggles to absorb its implications. That China's FTA with ASEAN takes effect on January 1, 2010 is the main impetus for the Ma administration to get its public to rally around the ECFA quickly. In addition to giving Taiwan exporters a more level playing field in China and Southeast Asia, there is also the hope that a Taiwan-China ECFA might lead to enabling Singapore to follow that precedent with a Taiwan-Singapore FTA.

Significantly, private sector analysis of the likely impact shows that the ECFA will have minimal benefit for Taiwan's IT industry. This is because the IT industry, already highly integrated into the global supply chain, faces low commodity taxes of only 0.58 percent when exporting its components to China for assembly and reshipment to world markets. By contrast, the tariff barriers facing exported products from Taiwan's more traditional industrial sectors—petrochemicals, heavy machinery, steel, automotive, building materials, and textiles—are significantly higher. Accordingly, these traditional sectors of Taiwan's economy stand to gain more from the ECFA than Taiwan's tech sector.

All of this is requiring the Ma administration to undertake strenuous efforts to educate its public of the potential benefits of the ECFA. Despite some clear structural advantages which the proposed ECFA holds for Taiwan given its strengths in knowledge-based industries,[5] there is growing concern and appreciable risk for the ruling party in upcoming regional elections if it fails to persuasively make the case for the ECFA. Currently, the Ministry of Economic Affairs is leading the administration’s efforts in this regard, identifying "early harvest lists" of sectors which stand to benefit directly from the ECFA and initially excluding from the agreement a number of product categories[6] where direct competition with mainland firms is more politically problematic. The administration's case was underlined in mid-October by a report from the Council of Labor Affairs which showed a positive impact of 0.75 percent GDP growth and a net gain of 125,000 jobs under a favorable ECFA scenario and a dip of almost 0.2 percent in GDP, accompanied by a net loss of 47,000 jobs, in the event of the ECFA not being concluded. Even China has been working to demonstrate the benefits of an ECFA to the Taiwan public (while presumably also demonstrating its role as a responsible regional stakeholder to a global audience). More than a half-dozen procurement missions from China have come to Taiwan in 2009 and purchased close to U.S. $10 billion in consumer electronics, processed foods, and other goods.

In broad view, the key dynamic in all of these developments is their lesser impact for the globally-integrated and globally-mainstream sectors of Taiwan's economy (i.e. IT/electronics) and their relatively greater impact for more parochial sectors of Taiwan's traditional economy. By normalizing cross-strait commercial relations in these "stodgier" sectors, the ECFA makes possible an overdue structural adjustment. Along with greater competition, the agreement promises new markets in the mainland and a new level of regional and global economic integration, via the China market springboard.

Perhaps the shock of an economic downturn was required to position Taiwan and China for this next level of mutual engagement and economic integration. While joint entry into the WTO was immeasurably important to both parties as a confidence-building measure, Geneva has not served as an arena for directly advancing bilateral rapprochement. While economic integration has proceeded apace to meld the two countries' IT sectors into a nearly seamless global supply chain, integration of other, more traditional sectors (such as agriculture, transportation, energy, and petrochemicals) has been impeded by political opposition and, in some cases, by national security concerns.

While the global financial crisis may have pushed Taiwan and China significantly closer in their economic relationship, neither party seems to be ignoring the key "lessons learned" from the crisis. The deliberate ECFA process is structured on a shared recognition that cross-strait integration needs to be pursued in measured and balanced fashion, not as a pell-mell rush. The staging of these talks throughout the year has been designed to allow time for public opinion in Taiwan to recognize the need for, and to help shape the final form of, this outcome. In the final analysis, the ECFA seems to represent a recognition in both Taipei and Beijing that they need to work together to co-manage the impact of global economic crisis by adding previously insulated sectors of their respective economies to the cross-strait grid.

Around the Corner

For sound economic reasons, the government in Taiwan is forging down the ECFA path in an attempt to recapture forward momentum following a year of stalled economic performance. Those at the helm of Taiwan’s economy have made clear[7] that the ECFA is not merely a short-term tactical shift to gain from the world-leading pace of growth across the Strait of Taiwan; rather, it reflects strategic recognition of the fact that traditional sectors of Taiwan’s economy stand to gain from the degree of integration with the world that the technology sector has long enjoyed. In short, the longer-term path to economic recovery for Taiwan is through fuller integration with global markets, not only in the tech sector but across the spectrum of its economy. The ECFA represents a significant stage towards that goal by promising to normalize economic channels ruptured through decades of political antagonism and posturing with China. Whatever variety of economic recovery China ultimately experiences – V, U, or W – and whatever form of rebalancing ultimately takes place between excessive savings in China and overconsumption in the United States, Taiwan cannot realistically afford any of its economic cylinders to be idled. Integrating more fully with the mainland economy through the ECFA roadmap will allow Taiwan to capture drive from China's rapid growth, to contribute to the prosperity and stability of the regional economy, and to participate with a higher degree of integration in the global economy.

The United States' stake in these outcomes is significant, as is its role in supporting their realization. As to direct American economic and commercial stake in Taiwan, the Obama administration should recognize the recent steps made by the Ma administration and join in advancing the TIFA process. For its broader stake in cross-strait prosperity and stability, the United States should be appropriately encouraging of Taipei's and Beijing's moves to further normalize cross-strait commercial ties through the ECFA process. In essence, the ECFA outcome would represent in the economic sphere the long-standing U.S. policy position toward cross-strait tension in general—namely, U.S. support for China and Taiwan to act together to resolve their differences by peaceful means. Successful conclusion of an ECFA would not only provide "political cover" for regional trade partners to conclude their own trade agreements with Taiwan, it would provide an opportunity for the United States to validate the success of Beijing's and Taipei's joint efforts economically and politically.

[1] The following figures represent export performance against prior year results for the seven-month period Jan – Jul 2009.

[2] A more 'dynamic' model used by Taiwan's Chung-hua Institution for Economic Research (CIER) calls for 4.65 percent increase in GDP for 2010.

[3] See commentary by Qin Xiao, Chairman of China Merchants Group, "China Must Keep Its Eyes Fixed on the Exit," Financial Times, October 21, 2009, p. 9.

[4] The Lenovo case-study illustrates both how difficult it has been for Chinese-owned manufacturers to dislodge Taiwan IT firms from their perch in the global IT value-chain and how important the PRC domestic market is in their current strategy to wrest global market-share away from Taiwan firms.

[5] See "Taiwan's Improving Relationship with China," The Economist, May 7, 2009, p. 48.

[6] These include many agricultural products and certain industrial products such as steel, footwear, white goods, printed circuit boards, and others.

[7] "Not only will the ECFA strengthen our economic ties with China, it is also key to Taiwan's connection with the world market." (Minister of Economic Affairs Shih Yen-hsiang, Taiwan Today, September 18, 2009)

Authors

Merritt T. Cooke