A balancing act increasingly out of balance

    Posted on: 2011-04-30 (台灣) 出版

A balancing act increasingly out of balance

Given the immensity and proximity of the Chinese market, it would be impossible for Taiwan to ignore the elephant in the room and hope to stay afloat economically. This is something that even pro-independence governments under former presidents Lee Teng-hui and Chen Shui-bian realized long ago.

By J. Michael Cole

Given the immensity and proximity of the Chinese market, it would be impossible for Taiwan to ignore the elephant in the room and hope to stay afloat economically. This is something that even pro-independence governments under former presidents Lee Teng-hui and Chen Shui-bian realized long ago.

However, while Lee and Chen, who ruled from 1987-2000 and 2000-2008, respectively, opened up parts of Taiwan’s economy to the emerging Chinese powerhouse, they did so gradually and calibrated cross-strait liberalization in a manner that sought to vouchsafe Taiwan’s sovereignty and its key industrial sectors.

Under President Ma Ying-jeou of the Chinese Nationalist Party (KMT), who came into office in 2008 on a self-appointed mandate to improve relations with Beijing, not only has that process accelerated, but most sectors that had hitherto been off-limit to China, such as TFT-LCD panels and advanced semiconductor factories, are now being made accessible by Taipei. By lifting those precautionary measures, Taiwan risks losing its technological edge to espionage, intellectual property theft and the shifting of factories — along with their employees — from Taiwan to China. As Beijing regards Taiwan as part of its territory, it will have little compunction in stealing secrets from Taiwanese firms. After all, how can stealing from oneself constitute theft?

Beyond those risks, the signing of the Economic Cooperation Framework Agreement (ECFA), a limited free-trade agreement, with China in June 2010, added to Beijing’s use of large purchasing promises as a political instrument of “goodwill,” risks exacerbating Taiwan’s already high dependence on China for its external trade. By last year, more than 40 percent of Taiwan’s total exports went to China, often for re-export.

While under normal conditions such dependency would not be overly worrying and does find analogues elsewhere (as with Canada vis-à-vis the United States, for example), Taiwan’s peculiar relationship with China creates certain dangers that should not be ignored by Taipei. This is all the more important as top Chinese officials have repeatedly signaled that the ECFA and trade liberalization with Taiwan are part of a united front strategy to create the conditions for unification. Try as it might to portray such deals as purely economic in nature, the Ma administration has so far failed to demonstrate how it hopes to counter Beijing’s ulterior motives. Denials alone will not suffice, nor can meek comments by officials that they are “aware” of Beijing’s intentions substitute for a clear strategy to avoid nefarious outcomes.

Although the ramifications of the ECFA on Taiwan’s economy have yet to be felt or fully understood, economists have for the most part been optimistic. In fact, a few have already ascribed Taiwan’s rebounding economy to the trade pact, while failing to realize that the island’s export-dependent economy was bound to improve as the global financial crisis receded. On the political side, whether the ECFA is positive or not for Taiwan’s economy is beside the point, as the ramifications for Taiwan’s sovereignty are all-too-clear. The more Taiwan becomes dependent on China, to such an extent that its efforts to diversify its market destinations become half-hearted, the greater the risk that China will use that over-reliance for blackmail to dictate Taipei’s policies.

The jury is still out on how beneficial greater engagement will be for Taiwan economically. But the risks of doing so are undeniable, and the deeper the relationship gets, the more important it will be for Taipei to keep things in balance. So far, this necessary prophylactic the Ma administration has failed to explain, let alone implement.

J. Michael Cole is deputy news chief at the Taipei Times and a contributor to Jane’s Intelligence Review.

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