Print

Mail

wiki links

WTO entry and cross-strait rivalry

Taiwan and China have finally obtained WTO observer status. after 11 and 15 years of hard work respectively. Even though the goal of joining WTO for both Taiwan and China is to raise their economic competitiveness by becoming part of the international community, each may nevertheless bring their own bargaining chips and strategies to the complicated bilateral political and economic relationship

Political issues have always been sensitive for the two sides. Taiwan believes that the Taiwan issue should be internationalized, while China believes it is a domestic problem that the international community (especially the US) should keep out of.

Taiwan hopes to be able to discuss direct links with China within the economic framework of the WTO, while Beijing, as always, hopes to remove economic factors and discuss direct links in the light of Taiwan's recognition of the "one-China" principle.

In real life, negotiations on this topic often change with the situation and lead to different assessments. For the time being, China's assessment is that while the Taiwanese economy is slow, a new China fever will emerge, and in particular the high-tech industry -- the pride of Taiwan -- will move across the Taiwan Strait.

With the global economy on a downturn, the Chinese economy still maintains its high growth rate, something that seems to make Beijing believe she can draw various Taiwanese industries into the Chinese market, giving China great self-confidence in political discussions regarding direct links.

The interactive relationship between politics and economics is extremely complex. After China joins the WTO, some topics will become purely political while some will become purely economic. The struggle between opposition and ruling parties in Taiwan over whether there was a 1992 consensus will be representative of the first group of topics, while the interests of Taiwanese businesspeople after China joins the WTO will be representative of the second group.

The reason that the struggle over the 1992 consensus has been rekindled is twofold -- the unusual slowdown in Taiwan's economy and the new "China fever." Pundits who believe that Taiwan should recognize the "one China" principle, believe that it is the only way to improve both the cross-strait relationship and Taiwan's economy.

However, the logic of market competition suggests that, following the entry of both sides into the WTO, competitive cooperation or cooperative competition will develop between the different industries on both sides of the Strait. This is unrelated to the "one China" issue, since the main question is whether Taiwan is economically competitive enough or not. Whether the recognition of "one China" will be beneficial to the Taiwanese economy will become evident after the two sides have entered the WTO.

Apart from this, the Chinese entry into the WTO will be beneficial to Taiwanese companies in traditional industries in the short term, but it may be harmful to them in the long run. If they export their products to the US, they may obtain orders in the short term by relying on China's abundant labor force.

However, WTO members are all treated alike and many of the Chinese government's preferential policies for Taiwanese companies will gradually have to be cancelled. Thus the companies in traditional industries will face tough competition with foreign enterprises and even local Chi-nese companies. The interests of these companies in China will eventually fall in line with normal economic competition.

Of course, the opening up of markets after China joins the WTO will include development of the communications, finance, insurance and car industries. These have been protected by the government for a long time.

The more competitive Tai-wanese industries must also target the huge Chinese market and move westwards. It is worth noticing, however, that the difference between these industries and traditional industries is that the former are exporting industries while the latter are industries working for the domestic market.

From the competitiveness perspective, the competitive industries are more closely connected to the international community, and have far more capital. What is more important is that the globalization process has created a division of labor between these industries and international industries.

International companies may use Taiwan as a stepping stone to China, since Taiwan has a higher level of internationalization and uses the same language. Compared to traditional industries, these industries may attack the markets, while traditional industries will have to fight to maintain their market share.

Will the move westwards of Taiwanese companies become a bargaining chip for China to use to force Taiwan into negotiations? "A deadlocked political situation, while the economy is moving by leaps and bounds" is one description of the relationship between Taiwan and China.

Following their entry into the WTO, China and Taiwan will enter into a relationship based on economic competition. Economic factors will play an important part in the cross-strait political situation, and market competition will supplant political manipulation in the handling of economic issues.

As far as Taiwanese economics go, the experiment with Taiwanese companies in China may lead to companies changing their manufacturing and investment patterns, a situation that is unavoidable in the trend toward globalization. The important thing is that Taiwan's government must implement efficient management of capital invested by Taiwanese businesses in China.

The right time for negotiations regarding direct links will only occur once the basic economic framework has been established, following the accession of both sides into the WTO.

Hsu Tung-ming is a freelance writer based in Beijing.

Translated by Perry Svensson
This story has been viewed 2846 times.