When Taiwan joined the democratic club in the last decade, a careful observer would discover similarities in problems or issues with those of the other democracies. That continues even today.
For Taiwan, the hot issue of the moment seems to be whether or not to allow the emigration of eight-inch wafer manufacturing to China.
The principle is a familiar one in Washington and, I suppose, in other democracies as well. It is the balance of priorities between the economy and security. The Clinton administration placed economics first and the Bush administration security.
The difference between the US and Taiwan on this issue, however, has to be kept in mind. For Clinton, economics was the first priority because no one could challenge the US after the Cold War was over. Security became the first priority with the present administration after Sept. 11. Taiwan, however, was, and remains, in what amounts to a cold war situation. Which priority should come first?
Clinton's decision to put economic matters first in the US relationship with Taiwan was a disappointment for me. Democracy was breaking out and it was therefore the most opportune time to "normalize" the conduct of the relationship.
Democracy brought such major changes to Taiwan's political system that it would have been natural and more easily justifiable, both in the practical sense and in demonstrating to the international community, US support for democratization.
This not only didn't happen, but the sensitivity level in the US-China relationship went up and made any meaningful "normalization" even harder.
Despite the high priority being security, including the positive moves made in the US-Taiwan relationship, in the Bush admin-istration there is still great impor-tance given to support for China's involvement in the WTO and international economic issues generally.
US business can invest and trade as it will. But there are here, once again, very great dif-ferences between businesses in the US and those in Taiwan in terms of economic interchange with China.
On some security-related goods, the US does have effective restrictions on trade and investment in China and sanctions when the use or export of certain products violate agreements.
Furthermore, US business places much greater weight on the risk factors in doing business with China. US business has gone through more than one "China fever" and the experience has made them at least a little more cautious.
American investment in China has grown to be sure, but even today, five times more money is being invested in Japan by US companies. For US companies, there is full understanding that they are on their own should they fail in their businesses abroad. Only if clear discrimination against US firms is practiced by a foreign country does their government intervene.
I recall last year writing about the intense pressure being put on Taiwan's government by much of the media and business community. There were, however, different motivations: some for profit, some for national-identity objectives and some simply for political reasons. The purpose in generating this pressure was to loosen or even eliminate the barriers to direct economic interchange with China The justification that was generally accepted by many was that it was the only alternative for reviving the economy.
The facts about the degree of risk involved for individual companies were not unknown in Taiwan. Nor, more importantly, was the knowledge that the lower cost of production in China gave only a short-term advantage as local companies would soon gain know-how.
Though there were voices that brought up national security concerns, the atmosphere was one that was riveted on immediate economic problems. Under these conditions, the Economic Devel-opment Advisory Conference was formed and produced recommendations that government has said will be implemented.
But the economy is showing signs of improvement and people may be feeling less anxiety. Per-haps now they are beginning to listen a little more about not only the business risks but the security risks that should be taken into account in broadening the economic interchange with China.
We often hear about the advantages Taiwanese companies have in doing business with China: culture, language, relationships, and geography. The sheer size of China and its closeness inevitably means its economy will always be an important factor in Taiwan's own economy. Making adjustments as China's economy grows is both appropriate and necessary.
As long as there is an adversarial relationship between the two sides of the Strait, however, it would be irresponsible to ignore the security implications.
The concerns being voiced now, as the time for decision on opening the door to investment in China in the form of eight-inch wafer fabs draws near, are about far more than just the wafer industry, as important as it is. It may open a necessary debate on how and what limits should be made to protect national security.
The US has encouraged economic interchange between the two sides of the Strait, based not only on economics but also on the potential for opening a dialogue between the two sides. There are some in the US who have concerns about technology transfer, something Taiwan itself should be concerned about.
If China has now become the third largest producer of high-tech products in the world, it has become so only by virtue of Taiwan's high-tech industrial investments there.
The process of identifying and effectively proscribing certain high-tech transfers has become ever more difficult. American companies, as much as the US government, however, have an interest in this problem. Doubtless, there are questions about how and what technology may have been passed along to China as part of past investment projects there.
As Taiwan expands its economic interchange with China, the way it establishes and implements regulations that protect the manufacturing capabilities of potential foreign investors in Taiwan will become increasingly important.
The eight-inch wafer producers may well feel put upon by criticism from lawmakers and others, but they have opened an important debate on a very serious subject: What comes first for Taiwan, economics or security?
Nat Bellocchi is the former chairman of the American Institute in Taiwan (AIT) and is now a special adviser to the Liberty Times Group. The views expressed in this article are his own.
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