Does economic interdependence increase or decrease the probability of peace across the Taiwan Strait? With bilateral trade between China and Taiwan hitting a record high of US$132.9 billion last year, according to the Bureau of Foreign Trade, this question holds great significance.
Liberals argue that trade creates vested interests in peace and that economic interdependence can lower the likelihood of war by making trade worth more than the option of aggression. According to this view, economic interdependence reinforces institutional constraints and spill-over effects by creating non-state actors and transnational ties that encourage cooperation rather than conflict.
A May 4 article by Daniel Rosen in the Wall Street Journal Asia, “Investing in Cross-Strait Relations,” takes this viewpoint.
“The reduced political risk of cross-Strait hostility is the most exciting economic dividend” of the third cross-strait meeting in Nanjing, Rosen writes.
A case in point is Taiwan’s recent admission — with Beijing’s agreement — to the World Health Assembly (WHA) as an observer. This was not only a major breakthrough in the nation’s persistent campaign for international space, but also a gesture of goodwill from China.
But realists dismiss the liberal viewpoint, arguing that economic interdependence increases rather than decreases the probability of war because asymmetrical dependence, political discord and vulnerability have a negative bearing on the politics of national security.
Some China specialists warn that economic overreliance by Taiwan on China will give the latter leverage to achieve unification. China could impose economic sanctions on Taiwan, potentially coercing it into making political concessions or suffering the military consequences for resisting. This constitutes an imminent threat to national security.
A Taipei Times article by John Tkacik (“An Obama TPR: Too little, too late?”, April 29, page 8) echoes this argument: “An Obama TPR [Taiwan Policy Review] will judge that the powerful momentum in cross-strait dynamics is pushing Taiwan rapidly into full economic dependence on China. It will conclude that Taiwan’s inextricable economic dependence on China — absent counterbalancing action — will quickly drive the country beyond its ‘tipping point’ toward political and, ultimately, security dependence on Beijing.”
But economic interdependence is Janus-faced — obfuscating our understanding of its complex processes and impact on cross-strait relations.
There are two outcomes of economic interdependence: zero sum and nonzero sum. In a zero-sum scenario, China wins, or gains as it may, and Taiwan loses — or vice versa.
In my view, this scenario is less likely today because globalization is making the world smaller and binding each country’s destiny within a worldwide network of mutual dependence. It is thus impractical to perceive recent cross-strait interaction as a zero-sum game.
Nonzero-sum scenarios, however, deserve closer analysis, including positive-sum and negative-sum outcomes.
A positive-sum game entails a win-win situation — everybody benefits.
A precondition for this is that China and Taiwan both see economic interdependence as an absolute gain that is mutually beneficial and do not stray from this view.
In his recent book, Charm Offensive: How China’s Soft Power Is Transforming the World, Joshua Kurlantzick writes: “China has drastically changed its image in many parts of the world from dangerous to benign.”
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