The proliferation of regional trading arrangements in East Asia offers challenges and opportunities for several countries in the region, including Taiwan.
Because of different levels of development, asymmetrical GDP size and divergent economic structures in East Asia, the emergence of trading blocs — be they ASEAN plus China or ASEAN plus China, Japan and South Korea — would generate a domino effect in favor of the largest countries.
As Nobel laureate Paul Krugman predicted, a free-trade area between large and small economies results in all factors of production, except land, transferring to the larger country, and thus the “hub and spoke” scenario.
Richard Baldwin has argued that a bicycle model of East Asian integration “with two natural hubs and many overlapping spokes” will emerge in the region. Essentially, there would be a Japan-centric versus China-centric hub, surrounded by many spokes across the region.
One can locate the divergence between the hubs: The Japan-centric hub would be driven by market forces through trade, investment and technology flow, whereas the China-centric hub would be largely motivated by foreign policy. Also, the Japan-centric hub is dominated by the nation’s industrial democracy — a leader of East Asian industrialization and well endowed with “oceanic civilization.”
On the other hand, China has been and still is an authoritarian regime, and is traditionally tied with “continental civilization.” The China-centric hub is, in addition to its political leverage over Hong Kong and Macau, manipulated by Beijing’s “good neighborhood” policy relating to Southeast Asian countries, as well as its overtures toward Taiwan.
From a global perspective, the China-centric hub would be technologically inferior to the Japan-centric hub. Unlike Japanese investments overseas, China’s outward foreign direct investment aims to exploit natural resources and obtain strategic supplies with little or no possibility of technology transfer to host countries. Moreover, China remains an emerging market economy at an earlier stage of development and industrialization relative to Japan.
What are the options for Taiwan? Since the Dutch arrived in the 17th century, Taiwan has belonged to an oceanic civilization. In its postwar development, Taiwan has been following the Japanese trajectory since its economy took off in the 1960s. By the measures of economic development and degree of industrialization, Taiwan is more similar to Japan than to China.
Therefore, if Taiwan signs an economic cooperation framework agreement (ECFA) with China without also signing individual free-trade agreements with the US, Japan and other ASEAN countries, then it will become one of the many spokes (or peripheries) of the China-centric hub. By integrating itself with a Greater China Economic Zone, Taiwan would become vulnerable to a clash between the oceanic and continental cavitations, as Samuel Huntington’s thesis dictates.
As long as unification is Beijing’s goal, economics cannot be separated from politics. Once Taiwan signs an ECFA with China, it will become part of Greater China economically — and eventually join China’s orbit politically.
Those who proclaim that trade pacts do not affect sovereignty are either naive or putting their heads in the sand. While Hong Kong has had no choice but to sign its trade pact with China, Taiwan still has autonomy — and vital alternatives in the process of globalization.
Taiwan must adopt a cosmopolitan perspective for the sake of its future. Globalization is not the same as Sinicization.
Peter C.Y. Chow is professor of economics at the City University of New York and a research associate at the National Bureau of Economic Research.
The Donald Trump administration’s approach to China broadly, and to cross-Strait relations in particular, remains a conundrum. The 2025 US National Security Strategy prioritized the defense of Taiwan in a way that surprised some observers of the Trump administration: “Deterring a conflict over Taiwan, ideally by preserving military overmatch, is a priority.” Two months later, Taiwan went entirely unmentioned in the US National Defense Strategy, as did military overmatch vis-a-vis China, giving renewed cause for concern. How to interpret these varying statements remains an open question. In both documents, the Indo-Pacific is listed as a second priority behind homeland defense and
The conflict in the Middle East has been disrupting financial markets, raising concerns about rising inflationary pressures and global economic growth. One market that some investors are particularly worried about has not been heavily covered in the news: the private credit market. Even before the joint US-Israeli attacks on Iran on Feb. 28, global capital markets had faced growing structural pressure — the deteriorating funding conditions in the private credit market. The private credit market is where companies borrow funds directly from nonbank financial institutions such as asset management companies, insurance companies and private lending platforms. Its popularity has risen since
Every analyst watching Iran’s succession crisis is asking who would replace supreme leader Ayatollah Ali Khamenei. Yet, the real question is whether China has learned enough from the Persian Gulf to survive a war over Taiwan. Beijing purchases roughly 90 percent of Iran’s exported crude — some 1.61 million barrels per day last year — and holds a US$400 billion, 25-year cooperation agreement binding it to Tehran’s stability. However, this is not simply the story of a patron protecting an investment. China has spent years engineering a sanctions-evasion architecture that was never really about Iran — it was about Taiwan. The
For Taiwan, the ongoing US and Israeli strikes on Iranian targets are a warning signal: When a major power stretches the boundaries of self-defense, smaller states feel the tremors first. Taiwan’s security rests on two pillars: US deterrence and the credibility of international law. The first deters coercion from China. The second legitimizes Taiwan’s place in the international community. One is material. The other is moral. Both are indispensable. Under the UN Charter, force is lawful only in response to an armed attack or with UN Security Council authorization. Even pre-emptive self-defense — long debated — requires a demonstrably imminent
RSS