Thu, Feb 28, 2013 - Page 8 News List

Balancing power across the Strait

By Russell Hsiao 蕭良其

The thaw in cross-strait relations over recent years has taken many observers by surprise. The perceived trajectory of Taiwan-China relations is shifting and raising concerns about Taiwan’s susceptibility to the People’s Republic of China’s (PRC) increased ability to coerce and compel unification.

Taiwan’s close economic cooperation with China, while necessary, is drawing the nation deeper into a dependent economic relationship with the PRC that some argue will make it more vulnerable to Chinese political demands.

While the nation has long enjoyed a massive trade surplus and advantageous economic relationship with China, the trend-line is moving downward for Taiwan as China’s economy grows and gradually diversifies from Taiwan’s investments.

This changing dynamic leaves Taipei more exposed to Beijing’s coercive strategies as the former becomes more dependent on the latter.

Indeed, in recent years China has demonstrated that it will not hesitate to use its economic leverage to attain political objectives (ie, its limitation of rare earth exports to Japan).

Given the special relationship between Taiwan and China, the former’s diminishing leverage in cross-strait relations may leave its leaders with less capacity to resist coercion and intimidation over a final political settlement to the long-standing cross-strait dispute.

In order to maintain US interests in preserving a stable “status quo,” and more importantly a non-violent and voluntary resolution to the situation, Washington needs a comprehensive strategy that includes both hard and soft balancing tactics that can offset China’s ability to use coercion to intimidate and force Taipei into a final political resolution.

While the US “pivots” toward Asia, there is an economic as well as a security imperative for a stronger and closer partnership with Taiwan.

Robust trade between Taipei and Beijing is becoming a permanent fixture in cross-strait relations as the trade volume between the two nations has been increasing at a rapid pace ever since China lifted restrictions on trade with Taiwan in the late 1970s.

In January 1979, after Chinese leader Deng Xiaoping (鄧小平) had initiated economic reform and the country’s opening up, Beijing proposed establishing the “three links” (direct trade, postal services and transportation) between Taiwan and China.

While it took almost three decades for such links to come online, Taiwanese businessmen from seeking to increase their profit margins by taking advantage of the abundant low-cost labor market in China for manufacturing-intensive exports to developed economies flocked to the major coastal cities.

In spite of the tense political and military relationship, trade between the two nations grew by leaps and bounds over the following decades.

Between 1981 and 2002, Taiwan’s trade with China increased 134-fold.

Even during the Democratic Progressive Party’s (DPP) administration from 2000 to 2008 — during which time cross-strait relations were frequently punctuated by political boxing matches — trade relations grew faster than in any other period in the previous two decades.

More specifically, “mini links” were created to allow travel and trade between Kinmen and Matsu and China’s Fujian Province in 2001.

The total volume of trade between the two nations increased threefold since Taiwan lifted its ban on direct trade and transport links between the two sides in 2000 — increasing from US$31 billion in 2000 to US$105 billion in 2008.

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