Taiwan is only 36,000km2 and it nurtures a population of 23 million people, despite its lack of natural resources. In the 1980s, Taiwan became a global role model for economic development thanks to the nation’s liberalization, globalization and its hard-working people.
Products “Made in Taiwan” are sold across the world and the level of economic freedom remains among the world’s highest, ranking 14th last year. That was much higher than Japan at 20th and South Korea at 29th. In 1990, the nation’s foreign exchange reserves were the world’s second-highest next only to Japan, and in 1999, GDP was the world’s 17th-highest.
However, the China-leaning, pro-Chinese Nationalist Party (KMT) media dominated public opinion in the mid-1990s, and intentionally and systematically distorted Taiwan’s move toward internationalization, creating the misconception that the Chinese market equaled the global market, and that there could be no internationalization without going through China. The result would be that the Taiwanese economy would be marginalized.
Taiwan has made big adjustments to its economic development blueprint and relocated its production base to China, making China its biggest trade partner, not Japan, the US or the EU. After President Ma Ying-jeou (馬英九) and the KMT took power in 2008, the government made China the core of the Taiwanese economy, linking all economic development policies to China, such as the Economic Cooperation Framework Agreement (ECFA), the cross-strait service trade agreement, the proposed trade in goods agreement and the free economic pilot zones.
In 2010, Taiwanese direct investment in China reached 84 percent of external investment and exports to China were 42 percent of the total. The nation’s economy is far from internationalization.
The problem is that the Ma administration’s pro-China policies and former president Chen Shui-bian’s (陳水扁) active opening policy have failed to revitalize the economy. They have caused increasing unemployment, while real salaries have fallen to a level last seen 16 years ago. The shadow cast by low starting salaries has seen Taiwan record the world’s lowest birthrate.
Furthermore, the formation of the so-called “one China” market saw Taiwan’s GDP growth decline from an average of 6.4 percent in the 1990s to 4.42 percent between 2000 and 2007 and 2.9 percent under Ma’s rule from 2008 to last year.
There is still time to remedy the problem. Taiwanese leaders, economic officials and academics must start to engage more in negotiations with other countries over economic integration or sign free-trade agreements, but it must not discuss economic integration with Beijing.
While economic integration with China might seem “natural” — after all both sides have a shared language and culture — the problem lies with entities that differ so much in size. It will always cause talent and capital to flow from the smaller to the larger economy, causing a “center-periphery” effect.
China has also threatened to “liberate” Taiwan by force and it is using economic means to promote unification, making this the supreme guiding principle for cross-strait exchanges. This is why the pro-China policy over the past 15 years has caused a stagnant economy.
After understanding this, Taiwanese must realize that if the nation wants to revitalize itself and regain its past leading role among the four Asian Tigers, the only way is to resume the move toward internationalization. In other words, internationalization without the “one China” market is the only path to stimulate the nation’s economy.
Huang Tien-lin was an adviser to former president Chen Shui-bian.
Translated by Eddy Chang
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