During President Ma Ying-jeou’s (馬英九) term in office, the government has adopted a more open policy for cross-strait economic integration. The two sides of the Taiwan Strait have signed 23 agreements to institutionalize and facilitate cross-strait economic integration.
Ma has repeatedly said that deepening such integration would benefit the nation and have a positive spillover effect for Taiwan’s participation in Asia-Pacific economic integration efforts.
However, a majority of Taiwanese have not seen or felt the expected spillover benefits; instead they have developed concerns about economic costs, income distribution, security and sovereignty. As a result, most Taiwanese no longer support further expansion of cross-strait economic integration without transparent negotiations and adequate supervision of policymaking. Because of this, economic integration has stagnated as the nation waits for the legislature to pass the proposed oversight act for agreements between Taiwan and China.
Yet, even without the further liberalization of cross-strait economic exchanges, Taiwan still faces the staggering challenge of economic marginalization.
Taiwan faces a serious crisis, evidenced by its historically low investment rates, decline in attracting foreign investment and talent, and the massive outflow of capital and skilled workforce. This has left the public anxious.
China is a very important market and production base for Taiwanese and foreign businesspeople, and Chinese personnel and investments could be essential for Taiwan’s economic development.
To improve its competitiveness, Taiwan has to maintain an equal or preferential access — compared with other economies — to China’s market and resources, and cautiously open itself to Chinese investment.
Taiwan also has to gain Beijing’s tacit consent, or at least non-objection, to participate in the Asia-Pacific economic integration regime.
To maximize opportunities and minimize risks, Taiwan should develop a new strategy to make breakthroughs on the current dilemma: the lack of progress in cross-strait economic integration and lack of participation in the regime.
With respect to the first problem, the government should follow three policy goals: creating overall economic benefits that are significantly bigger than the costs, subsidizing and assisting disadvantageous parties, and addressing the public’s concerns about security and sovereignty.
To achieve these three goals, the government should adopt a balanced policy approach: large-scale economic structural reforms, deepening cross-strait economic integration and participation in the regime.
Without large-scale economic structural reforms, the nation would lose its international competitiveness, efficiency and vitality vis-a-vis other economies in Asia, and it would continue to hemorrhage capital and personnel. If Taiwan opens up more to cross-strait economic exchange under the current conditions, its capital and people are likely to continue to pour across the Strait to China.
However, without deeper economic integration, Taiwan might lose its opportunities for equal or preferential access to Chinese markets and professional talent. Without Beijing’s tacit consent, it would be very difficult for Taiwan to participate in the regime.
Without Taiwan’s participation in the regime, Taiwanese are unlikely to feel confident about greater cross-strait ties, while the economy would continue to be marginalized and investors would continue to lose confidence in the economy.
The government should consider adopting the following concrete policy measures:
One, provide a comprehensive assessment on the political-economic effects of cross-strait economic integration.
Two, better coordinate its departments and agencies to develop a negotiation strategy with China.
Three, provide supplementary measures and assistance for those who are likely to be hurt by the economic integration efforts.
Four, communicate and build consensus with public and industrial sectors through public hearings, consensus-building meetings and opinion polls.
Five, ensure adequate supervision by the Legislative Yuan of the cross-strait process and closely brief opposition and ruling party lawmakers on the negotiating efforts.
Six, regularly review and publicize the effect of the implementation of cross-strait economic agreements.
Finally, to reduce the risks and uncertainties brought by cross-strait economic integration, the government should proceed in incremental steps.
If consensus on cross-strait economic integration policies can be reached, Kinmen could serve as an excellent location for testing cross-strait integration projects.
Tung Chen-yuan is a visiting scholar at the University of California at Berkeley.
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