Medium powers and small nations that are located next to mighty neighbors are faced with the danger of military coercion and the irresistible attraction of economic opportunities. This dilemma characterizes cross-strait relations, as Taiwan sees China as both a serious security challenge and a significant business partner.
For years, Taiwan’s economic policy toward China has been torn between two irreconcilable objectives: pursuing liberalization and restricting bilateral ties.
Driven by different interests and identities, Taiwanese businesses and civic society are becoming skeptical of the short-term gains of political and socioeconomic absorption into China.
However, economic forces are global and politics is always local.
As Syaru Shirley Lin argued in her monograph published last year, Taiwan’s China Dilemma, the nation’s engagement with China seems to be inconsistent, but this must be examined against the changing patterns of overseas Taiwanese investment and the formation of a Taiwanese national identity.
During the 1980s and 1990s, Taiwanese merchants flocked to China and invested in labor-intensive, export-oriented industries. After several decades of operation, they are keen to sell their products and services to the Chinese urban middle class, the fastest-growing consumer market in the world.
As China emerges as a global economic powerhouse with a vastly diversified and technologically sophisticated production sector, Taiwan’s comparative advantage has decreased.
Without diversifying and globalizing its trade and investment orientations, the nation is vulnerable to sociopolitical and financial crises in China. Overreliance on China enhances Beijing’s leverage and undermines Taiwan’s autonomy.
More importantly, the rise of a Taiwanese national identity has occurred in tandem with its democratic transformation since the 1990s.
Most Taiwanese have seen the failure of Beijing’s “one country, two systems” framework in Hong Kong and Macao, and feel reluctant to identify with the Chinese political union.
Worrying that dependence on cross-strait trade would weaken the nation’s bargaining power, there is a great deal of public support for protectionism against China.
Contemporary history offers a valuable lesson: In Taiwan, as in other nations, debates over national identity, cultural values and religious doctrine tend to be more intense than debates over policy issues and security concerns.
Therefore, the most feasible way for Taipei to build a domestic consensus about cross-strait relations is to schedule a national strategic conference that involves political elites and civil society organizations.
In 1996, former president Lee Teng-hui (李登輝) launched the “go south” policy to divert Taiwanese investment away from China.
In response, China blocked the growth of pro-independence sentiment by threatening military action and diplomatic isolation.
However, this heavy-handed strategy backfired.
Beijing misjudged the feeling of ordinary Taiwanese who were searching for their national identity through democratization, rather than advocating immediate separation from China.
China’s hostile policy produced a widespread anti-Beijing sentiment among Taiwanese and strengthened popular support for Lee’s restrictive measures on cross-strait trade. Only when Taiwan was no longer worried about its own security did it accept increased bilateral trade.
Today, the timing of China’s hostility toward Taiwan coincides with its own economic downturn, presenting three challenges to President Tsai Ing-wen (蔡英文):
First, Tsai needs to take extra precautions and establish institutional safeguards to protect equity and market stability.
Because youth unemployment, wage stagnation and overreliance on China are explosive issues, it is hard for any political party to articulate a comprehensive economic strategy that meets the public’s expectations.
Tsai frequently reassures Beijing and Washington about Taipei’s efforts to stabilize cross-strait relations with the goal of revitalizing the nation’s economy and consolidating her political base after the last presidential election.
Second, China’s discourse of “one country, two systems” or “one country, many systems” has lost its appeal to Taiwanese. This ideological discourse is based on narrow material interests rather than shared democratic values and norms.
Witnessing all the structural restrictions that have been imposed on Hong Kong since 1997, Taiwanese do not want to lose their rights to elect their president and legislators.
They fear that the nation might degenerate into another Hong Kong under Chinese Communist Party rule and would have to live with an unfulfilled promise of autonomous governance.
Finally, the severing of formal diplomatic relations with Panama shows that Tsai has been under immense pressure from Beijing to acknowledge its “one China” principle and a certain degree of political reunification.
As a popularly elected leader, Tsai is responsible to her electorate. It is necessary for her to balance external pressure with Taiwanese people’s desire for political autonomy and democratic governance.
From this perspective, any perceived hostility from Beijing only reinforces Taipei’s resolve to defend itself and hold on to its democratic polity.
Like it or not, Beijing has yet to recognize, appreciate and embrace a unique Taiwanese identity. Instead of using military threats and diplomatic muscle, it should carefully study the Taiwanese model of peaceful democratization and incorporate it into a more cosmopolitan, inclusive and pluralistic Chinese nation.
Otherwise, it would miss an opportunity to appropriate the “Taiwan question” as a way to explore the larger enterprise of pursuing good, fair and democratic governance in 21st-century China.
Joseph Tse-Hei Lee is professor of history at Pace University in New York.
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