Fostering economic ties with UK

By Ian Inkster  / 

Wed, Sep 13, 2017 - Page 8

At a time when Britain floats away from many of its earlier European commercial arrangements and when the Taiwanese government still adheres to its determination to loosen foreign commercial relations with China, the past few weeks have seen interesting developments in UK-Taiwan economic relations.

Meeting with a British parliamentary delegation on Aug. 3 in Taipei, President Tsai Ing-wen (蔡英文) voiced Taiwan’s willingness to increase cooperation with the UK, calling for a free-trade agreement or bilateral investment agreement between the two economies.

She went on to emphasize recent exchanges between the two nations that addressed issues such as industrial development and city government.

The clear hope was to give the British policymakers some understanding of Taiwan’s current political and economic developments, particularly the “five plus two” innovative industries initiative, the complexity of diplomatic relations and cross-strait relations.

We can usefully see this as an umbrella under which other wide-ranging initiatives might be sheltered. We might mention the Aug. 1 to Aug. 10 visit to the UK of a delegation led by Changhua County Commissioner Wei Ming-ku (魏明谷), which did not narrow down its visits just to the great cultural capitals, but ranged between London and Edinburgh and Manchester, Barrow-in-Furness and Grimsby, and included in its work possible joint or cooperative studies of sustainable housing development, bank funding of green projects, offshore wind energy, low-carbon cities and high-level energy research.

As another indicator in recent weeks we might mention the extension on Aug. 1 of the Taipei Representative Office in the UK’s memorandum of understanding with the Taiwan studies program at the University of Nottingham, which will allow that program under its director — Chun-Yi Lee (李駿怡) — to continue working closely with affiliated programs across Europe in creating a dynamic platform for academics and students who are interested in Taiwan.

It was precisely that London-based office that had arranged the visit to Taiwan of the delegation that met Tsai on Aug. 3.

In the present conditions of the global economy, do such positive steps have a high probability of increasing the actual commercial relations between Britain and Taiwan along a broad front?

This is itself a reasonable query. The skepticism mounts when we look a little more broadly.

Britain is fishing for both substantial and nominal alternatives to the European Economic Community membership in this long, clumsily drawn-out period in which the Brexit melodrama is dominant in domestic policies, probably as prominent as Taiwan-China relations in Taiwanese politics.

This might well be the real limiting factor in even mid-term relations and almost certainly in short-term ones.

The nature of the commercial economy in Britain is very difficult to formulate for these few years, and it is probable that a noisy flux of proposals will be forthcoming from the Tories to both appease the Brexiters and stop the flow of supportive interest that has been directed at the Labor Party since leader Jeremy Corbyn’s clever election manifesto.

Bank of England figures show that wage growth is not keeping up with inflation, spelling some fall in real incomes and a near future of a fall in consumption and some rise in interest rates.

In this atmosphere, banking on any talks coming to a hard conclusion, or on any such conclusions being put into practice over the next two or three years might be foolhardy.

For such reasons, regional agreements of the sort proposed by the delegation from Changhua, exploring opportunities for cooperation in offshore wind power and in developing renewable energy technologies, might well be a better way forward.

It must also be remembered that succulent fish might be of very different sizes. Whatever Taiwanese and UK ministers might say, all is set against the backdrop of UK-Chinese commercial relations.

These are presently under discussion in that traditional British manner, the select committee, in this case the British House of Commons’ Foreign Affairs Select Committee inquiry on British relations with China.

In my own submission to that inquiry, I have argued that the proposed large projects and restructuring program of the five-year plan will be sustained in China as there is not much alternative.

So, the chances of Beijing planning for much in the way of basic materials importing from Britain are low, British high-tech exports have a better chance combined with what might be called “middle-class” domestic products — from music and furniture and TV shows to the complete array of housing/home goods, styles or fashioned products, automobiles for niche markets that in China might be very large, as well as educational products and services especially associated with English-language usage or training.

So outside of the EU, the UK might benefit from a very open, free-trade relationship with China across high-tech and such middle-class areas, which when accumulated can add up to a very high proportion of the British economy’s exporting capability.

If this sort of view is held by strategic players, then Taiwan might well be pushed further from the limelight of British strategic thinking.

Who among such parliamentary committee discussants in London will forget that diplomatic relations between Taiwan and the UK only ever take place on an unofficial basis precisely because of the British full recognition of China and rejection of all forms of “one China” policy or declaration.

If closer relations with the huge — and still faster-growing — Chinese economy are felt to require commercial distance from Taiwan, then all indicators are that such a distance shall be continued indefinitely.

Under the Brexit conditions just mentioned, and with a confused and diplomatically conservative Tory party in power, no one would forecast change from these relative positions.

Recent history does not give clear guidelines for the immediate future of commercial relations between Britain and Taiwan, although this is perfectly compatible with a more likely cementing of educational, cultural and even diplomatic relations — visa waiver, direct flights and so on are all progressive moves.

However, that type of indicator, which we must all approve, does not spell out change in terms of the billions of dollars of profits involved in international trade, investment and technology agreements.

The historical story has always been uneasy and commercially unsettling. After the retreat of the Chinese Nationalist Party (KMT) to Taiwan, Britain was one of the first to break off diplomatic relations with the Republic of China, and it recognized the People’s Republic of China (PRC) on Jan. 6, 1950.

At the beginning of our present century, British exports to Taiwan were large and rising, and about 170 Taiwanese companies were already operating in the British economy, employing 15,000 or so workers.

However, as a result of a 1972 agreement with China — which “acknowledged the position of the government of the PRC that Taiwan was a province of the PRC and recognized the PRC government as the sole legal government of China” — the British did not recognize Taiwan as a state.

This was somewhat of a more empathetic diplomacy than that of, say, France or Germany, who “agreed with” rather than merely “acknowledged” the Chinese definition of “one China.”

However, we might ask how much Britain has capitalized on this nuance of diplomacy, or how much it has determined Taiwanese commercial diplomacy over the intervening years.

On some measures things look healthy enough — Taiwan ranks as Britain’s sixth trading partner in the Asia-Pacific (behind China, Japan, Hong Kong, South Korea and Singapore).

However, to put things in perspective, first imagine who might be sixth if it were not Taiwan and then consider that Taiwan ranks below 30 in the global list of British trading partners.

In contrast, Britain ranks 13th globally as an importer of Taiwanese goods and services. About 68 percent of Taiwanese investment in Europe is in Britain.

At a time when Britain is looking for new trading deals globally, when Taiwan is committed — more or less — to diversification of trade from China to a wider mix of nations, and when the global economy is hardly thriving under the potentially restrictive trading regime called for by US President Donald Trump, the best longer-term tactic for Taiwan might well be to foster the British relationship, which in terms of comparative advantage appears to be mildly in Taiwan’s favor.

So, whether we see present relations between the two nations optimistically or not, we should beware selling the long term for more attractive short-term possibilities. Seeing through the confusions of a Trumpian world requires a telescope plus foresight.

Ian Inkster is a professorial research associate at the Center of Taiwan Studies, SOAS, University of London; a senior fellow at the Taiwan Studies Programme, China Policy Institute, University of Nottingham; and the editor of the international journal History of Technology.