In a recent issue of The Economist (July 28), an article headlined Business trumps politics argues that China's best policy for dealing with Taiwan is to "wait patiently and welcome its business," so that it can attain its goal of peaceful annexation sooner or later. What a poignant remark.
In view of the "China fever" growing among local political, business and media groups and the all-out effort being made by some at the Economic Development Advisory Conference to promote the establishment of direct links and the easing of the "no haste, be patient" policy, it is not difficult to see the validity of the The Economist's point. This should serve as a warning call.
According to the article, "des-pite the occasional outburst of bellicose language from Beijing, and ritual military maneuvers in the Taiwan Strait, China is concentrating on wooing the island's business people. It knows that high production costs in Taiwan are forcing the island's manufacturers to move elsewhere to stay competitive."
China, with "its vast potential market, cheap labor and cultural similarities," has become a powerful magnet for Taiwanese businessmen. The article also mentions that "last year Taiwanese government-approved investment in China soared by 108 percent to US$2.54 billion ? In the first half of this year, investment [in China] has grown by nearly 24 percent compared with the same period last year, with half of the money going into high-tech industries."
China adopts a strategy of separating politics from economics, and its attitude toward political issues is "don't ask, don't tell." China tries to conceal its fierce-looking face and ambition toward Taiwan. "China knows that no matter what the political background of Taiwanese investors, all of them want the Taiwanese government to lift its restrictions on economic dealings" with China and establish direct links, according to the article.
The joint efforts of pro-unification media and activists in Taiwan adding fuel to the flames and businessmen pressuring the government will be much more economical and effective for China than launching missiles at Taiwan.
In reality, the relaxation of the "no haste" policy and establishment of direct links had already been discussed at the National Economic Development Conference (
Though they failed to completely reach their goal, they did successfully break the shackles of the "no haste" policy set in the KMT era. A major resolution of the conference was that the government should declare its willingness to negotiate with China before establishing direct links.
In the era of KMT rule, the establishment of direct links was a medium-term policy set out in the Guidelines for National Unification (國家統一綱領). The then-government used to promote economic relations with China as a short-term policy and believed that the two sides of the Taiwan Strait could not enter the medium term until political problems had been solved.
The DPP government's decision to declare its willingness at the development conference to establish direct links through negotiation has opened the door wider than the KMT government ever did.
The crux of the cross-strait links issue lies in politics. China has long called on Taiwan to establish direct links but at the same time to accept its precondition, the "one China" principle. Accepting "one China" would amount to surrender. So what else can we negotiate? Now the pro-unification activists demand that the government agree on direct links before negotiating with China. But as China insists on its preconditions, establishing direct links actually means backing down and accepting "one China."
The government is, for example, fully prepared to implement a policy allowing Chinese tourists to visit Taiwan and has expressed its willingness to open dialogue with China, but Beijing has refused to negotiate. The so-called "mini-links" established at the beginning of this year between Taiwan's outlying islands and China's Fujian Province have not been a great success because Beijing has refused to cooperate and negotiate with Taiwan, thus minimizing their effects.
There is therefore no point in unilaterally establishing the links. For Taiwan, talking to itself about direct links is not only impractical but also untimely. The links, moreover, would not be a panacea for salvaging Taiwan's economy.
Any solution to reinvigorate the economy must begin with the resolution of fundamental problems -- such as insufficient domestic investment, an industrial exodus and capital outflow. We should not, instead, blindly follow the lead of the media and pro-unification activists, thinking that the economy will remain at rock bottom if the "no haste" policy is not eased and the direct links not established.
The government should have the determination to demonstrate its capability. Taiwan can offer all the preferable conditions China provides for Taiwanese businessmen, except low labor costs.
The government could build science-based industrial parks on state-owned land, provide lower rent to attract long-term tenants, help with infrastructure construction and promise to provide sufficient water and power. It could also offer tax breaks. Despite a decline in tax revenues, the government could at least create job opportunities and increase domestic demand. If measures are not adopted to keep enterprises in Taiwan or attract business from abroad, both tax revenues and employment will decrease as industries move offshore.
The government could provide technological assistance and grant low-interest loans to help enterprises purchase equipment. With automation replacing manpower, the proportion of labor costs to overall production costs will be reduced and industrial survival will be possible with minimal labor cost pressures. The restrictions on setting up factories and related regulations should be relaxed. A one-stop shop should be adopted to handle companies' applications for registration as well as for all forms of government assistance.
It is by no means easy to reinvigorate Taiwan's economic potential. But if the government does not make efforts to slow the trend of the industrial exodus, improve the domestic investment environment, attract foreign businesses and attract capital back to Taiwan, The Economist's prediction will soon be born out.
Peter Lin is director of the Institute of Economics, National Sun Yat-sen University.
Translated by Jackie Lin
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