The recent release of the Chinese edition of The Emergence of the United States of Chunghwa (
This "marginalization" argument defies the logic of economics. There is no such thing as "marginalization" in economics. The theorists probably meant to suggest the economic stagnation or decline. From a theoretical perspective, if a government can improve the quality and quantity of productive elements in the economy (such as education or savings), the country can develop. If the resources can be efficiently distributed, the economy will be able to grow more quickly. Therefore, if investment in and exports to China increase because of profit considerations, the efficiency of Taiwan's resources, as well as the production and economic growth rates, will increase.
If the theory sounds too general, we can refer to some historical cases. Today, besides East Asia, the other two major economic systems are the EU and North America. The EU's predecessor, the European Economic Community, was created in 1958. Six countries (France, Germany, Italy, Belgium, the Netherlands, and Luxemburg) started the process of economic integration, and were followed by nine others. Among them, Greece and Ireland were the smallest, least-developed countries. In 1972, one year before Ireland became a member, its exports to the six core countries accounted for only 15 percent of its total exports. By 1993 this percentage rose to 35 percent. Ireland's per capita income as a percentage of the six core countries' increased from 50 percent to 60 percent. And because foreign investment poured into Ireland in the 1990s and led to rapid economic growth, Ireland's per capita income caught up with that of the core countries by 2000.
The experience of Greece is quite similar. In 1980, one year before Greece became a member, Greece's exports to the six core countries was about 40 percent of its total exports. This percentage rose to almost 50 percent by 1993. Although the EU signed an "association agreement" (similar to a free-trade agreement) with East European countries in the 1990s and redirected Greece's exports to eastern Europe, Greece's national income continued to grow. The ratio of Greece's per capita income to those of the six core countries increased from 40 to more than 50 percent.
If the examples of the above "backward" countries leaning toward the core countries are not convincing, let us take a look at a few examples of "small advanced countries." In 1972, one year before Denmark became a member of the EU, Denmark's export dependency on the six core countries was 20 percent. The ratio continued to grow and reached 40 percent by 2000. The ratio of Denmark's per capita income to those of six core countries increased from 1.2 to 1.3. The export dependency of Norway -- still a member of the European Free Trade Association (EFTA) -- on the EU has continued to grow, because of the growth of the EU and the free trade of industrial products between the EU and the EFTA. The ratio grew from more than 20 percent in 1972 to almost 40 percent in 2000. As for Norway's per capita income, the ratio increased from one to 1.6.
If anyone doubts that the increase of Norway's ratio was a result of the increase of oil exports, we can also take a look at Switzerland. Switzerland, a neutral country in the center of Europe, aimed for a balance of trade, but dependence on the EU was unavoidable because of the union's growth. The dependency ratio of Switzerland grew from 25 percent in 1972 to 35 percent in 2000. As an "operations center," the ratio of Switzerland's per capita income to those of six core countries increased from 0.9 to 1.5.
Finally, the economic relationship between Canada and the US is a perfect example of a small country economically dependent on a big country. Because of a powerful and strong US economy, Canada's dependency on the US increased from 55 percent in 1963 to 75 percent in 1989 (the start of a free-trade agreement). The ratio of Canada's per capita income to that of the US also increased from 65 percent to 95 percent in 1989. After making the Internet the basis of the "New Economy" in the 1990s, the US once again took the economic lead among developed countries, including Canada.
As the theory and historical examples demonstrate, we must renounce the hypothesis that a country's "economic dependence on a maturing core country will lead to marginalization." The dependence on or a firm grasp of China's economy should promote Taiwan's economic growth, even helping to materialize the vision of Taiwan as a center of planning and management. Those theorists who worry about Taiwan's future will most likely need to return to the discussion on "national security."
Tu Jenn-hwa is an associate professor at National Taiwan University's Graduate Institute of National Development. Wang Chia-wei is a graduate student.
Translated by Grace Shaw
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