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Cross-Strait links: US muddies the
waters
By Matthew Smith
TAIPEI - For supporters of closer economic ties
between Taiwan and mainland China, it was a
heart-warming speech. Standing at the podium might have
been the tycoon head of one of Taiwan's large business
conglomerates or a multinational corporate executive
with operations in Greater China. But given that the
speaker was Douglas Paal, the de facto US ambassador to
Taiwan in the absence of official diplomatic ties, the
speech has created more of a stir. The US
representative's message: Taiwan should view China as an
economic opportunity, rather than as an economic threat.
Glance at the statistics and this might seem
like preaching to the choir. Taiwan's real level of
investment in China cannot be determined because of the
common practice of funneling capital through third
countries for tax and sovereignty reasons, as well as to
avoid the Taiwan government's attempts to restrict
mainland investment. However, Taiwanese investment in
China is variously estimated at between US$50 billion
and $200 billion, not exactly pocket change for Taiwan's
economy, which was worth $281 billion (measured by
nominal gross domestic product) in 2001. Meanwhile,
Taiwanese manufacturers are shifting their
labor-intensive industrial operations to more
competitive labor markets overseas - mostly to China -
and an estimated 500,000 Taiwanese investors are now
living in the Shanghai area alone. Hardly a people in
need of a US diplomat to remind them about China's
economic potential.
Yet it is precisely the
private sector's enthusiasm for investing in China that
leaves Taiwan government officials concerned about
opening restrictions on economic links with the
mainland. "If you have too many job losses here because
industries are moving out, then you don't have as much
economic activity on the island and the economy
shrinks," says Tsai Ing-wen, chairperson of the Mainland
Affairs Council (MAC), a cabinet-level agency charged
with formulating Taiwan's China policy. "These are
issues of economic security that we're talking about."
Paal, the director of the American Institute in
Taiwan (AIT), countered that Taiwan's economic security
requires that the government - and not just the private
sector - engages China, both for the sake of domestic
businesses operating there and to maintain Taiwan's
attractiveness as a destination for international
investors. "If Taiwan continues to view the mainland
through the prism of economic threat, it is in danger of
isolating itself and getting cut out of tomorrow's
deals." His remarks came in a September 18 speech to
members of the American Chamber of Commerce in Taipei.
Greater China regional economic integration "is
a new reality that Taiwan, with its maturing economy,
must accept and address", he said. "To ignore this fact
of life or adopt policies to try to counter it will
inevitably lead to self-marginalization."
The message was music to the ears of Taiwan's international
business community, many of whom see "three links" -
which usually refers to direct trade, travel, and postal
links across the Taiwan Strait - as vital for their
business development. Some warn that in the absence of
direct links, they will have no choice but to move their
Taiwan operations to China or elsewhere. Many others
have already carried out the threat, such as the US
shipping giant Sea-Land, which has shifted its regional
operations center from Kaohsiung, Taiwan's
second-largest city and the fourth-largest container
harbor in the world, to Guangdong province on the
mainland.
Such rumblings from foreign corporate
interests are perhaps not surprising, but in recent
years Taiwanese business tycoons have been echoing the
calls. "The best time to establish three links is
tomorrow," said Kao Chin-yen, chief executive officer of
Uni-President Enterprises, in a recent interview in the
Chinese-language magazine Business Weekly. Kao, whose
conglomerate is often cited as having the heaviest
investment interests of any Taiwanese group operating in
China, decried the administration's failure to set up a
schedule for renewed links. "They say they want it, but
they're just like the old Kuomintang administrations -
even after the transition of government [to the
Democratic Progressive Party], it's still not a
reality."
Yet to be sure, Paal's message was not
welcomed by everyone - in Taiwan or in Washington.
Benjamin Gilman, a Republican congressman from New York
and former chairman of the House International Relations
Committee, reportedly called the AIT director's
criticism of Taiwan's cross-Strait policy
"disappointing". His response came during a
congressional reception for Wu Shu-chen, wife of
President Chen Shui-bian, who last month traveled to the
United States as a represent her husband - the first US
visit by a Taiwanese First Lady since Washington
switched recognition to Beijing in 1979. "We need to
work closely with our administration to ensure that our
nation sends an unambivalent [sic] message that we
understand both the aspirations and the fears of the
people of Taiwan," Gilman said, according to a report in
the Taipei Times newspaper.
Although security
issues remain paramount for US ambassadors (or in
Taiwan, representative-office directors), promoting US
business interests to a certain extent has become a
common activity for them in recent years. But Julian
Baum, former Taiwan correspondent of the Far Eastern
Economic Review, believes that Paal went too far in his
speech. He believes that there is "a big leap" between
promoting US corporate interests - such as the awarding
of foreign contracts or the liberalization of US export
markets - and urging Taiwan to open up more to mainland
China. "By entering so firmly and simplistically on one
side of a difficult and highly politicized national
debate, Washington's top representative in Taipei has
compromised himself when it comes to his other
responsibilities," says Baum. "The policy discussion
needs to be more specific and focused - not just
programmed exhortations."
Paal's words were
indeed strong when compared with the public comments of
at least one of his recent predecessors. Former AIT
director Raymond Burghardt delivered a similarly
pro-integration message upon his departure from Taiwan
in September 2001. But Burghardt, who is now US
ambassador to Vietnam, acknowledged that setting up
direct economic links with the mainland requires
bilateral cooperation - in other words, Taiwan could
only go so far on its own.
The former AIT
director also noted the security risks Taiwan faces in
establishing economic links, adding that it is also in
the interests of the United States and the rest of the
world to ensure that sensitive technologies are not
transferred across the Strait. In his farewell speech,
Burghardt also pointed out the difficulty of direct air
links: "If I was the guy in charge of air force
intelligence, I would not be happy about [direct
flights] because my job just got a lot more difficult."
The change in tone might just represent the
different personalities of the two diplomats, but some
believe that there been an alteration in US policy in
regards to cross-Strait economic links. AIT spokesperson
Judith Krijgelmans says that Paal's September 18 speech
was "appropriately cleared by the US government in
Washington", signifying that it does indeed reflect the
George W Bush administration's policy. But is it really
anything new?
Given that US foreign policy is
focused on the Middle East, probably not. "I doubt very
much that it represented any new policy," says Nat
Bellocchi, a former AIT chairman and career diplomat who
is now chairman of Bellocchi & Co LLC, a US
consulting firm. "A new policy on so sensitive a
relationship, at least in my experience, would be
handled differently, and take a lot longer to gain a
consensus."
In any case, few observers are
betting that the US representative's advice will cause
the Chen administration to throw open the cross-Strait
floodgates anytime soon. The issues, which include
security and domestic political considerations, are far
too complex for that.
A recent report by the
Control Yuan (CY), one of Taiwan's five government
branches, offers fairly convincing evidence that things
are not going to move very quickly. The CY, which has
the mandate of overseeing other government branches,
censured the Chen administration for not doing enough to
stop the one-way flood of investment from Taiwan into
China. Ironically, the CY released its report on
September 18, the same day that Paal told Taiwan to
loosen up.
(©2002 Asia Times Online Co, Ltd. All
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