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HEADING INTO THE HOME STRAIT? NOT YET
Barry Pearton*
24-02-2010
ATI December 2009
HINA AND TAIWAN are smoking the peace pipe — in one of the
most significant turnarounds seen in East Asia since World War 2. Each remains wary of the other, but co-operation is occurring at too many levels between Beijing and Taipei
for this dance macabre to be written off
as a fraud.
Unless an extraordinary event derails
ongoing talks between China’s Association for Relations Across the Taiwan Straits (ARATS) and Taiwan’s Straits Exchange Foundation (SEF) in the next few months, the two will sign off by mid-2010 on an Economic Co-operation Framework Agreement (ECFA), a pact which, as Sun Yang-Ming, Vice-President of the Taiwan think-tank, the Cross-Strait Interflow Prospect Foundation, says, is an economic document — “but there are political implications inside”.
ECFA is, in reality, a very political document.
Unless it is signed, Taiwan faces phased import tariffs from January 1, 2010, when ASEAN+1 comes into effect, of up to 10 per cent on everything it exports to China and ASEAN. That adds up to probably 55 per cent of Taiwan’s total export markets. (Latest figures show that China took more than 32 per cent of Taiwan exports in November — add 12 per cent for Hong Kong trade and you have 44 per cent, plus 15 per cent to ASEAN.)
ECFA will allow Taiwan to seek FTAs with ASEAN, or its member countries, and other key trading partners, including Korea, Japan and Australia, who might be more kindly towards a Taiwan which has been economically embraced by China.
ECFA will also open world markets to Taiwan — through China — according to trade analysts.
Last month, Taiwan and China signed three MoUs on financial services. These will see the Bank of China, and other Mainland banks, open Branch offices in Taiwan. Up to eight Taiwanese banks have already indicated they will establish full-service operations in the Mainland.
In August, Taiwan and China opened direct air and shipping links, and postal services. Already, 27 Chinese cities are serviced from Taipei, and 6,000 Mainland tourists daily visit Taipei’s National Palace Museum, which currently boasts a special exhibition hall of exhibits on loan from China.
Buying missions from China now regularly visit Taiwan, there are increasing exchanges between think-tanks and universities on both sides of the Strait, intellectual property officials of both China and Taiwan attend joint seminars, Chinese companies can now invest in Taiwan — even China SOEs (State-owned enterprises) will be able to invest in Taiwan (with conditions) once CEPA is signed off.
Lessening of tensions between Beijing and Taipei has seen Taiwanese investment begin flowing back home from China, and a number of expatriate Taiwanese firms listed in Hong Kong (together with some Mainland counterparts) are expected to list on the Taiwan Stock Exchange now that the TSE is open to foreign listings.
On the security side, there are even the beginnings of unofficial discussions between China and Taiwan — in Taiwan referred to as CBMs (Confidence Building Measures) — to diminish the threat of military conflict.
The loser in all this is likely to be Hong Kong, whose Chief Executive, Donald Tsang, admitted as much in his Budget speech, publicly suggesting he would like to visit Taiwan to discuss co-operation. Taiwan is closer by air to Shanghai and Beijing than is Hong Kong, and Hong Kong’s role as a middle-man for Taiwan-based domestic and foreign trade and investment in China doubtless will be impacted to some extent. So, probably, will be the Hong Kong tourist market.
So Taiwan has much to gain, both economically and politically, from a closer working relationship with China. What of China? What benefits does it see?
Our special report on the Beijing-Taiwan relationship is drawn from Taiwan. We have not asked China. But it is a fair bet that China sees the game as one of economic co-operation leading to economic integration — a high level of economic dependence by Taiwan on China — perhaps leading, ultimately, to some form of political integration.
That is the fear of opponents to CEPA in Taiwan. They view CEPA as a transparent trap to lure Taiwan into Greater China, and they also worry at the sheer pace of the new rapport with the Mainland.
Kuomintang officials, for their part, acknowledge the potential dangers, but are firm in their declarations that “Sinosisation”, as they say the Americans call it, is not on the agenda. Defining KMT policy, Chien-Min Chao, Deputy Minister of Taiwan’s Mainland Affairs Council, says that China “stopped being the enemy” in the early 1990s. “My government’s policy is that we have to be realistic, that there is a new situation in the world, a new East Asia.”
Meanwhile, the dance continues. Taiwan’s former Vice President, Lien Chan, who met China’s current President, Hu Jin Tao, in China in 1995 to propose a setting aside of enmities, had to represent his President, Ma Ying-jeou, at the APEC meeting in Singapore in November to avoid an “official” meeting of China and Taiwan leaders’ at the APEC Leaders’ Summit.
There is some belief that if current discussions continue to be successful, that an “official” meeting of the two sides could be held at the APEC Leaders’ Summit in 2012. This will be hosted by the United States and will be the last to be attended by Hu Jintao as China’s President.
In the interim, there will be ongoing issues to be addressed in ECFA once the initial agreement is signed off. The timing and content of the “hard” issues — security and political matters — and the possible vehicle for such talks, has yet to be settled.
Sun Yang-Ming of the Cross-Strait Interflow Prospect Foundation says that, through ECFA, Taiwan is buying time. “You never say that things will never change. You never know when change will come — I was in Berlin when the Berlin Wall crashed, and no-one expected it,” he says.
“There is a Taiwanese saying — you can be a chicken in the playground, but that does not mean you can play inside. You just have a chance to get in.
“So if China has economic co-operation, and later on economic integration, later, maybe, it will be easier for them to sell their goodwill. We know what they are trying to do. But it is all at a very early stage.”
* Barry Pearton is Publisher of ATI Magazine
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