SERIES: Taiwan-U.S. Quarterly Analysis | Number 14 of 16 « Previous | Next »

Beyond the Cross-Strait Trade in Services Agreement: Seeking a “2014 Consensus” for Taiwan

Why does mainland China appear willing to grant significant economic concessions in negotiations with Taiwan under the Economic Cooperation Framework Agreement (ECFA)? A simple and probably incontrovertible answer could be: to foster and enhance cross-Taiwan Strait ties for the possibility of peaceful unification. This has triggered the concern and worry of some Taiwanese people, particularly when President Ma Ying-jeou pushed the cross-Strait Trade-in-Services Agreement (TiSA) full speed ahead at the Legislative Yuan (LY) this March.

Despite the focus on the TiSA, a more fundamental question needs to be answered by the people and government of Taiwan – i.e., should Taiwan continue to engage mainland China economically and proactively if mainland China gives away substantial economic profits to Taiwan? If Taiwan should, then supporting measures of national security must be established in an efficient way in order to prevent further dependence on the mainland. If Taiwan shouldn’t, then Taiwan must come up with a few alternatives for sustainable development in lieu of economic interactions with mainland China. So far, constructive and realistic discourse on this question seems to be lacking in Taiwan.

No matter what the answer will be, Taiwan cannot ignore the “China factor” in its economic strategy, given the fact that Taiwan currently relies on the mainland market (excluding Hong Kong) for roughly 26-27 percent of its exports and that the business activities and people-to-people exchanges between the two sides of the Taiwan Strait continue to increase.

President Ma knows that Taiwan’s negotiations on economic and trade cooperation with other major trading partners rely partially on the healthy development of cross-Strait relations. A complex set of risks and opportunities has resulted in what can be called a two-tiered policy toward regional economic integration. First, even as it faces great political, economic, and military pressure from mainland China, the Ma administration has chosen to tackle the problem head-on and develop relations with Beijing in a hopefully reciprocal way. Second, as enhanced relations with Beijing entail certain domestic political risks, the Ma administration is attempting to create a positive association between cross-Strait relations and Taiwan’s participation in major efforts at regional economic integration. It intends to develop economic cooperation with other major trading partners at the same time it is increasing economic ties with mainland China.

Four major economic challenges ahead

Taiwan’s civic groups, political parties, and government must collectively confront the immediate economic challenges associated with the afore-mentioned two-tiered policy. These challenges can be divided into four major categories. First, as implied earlier, the complicated nature of cross-Strait economic interactions has brought up the “trust issue” between the Ma administration and some of the general public in Taiwan, which has created a persistent political struggle in Taiwan and further weakened the government’s capacity to act. Under conditions of weak governance and possibly messy domestic politics, Taiwan’s economic growth will encounter severe challenges.

The second challenge is mainland China’s approach toward Taiwan’s engagement with regional economic mechanisms. The question for Taiwan is whether economic cooperation with mainland China will facilitate greater involvement for Taiwan in regional economic integration. This question cannot be answered simply by observable political statements issued by Beijing. Leaders of the Communist Party of China have not explicitly made that argument, but it is logical and reasonable to infer that the economic cooperation agreements Taiwan signed with New Zealand and Singapore in 2013 are in part products of the improvement in cross-Strait relations after May 2008. The possibility of using economic cooperation between Taiwan and mainland China, under the ECFA rubric, to create space for Taiwan’s participation in the Regional Comprehensive Economic Partnership (RCEP) needs further discussion between Taipei and Beijing, followed by some special arrangements agreed by both parties. In the meantime, in Taiwan, more controversies and anxieties about the possibility of being treated like Hong Kong under the “One Country, Two Systems” model will surface and create some instability in cross-Strait relations.

The third challenge comes from RCEP again. To avoid Taiwan’s further isolation and possible trade diversion that would be generated by its absence from RCEP, President Ma has expressed the desire to join RCEP as soon as possible. The agreement will include trade in goods and services, investment, rules for dispute settlement and so on. RCEP negotiations are scheduled to conclude by 2015 among ASEAN member states and their Asia Pacific dialogue partners – Australia, mainland China, India, Japan, New Zealand, and South Korea. It is widely believed that mainland China is one of the leading and influential participants in RCEP. If Taiwan is going to have a chance to join RCEP, it must begin negotiating with the founding members of RCEP respectively after the signing of the agreement, and therefore will be almost unable to alter the agreement in its favor. In short, Taiwan will be forced to accept most of the agreements reached by the founding members and will have to deal with the unilateral power exercised by the existing member states in the accession process.

Obviously, the domestic concern over the TiSA with mainland China, which was demonstrated clearly in the protests in Taiwan, will loom large again if Taiwan finds a way to join RCEP. From this perspective, it can be argued that the current attempt of the pan-green parties and of some of the protesters to escape from mainland China’s influence might be in vain. Although in the process of Taiwan’s involvement in RCEP mainland China will become merely one of the major factors impacting Taiwan’s economic future, it will be an immense one. At any rate, if Taiwan decides to participate along with all other major economies in RCEP, it will be unable to break away from mainland Chinese influence as some in Taiwan wish.

The last challenge, but not the least, that Taiwan as a whole has to encounter inevitably is the tremendous difficulty in liberalizing its economy in a timely manner to meet the standards of the Trans-Pacific Partnership (TPP) as the Ma administration has pursued since 2009. Currently, TPP is under the framework of the Asia Pacific Economic Cooperation (APEC), of which both Taiwan (under the name of Chinese Taipei) and mainland China (using its national title) are member economies. The United States views TPP as “the cornerstone of the Obama Administration’s economic policy in the Asia Pacific” and basically leads the development of the TPP in negotiations among the 12 member economies, in the hope that the final negotiation can be completed by this year. Given the rigorous standards of this “high-quality” agreement, if it is to participate Taiwan will have to make more adjustments or modifications in its internal laws, rules, and regulations than what it is doing in the ECFA negotiations or in the free trade negotiations with New Zealand and Singapore. Is Taiwan ready for that? The answer does not seem very positive, partially because Taiwan, with very limited experience in negotiating with and liberalizing economically with its trading partners, is not accustomed to the rapidly changing economic and trade environment in the region of the Asia Pacific.

Even though mainland China is not currently engaged in TPP negotiations, the “China factor” still looms large for Taiwan. It is likely that neither Taiwan nor mainland China will join TPP negotiations before the initial agreement is reached among the current 12 parties. Regardless of mainland China’s intent on TPP membership in the future, understandably it will not be glad to see Taiwan join TPP while it has not been admitted. In other words, it is possible that Taiwan’s hope to participate in TPP will hinge partially on the political attitude of mainland China, a giant political and economic actor which may or may not choose to become a member of TPP in the foreseeable future. Despite the fact that the U.S. Deputy Assistant Secretary of State Kin Moy clearly stated in March that the United States welcomes Taiwan’s interest in TPP, and that U.S. Assistant Secretary of State Daniel Russel affirmed in April that the United States supports Taiwan “to participate in the international community in a manner befitting a large economy and modern society with a great deal to contribute,” the “China factor” obviously remains an unpredictable variable for Taiwan’s application to TPP so long as mainland China upholds the “One China” principle and tries to exert influence on the original TPP member economies.

A “2014 Consensus” can probably save Taiwan, temporarily

Taiwan is in a tight spot both domestically and internationally, and has little time to manage or conquer these four challenges as regional economic integration is speeding ahead without it. At the same time, it must manage cross-Strait relations and its own contentious and complicated domestic politics.

Despite cross-Strait relations being controlled in a relatively predictable way, Taiwan is facing a serious split in its society and an evident decline in the general public’s confidence in or respect toward the government as a whole. The recent protests against the TiSA, along with protesters’ extended occupation of the LY chamber and failed occupation of the Executive Yuan headquarters, have demonstrated the extremely urgent need for a resolution, at least an interim one, which can help Taiwan re-focus on national development in general and steer clear of great risks associated with rising domestic disputes and tensions. As a result, a consensus must be built as soon as possible to set Taiwan’s future economic strategy toward the region of the Asia Pacific. Such a consensus can be called “2014 Consensus.”

The hundreds of protesters who occupied the Legislative Yuan and thousands more sitting outside basically asked the Ma administration to take the agreement back, enact a mechanism in the current legislative session to allow the LY to monitor cross-strait agreements, and then review the TiSA in this mechanism and subject it to a line-item-review and line-item-vote basis. In other words, the protesters would like to start a new round of negotiation with mainland China. With this mechanism, the leaders of the student protesters even argued that the already-existing agreements between Taiwan and mainland China would have no domestic law status had the agreements not been reviewed and passed by the LY.

The trade-in-services agreement is part of ECFA. The failure in passing this agreement will bring greater uncertainty to Taiwan’s economic future. The Ma administration is willing to accept a line-item-review and line-item-vote at the LY, as the demonstrators and the pan-green camp called for at the outset of the protests in mid-March, but does not seem to favor reviewing this agreement under a yet-to-be established monitoring mechanism.

Demonstrators also demand a “Citizens’ Constitutional Conference.” The Ma administration does not like the idea of a “Citizens’ Constitutional Conference.” It prefers a national affairs conference on economics and trade.

The contents of the monitoring mechanism, the question of whether the mechanism will apply to the TiSA, and the nature of the conference to be convened have caused a sharp conflict not only between the Ma administration and the groups and people occupying the chamber of the LY and demonstrating on the streets, but also between friends and between family members. Hence, consensus-building is indispensable both for international strategic reasons and for the sake of social cohesion.

It does not make sense that the two sides of the Taiwan Strait could reach the “1992 Consensus,” which has undeniably paved the way for risk reduction in and the enhancement of cross-Strait relations since President Ma was inaugurated in May 2008, while Taiwan’s own people and political parties, even if they may have different ideas about TiSA and cross-Strait and regional economic strategies, can’t attain some kind of sensible consensus as to how the current dispute can be shelved or dealt with constructively. If the “1992 Consensus” reflects a realistic consideration of shelving disputes and negotiating practically between Taipei and Beijing, then a somewhat idealistic but not totally unfeasible thought is that all parties in Taiwan can have a “2014 Consensus” aimed at temporarily shelving political and legal disputes and discussing economic and external trade issues together in a timely, sensible, and practical way.

Such a “2014 Consensus” would not attempt to solve the ultimate question of Taiwan’s future, or to address the inadequacy of the Republic of China Constitution. To do so would take time that Taiwan does not have as it faces immediate economic challenges, and a constitutional conference to be held now may create more political and social instability than it solves. Rather, all parties concerned in Taiwan should try their best to look at a shared interest: Taiwan’s survival in the wave of regional integration and in the face of a rising mainland China. To do this the parties must play down the importance of mutual differences in politics, and make some concessions as a gesture of goodwill, in the hope that a workable consensus can be established to find a widely acceptable way to pull together.

A “2014 Consensus” is not impossible in current democratic struggles and domestic politics of Taiwan. Just as the “1992 Consensus” is a tacit understanding between the two sides of the Taiwan Strait and makes good use of the beauty of political ambiguity to find the greater commonalities, the “2014 Consensus” can be reached verbally or in words by the political parties and civic groups engaged in the demonstrations recently. Once reached, with any luck, such a consensus could put on hold the unification-independence argument, the long-standing but hard-to-define issue of so-called “generational injustice,” and the debate over the justification and legitimacy of the “occupying the Legislative Yuan” movement in Taiwan. It would help concerned groups and parties that are really willing to find a way out to work on pressing economic and trade issues which are central to Taiwan’s prosperity and survival. The process of forming such a consensus is very difficult, but it deserves immediate joint action.

As a final point, a “Citizens’ Constitutional Conference” can be better realized after Taiwan passes the clear and present danger: the trial of interacting economically with mainland China and with the emerging regional liberalization regimes, RCEP and TPP.

SERIES: Taiwan-U.S. Quarterly Analysis | Number 14

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