2. Taiwan’s Political and Economic Ecosystem

Mainland China’s main guideline for its Taiwan Policy is the “One Country, Two Systems” formulation advanced by Deng Xiaoping in 1979. Taiwan would enjoy a high degree of autonomy under it, but that autonomy would be preconditioned on Taipei’s giving up its sovereignty. It upholds both China’s state sovereignty while promising to take into account the specific conditions of Taiwan (coexistence of the socialist system with the capitalist system and way of life in Taiwan) within the sovereign state of “China”. See “A Policy of ‘One Country, Two Systems’ on Taiwan”, Ministry of Foreign Affairs of PRC at http://​www.​fmprc.​gov.​cn/​eng/​713.​html. From insisting that “there is only one China in the world, Taiwan is an inalienable part of China, and the seat of China’s central government is in Beijing” (PRC’s White Paper on Taiwan, 31 August 1993), the present understanding on “One China” is that “there is only one China in the world and both Taiwan and the mainland are part of China” (Article 2 of the Anti-Secession Law adopted at the Third Session of the Tenth National People's Congress, Monday, 13 March 2005).

This was accompanied by removal of the official ban on travel to the Mainland, in November 1987; see “Major Events across the Taiwan Strait”, Mainland Affairs Council of the Republic of China (2010).

The pan-Green parties comprise, chiefly, the Democratic Progressive Party (DPP) and Taiwan Solidarity Union (TSU) and are considered pro-Independence; whereas the ‘Blue camp’ (Kuomintang (KMT) and People First Party (PFP), chiefly) is considered soft on defending the status quo.

While policies such as the Jiji Kaifang, Youxiao Guanli (Active Opening, Effective Management) policy in August 2001 or the subsequent opening of the ‘three mini links between the two offshore islands of Quemoy (Kinmen) and Matsu and Mainland China are noted, these were either curtailed as in case of the subsequent Youxiao Kaifang, Jiji Guanli (Effective Opening, Active Management) policy in 2006, or have been termed (in the case of the mini three links) as means of effective regulation than to ease existing restrictions.

Main instruments of such signaling include, PRC’s first White Paper on Taiwan (August 1993); Jiang’s Zemin’s ‘eight points’ offer to Taiwan, issued in January 1995; Military exercises, including the launching of missiles, before the 1996 presidential election in Taiwan; PRC’s second White Paper on the Taiwan Issue (21 February 2000); China’s missile exercises before the 2000 Presidential elections in Taiwan; PLA military drills on Dongshan Island (involving about 18,000 troops) in the summer of 2004; and the Anti-secession Law of March 2005.

Decree of the State Council of the People's Republic of China, No. 7 (2010), “Provisions of the State Council Concerning the Encouragement of Investments by Compatriots from Taiwan”.

Li (1993) Governmental Report to the Sixth Plenary Meeting of the Seventh National People’s Congress, April 1993.

“Law of the People's Republic of China on Protection of Investment by Compatriots from Taiwan (2010).”

The inaugural flight was a China Southern Airlines from Guangzhou to Taipei. The Bridges Building Project (approved by the Executive Yuan in August 2008) aims to hold a series of Cross-Strait conferences on exchanges in individual industries between Taiwan and Mainland China as a way of building bridges between the two sides. See http://​doit.​moea.​gov.​tw/​doiteng/​contents/​printPage.​aspx?​name=​event&​sn=​20.

This comprises 539 products (roughly 16 per cent of Taiwan’s exports to Mainland China), eight service industries, and three financial service sectors, while 268 products from Mainland China (roughly 11 per cent of exports to Taiwan), eight service industries, and one financial service sector would be subject to tariff rationalization. See Appendix I for detailed break-up.

SEF and ARATS are semi-official intermediary bodies set up by Taiwan and the Mainland China, respectively, to handle Cross-Strait ties in the absence of official ties.

For an in-depth discussion on these and other contentious aspects of the ECFA, see Karackattu (2012).

See http://​www.​mac.​gov.​tw/​public/​data/​051116322071.​pdf; Others project Taiwan’s real GDP growth to as high as 1.83 % after trade normalization; see Liu and Shih (2012, p. 19).

The Chinese stimulus response to the 2008 financial crisis was in the form of a four trillion Yuan (or roughly 586 billion USD) package and a 3-year, RMB 850 billion healthcare plan. Of this roughly 40 per cent was earmarked purely for infrastructure and Sichuan post-quake re-construction. See Karackattu (2011) for a detailed exposition on China’s financial recovery planning. See also Chen (2011, p. 191), Chen et al. (2011a, pp. 66, 67).

See http://​www.​ecfa.​org.​tw/​EcfaAttachment/​ECFADoc/​ECFA.​pdf.

Mainland China too has filed anti-dumping investigations against trading partners, which has involved Taiwan as third party.

Dispute DS318 relates to provisional and definitive anti-dumping measures imposed by India on products from Taiwan, whereby Taiwan requested consultations with India concerning the anti-dumping measures on acrylic fibres, analgin, potassium permanganate, paracetamol, sodium nitrite, caustic soda, and green veneer tape. Taiwan considers that these Indian measures are inconsistent with, inter alia: Article VI:1 and VI:2 of GATT 1994, and Articles 1, 2, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.8, 4, 5, 6 (including Annex II), 7.4, 12.1 and 12.2 of the WTO Anti-Dumping Agreement. See http://​www.​wto.​org/​english/​tratop_​e/​dispu_​e/​cases_​e/​ds318_​e.​htm.

Refer also Lee Deng-Hui’s six point-statement (specifically number 4) on “joining international organizations on the basis of equality”.

Tsai Ing-wen, former Chairperson of the DPP, clarifies that the DPP would look into the arrangement and bring it into consistency with WTO Rules (on both counts of transparency and comprehensive coverage), where the ECFA would be structured in a multilateral framework with safeguards for the Taiwanese industry. Responding to a specific question by this author that notification of the ECFA to the WTO (as reported in the WTO Annual report 2012) was under the curious category of PTAs which offer preferential treatment to the products of “LDCs”, Tsai Ing-wen noted that it was not a normal notification since neither party had acceded to the WTO on the basis of LDC status. Author’s Q&A with Tsai Ing-wen at the India International Center, 20 September 2012, New Delhi.

The offshore production of Taiwan-based ICT device firms has now substantially outweighed their domestic production, with China accounting for 89 % of total production in 2007.

See Skyrms (2001) for an exposition on the game itself.

It is interesting to note that scholars such as Ching-Chang Chen argue that as a paradigmatic optic, earlier restrictions in Cross-Strait ties were useful as a “boundary-producing exercise”, where even hitherto restrictive policy from this perspective, is attributed to have played the dual role (a la David Campbell’s critical constructivism), of disciplining the Taishang and reproducing the identity of a separateness; See Chen (2010a, pp. 391–412).

See Waever’s description of ‘asecurity’ in Waever (1998, p. 81).

The Election Study Center at National Chengchi University conducts authoritative survey polls based on responses from the adult population (20 years or older) in Taiwan (excluding, for survey purposes, the offshore islands of Kinmen and Matsu). The sample set is drawn from records from the most recent China Telecom Residential Telephone Number Book. See http://​esc.​nccu.​edu.​tw/​english/​modules/​tinyd2/​index.​php?​id=​6 for the detailed surveys and methodology.

NCCU survey op cit; The respondents were required to choose between six options, viz. 1. unification as soon as possible; 2. independence as soon as possible; 3. maintain the status quo and move toward unification in the future; 4. maintain the status quo and move toward independence in the future; 5. maintain the status quo and decide in the future between independence or unification; 6. maintain the status quo indefinitely.

See NCCU survey at URL: http://​esc.​nccu.​edu.​tw/​english/​modules/​tinyd2/​index.​php?​id=​6; The respondents were specifically asked which of the political parties, Chinese Nationalist Party (Kuomintang, or KMT), Democratic Progressive Party (DPP), New Party (NP), People First Party (PFP), and Taiwan Solidarity Union (TSU) would they support the most.

This is a situation where Taiwan could sign preferential agreements such as ECFA with it key trading partners (negotiations for probing “Trade Enhancement Measures” or TEM with the European Union, trade and investment framework agreement (TIFA) with the United States, an ECA with New Zealand, possible FTA/CEPA with India, Singapore, are key examples of pursuing such a track).

TPP is the acronym for the proposed trade agreement between Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States (with Japan, Mexico and South Korea expressing interest in inclusion) under the APEC umbrella.

Responding to a specific question by this author on the realistic probability for Taiwan to conclude FTAs with other economies in the spirit of greater international space being claimed under the ECFA, Tsai Ing-wen, former chairperson of the DPP clarified that a case-by-case approach is likely where hurdles were likely to be specifically brought up by Mainland China in the case of Taiwan’s FTAs negotiated with bigger economies. She clarified that in the present negotiations on FTAs and CEPAs only those economies which have a prior FTA/CEPA arrangement with Hong Kong would stand a chance of being concluded. This, according to her, is symptomatic of a “Hong Kong model for Taiwan’s FTA efforts”. Author’s Q&A with Tsai Ing-wen at the India International Center, 20 September 2012, New Delhi.

Author’s interview.

see also Crawford and Fiorentino 2005, p 7 for a discussion on how agreements involving developed and developing WTO members fall under GATT Article XXIV.