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Toward the Creation of a "Cross-Strait Common Market" |
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Why Do I Advocate a Cross-Straits Common Market? |
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A Cross-Straits Common Market - Working Together to Build Prosperity in the Asia-Pacific Region | ||
Toward the Creation of a "Cross-Strait Common Market"
Keynote Speech
Vincent C. Siew
Former Premier
Republic of Chinaat the
American Enterprise Institute
Washington, D.C.January 22, 2001
It is indeed a great pleasure to be here in Washington, D.C., among so many trusted friends of long standing, and especially at the beginning of the presidency of George W. Bush. I know many of you here today have advised the Bush family over the years and counseled the President on foreign policy and other matters during the campaign. Therefore the challenge you have put before me today is very great - to say something of interest to an audience full of distinguished experts who know the intricacies of relations in East Asia exceedingly well. The nice thing about being among friends, of course, is that you will be much more willing to forgive me my shortcomings.What I would like to do in today's remarks is suggest a new direction for cross-strait relations. We are in a new century, and a new time. Therefore, new thinking and new approaches to old problems are called for.
I. Holdovers from the Past.
(a) Different stages in cross-strait relations
I hardly need to remind this audience that the Republic of China (ROC) was founded in 1912. You know well that in 1949, when the Communist armies seized mainland China by force, the central government moved to Taiwan, resulting in the existence of two separate political entities. The past 51 years of cross-strait relations have been marked by periods of volatility, with a lack of trust and communication, and a reluctance to consider genuine dialogue, although from time to time various exchanges have taken place. We can point to three major stages in the development of cross-strait relations:
· 1949-1978 The Military Confrontation Stage
· 1979-1987 The Cold War Stage
· 1987-2000 The Cross-strait People-to-People Exchange and Reconciliation Stage
When long standing Taiwanese independence advocate and presidential candidate Chen Shui-bian of the Democratic Progressive Party (DPP) won the tenth ROC presidential election on March 18, 2000, cross-strait relations at once entered a period of renewed tension. Although relations became somewhat smoother after May 20, when President Chen articulated his mainland China policy during his inauguration speech, mainland China continues to treat Taiwan with a degree of coldness.
(b) Rapid trade growth
Although cross-strait relations have been uneven over the years, mutual trade has grown steadily since mainland China adopted its open-door policy in 1979. That opening was complemented in 1987 by Taiwan permitting its citizens to visit mainland China, and cross-strait trade has since developed rapidly, despite difficulties from time to time. Between 1987 and 2000, over 17 million Taiwanese residents visited mainland China for sightseeing or commercial activities. By contrast, only 550,000 mainland Chinese residents visited Taiwan during this same period.
Since the opening of indirect trade with the mainland China in 1987, total trade has reached US$ 222 billion. In 1999 alone, the value of Taiwan's indirect trade with mainland China reached nearly US$ 26 billion. For all the year of 2000, the estimated value of such trade is expected to total as much as US$32 billion. According to our statistics, by the end of October 2000, more than 22,780 ROC-invested firms will have been approved for operation in mainland China, with a total investment value of US$16.5 billion. According to statistics obtained from mainland China, investments already approved for Taiwanese investors total US$46.5 billion, with actual utilization at a little more than half that, at US$25.3 billion. Taiwan is now mainland China's third largest foreign investor, after Hong Kong and the United States.
A major factor driving this rapid trade development is the complementary strengths contributed by both sides. At the end of the 1980s, when wages and land prices in Taiwan soared, our investment environment changed very suddenly. Many under-developed industries and small and medium-sized companies faced very severe difficulties. It was precisely at this time that mainland China advocated reforms and more open policies. Access to resources and labor in mainland China enabled many of these companies to survive. Mainland China's policy reforms strengthened its domestic economy, and Taiwanese traders have been able to contribute significantly to China's economic development and modernization. However, the Tiananmen Square incident in 1989 caused most foreign investors to be cautious. Business people from Taiwan, however, continued to expand their investments, thus helping to maintain stable conditions for China's economy.
(c) Review of cross-strait relations
Looking back over the last 13 years, cross-strait relations have benefited from close cultural ties, and many official channels of contact have been opened up. But clear political differences remain. Mainland China continues to insist on its "One Country, Two Systems" policy, while our government maintains that the ROC has been continuously a sovereign entity since its founding in 1912. Furthermore, mainland China refuses to renounce the use of force against Taiwan. Therefore both sides have been unable to develop mutual trust, and each remains suspicious of the other. Meanwhile, in Taiwan, due to our highly developed democracy, there are various strongly held views and vigorous debates about the development of our policy toward China.
This reality can lead to both sides following directly opposite paths when it comes to political issues. Yet political and economic issues are closely inter-twined. Complementary economic interests and market influences on both sides of the Taiwan Strait exist alongside structural imbalances and policy conflicts. This is an uncomfortable situation for the future, and leads to continuing instability in the relationship when, in fact, both sides have much to gain from economic cooperation.
II. The solution for cross-strait relations is to establish a "cross-strait common market" in the 21st century.
January 1 this year marks the beginning of the 21st century, making it appropriate to pursue new concepts for a new era. I have given a great deal of thought to how the cross-strait situation might be improved. Through my past positions as MOEA minister, chairman of the CEPD, chairman of the Mainland Affairs Council and Executive Yuan Premier, I have devoted considerable time and energy to handling cross-strait affairs. I recognize that in order to achieve a breakthrough in cross-strait relations in this new century, it is first necessary to replace orthodox and conservative views with new concepts. Then we can construct a new framework within which a new direction in relations can develop.
My proposal is to set a new focus for the relationship, based on the economy, which will lead to the establishment of a "cross-strait common market". There are a number of major reasons which lead me to advocate such a concept.
Reason One: A new position for both sides in the emerging global economy
Global development trends today are marked by rapid changes. The emergence of a common market like the European Union in 1990, or the North American Free Trade Agreement in 1994, have reduced the importance of traditional concepts such as state boundaries. Combined with the rapid development and prevalence of information and communication technologies, these economic integration models are bringing about rapid globalization of production patterns, and enhancing the importance of trade and investment.
With the advent of the 21st century, the globalization of business will increase, not subside. In my view, globalization signifies the value of peace, liberty, democracy, human rights and economic advancement, and brings with it powerful incentives to create a new order. In the face of these inevitable international trends, cross-strait relations must adapt. Principles such as "peaceful development" and "win-win", which are fundamental to the establishment of a "cross-strait common market," must take the place of past tensions. Based on the shared expansion of comprehensive economic exchanges and integration, both sides will have a strong incentive to develop constructive relations. Building on the progressive integration of their economies, the two sides can then turn to a step by step integration of politics, giving both sides of the Taiwan Strait the capability to make breakthroughs in solving mutual issues of concern while pursuing continued peaceful development.
Reason Two: Remove controversial political & economic impasses
Political and economic issues present potential obstacles to both sides in efforts to resolve mutual conflicts and disputes. Political discrepancies and confrontations have often forced the ROC to take defensive and restrictive measures in the practice of its mainland trade policies. As a result, major barriers remain in place, and these in turn increase the level of suspicion and confrontation between the two sides. The establishment of a "cross-strait common market" can help to overcome existing political and economic impasses by creating a framework for integration while implementing concrete projects along a timeline of 20 or 30 years.
Systematic pursuit of these aims would lead, over time, to the creation of a closely-tied economic entity spanning both sides, beyond the tangible boundaries. Such economic unity would encourage the development of social and cultural coalitions, and pave the way for political integration. If both sides were able to steer towards such a goal, with support and cooperation steadily supplanting suspicion and bickering, cross-strait relations could increasingly rely on the concepts of "win-win" and "peaceful development".
Reason Three: Role played by both sides in the new century
Both mainland China and Taiwan anticipate becoming members of the World Trade Organization later this year. This relationship will provide an international legal basis on which to build cooperative economic relations. As we enter this new century, the two sides of the Taiwan Strait have the opportunity to push simultaneously for peaceful development, promote the collective security of East Asia, and to work toward global economic progress. The establishment of the "cross-strait common market" accomplishes several goals: It provides a practical means to build safe, stable and normal relations between two important economies. It adds to the efficiency and competitiveness of each economy by promoting the pooling of resources and factors of production. Cooperative cross-strait relations will add to the prosperity and stability of the Asia-Pacific region in particular, while also removing a significant source of tension from the world stage. Seen from this perspective, the "cross-strait common market" not only strengthens mutual relations, but also plays a key role in global relations.
III. Contents of the cross-strait common market.
I have several practical suggestions to make about the characteristics and content of the "cross-strait common market".
(a) Follow the example of the EU
First, it should aim to follow the example of the European Union, by progressively achieving increasing and more complex levels of integration. Beginning from 1951, the antecedents to the formation of the European Union were the European Coal & Steel Community, followed by the customs union, the European common market, the removal of internal barriers through the single market, and the realization of monetary union with the introduction of the Euro.
These steps have taken almost half a century to put into place. The first measures involved the reduction of trade barriers, followed by complete liberalization of resources and freedom of movement for factors of production, including commodities, personnel, capital, services, and information. These initial liberalizing steps then proceeded to more comprehensive economic and political integration, until eventually political union is achieved. During the 21st century, it is expected that the EU will continue with the "broadening and deepening" of this integration, to achieve an even stronger level of economic and political union. The mode and spirit of the integration as pursued by the EU - moving step by step from economic cooperation to coordination of actions in the political sphere - offers a roadmap for the establishment of the "cross-strait common market."
(b) Adaptation to special conditions between the two sides
Of course the political situation underlying cross-strait relations differs from that of the EU. The state of economic development and modernization on either side of the strait differ markedly. For example, the size of the respective economies varies significantly. Mainland China covers 9.6 million square kilometers, an area 267 times larger than Taiwan; its population is 1.26 billion, 57 times larger than that of Taiwan. Given these huge disparities, the independence and stability of the Taiwanese economy would be affected unless the common market is based on adequate guidelines and specifications. Consequently, while the establishment of a "cross-strait common market" may follow the EU model in spirit, I recognize that special conditions between both sides must apply so that reasonable adjustments are possible. In my opinion, the development of the "cross-strait common market" should be based on several key concepts.
(i) Emphasis on areas of "natural" economic integration and "open regionalism"
Economic integration on both sides of the Taiwan Strait should occur naturally, in areas of economic activity where entrepreneurs seek mutual opportunities. I prefer that the development of a "cross-strait common market" build on the economic integration already underway in the Asia Pacific Economic Cooperation (APEC) forum, and that both sides adhere to WTO concepts in pursuing integration. Cooperative economic and trade relations will develop naturally where there is complementarity in economic conditions and similar cultural and social backgrounds among producers. At the same time, both sides must remain free to open their markets to other countries, leading to progress in the optimal distribution of resources, including the division of labor, and increased international cooperation. Following this "natural" path not only dismantles domestic concerns in Taiwan but also permits each side to share economic benefits with neighboring states.
(ii) Emphasis on market cooperation rather than open and free movement of production and resources
The "cross-strait common market" should adopt practical approaches that enhance market cooperation, rather than the full opening of factors of production and resources. Taiwan is much smaller than China, yet enjoys a considerably higher level of development. If too great an emphasis were put on eliminating restrictions on the movement of production and resources, the result would adversely affect Taiwan's economy, thus weakening Taiwan's ability to contribute to the development of mainland China's economy. Therefore, the establishment of a "cross-strait common market" should particularly emphasize market cooperation that allows the economies of Taiwan and mainland China to complement each other. For example, Taiwan with its rich and powerful managerial expertise, especially in the information industry, can take advantage of the potential of the mainland market to develop global operational and logistics centers.
On the other hand, mainland China can use Taiwan as its window for connecting to international markets and to induce investment capital to promote the development of the inland economy, especially in the mid-western districts. In addition, Taiwan's experience will be useful in the reformation of China's state-run enterprises and local companies, enabling China to further accelerate the modernization of its economy.
(iii) From economic cooperation to a "sharing of sovereignty"
The key dispute between the two sides is the One China principle and the implied sovereignty issues. The future establishment of a "cross-strait common market" will reduce the areas where the One China dispute is relevant, thus lessening mutual political arguments. During the establishment of a "cross-strait common market," we can devise coalition mechanisms, via negotiation and cooperation, to manage specific aspects of mutual economic affairs. These interim arrangements will lead to the "sharing of sovereignty" in the agreed areas. Under this concept, therefore, the One China issue will be solved gradually as the jurisdiction of "A Greater China" is phased in.
IV. Measures for establishment of a "cross-strait common market".
Establishment of a "cross-strait common market" should be implemented, step by step, in accordance with several proposed stages.
(a) First stage - Promote the normalization of economic and trade relations between both sidesIn the establishment of a "cross-straits common market", a pressing matter is to promote the normalization of economic and trade relations between both sides. At present, Taiwan has in place the indirect "three links" to mainland China, and the "Make no haste, be patient" mainland investment policy for Taiwanese investors. These are defensive concepts, however, stemming from a "besieged" mentality. They must be significantly adjusted in order to establish mutual trust and enable normal trade relations to develop. In his New Year Speech, President Chen voiced his support for "positive openness with effective management" over the "Make no haste, be patient" policy. I believe this is significant.
Next, both sides can cooperate on certain subject matters of mutual interest. Some examples would be agricultural and fishery cooperation, cooperation to stabilize financial flows, and cooperation among medium and small businesses. Also, the authorities of the two sides shall agree to establish a schedule for regular, official negotiations leading to a series of cooperation mechanisms. As this process continues and is tested against experience, it will promote the normalization of relations and mutual trust, and lead to enlarging areas for actual cooperation. Thus, utilizing this approach, the "cross-strait common market" will provide a solid basis for the launching of extensive economic projects covering a variety of areas where the desire for mutual cooperation exists.
(b) Second stage - Develop a system of economic coordination for both sides to follow
Once economic relations are normalized and benefits are realized, both sides can then coordinate the development of economic rules and regulations with the aim of harmonizing policies. This step can be useful in reducing discrepancies and in enlarging those areas that are ready for inclusion in the common market. Meanwhile, both sides can increase their level of economic cooperation, including the use of approaches such as production sharing across firms and sectors and strategies to promote regional development. During this stage, both sides can negotiate agreements under the framework of the "cross-strait common market" to promote economic integration and to encourage the adoption of harmonized systems.
(c) Third stage - Development of comprehensive economic integration tasksBoth sides can initiate comprehensive economic integration once the cross-strait common market has matured to a greater extent. Examples would include currency unification, collaboration on labor policies, and other similar forms of cooperation. Also, joint studies and the regular exchange of views, drawing on our collective cultural heritage and traditions, will assist us in the process of making the transformation toward political integration.
These three stages depend on actual progress and results, with flexible adjustments being made along the way as hurdles are overcome. The overall objective is that the two sides of the strait are progressively united economically.
V. The significance of the "cross-strait common market" to international society.
Peace in the Taiwan Strait, a democratic China and a stable economy on both sides of the strait are crucial to Asian and global stability and development. These objectives will also greatly benefit the United States.
Establishment of a "cross-strait common market" is essential to reducing tensions in cross-strait relations. Creating conditions for the peaceful development of both sides of the strait is the best available path. Further, establishment of a "cross-strait common market" blends Taiwan and mainland China. The successful development of a "cross-strait common market" will be a boon to regional economic prosperity and stabilization. A prosperous and stable mainland China, and a peaceful cross-strait relationship, will unleash new energy into the world and open new areas of opportunity in the Asia Pacific.I propose the "cross-strait common market" as a path-breaking concept allowing both sides to step out of the current deadlock and to create new potential for advancement. The implementation of the contents and measures of such a common market require further discussion and careful planning. But it is the right direction to follow.
We need our American friends to strongly support us in this endeavor. I hope my proposal will receive a positive response from those of you present, and that we can work to build more support for the idea and to generate more recognition for our cause. Finally, I sincerely hope that we can work together toward achieving a new era in cross-strait relations that will also promote world peace.
VI. Conclusion.The establishment of a "cross-strait common market" will lead both sides into a new era, where cooperation takes the place of conflict, and exchange takes the place of confrontation. The "cross-strait common market" provides a comprehensive framework under which both sides can work progressively to build areas for improving relations and achieving reconciliation. While both sides are doing their best to join the WTO, the establishment of a "cross-strait common market" will add to the relationship by providing a new framework for cooperation. I sincerely hope that both authorities will have the long-range perspective and broadmindedness to embrace and promote the promise of a "win-win" situation for those on both sides of the Taiwan Strait.
Thank you for your kind attention.