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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 | ||
Why Do I Advocate a Cross-Straits Common Market?
Vincent C. Siew
Chairman
Cross-Straits Common Market Foundation
People often ask me: "Why have you suddenly put forward the idea of a cross-straits common market?" In fact, the idea of a cross-straits common market did not take shape in just one or two days. It was not by any means a "sudden" proposal. It was an idea that grew out of my involvement in and understanding of Taiwan's development over the past thirty years, during which my constant concern has been how to keep making Taiwan more competitive and keep its economy growing. This was the context in which my cross-straits common market proposal gradually took form.My Views on Cross-Straits Relations and Taiwan's Development
I believe that Taiwan's survival and development in the global arena most depend on its economic growth and trade expansion. It was such a perception that prompted me to devote myself to work in the field of economics and trade. In the past thirty years, I have participated in several important stages of Taiwan's economic development and political transformation. In each stage, I have come to a different understanding of Taiwan's future survival and development.
About twenty years ago, it became profoundly clear to me that Taiwan's survival and development could not avoid coming to terms with the mainland China factor.
In the early years, mainland China chose to cut itself off from the world. At that time, there were no exchanges between it and Taiwan. Consequently, except in matters of national security, the mainland did not figure at all as a factor in Taiwan's development. But change came in 1978 when, at the Third Plenary Session of the 11th Central Committee of the CPC, the Chinese Communist regime adopted its policy of reform and opening up to the outside world. Thereafter, with its foreign trade growing rapidly year by year, mainland China began to be an active player in the world economy. This gradually came to have a growing impact on Taiwan's economy and engaged increasingly my close attention to interaction between the economies across the Taiwan Straits.
At that time, a state of hostility prevailed across the Taiwan Straits. A Taiwan businessman engaged in trade with the mainland, even if indirectly, would be subject to severe punishment under the law for treasonable association with enemy "bandits." In early 1985, when I was serving as director general of the Board of Foreign Trade, I discovered that the volume of trade between Taiwan and Hong Kong had risen sharply and that most of Taiwan's exports were being transshipped from Hong Kong to mainland China. It was then I saw clearly from the international perspective that trade between Taiwan and mainland China was not only unavoidable but actually would be beneficial to Taiwan's survival and development. Thereupon I decided to do my utmost toward legalization of the entrepot trade, so that our businessmen could carry on this trade free from any burden of fear. I subsequently presented a proposal to this effect in a report to then President Chiang Ching-kuo, and he accepted my proposal. Thenceforth, our businessmen could engage in this trade lawfully and openly.
The Contradiction of "Political Chill" and "Economic Zeal"
Beginning in 1987, our government allowed people to visit relatives on the mainland. This was followed by an acceleration in the pace of cross-straits trade. In particular, with the appreciation of the New Taiwan dollar in 1990 and rising costs of production, manufacturers began shifting their production offshore in droves, to mainland China in particular. As then minister of economic affairs, I initiated steps to ease restrictions on investment in the mainland. Later on, I also moved to set up a flexible reporting and approval system, which enabled our people to engage in business on the mainland free from any anxiety about getting into trouble at home.
In the thirteen years between 1987 and 2000, people from Taiwan made some 17 million trips to mainland China for family visits, pleasure, business and other purposes. During the same period, the cumulative volume of indirect cross-straits trade reached nearly US$220 billion. In 2000 alone, our trade with the mainland exceeded US$32 billion, up by more than one quarter from the year before. It accounted for more than 11% of Taiwan's total external trade. As of the end of September 2000, our businesses had made more than 22,700 separate investments in mainland China, amounting to US$16.3 billion. According to statistics from the mainland authorities, our firms had committed as much as US$46.5 billion, with actual investment at US$25.3 billion, making us the third largest source of foreign investment there after Hong Kong and the United States.
The last thirteen years have seen intense non-governmental contacts across the Taiwan Straits, as well as the establishment of systematic channels for contact and communication. Because mainland China exerts a tremendous impact on Taiwan's development, our government must be extremely prudent in its handling of cross-straits relations. That is why the "No haste, be patient" policy was adopted. There is a clear awareness that we cannot act against the tide of events, but that we can only do the best we can as the situation permits. We also clearly understand that cross-straits trade and economic links are bound to get closer, and that this offers a winning opportunity for development on both sides.
However, because of a lack of mutual trust, especially in the political sphere, doubt and suspicion prevail between the two sides. And given Taiwan's democratization it will take time to achieve a good measure of consensus in our mainland China policy. Such is the background that, with cross-straits economic links growing stronger by the day while political differences show no sign of reconciliation, has given rise to the phenomenon of "economic zeal, political chill." This peculiar cross-straits relationship has become more and more evident in recent years.
The ever-rising intensity of economic interaction across the Taiwan Straits has already become an irresistible tide. Ten years ago, Taiwan firms investing in the mainland were mostly manufacturers in traditional industries or small and medium-sized enterprises (SMEs). Later on, firms in capital- and technology-intensive industries, including publicly listed companies, followed in their path. Most recently, even high-tech firms, in which we take pride, have been mulling over investment across the Straits - a trend that has certainly caused many to feel a sense of unease.
In contrast, cross-straits political relations grow increasingly frosty. Since the Democratic Progressive Party (DPP) took over as Taiwan's ruling party in 2000, political divergence has become increasingly apparent and the lack of mutual trust has deepened, although cross-straits tension seems to have not further deteriorated.
These developments have given rise to a serious contradiction between the economic and political situations. Political stability is prerequisite for economic development. If cross-straits relations are unstable, trade and economic development will be adversely affected to a more or less extent. The growing contradiction between the political and economic development trends is instilling in our people a sense of uncertainty and insecurity about the future. If such a stalemate continues unabated, on the one hand it will heighten the potential for mischief stemming from political irrationality, and on the other hand will prevent the government from providing needed safeguards and assistance to private investment in the mainland. As a result, not only will public confidence in the government fall lower and lower, but also the government will be powerless to take charge and plan the direction of overall economic development.
On the political side, mutual trust cannot be established in a short period. However, the irreversible trend toward economic coalescence also means that Taiwan must take a more positive stance in handling its relations with mainland China. Under such contradictory circumstances, what exactly is the way out for Taiwan?
Cross-straits Relations in the Framework of Globalization and Regional Cooperation
To find a smooth way out for Taiwan, we must consider our development in the context of the global framework. Development in cross-straits relations must likewise be considered with regard to the whole structure of international relations. At this crossing-point from the old century into the new, the trends of political and economic development in the international sphere point us to a hopeful way forward:
Globalization has been the trend of world economic development since the 1990s. On the production side, globalization involves the establishment of a global system for division of labor or logistics. On the financial side, globalization allows more efficient utilization of global capital resources, though it also increases the fluctuations and uncertainties of international financial markets. Besides, because of the gradual disappearance of economic barriers across national boundaries and with the growing awareness of the need to pursue sustainable development for environmental protection and conserve the earth's limited resources, the age of the global village is drawing closer to realization.
In light of these development trends, we see a broad pathway into the future for Taiwan: As long as we keep to the forefront of knowledge and technology and retain the capacity for continuous innovation, we will have both the opportunity and the ability to cut across economic boundaries, fully utilize production resources from around the world, and continue to extend Taiwan's economic power. Such a breakthrough in economic thinking from "limited resources" to "unlimited resources" can surely open a new horizon for Taiwan's economic development.
Taiwan's future development and cross-straits relations cannot remain outside this global development trend. Otherwise, Taiwan will be sidelined, and will not be able to participate in the new international politico-economic order. We must therefore think anew on cross-straits economic relations. Division of labor in international production is an inescapable trend. As participants, what we need to consider is: What pattern of labor division will be most advantageous to Taiwan? Our policy makers need to create favorable objective conditions for guiding the cross-straits division of labor in the direction most beneficial to Taiwan. That, indeed, was the rationale behind our plans for developing an Asia-Pacific Regional Operations Center (APROC). Compared with mainland China, we believe we have better management and marketing skills, stronger technical and design capabilities, and more financial resources. We need to transform ourselves into an investor, business operator, technical innovator, and market maker. In the cross-straits division of labor, we need to place ourselves in a superior strategic position, so that we can secure market channels and sources of technology, and make more efficient use of available financial resources.
Alongside globalization, we are also seeing regional cooperation replacing political antagonism. The EU, APEC, NAFTA, ASEAN, and other such mechanisms for regional cooperation are inspiring examples of this trend of development. The leadership in mainland China well understands it and has put forward its own ideas on regional cooperation. Indeed, at the ASEAN Plus Three Meeting in November 2000, Mr. Zhu Rongji responded positively to the proposal from Singapore's Prime Minister, Goh Chok-tong, for an East Asian Summit, and himself floated the idea of an East Asian free trade area.
In the 21st century, maintaining peace, pursuing sustainable development, and working toward the continuous advancement of human civilization will be the common responsibilities of members of the global village. Working together to promote collective regional security, as well as regional and even global economic prosperity and progress, is the joint responsibility of leaders on both sides of the Taiwan Straits. If both sides can adhere to the spirit of regional economic cooperation and pool their resources for common prosperity, they will be able to bring their regional and global economic influence into full play. Then they will be able not only to make cross-straits relations secure, but also to play a more positive and more constructive role on the world stage.
In the 20th century, political factors made it impossible for problems of cross-straits trade and economic relations to be resolved on a satisfactory basis. But now, with both Taiwan and mainland China poised to join the WTO, we are entering a new era wherein future relations will be conducted within a broader international multilateral framework. This is a favorable development for Taiwan. The two main world trends of globalization and regional cooperation will offer a way out of difficulty for cross-straits relations; namely, the formation of a cross-straits common market.
A Turning Point for Reconciliation across the Straits: a Cross-Straits Common Market
What is a cross-straits common market? Basically, it is modeled on the example of the European Union, with economic integration gradually leading to political integration. After World War II, the countries of Europe progressed in stages from the European Coal & Steel Community to the European Common Market to today's European Union. The European Union tells us that, if we can first put political issues aside and seek economic cooperation, then and only then will we be able to establish mutual trust.
Under the rules of the WTO, the two sides will be able to cast off the restraints of political forces and proceed toward the development of a cross-straits common market. It will enable both sides, observing the principles of peace, security, equality, and mutual benefit, to lower trade barriers and cut costs, and to gradually set up systems and agreements of substantive benefit to them both. Within the scope of such arrangements, conflicts and contradictions across the Straits can be gradually reconciled, enabling the two sides to develop together, prosper together, share benefits, and form a kind of political and economic virtuous circle, marching forward along the path of long-term stability and peace.
A cross-straits common market could make up for the lack of order and standards in trade and business dealings, and thus avoid the negative impact on both sides of deficiencies such as non-existence of legal safeguards, inadequate data, excessive transaction costs and barriers, and inefficient deployment of resources. Under the framework of a cross-straits common market, trade and economic exchanges could be mutually beneficial and serve the needs of both sides, while attendant risks could be greatly reduced. If we could move forward along such a course, then the problems surrounding "No haste, be patient" and the "Big Three Links" could be resolved with the greatest of ease.
Simply put, the "No haste, be patient" policy seeks to use regulatory means to protect Taiwan's economic security, while the cross-straits common market would secure the systemization of cross-straits trade and economic exchanges. Political interference in an economy can only produce short-term results. Ultimately, economic activity needs to be guided by a system of rules that conform to market principles.
The following are some of my thoughts on and explication of the substance, establishment, and concrete workings of a cross-straits common market:
The Substance of a Cross-Straits Common Market
(1) The spirit of the EU
The EU began with the formation of the European Coal & Steel Community in 1951, followed by the establishment of the European Economic Community in 1957, the implementation of a single market in 1986, the transition to the European Community in 1993, and at last the launch of the euro in 1999. This entire process of integration took almost half a century to complete. It was started with the lowering of trade barriers and proceeded toward achieving complete freedom of movement for factors of production, including merchandise, labor, capital, services, and information. Then ensued more comprehensive economic policy harmonization and political alliance. And it can be expected that during the 21st century the EU will achieve an even stronger level of economic and political union.
The mode and spirit of the EU's development from economic union to political integration offers many helpful pointers for the establishment of a cross-straits common market.
(2) Adaptation to the special cross-straits situation
Of course, the political situation underlying cross-straits relations differs from that among the members of the EU. On opposite sides of the Taiwan Straits, levels of economic development and conditions for integration lie far apart. The difference is especially pronounced in terms of economic scale: mainland China occupies an area of 9.6 million square kilometers, 267 times larger than Taiwan; and its population of 1.26 billion is 57 times larger. Given these huge disparities, the stability of Taiwan's economy would be at stake unless the establishment of a cross-straits common market takes into account these special circumstances and incorporates several key concepts:
(a) Economic integration with emphasis on an open and natural manner
Economic integration across the Taiwan Straits should initially proceed in an open and natural manner, with cross-straits common market established within the framework of economic integration in the Asia-Pacific region. It should be compatible with the WTO, so that both sides can be guided by WTO rules and standards in establishing bilateral trade mechanisms. Economic integration can be expected to develop naturally and more speedily where there is complementarity in economic conditions and similarity of cultural and social backgrounds, to pave the way for gradual formation of a common market. At the same time, both sides must remain in step in opening their markets to other countries, so that during the process of integration they can each accommodate broader regional division of labor and international cooperation. Following this path not only dismantles domestic concerns in Taiwan but also permits each side to share economic benefits with neighboring states.
(b) Emphasis on economic cooperation through market sharing
The cross-straits common market should, of course, move toward market opening and the free movement of factors of production. However, Taiwan's economy is much smaller than the mainland's, though at a higher level of development. Overemphasis on complete freedom of movement of economic resources in a hasty manner will have an adverse impact on Taiwan's economy, which will in turn weaken Taiwan's ability to contribute to the development of the mainland's economy. Therefore, the establishment of a cross-straits common market should place special emphasis on economic cooperation through market sharing that makes for complementarity between Taiwan and the mainland and promotes prosperous development of markets on both sides of the Straits as well as of the whole Asia-Pacific region. For example, Taiwan's mature managerial skills, especially in the information industry, can be combined with mainland China's market potential in the interest of formation of a regional and even global operations and logistics center.
On the other hand, mainland China can make use of Taiwan as its window for speeding up connection to international markets and attracting inward investment, to help it develop its inland economy, especially in the mid-western region. In addition, Taiwan's experience can be useful in its efforts to reform state-run enterprises and village industries in the interest of modernization of its economy.
The Basis for Building a Cross-Straits Common Market
Establishing a common market can help mainland China and Taiwan move toward harmonization and coalescence. It will be a key step in reducing cross-straits tension and opening up a new era of peaceful cross-straits development. The successful establishment of a cross-straits common market also will contribute to the prosperity and stability of the regional economy, and provide new impetus for growth of the global economy.
Developing a cross-straits common market will be a long-term process. It is an ideal that will need to be realized step by step. It must be based on a foundation that is acceptable to both sides. I believe that Taiwan and mainland China should return to the 1992 consensus of "One China, separate interpretation." This can be the starting point for extenuating political differences and strengthening economic cooperation.
Concrete Steps for Establishing a Cross-Straits Common Market
The establishment of a cross-straits common market should proceed step by step in proper sequence, through the systemization and normalization of economic integration. I envisage its main stages of development as follows:
First stage - Promote the normalization of cross-straits trade and economic relations
In establishing 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" and the "No haste, be patient" policy concerning mainland investment. These are of a defensive nature, derived from a "besieged" mentality. Under the new economic environment, they must be fully adjusted in order to establish mutual trust and enable normal trade relations to develop. In his 2001 New Year speech, President Chen voiced his support for a policy of "Pushing for opening with effective management" rather than "No haste, be patient." This is significant. Secondly, the two sides can conduct exchanges among scholars and industrialists to work out strategies for cooperation on matters of mutual interest.
The governments on both sides of the Straits should also act as speedily as possible to set up a mechanism for regular official consultations, with a view to establishing mutual trust, speeding up the normalization of economic and trade relations, and making provision for the orderly lifting of restrictions on two-way direct investment.
Second stage - Harmonize the economic systems on both sides and establish a cross-straits free trade area (FTA)
As cross-straits economic and trade relations move toward normalization, the two sides can make progress in removing non-tariff barriers, harmonizing economic regulations, and establishing common standards, in order to narrow the differences between their respective economic systems. At the same time, both sides can increase their level of economic cooperation, for example in conducting joint R&D and developing special economic zones. During this stage, the two sides should negotiate for a cross-straits common market agreement, to effectively push for harmonization and standardization.
Third stage - Comprehensive economic integration for the realization of a cross-straits common market
Once the establishment of a cross-straits common market has reached a certain point, the two sides can embark on comprehensive economic integration, embracing such areas as currency alliance and tax-systems harmonization.
The three stages outlined above are only a preliminary charting of course. Detailed planning and implementation will need to be adjusted along the way in accordance with evolving circumstances and the changing environment.
Conclusion
The concept of a cross-straits common market has gained broad approval in business, academic and political circles. We have therefore taken the step of establishing the Cross-Straits Common Market Foundation to promote this idea and, we hope, induce more and more people to think about it and join our cause. I believe that, by working toward the creation of a cross-straits common market, we can slowly but surely mitigate the contradiction between political and economic relations that has existed across the Taiwan Straits for more than a decade. By progressing from economic integration toward political integration, the people on both sides of the Straits will be able to make progress and prosper together.
In the last thirty years, Taiwan's development has passed through a number of stages, each presenting its own particular challenges. I feel fortunate to have been involved in that process, doing the best I could to help it along. Now, at the start of this new century, Taiwan finds itself in a new international politico-economic framework. And in this new framework, the issue of cross-straits relations can no longer be evaded.
The concept of a cross-straits common market has come partly from my familiarity with Taiwan's course of development over the last thirty years, and partly from my perception of future global politico-economic development trends. It is my earnest hope that all friends of Taiwan who care about its sustainable development and lasting peace across the Taiwan Straits, and embrace the ideal of the global village, will join with us and help turn this concept into reality.