Peace is breaking out across the Taiwan Strait. Presumably, that is good for Taiwan
LOCAL gloom holds sway, from Pakistan to North Korea, in so many corners of Banyan’s woods, and an economic pall hangs over nearly all. So it is nice to stumble into a sunlit clearing once in a while.
Taiwan is such a clearing, and the sunlight is its improving relationship with China. Ground-breaking recent agreements on cross-strait travel and investment promise profound consequences for Taiwan. And after a dozen failed attempts to join the World Health Organisation (WHO), Taiwan at last won China’s agreement to be invited to the WHO’s World Health Assembly this month, though merely as an observer.
President Ma Ying-jeou of the Kuomintang (KMT or Nationalist Party) has presided over the change. He came to office a year ago determined to alter the course of his predecessor, Chen Shui-bian of the Democratic Progressive Party (DPP). For eight years, Mr Chen aired his independence-minded views with increasing abandon. China seethed. It views Taiwan as the last unfinished bit of a civil war in which the Chinese Communist Party drove the KMT off the mainland in 1949. It promises war if Taiwan ever declares independence. The tensions were not all Mr Chen’s doing, since China rebuffed early overtures. Still, by the end of Mr Chen’s term, relations with the United States, Taiwan’s protector, were badly strained, too. It was conceivable that Taiwanese provocation might drag America into a conflict with China, dashing hopes of an Asia-led 21st century.
Mr Ma promised a more conciliatory line. The WHO breakthrough is being celebrated in Taiwan as proof it is paying off. This will be the first delegation to represent Taiwan at a UN event since the island lost its seat to China in 1971. Cross-strait relations are the stuff of debate and disagreement, but most Taiwanese see the deal as gaining the kind of “international space” which China has long sought to constrict. Perhaps China reckoned that obstructing Taiwan did nothing for the image China is polishing for itself as a responsible global power. And without its long-planned gesture, progress on cross-strait ties would be harder. China’s long-term strategy for Taiwan is sometimes likened to boiling a frog in water, over a flame so low the frog does not feel it. But first you have to get the frog to plop into the pan.
And so the cross-strait agreements may prove to be the more far-reaching for Taiwan. Direct flights will more than double, to 270 a week. The two sides agreed on a framework to allow financial firms to set up in each other’s country. And Taiwan agreed to open up to Chinese investment. Until now Taiwan, which has up to $400 billion invested in China, allowed almost nothing in return, citing national security. Now, both companies and fund-managers will be allowed in. Already, China Mobile’s purchase at the end of April of a 12% stake in a Taiwanese telecoms firm, Far EasTone, marks the first big mainland investment in Taiwan since 1949, a harbinger of much more to come (see
article).
Of the two sides, Taiwan stands to gain hugely more from all this. Its strengths are in fields such as electronics, information technology and biotechnology. Even with Chinese involvement, these industries will stay in Taiwan, for they depend on decent regulation and copyright protection, both lacking on the mainland. Meanwhile, top Taiwanese brands will get readier access to China’s huge domestic market, so shielding Taiwan’s exports somewhat from the vagaries of the global economy. More mainland Chinese visitors, already running at 3,000 a day, will be a boost to flagging tourism. (Hoteliers report that groups first lock themselves in their rooms, to gawp gobsmacked at politicians being insulted on television chat shows.) Recently a pariah among foreign investors because of poor cross-strait relations, Taiwan has suddenly become the only bull-market story in town.
For some in Taiwan, notably in the DPP, the risks are only beginning as China puts the pan on the heat. Deeper economic integration, they say, will dangerously narrow Taiwan’s options as China moves towards the endgame of unification. Yet Mr Chen’s tenure undermined these arguments. His legacy is very nearly destroyed. Family members have admitted to venality, and Mr Chen himself sits in jail accused of graft and embezzlement. On May 5th prosecutors filed yet more charges of bribe-taking and influence-peddling. The sanctimony of the KMT, once one of the world’s most thuggish and corrupt political parties, but largely spared by the present judicial system, is grotesque. Yet Mr Chen and his approach are discredited, the DPP in tatters.
Enmeshing China too
So at least until 2012, the date of the next presidential election, Mr Ma and his colleagues will make the opposite case. The chairman of his Mainland Affairs Council, Lai Shin-yuan, says that economic integration will increase security by making Taiwan so valuable for China that it will think twice about jeopardising stability. Others argue that an unprovocative island more firmly enmeshed in the global economy will bring about greater American commitment. For now, the United States is delighted at the rapprochement, and at a Beijing-Taipei-Washington triangle that for once is pretty harmonious. Ms Lai promises a “diplomatic truce” with Beijing and an end to a costly (and losing) battle to win diplomatic recognition from tinpot countries. Nor, she says, will political showmanship play any part in Taiwan’s participation in the WHO assembly.
Mr Ma, as it happens, tapped Ms Lai from the pro-independence movement, a sign of the constraints on his policy. Even if he does harbour longings for a closer eventual union with China, its Communist rulers view the 58-year-old upstart as a liberal with ugly habits: advocating human rights and trimming his sails to suit the Taiwanese majority. For now, at least, the desire of that majority is, overwhelmingly, to keep Taiwan’s sovereign arrangements—independent in fact if not law—exactly as they are.
May 7th 2009
From The Economist print edition
Banyan
