President Ma Ying-jeou (馬英九) has repeatedly stated that Taiwan’s economic development cannot be separated from that of China, while criticizing the administration of former president Chen Shui-bian (陳水扁) for what he describes as closed economic policies and telling the public how he has improved the situation.
Indeed, no country can ignore the scale of China’s market and its economic development in recent years. However, it is extremely naive to suggest that China is some kind of panacea — the answer to all of Taiwan’s economic problems. To do so would be to disregard a whole raft of problems.
First, as an economic entity, China is not a completely deregulated market. Politics plays a significant role in its economic development. Taiwanese businesses investing in China lack comprehensive legal guarantees, and there are many cases of corrupt local governments with their fingers in the cookie jar. Indeed, an increasing number of these companies are returning to Taiwan, complaining about their treatment by undesirable elements in China, or even by the government. This evidently is a serious problem.
Second, China has access to a prodigious labor pool and follows its own model of industrial development. For the short term at least, Taiwanese products enjoy an advantage in the Chinese market. However, if Taiwan fails to upgrade and improve its own manufacturing industries and continues to rely on low-tech and original equipment manufacturing (OEM), China will very soon be able to manufacture these same products at a lower cost.
It will become progressively difficult to sustain Taiwan’s traditional manufacturing industries solely by relying on the Chinese market. This is especially true given Beijing’s current development model, which entails absorbing Taiwan’s technology and using it in its own factories. For an example of this, look at what’s happening in the agricultural industry.
Third, China is making all kinds of concessions and opening up trade with Taiwan, but all these are predicated on political considerations. In other words, China has consistently and clearly placed politics over economics. Not only has it maintained that the “one China” principle is to inform all trade exchanges with Taiwan, it is furthering its goal of unification by making Taiwan increasingly economically dependent. Anyone who is naive enough to believe that politics and economics can be kept separate when dealing with China has erred in their understanding of the very basis of China’s cross-strait policy and the timetable it has set for achieving its goal.
As far as China is concerned — and perhaps for any other country too — economic development, while important, is no substitute for politics. The idea that one can avoid or dissipate political disputes through trade exchanges alone has never been borne out historically. When engaging in economic and trade exchanges with China, then, not only does Taiwan need to be careful about ensuring sustainable economic development, it also needs to consider the concomitant political implications.
Lo Chih-cheng is chief executive of the Taiwan Brain Trust.
Translated by Paul Cooper
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