It would be difficult to overstate the importance and timeliness of Scott Kastner’s Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond, which seeks to explain why, despite hostile political relations between Taipei and Beijing, economic ties have not only persisted, but accelerated.
Kastner, an assistant professor in the department of government and politics at the University of Maryland, goes far beyond the general, albeit contested, view that increased trade between two states reduces the likelihood of armed conflict. Rather, he argues that the more important question is when conflict affects trade. His main hypothesis is that national leaderships that are more accountable to “internationalist economic interests” are less likely to act in ways that threaten economic stability.
To make his case, Kastner looks at three protracted hostile political relationships, or dyads — Taiwan-China, India-Pakistan and South-North Korea — with emphasis on the Taiwan Strait. What follows is a fascinating exploration of the cross-strait paradox, whereby despite serious political conflict, trade between the two sides from the 1980s on has accelerated.
While prior to the mid-1980s economic interaction between Taiwan and China was extremely limited, democratization in Taiwan, added to a revaluation of the New Taiwan dollar that made domestic manufacturing less competitive, brought gradual changes in Taipei’s policies on investment in China. Democratization meant that the authorities became more accountable to the people and could no longer ignore business associations, or the “internationalist economic interests,” which gained clout as the size of the businesses investing in China grew. As liberalization intensified, the cost to the national leadership of ignoring those interests, or of preventing their expansion, increased.
This process went relatively smoothly, until the nature of the commercial links began having what Kastner calls “negative security externalities” for Taiwan. Arguments for caution included fears that investment in China helped it modernize, or that Taiwanese operating in China could be used for blackmail by Beijing, or held hostage. Furthermore, as trade intensified, Taiwan became increasingly dependent on China, which by the early 2000s surpassed the US as Taiwan’s primary trade partner.
Those security externalities forced the Taiwanese leadership to perform a balancing act between safeguarding political interests (e.g., sovereignty) and remaining accountable to business interests that not only called for further cross-strait trade liberalization, but also increasingly clamored for stability in the Taiwan Strait.
Taipei was therefore compelled to adopt a two-track approach to economic ties with China, one that clearly separated trade from politics. For Beijing, however, the growing cross-strait economic relationship had few negative externalities; it realized, in fact, that economic integration could be a crucial component of its ambition to annex Taiwan. To this end, in times of crisis it has sought to reassure Taiwanese businesses operating in China — including, with a few exceptions, “green” ones — that their interests are safe. As it stands to gain economically and politically from cross-strait economic integration, Beijing has refined the signals it sends to Taipei to express displeasure when the Taiwanese leadership appears to threaten the “status quo” so that Taiwanese business will not be scared off. Still, given the authoritarian nature of its government, in extreme cases Beijing is at greater liberty to act, even when its decisions risk undermining local governments that benefit from Taiwanese investment.
Kastner nevertheless shows that despite becoming increasingly beholden to business interests, Taiwanese leaders can slow the pace of integration when the domestic political conditions are right. As such, both Lee Teng-hui (李登輝) during his second term and Chen Shui-bian (陳水扁) during the 2004 elections were able to tap into sovereignty and protectionist constituencies to retain their grip on power, which had a cooling effect on cross-strait liberalization.
Still, one conclusion that can be drawn from Kastner’s book is that even when pro-independence administrations are in power, and even in times of high political tension across the Taiwan Strait, liberalization will proceed. Furthermore, as Kastner rightly points out, leaders and their coalitions can have very different interpretations of the negative security externalities involved in trading with China, as President Ma Ying-jeou (馬英九) has shown.
The author remains ambivalent about the impact of trade on conflict, concluding that its constraining (higher costs of war making it less likely) and transformative (reconciliation through increased contact) effects appear to have been marginal. Despite two decades of economic integration, for example, Taiwanese support for the “status quo” has remained constant. Ironically, international economic interests and China’s dependence on global markets may also have limited its ability to send threatening signals to Taipei, as doing so risks alarming international investors. Taipei, Kastner writes, may have been aware of this, which could account for risk-taking on the question of sovereignty. One constraining factor that Kastner oddly leaves out, however, is the security guarantees the US has extended to Taiwan.
Kastner concludes on a note of cautious optimism about the pacifying potential of economic liberalization in the Taiwan Strait. Still, he argues that if economic integration continues to accelerate — which the proposed economic cooperation framework agreement (ECFA), added to growing Chinese investment in Taiwan, would certainly do — future Taiwanese presidents may be less inclined, or able, to undermine stability for political reasons. This would indicate that we can expect more “centrist” government coalitions that are more accountable to business internationalists to be voted into office. The ramifications for the future of Taiwan as a distinct political entity, while serious, are not addressed by Kastner, who throughout his book remains commendably neutral, if not clinical, about his political preferences regarding the question of Taiwanese independence.
Given the idiosyncratic nature of the Taiwan Strait conflict, added to the unique nature of the political systems in Taipei and Beijing, it would be imprudent to generalize the findings by applying them to other conflicts (something Kastner admits himself). This said, Political Conflict and Economic Interdependence Across the Taiwan Strait is arguably one of the most important works of political science theory written about the Taiwan Strait in recent years and makes a substantial contribution to our understanding of political decision-making.
That US assistance was a model for Taiwan’s spectacular development success was early recognized by policymakers and analysts. In a report to the US Congress for the fiscal year 1962, former President John F. Kennedy noted Taiwan’s “rapid economic growth,” was “producing a substantial net gain in living.” Kennedy had a stake in Taiwan’s achievements and the US’ official development assistance (ODA) in general: In September 1961, his entreaty to make the 1960s a “decade of development,” and an accompanying proposal for dedicated legislation to this end, had been formalized by congressional passage of the Foreign Assistance Act. Two
Despite the intense sunshine, we were hardly breaking a sweat as we cruised along the flat, dedicated bike lane, well protected from the heat by a canopy of trees. The electric assist on the bikes likely made a difference, too. Far removed from the bustle and noise of the Taichung traffic, we admired the serene rural scenery, making our way over rivers, alongside rice paddies and through pear orchards. Our route for the day covered two bike paths that connect in Fengyuan District (豐原) and are best done together. The Hou-Feng Bike Path (后豐鐵馬道) runs southward from Houli District (后里) while the
President William Lai’s (賴清德) March 13 national security speech marked a turning point. He signaled that the government was finally getting serious about a whole-of-society approach to defending the nation. The presidential office summarized his speech succinctly: “President Lai introduced 17 major strategies to respond to five major national security and united front threats Taiwan now faces: China’s threat to national sovereignty, its threats from infiltration and espionage activities targeting Taiwan’s military, its threats aimed at obscuring the national identity of the people of Taiwan, its threats from united front infiltration into Taiwanese society through cross-strait exchanges, and its threats from
March 31 to April 6 On May 13, 1950, National Taiwan University Hospital otolaryngologist Su You-peng (蘇友鵬) was summoned to the director’s office. He thought someone had complained about him practicing the violin at night, but when he entered the room, he knew something was terribly wrong. He saw several burly men who appeared to be government secret agents, and three other resident doctors: internist Hsu Chiang (許強), dermatologist Hu Pao-chen (胡寶珍) and ophthalmologist Hu Hsin-lin (胡鑫麟). They were handcuffed, herded onto two jeeps and taken to the Secrecy Bureau (保密局) for questioning. Su was still in his doctor’s robes at