Setting the record ‘strait’

Locked in China’s shadow, Taiwan continues its struggle to become an economic powerhouse.

Buddhists pray at the Chiang Kai-shek Memorial Hall in Taipei (photo credit: REUTERS)
Buddhists pray at the Chiang Kai-shek Memorial Hall in Taipei
(photo credit: REUTERS)
Imagine a country, geographically isolated, surrounded by bigger, tougher neighbors. Imagine this country had pulled itself up by its bootstraps, turning from an agriculturally focused economy to a modern economic powerhouse.
Despite efforts to isolate it, this country managed to economically integrate itself into global hi-tech supply chains.
The country in question may sound a lot like Israel, but in fact it is Taiwan. Its intractable cold conflict with China remains a volatile flashpoint in the western seas of the Pacific Ocean.
“It looks more peaceful than the Middle East, but it’s a very serious hot spot,” says Alexander Pevzner, founding director of the Chinese Media Center at the School of Media Studies of The College of Management Academic Studies.
Though Taiwan is an important strategic and economic player, China’s increasing might has eclipsed it. Even as China’s growth wobbles, it is poised to become the largest economy in the world by the end of the decade. Prime Minister Benjamin Netanyahu has noted the key role of the rising red giant in Israel’s own economic growth strategy. Just as many countries struggled to navigate their relationships with Israel given the importance of Arab oil over the years, Israel and other countries walk a fine line when they set policy with Taiwan, always looking over their shoulders to check whether the big red dragon in the room approves.
In September, The Jerusalem Post Magazine traveled to Taipei on one of the frequent press tours the Taiwanese government sponsors to sell its side of the story. From the ancient wonders in the National Palace Museum, the modern marvel of the Taipei 101 skyscraper, the Post discovered a country struggling with its identity, and striving to keep its global position under China’s growing shadow.
The National Palace Museum in Taiwan. (photo credit: NIV ELIS)
THE CONFLICT between China and Taiwan dates back to the beginning of the Chinese civil war in 1927, which pitted the Communists against the ruling Nationalist party (KMT). After World War II, the Communists succeeded in taking over the country and establishing the People’s Republic of China (PRC) in 1949, which still rules the mainland today. The nationalist leader Chiang Kai-shek fled to the island of Taiwan, and built a government-in-exile there, maintaining the name of the mainland regime he had ruled until that point, the Republic of China (ROC).
The central tension between the two countries revolved around which was the legitimate ruler of China.
The Cold War complicated matters, demarcating alliances on ideological and geostrategic lines.
Chiang ruled the island with an iron fist, but policies that focused on education and investment helped the agrarian society industrialize, first becoming a manufacturing hub for cheap labor, then moving onto advanced electronics and higher-level manufacturing.
On the mainland, in the meantime, China experimented with disastrous economic policies under the leadership of Mao Zedong.
When it came to diplomatic relations, China established an “us-or-them” approach vis-à-vis Taiwan, refusing full relations to countries that kept embassies on the island across the straits.
Although the ROC recognized the fledgling State of Israel before the government fled mainland China, Israel did not return the favor.
“Israel has never recognized ROC Taiwan, so when the time came for Israel to establish relations with China in 1992, they didn’t have this burden of having to slash relations with Taiwan,” said Prof. Yitzhak Shichor, a professor of Asian studies at the University of Haifa.
Shiyu, or Lion Islet, is one of Taiwan’s offshore islands, less than a half-hour ferry ride to mainland China. (photo credit: REUTERS)
Yet from its new seat of power in Taiwan, the ROC held on to international recognition as the legitimate government of the mainland for several decades after the civil war ended. It continued serving as China’s representative at the United Nations, including its role as one of the five permanent members of the Security Council, until 1971. But as US president Richard Nixon made the strategic choice to open up ties with the PRC, realigning the Cold War map, the ROC found itself outside the body’s membership.
In 1979, the US opened formal diplomatic ties with the PRC, and acquiesced to its demand of withdrawing its embassy from Taiwan.
Yet making sure that Taiwan served as a counterweight to China remained a US priority, and Congress set out to ensure that the ROC maintained a military edge through the Taiwan Relations Act. As the US opened up to China, Israel, which had developed some economic and trade ties with Taiwan, became a useful proxy arms supplier for the island nation.
“Washington needed a reliable, indirect and not too competitive proxy for military supply to Taiwan,” Shichor wrote in a 1998 analysis of the Sino-Taiwanese- Israeli relationship in the journal Survivor.
“As a long-standing US ally with experience in advanced military research and development (R&D) and production, whose quest for diplomatic relations with Beijing had consistently been rebuffed since the early 1970s, Israel was a perfect choice,” he added.
But Israel, finding itself in hard economic times, also saw China as a potentially large weapons buyer. It was one of the few countries that decided against imposing military sanctions on China after 1989’s Tiananmen Square massacre, and began supplying weapons to Beijing. When the two countries established official relation three years later, Israel phased out its military sales to Taiwan.
TAIWAN DID not transition to democracy until the late 1980s, lifting martial law in 1987 and setting its first direct presidential elections for 1996.
While the KMT continued to strive for a reunification with China, the opposition DPP party came to represent a new view that Taiwan should strive to be an independent state.
“If you look 40 or 50 years ago, Taiwan under the rule of the KMT saw themselves as the rightful rulers of China, and Chiang Kai-Shek, who was Mao Zedong’s main rival, saw this is his life’s mission. But as time passed, the third and fourth and fifth generation Taiwanese have developed their own sense of identity,” says Pevzner of the Chinese Media Center.
Around the same time, ties between the two Chinas began to thaw, as the rivals settled on a formula for cooperation.
The “1992 Consensus” between the governments found common ground in their view that there was really one geographic China (including both the mainland and Taiwan), but agreeing to disagree over who ruled it, chalking it up to different “interpretations.”
The somewhat bizarre compromise has allowed the two governments to carry on relations despite their differences.
The resulting stability accelerated a sea of change in Taiwanese politics.
Although voters were split on whether they ultimately wanted unification or independence, the vast majority settled upon the belief that such goals were not realistic in the short term.
Taking over mainland China, they decided, was a far-fetched notion, while declaring outright independence would be seen by China as a provocation, an act of war.
Instead, polls over time showed that around 90 percent of the Taiwanese people wanted to maintain the status quo relationship with the mainland in some form or another, even if they disagreed about whether that status quo should lead to eventual unification, independence, or simply more status quo.
One modern manifestation of the KMT perspective is a pro-democracy view, in which Taiwan sympathizes with people in mainland China whose aspirations for freedom, rule of law and democracy are crushed by the Communist government.
“We see Taiwan as the guardian for democracy and human rights across the straits,” says Jeff J.J. Yang, Taiwan’s secretary- general of Cross-Strait relations.
The DPP remains more wary.
“My sense is that Taiwan is already part of China, not in any official sense, but economically it’s so dependent on China that China can just make Taiwan fall apart in a couple of days,” says Shichor, articulating the DPP’s greatest fears. “As far as I’m concerned it’s a matter of time until Taiwan, one way or another, is incorporated into China.”
IN JANUARY, Taiwan will hold presidential elections, and according to the latest polls, is set to elect its first female president, with DPP’s Tsai Ingwen leading by more than 20 percentage points. Candidates from the KMT and DPP are vying to replace President Ma Ying-Jeou, of the KMT, who for the past eight years has taken unprecedented steps to strengthen Sino-Taiwanese ties. In 2010, the governments signed the Cross-Straits Economic Cooperation Framework Agreement (EFCA), essentially a miniature free trade agreement for goods. A similar, hotly debated proposal for services is in the works.
Despite Ma’s progress on the crossstrait relationship, he has been widely seen as a disastrous leader on domestic policy, with even the KMT distancing itself from him as it promotes its candidate Eric Chu. (KMT’s previous candidate Hung Hsiu-chu fell so far behind in the polls that KMT called a party congress to review her candidacy. At the congress, 91% of the delegates voted to replace her, and KMT chairman Chu was chosen in her stead.) The DPP, with its “status quo now, independence someday” platform, is heavily favored to win the elections, raising questions as to how Tsai will handle the cross-strait relationship.
“The Chinese are terrified that the DPP won’t accept the 1992 Consensus,” Pevzner explains.
In a speech in Washington in June, Tsai sought to ease concerns that she would make sudden moves that would upset the region. She also called for restoring Taiwan’s military edge against China.
The bigger question was how she would approach Ma’s economic agenda, which has had a profound effect on Taiwan-China trade.
Before 2008, there were no regularly scheduled weekly flights between the two countries. Now there are 890. By 2013, bilateral trade grew to over $124b., and China bought roughly 40 percent of Taiwan’s exports.
For Ma, a central objective of warming ties with Beijing was convincing China to clear Taiwan’s path to sign free trade agreements with other countries.
China has over the years made it clear that it will not allow other countries to sign FTAs, which lower trade barriers and bring the signatories economically closer, with Taiwan. In a sense, it is the economic equivalent of establishing full diplomatic ties.
“Many countries want to do business with Taiwan, but when it comes to signing an FTA with us, they become hesitant, because of our diplomatic predicament,” Ma told The Economist in 2014.
Since the EFCA, however, China has loosened its grip, and stood aside as Taiwan signed FTAs with New Zealand and Singapore in 2013, bringing Taiwan’s grand total of FTAs to nine. Even in its most recent deals, it had to call itself a “Separate Customs Territory” instead of a country. Now, the country is trying to convince Japan, the US and the EU to sign bilateral agreements. It is also focusing its effort on important regional deals, such as the Trans-Pacific Partnership (TPP), the 12-country trade deal concluded earlier this month that includes the US, Mexico, Canada, Japan, Singapore and other important regional players.
For China’s trade partners, however, moving forward with a Taiwan FTA is a delicate, dangerous process. Nobody wants to anger a sleeping dragon.
MA’S EMPHASIS on structural economic reforms has helped Taiwan shoot up from 61st place in the World Bank’s Ease of Doing Business Index in 2008 to 19th this year (Israel has slowly dropped to 40th place). Unlike Israel, which hosts R&D centers for world-leading multinational tech companies such as Intel, Microsoft and Apple, Taiwan has found itself specializing in hi-tech manufacturing, serving as a middleman in the supply chains of those same companies.
The first iPhone was 100% manufactured in Taiwan. Now much of it is assembled in China.
“We don’t have the big giants who can control everything. Rather, it’s the small and medium enterprises that can adapt and be flexible” to the needs of global companies, said Chenlung Kuo deputy editor-in-chief of United Daily News Group.
A general view of booths at the 2014 Computex exhibition held in Taipei, the world’s second largest computer show. (photo credit: REUTERS)
Given that Israel is a leader in hi-tech and Taiwan is a leader in hi-tech manufacturing, strong economic ties between the two would seem like a no-brainer.
But despite the fact that Taiwan is one of the biggest traders in the world, only some $1.5b. of goods and services flow between it and Israel each year.
“This is far from meeting the potential,” says Asher Yarden, Israel’s new economic and cultural representative in Taipei.
DPP candidate Tsai has promised to move Taiwan’s economy from an “efficiency- based” model to an “innovation- based” model. Israel, which the World Economic Forum recently ranked third in global innovation, could play an obvious role in achieving that goal.
The two countries signed an agreement on industrial R&D cooperation in April, and have committed to increasing cooperation in other areas as well.
“Israel has a very good, you can say, ‘brand recognition’ in Taiwan,” says Ross Feingold, chairman of the Taipei Jewish Center.
“You mention Israel and people recognize its technological capability, its technical capability. They know that Israel is a democracy in a very dangerous part of the world, and people in Taiwan, who tend to be well-traveled, they know this. They’re aware of the important role that Israel plays in the Middle East.”
Though the Middle East isn’t foremost on the average Taiwanese’s radar, there is a sense of shared values between Israel and Taiwan with their advanced hi-tech economies and strong democratic institutions.
But since Taiwan lost its military edge over the past decade and has grown more economically dependent on China, people in some circles are beginning to approach Israel from a different perspective.
“In the old days we considered ourselves like Israel, surrounded by hostile neighbors and trying to sustain ourselves, not only on national defense but cooperation. But actually, we may be more similar to Palestinians,” says Kuo, the journalist.
That view finds commonalities with the Palestinians’ stateless limbo and lack of full access or representation in global institutions and multinational organizations. It identifies with the feeling of being economically dependent on their larger, stronger neighbor, and feeling a certain degree of helplessness.
In a discussion of the Israeli-Palestinian conflict, the DPP’s Huang said, “We are facing more or less the same problem vis-à-vis China. If we have differences we hope they will be resolved peacefully.”
Such comparisons will likely do little to temper Taiwan’s desire for closer ties with Israel, however, especially because of the stark differences between the conflicts.
“Unlike here in the Middle East, Taiwan and China are really the same people. They speak Chinese, celebrate the same holidays, have the same culture. They don’t have the big religious conflict,” says Pevzner.
Further, China’s military does not control Taiwan, and one would be hardpressed to imagine Taiwanese terrorism hitting the streets of Shanghai or Beijing.
If nothing else, Taiwan has shown itself to be pragmatic, and closer economic ties to Israel are a pragmatic move for Taiwan. For Israel, however, boosting its relationship with Taiwan can be fraught, given the ever-increasing importance of its “frenemy” across the straits. Israel sees China as a potential source of capital and a huge market, and is in the process of negotiating its own FTA with Beijing.
Yarden, Israel’s representative in Taiwan, says both countries are important to Israel.
When asked if Israel would consider its own FTA with Taiwan, he says, “We first have to conclude FTA negotiations that we have with other countries, but down the road, I think that this is something that we would definitely consider seriously.”
The writer was a guest of the Taiwanese government.