NBR Analysis, Vol. 11, No. 2, Essay 1

THE TAIWAN FACTOR IN THE VOTE ON PNTR FOR CHINA AND ITS WTO ACCESSION

Nancy Bernkopf Tucker

The United States House of Representatives cast a crucial vote on May 24, 2000, to confer permanent normal trade relations (PNTR) status on China. The Senate is scheduled to consider similar the legislation during the current session. A positive outcome would both end the struggle conducted in Washington each spring since 1990 over China’s trade privileges and ensure that American business has full access to the commercial package that China is negotiating with the members of the World Trade Organization (WTO). China’s accession to the WTO and its acquisition of PNTR status are vital not just for the prosperity of its 1.3 billion people but also for the 22 million on the island of Taiwan. In recent years, Taiwan has shifted so much of its industrial production to the mainland of China that denial of PNTR would have a gravely negative impact on Taiwan’s economy. Moreover, as a result of an informal agreement reached in 1992, the WTO will not act on Taiwan’s application until China has been admitted. As a result, Taiwan has emerged as one of the strongest proponents of granting China membership in the WTO. Once both China and Taiwan have joined the organization, there is reason to hope that increased interaction and economic integration will encourage peaceful relations across the unstable Taiwan Strait.

On November 15, 1999, the United States and China signed an agreement on China’s accession to the World Trade Organization (WTO) and on May 24, 2000, the U.S. House of Representatives voted 237 to 197 in favor of granting China permanent normal trade relations (PNTR). These milestone accords, when affirmed by the Senate, will potentially revolutionize China’s economy and could have a radical impact on relations between China and Taiwan. For Washington, the accords could reduce strains inherent in dealing with Beijing and Taipei , as a multilateral forum assists in resolving some of the disputes between these antagonists. Over the long term, greater interaction and economic integration across the Strait could mean increased stability and a better chance for peace.

Taiwan and the PNTR Vote for China

The vote on PNTR with China and the issue of China’s accession to the WTO are, of course, not synonymous. Having completed its bilateral negotiations with Washington, China can enter the WTO as soon as its negotiations with other members are resolved; this entry is in no way contingent upon congressional action to grant PNTR. Should the U.S. Congress decide not to grant PNTR, the only effect would be to deprive American business of the concessions won in the complex process of integrating China into the world trading community.

For Taiwan (and Hong Kong) both WTO accession and passage of PNTR for China are critical, promising to have a lasting impact on economic development and political stability. Taipei promptly welcomed the November U.S.-China bilateral WTO agreement.1 Among the first statements made by the new president of Taiwan, Chen Shui-bian, after his election on March 18, 2000, was a call for "the normalization of U.S.-China trade relations" and China’s accession to the World Trade Organization.2 In subsequent statements to the press, Chen asserted that integration of China into the global trading community would facilitate democratization and thereby foster peace. On April 12, 2000, the Heritage Foundation sponsored a video-teleconference between members of Congress and Chen, who explicitly called upon the American legislators to help both China and Taiwan enter the WTO, reminding them that "normal trade with China does much more than promote China’s economic development. It also promotes Taiwan’s…economic growth."3 Chen’s efforts to improve China’s odds of gaining PNTR departed from past Kuomintang (KMT) practice, which left the third party campaigning in Washington to Hong Kong.4 Finally Taipei’s new leadership, in spite of hostile rhetoric from Beijing, never suggested that PNTR be used as a bargaining chip for better behavior.

Taipei sees China’s PNTR status and WTO membership as crucial for two reasons. The most obvious motive is Taipei’s desire to enter the WTO. Although U.S. policy does not link admission of Taiwan to a successful application by China, most members of the WTO have accepted the idea that Taiwan will not gain entry until China is admitted. But Taipei’s concern is broader than that. Taiwan has moved so much of its manufacturing to the mainland in recent years that any tampering with normal trade relations between the United States and China also has the potential to circumscribe Taiwan’s economy severely. Beijing calculates that, at the end of 1999, Taiwan’s investors had funded more than 43,500 projects on the mainland worth more than $43.8 billion.5 The goods produced in these manufacturing enterprises are generally not sold in China or in Taiwan, but are exported to the United States. The failure of China to secure PNTR would mean serious economic losses to Taiwan.

At the same time, it is important to note that, however critical obtaining PNTR may be to Beijing, China’s leaders have not been willing to risk their hold on power to get it. Thus neither claims of sovereignty over Taiwan nor suppression of dissent from the Falungong, the banned spiritual movement, or the China Democratic Party were sacrificed to create a more favorable image of China among members of the U.S. Congress. For Beijing these are highly emotional, fundamental, and non-negotiable challenges to the legitimacy of the Chinese state. Further, Chinese leaders suspect that Americans, particularly those in the Clinton administration and Congress, are ultimately guided by opportunities for financial gain and will award PNTR to China for economic reasons regardless of Beijing’s human rights record or threats against Taiwan. The House vote, which passed by a wider margin than had been anticipated, confirmed this view.

Taiwan's Participation in the WTO:
The Significance for China and Taiwan

Beijing has strong feelings about Taiwan’s participation in international organizations like the WTO. Over the years, insisting that the international community respect its sovereignty and accept that Taiwan is a part of one China, Beijing has driven Taiwan out of virtually all such multilateral organizations, particularly those affiliated with the United Nations. Taiwan has been able to preserve a foothold in certain economic groups such as the Asian Development Bank (ADB) and the Asia Pacific Economic Cooperation (APEC) forum, which do not require statehood as a criterion for membership.6 In 1983 Ronald Reagan threatened the ADB with reduced U.S. contributions to keep it from surrendering to Beijing’s demands that Taiwan be expelled. Over objections from Beijing, Taipei remained a member even after China entered the ADB in 1986, although Taiwan was forced to accept a name change from Republic of China (ROC) to "Taipei, China."7

Taiwan has also asserted an interest in entering the WTO. In fact, the Republic of China was a founding member of the General Agreement on Tariffs and Trade (GATT), the precursor to the WTO, in 1947 but rashly resigned its position in 1950 as the chaos of civil war on the mainland and the subsequent flight to the island of Taiwan made adhering to all the provisions of the agreement impossible. Between 1965 and 1971, Taiwan took part in the GATT as an observer, a position with less onerous responsibilities than full membership. When the ROC left the United Nations in 1971, however, it also lost its GATT observer status. For Washington this development was not entirely unwelcome since the United States enjoyed trade preferences that it would have had to surrender had Taiwan been part of the GATT system.8

In the mid-1980s Taiwan entered a new era of political, economic, and social transformation. It began a liberalization of its political system that eventually led to multiparty politics and democracy. It relinquished long-standing controls over contacts with the People’s Republic of China, permitting travel to the mainland and gradually sanctioning indirect trade. A new approach to world affairs called "flexible diplomacy" allowed Taipei to abandon its claim of being the capital of all of China and conduct its relations on a more realistic basis. Thereafter it accepted parallel representation in international organizations and even agreed to dual recognition formulas, which Beijing continued to reject. As part of this shift, in 1987 Taipei launched an internal study to review its relationship to the GATT and in 1990 requested membership under Article 33 of the GATT Charter as the "customs territory of Taiwan, Penghu, Quemoy, and Matsu," thereby hoping to evade the sovereignty issue.9 Since Hong Kong had been admitted to the GATT as a customs territory in April 1986, Taiwan anticipated entering on similar terms, taking full advantage of the trade benefits and adhering to all the same requirements. By this time several members of the GATT recognized the distinct advantages of having Taiwan inside the organization since membership would compel Taipei to lower trade barriers.

Nevertheless Taiwan’s path to reentry was not smooth. China had applied for membership in 1986, and although its own negotiations of terms progressed much more slowly than did those of Taiwan, the GATT proved unwilling to defy Beijing and admit Taiwan first. Not until July 1991, when George Bush shifted U.S. policy, did a major power support Taipei’s application. President Bush did so to secure the backing of Senator Max Baucus (D-MT) for extension of China’s most-favored-nation trade treatment in a contentious vote that year. Although Taipei appreciated the new U.S. posture, Foreign Minister Frederick Chien insisted that Taiwan deserved consideration on its own merits and ought not to be dependent upon a successful Chinese application, which might well be many years away.10 But in 1992, when the GATT restored Taipei’s observer status and created a Taiwan working group to negotiate entry, the membership also informally agreed to respect Beijing’s wishes and postpone the admission of Taiwan until after China joined.

Accession to the GATT/WTO has been far less contentious in Taiwan than in China, where opponents of close relations with the United States have been allied with economic conservatives who perceive adherence to the WTO as a threat to national security. China’s premier, Zhu Rongji, actually faced charges of being a national traitor for his April 1999 market-opening concessions to the United States. On November 15, 1999, the United States and China finally concluded 13 years of negotiation and signed a WTO accession agreement. Political scientist Joseph Fewsmith believes that this agreement is "the Rubicon in China’s opening to the outside world," as all previous efforts to integrate China’s economy with the world trading community had stopped short of "total commitment."11

In Taiwan, no similar nationalistic movement arose to block this step toward globalization. Indeed, the popularity of striving to join the world community was reflected in the 1996 National Development Conference in Taipei, which reconfirmed Taiwan’s desire to enter the WTO in addition to the World Bank and the International Monetary Fund.12 Taiwan has subsequently remained enthusiastic even though it will bear significant economic costs as a result of entering the WTO. Taipei’s Chung-hua Institute for Economic Research, writing for the Cabinet-level Council for Economic Planning and Development, has calculated that with its accession to the WTO exports will fall and imports will rise, producing a $5 billion drop in Taiwan’s trade surplus.13 But Taiwan’s officials and economists argue that market liberalization, to which Taiwan is committed, would trigger some short-term pain in any case and that WTO-induced dislocation would be worth the price.14 To expedite its application, in 1999 Taipei actually volunteered to abide by all the entry requirements of a developed economy and to subscribe to a range of optional rules in areas such as government procurement and high-tech import tariffs.15

Taiwan’s very enthusiasm for membership has heightened Beijing’s discomfort with it. Although Beijing has an informal and widely assumed obligation to support Taiwan’s accession, it is not formally required to do so. Indeed, even though parallel membership in the WTO would have clear economic benefits for China, Beijing’s leaders suspect that Taipei’s desire to join the WTO is motivated not simply by commerce but also by the desire for political integration with the world trading community that all members share.16 Beijing has consistently sought to ensure that other states treat Taiwan’s status as a matter of China’s internal politics and not as an international issue. Among Beijing’s most bitter complaints about Lee Teng-hui, Taiwan’s former president, was his effort to internationalize the sovereignty question. For years China has warned that a foreign presence on the island would be sufficient justification for Beijing to use force, a threat reiterated in its March 2000 Taiwan White Paper.17 So Beijing’s willingness to have Taiwan join the WTO is complicated by the likely political advantage this would give Taipei. What Beijing might do about this is unclear; perhaps not even China’s leaders are yet certain.

China's Accession and the Question of Taiwan

Both China and Taiwan appear finally to be on the threshold of accession to the WTO. China has not completed all its negotiations, but there is optimism that remaining disputes will be resolved in the not too distant future. Taipei has signed agreements with 25 of its 26 important trade partners, has gone through verification procedures that eliminate inconsistencies between separate accords, and is ready to enter. Hong Kong is the only party that has not signed its bilateral treaty with Taipei, although the agreement was initialed in 1997 and reconciled before the end of 1998. But now that Hong Kong is a part of the People’s Republic of China, the political reasons for its demurral are obvious. Technically Taiwan’s application could nonetheless be considered now, since under WTO rules decisions are made by a two-thirds vote. However, traditionally the organization functions by consensus, so approval of Taiwan’s request for membership will not be forthcoming until Beijing also is ready.

Even at that juncture accession might be difficult. Problems impeding Taiwan’s entry could arise from actions taken by either Taipei or Beijing. The least likely obstacle would be an effort by Taipei to invoke a non-application formula against China, under Article 13 of the WTO Agreement. Such an action would mean that some or all of Taiwan’s concessions could not be claimed by Beijing. Although current members, including the United States, have availed themselves of this option in the past, Taiwan is not expected to do so lest its admission be hampered.

Steeper hurdles may be erected by the Chinese. In fact, the government in Taipei worries that China, acting through sympathetic states inside the WTO—the so-called Gang of Five (Pakistan, Cuba, Bangladesh, Sri Lanka, and Uruguay)—could significantly delay Taiwan’s accession even as China is brought into the organization. Indeed, there are fears that China could join and then bar Taiwan. China’s strategy for preventing Taiwan’s entry might include:

action by a Chinese confederate in the WTO, who would take issue with words in the working party report that accompanies Taiwan’s application, averring that these terms bestow sovereignty upon Taiwan;

objection by a friend of China to consideration of Taiwan’s case on the grounds that it had not been properly consulted by Taipei;

efforts by Beijing to bully Washington, provoking the Clinton Administration to drop both China and Taiwan from consideration;

a request from China for a "decent interval" between its own entry and that of Taiwan. Once a member, China could build delay upon delay to prevent Taiwan’s accession;

assertion by China, upon its own accession, that it has sovereignty over Taiwan whose admission must be as part of China and at Beijing’s indulgence.

Taipei fears that China’s willingness to see Taiwan inside the WTO, expressed repeatedly in the past, may have been significantly diminished by the victory of the Democratic Progressive Party (DPP) in the presidential elections. Beijing’s attitude toward a related economic initiative, establishment of the so-called three links (in transportation, trade, and mail), did change radically in the aftermath of Chen Shui-bian’s election. Having originated the concept in 1979 and actively promoted it for years, Beijing declared just days after the DPP’s success that these links can only be created if the new president, who has a history of pro-independence activism, subscribes to a policy of one China.18 Were Beijing to adopt a similar strategy with regard to the WTO, it could, from Taipei’s point of view, make Taiwan’s accession so humiliating that it would feel obliged to abandon the effort and decline membership.

Taiwan also worries that the United States might not prove to be a reliable proponent of its case. To Americans the word games that China and Taiwan play when referring to sovereignty are difficult to understand and the sensitive nuances not always clear. Washington could misread the sparring between Beijing and Taipei or decide that Taipei’s reservations are not vital and, citing its one-China policy, side with Beijing. Taiwan’s distrust of the United States has long historical and bipartisan roots, dating from the civil war period of the 1940s, through the Nixon betrayal of the 1970s, to the recent actions of the Clinton Administration.

Only in the last two years have President Clinton’s decision to verbalize the "3 No’s" in Shanghai and the subsequent suggestion by Assistant Secretary of State Stanley Roth that Taiwan and China reach interim agreements demonstrated the dangers inherent in Washington’s position. From Taipei’s perspective, Clinton’s "3 No’s" statement (no support for Taiwan’s independence; for one Taiwan, one China; or for Taiwan’s membership in international organizations requiring statehood) foreclosed self-determination by the people of Taiwan and undercut the government’s status in negotiations with the mainland. The concept of interim agreements worsened the situation by pressuring Taiwan into talks with Beijing that the United States thought should end in substantive, political results. Not only had Clinton violated President Reagan’s six assurances, but he did so while cross-strait relations remained tense after the tumultuous events of 1995 and 1996, when Lee Teng-hui traveled to the United States and China responded by launching missiles into the waters around Taiwan.19

Lee Teng-hui reacted to these developments by firing his own broadside. On July 9, 1999, he told a German reporter that henceforth Taiwan and China should conduct their relations on a special state-to-state basis. Lee sought to capitalize on strained Sino-American relations in the wake of the bombing of China’s embassy in Belgrade and address several problems. He wanted to break out of the tightening international isolation imposed by Chinese diplomacy, strengthen the presidential candidacy of his vice-president Lien Chan, commit his successor (whether Lien, James Soong, or Chen Shui-bian) to his policies, deter Wang Daohan from visiting Taiwan—or, failing that, gain parity across the negotiating table—and rebuke Washington for trying to coerce Taipei and tilting more and more toward Beijing. That Washington, in accord with its growing tendency to equate one-China with the People’s Republic of China, might respond inappropriately to a WTO confrontation heightened the anxiety of Taiwan’s officials. 20

Thus an apprehensive Taipei government has actively offered inducements and sought guarantees regarding its accession. For instance, it increased its quota on imports of American meat and poultry products in early 1999. Overall analysts contend that WTO membership for Taiwan would mean an expansion of U.S. exports to Taiwan totaling several billion dollars annually.21 Taipei has sought to have China’s accession protocol made contingent upon approval of its own final agreement.22 In the U.S. Congress, Taipei encouraged efforts to connect PNTR for China to WTO accession for Taipei.

Accession and the Search for Peace in the Taiwan Strait

If both China and Taiwan are able to join the WTO, there will inevitably be significant changes in the relationship between them. Both sides would be compelled to drop trade barriers and open themselves to greater interaction and integration. This should mean a broader scope for confidence building, the most important component of any long-lasting peaceful solution to confrontation across the Taiwan Strait. Under existing conditions not even a reasonable proposal for resolving differences between Beijing and Taipei would have a chance given the depth of distrust between the two sides. Working together under the auspices of the WTO, however, could enhance understanding. Indeed, even if no final solution to the impasse between China and Taiwan results, expanded contacts will most likely reduce strains and the potential for war.

Accession will necessitate substantial departure from existing policies designed to protect Taiwan’s economy against dependence upon the mainland. In reaction to booming cross-strait economic relations, Lee Teng-hui sought to restrain eager entrepreneurs. Without limitations, it became apparent that businessmen would make increasingly significant investments in mainland China over longer time periods, hollowing out Taiwan’s industrial core and transferring advanced technology to make their mainland production internationally competitive. Lured by a common language, similar cultural background, cheap labor, natural resources, and a huge domestic market, these entrepreneurs would not exercise any self-control. Eventually Taiwan’s businessmen would act as a pro-China lobby in Taiwan, be used as hostages by Beijing, help build a richer and more threatening China, or simply render the island’s economy vulnerable to PRC boycotts and sanctions. The point was clearly illustrated from 1995 through 2000, when, at times of crisis, Beijing harassed Taiwan’s investors on the mainland, seeking to shape their politics and the influence they could exert at home.23

During the 1980s, to avoid giving Beijing leverage, Taiwan’s investment on the mainland was illegal, but widespread evasion of existing laws convinced Taipei officials to lift the prohibition in 1991. The resulting rush to put money into China led to a new effort in 1993 to encourage investment in Southeast Asia, including provision of funds to Indonesia, the Philippines, and Vietnam to build export-processing zones and industrial parks to accommodate Taiwan’s businesses.24 By the end of 1994, Taiwan had become the second largest investor in the region after Japan. But the flow of money southward did not stem the flood into China. In August 1996, Lee called upon entrepreneurs to "go slow, be patient." The government reinforced rhetoric with regulations, banning investment in PRC infrastructure, high-technology industries, the energy area, and the service sector, requiring investments over $5 million to be licensed and capping individual projects at $50 million.25 These restrictions also failed, according to statistics from Taiwan’s Ministry of Economic Affairs, which showed that at the end of 1999 some 40 percent of Taiwan’s overseas investments were in China and just 15 percent in Southeast Asia.26 With this much capital at stake and more than 200,000 of Taiwan’s businessmen residing in China, Beijing would have little difficulty exerting heavy pressure upon Taipei.

WTO rules of course threaten to further undermine Taipei’s defenses. A system that emphasizes elimination of trade barriers and the granting of most-favored-nation treatment strikes at the heart of rules meant not only to control Taiwan investment in and exports to China but also Chinese investment in and exports to Taiwan. For instance, WTO regulations would throw open Taiwan’s markets to mainland agricultural products and compel Taipei to permit direct shipping, air traffic, and postal communications (the three links) to facilitate commercial exchange.27 Although Chen Shui-bian and the DPP have long been committed to such openings to China,28 and the Kuomintang itself talked about making Taiwan an Asia-Pacific Regional Operations Center for international business, neither party doubts that these policies involve risk.29 Taipei could find itself under assault by aggressive Chinese economic policies. If so, it will have remedial options. It could invoke Article 21 of the WTO Agreement, which would allow it to restrict specific trade rights for China that jeopardize national security. A less confrontational approach would follow the Japanese model, imposing informal trade and investment barriers such as phytosanitary (plant health) regulations. Although China could lodge complaints against such commercial obstacles just as Washington has done against Japan in various venues, it would take years to break down each of these constraints. In addition, because so much of the commercial interaction in the Asia marketplace is multinational, Taipei might be able to call upon foreign investors to assist in overcoming threatening Chinese schemes.

Greater economic integration is not a one-way liability, just as it does not benefit only one side. Taiwan’s vulnerability is matched, if not equaled, by the growth of China’s reliance on Taiwanese investment and expertise. As Beijing seeks to create a potent business lobby to promote its interests in Taipei, it cannot help but nurture a domestic constituency with much to lose from harsh PRC actions against Taiwan.30 Furthermore, Beijing has long counted on the intertwining of the two economies to ensure eventual unification, and so the WTO-led commercial interaction, by gradually but reliably advancing Beijing’s agenda, may contribute to peace in the Strait. Finally, and more practically, the WTO will, for the first time, offer a structured arena for resolution of disputes between Taipei and Beijing.

Nancy Bernkopf Tucker is professor of history at Georgetown University and the Georgetown School of Foreign Service. She is a specialist on U.S. relations with China, Taiwan, and Hong Kong. Her publications include China Confidential (2000), Taiwan, Hong Kong and the United States: Uncertain Friendships (1994), and Patterns in the Dust: Chinese-American Relations and the Recognition Controversy, 1949-1950 (1983).

Notes:

1 Murie Dickie, "Taipei Sees Hope for Its Own Accession," Financial Times, November 16, 1999, p. 19.

2 Jim Mann, "Taiwan’s New President Backs Sino-American Trade," Los Angeles Times, March 22, 2000, A1.

3 Chen’s remarks to the Heritage Foundation group can be found online at: www.heritage.org.

4 Mann, "Taiwan’s New President," A1.

5 China Online, "Taiwanese Contracted China Investment Up 46%," April 13, 2000, quoting China’s assistant minister for Foreign Trade and Economic Cooperation, Ma Xiuhong.

6 Taiwan was admitted to APEC at the same time as China and Hong Kong in 1991. It was a founding member of the ADB in 1966.

7 Samuel S. Kim, "Taiwan and the International System: The Challenge of Legitimation," Robert G. Sutter and William R. Johnson (ed), Taiwan in World Affairs, Boulder: Westview, 1994, p. 161.

8 Nancy Bernkopf Tucker, Taiwan, Hong Kong and the United States, 1945-1992: Uncertain Friendships, New York: Twayne/Macmillan, 1994, pp. 168-69.

9 China had insisted that Taiwan’s case be considered under Article 26 governing colonial territories such as Hong Kong rather than under Article 33. June Teufel Dreyer, "Taiwan’s Position Regarding Transnational Issues," in Sutter and Johnson, Taiwan in World Affairs, p. 121.

10 Julian Baum, "A Favor of Sorts," Far Eastern Economic Review, August 8, 1991, p. 8.

11 Joseph Fewsmith, "China and the WTO: The Politics Behind the Agreement," NBR Analysis, vol. 10, no. 5 (December 1999), p. 25.

12 Ralph N. Clough, Cooperation or Conflict in the Taiwan Strait, New York: Rowman & Littlefield, 1999, p. 81.

13 Simon Burns, "WTO Entry to Cost Taiwan $5 billion," Financial Times, November 30, 1999, p. 16.

14 Higher taxes on cooking wine, for instance, engendered political friction in 1999. Murie Dickie, "Taiwan Fears Grow Over WTO Entry," Financial Times, November 2, 1999, p. 18. Likely to be penalized by WTO accession would be the agricultural sector, textile and auto makers, as well as processed food manufacturers. P.T. Bangsberg, "Taiwan Slashes Tariffs, Seeks to Enter WTO," Journal of Commerce, April 28, 1999, 3A.

15 John Zarocostas, "Taiwan Concedes More in Bid to Join WTO," Journal of Commerce, May 13, 1999, 3A.

16 In fact the Democratic Progressive Party’s (DPP), "White Paper on Foreign Policy for the 21st Century," (November 28, 1999, p. 15) states clearly that "Although the WTO is an economic entity, almost all of its members are important members of the UN. Thus, the WTO would be an important venue for Taiwan’s global participation."

17 The text of China’s White Paper on Taiwan is available online at: www.fmprc.gov.cn/english/dhtml.

18 Liu Xiaoming, deputy chief of mission at the Chinese Embassy in Washington, D.C. made the statement in a speech to a conference hosted by the Center for Strategic and International Studies (CSIS) in Washington, D.C. on March 29-30, 2000. See Jim Mann and Tyler Marshall, "Chinese Reject Taiwan Trade Overtures," Los Angeles Times, March 30, 2000, A4.

19 Reagan’s six assurances were given to Taiwan when its president grudgingly accepted the August 17, 1982, Communiqué with China regarding arms sales to Taiwan. These assurances said that the United States 1) had not set a date for ending arms sales; 2) would not consult China regarding arms sales; 3) would not mediate between Beijing and Taipei; 4) would not revise the Taiwan Relations Act of 1979; 5) had not altered its position regarding Taiwan’s sovereignty; and 6) would not pressure Taiwan to negotiate with China.

20 Nancy Bernkopf Tucker, "Security Challenges for the United States, China, and Taiwan at the Dawn of a New Millennium," Project Asia, Alexandria, VA: CAN Corporation, 2000.

21 Greg Mastel, "Stop Tiptoeing Around and Celebrate Taiwan," Journal of Commerce, March 17, 2000, p. 7.

22 "Taiwan May Join WTO," Financial Times, February 19, 2000, p. 5.

23 "Harassed Business," Far Eastern Economic Review, August 17, 1995, p. 12; Murie Dickie and James Kynge, "China Warning to Taiwan Businesses," and "Business in Taiwan Heeds Warning on Independence," Financial Times, April 10, 2000, p. 10, and April 11, 2000, p. 12. According to a Taiwanese newspaper, Beijing launched an investigation into which Taiwan’s businessmen dealing with China had voiced pro-independence sentiments. These businessmen would become targets for harrassment. "‘Pro-Independence’ Taiwanese Firms to Face Squeeze in China," Taipei Times, April 20, 2000.

24 Chu Yun-han, "The Prospect of Cross-strait Economic Relations Under the New President," paper delivered at the CSIS Conference on "Taiwan 2000 Presidential Election: Issues and Interpretation," March 29-30, 2000, Washington, D.C.

25 Clough, Cooperation or Conflict, pp. 55-58; Denny Roy, "Tensions in the Taiwan Strait," Survival, vol. 42 (Spring 2000), pp. 80-82.

26 Mark O’Neill, "Young Turks Invest in Cross-strait Ties," South China Morning Post, March 12, 2000, p. 11. These figures were probably too low since they did not include indirect Taiwan’s investments in China.

27 Anticipating these changes, Taiwan’s legislature opened the three links between several small offshore islands and China in March. John Pomfret, "Taiwan Enticed by ‘Huge Market’ in China," Washington Post, March 27, 2000, A19.

28 In November 1999 the "DPP White Paper on China Policy for the 21st Century" advocated bilateral travel and sea transportation. It viewed air transportation as a security problem, however, and proposed "unilateral operation by Taiwan but with the principle of mutual benefit and profit sharing." The paper also called for an investment protection agreement and establishment of trade representative offices. Further, it discussed the challenges of dependence on the China market and Chinese investment in Taiwan. The paper is available online at: www.dpp.org.tw.

29 Clough, Cooperation or Conflict, pp. 42, 44. The Kuomintang’s position, however, was not consistent since, until the presidential campaign of Lien Chan, it remained unwilling to implement the three links for various political and security reasons. Leng Tse-kang. The Taiwan-China Connection, Boulder, CO: Westview, 1996, pp. 73-74.

30 To some extent this is reminiscent of the Nixon-Kissinger effort to influence Soviet behavior through a policy of linkage in the 1970s. They soon found that American farmers grew as dependent on selling grain to Moscow as Moscow did on the purchases, which made it impossible to coerce Soviet leaders by shutting off grain supplies. Raymond Garthoff. Détente and Confrontation, Washington, D.C.: Brookings, 1985, p. 33.

© 2000 by The National Bureau of Asian Research

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