Foreign Policy Research Institute A Nation Must Think Before it Acts Editor’s Corner Fall 2016
Editor’s Corner Fall 2016

Editor’s Corner Fall 2016

Taiwan in the Tsai Era

When the Democratic Progressive Party (DPP) swept to victory in Taiwan’s presidential and legislative elections in January 2016, it marked a significant turning point in the island nation’s politics. The voters chose Tsai Ing-wen as the Republic of China’s first female president—a still-rare event in an Asian polity, and all the more unusual for a woman who is not an heir to a political dynasty. Taiwan’s robust democratic institutions reached another milestone of consolidation, leading to the third peaceful transfer of the office of the presidency across party lines during Taiwan’s two decades of fully democratic elections. The election also gave the DPP a majority in the Legislative Yuan (LY) for the first time and, thus, the mandate—and responsibility—that comes with control over both the legislative and executive branches.

Building on huge wins in local elections in November 2014, the DPP’s triumph in the 2016 balloting heralded a remarkable return from the wilderness for the DPP, which had been routed badly in 2008, at the end of the only prior DPP president, Chen Shui-bian’s second term.

The DPP’s success also reflected the failure of the prior ruling party, the Kuomintang (KMT), which bore the burdens of an unpopular two-term incumbent (Ma Ying-jeou), and a bungled nomination process which had led to the ouster and replacement of the party’s presidential candidate mid-campaign.

Yet, much about the enduring political significance of the 2016 election remains uncertain or in dispute. In this special edition of Orbis, Richard C. Bush, Shelley Rigger, and Hsiao-Huang Michael Hsiao take up these issues. Did the lopsided outcome reflect more the DPP’s strengths or the KMT’s failures, or something else? Bush identifies DPP strong points, including Tsai’s attributes as a candidate, the DPP’s well-run campaign, and its ability to define the issues on which the election was fought. Bush also points to KMT weaknesses, including voters’ fatigue or dissatisfaction with eight years of KMT rule, internal splits in the KMT (including the highly public feud between Ma and LY speaker Wang Jin-pyng), failure to address the rise of social movements (including the student-led Sunflower Movement that occupied the LY in opposition to a Ma-backed cross-Strait agreement on trade in services), and the KMT’s troubles in picking a presidential candidate. Rigger emphasizes the KMT’s serious problems, including: a long-running and deep-seated leadership crisis that undermined party unity (particularly between its “mainlander” and “Taiwanese” elements) and marginalized or ousted some of its most able politicians; and an inability to articulate policies for dealing with Beijing that could appeal to an electorate no longer satisfied with the KMT’s Ma-era policy of endorsing the 1992 Consensus (the framework, backdated to a 1992 meeting between representatives of the two sides, that accepted “one China, respective interpretations”)—a problem that grew worse for the KMT as the DPP under Tsai moved toward the center on cross-Strait relations. Hsiao emphasizes support from reinvigorated social movements, as well as public disenchantment with the KMT’s policies and performance on economic, social, and cross-Strait issues, as explaining the DPP’s electoral victories.

Did the 2016 election signal a lasting change in Taiwan’s political landscape or a more ordinary alternation in power between the two principal parties in a democratic system? Rigger and Bush are agnostic. Rigger concludes that the KMT’s deep distress may, or may not, prove fatal, but that the party so far has done very little to right itself. Bush considers whether 2016 will turn out to have been a “critical election” or a “realignment election” that heralds a lasting change in party affiliation and voting patterns. He finds that, although shifting patterns of identity (toward “Taiwanese” and away from “Chinese”) and party preferences point in that direction, the evidence is inconclusive. Bush also notes that the possibility of sustaining the recent DPP dominance may depend on Tsai’s ability to accomplish a truly daunting and ambitious policy agenda, and to do so in the face of an uncooperative China, partisan opposition from the Blue camp, indiscipline within the Green camp, and a set of dysfunctional political institutions. Hsiao suggests that fundamental and transformative changes are afoot. He points to: the remarkable rise of numerous and wide-ranging, largely middle-class social movements in Taiwan during the Ma presidency; the steady rise of stronger self-identification as Taiwanese—especially among younger voters—and identification of Taiwan as a country independent from China; and the DPP’s superior ability to respond to these changes with policies on social and economic issues and cross-Strait relations. Still, Hsiao cautions, a lasting realignment in the DPP’s favor depends on the party’s ability to handle many difficult policy issues, ranging from education to the economy, ethnicity to the environment, local governance to foreign policy, and truth-and-reconciliation at home to relations across the Strait.

Economic issues loomed large in Taiwan’s 2016 election and pose some of the biggest challenges facing Tsai Ing-wen and the new DPP-led government. By Taiwan’s standards, economic performance was dismal to sluggish under Ma, and this is part of what drove voters to the DPP. With the Chinese and global economies growing more slowly and amid increased competition from lower-cost producers abroad, a traditional driver of Taiwan’s economy—exports—held limited po-tential. The Sunflower Movement—which bolstered the DPP’s electoral fortunes in 2014 and 2016, and gave rise to the DPP’s more purist ally, the New Power Party (NPP)—reflected, among other things, economic anxiety among the young, who feared the consequences of a greater opening to the lower-wage behemoth across the Strait. A principal reason that cross-Strait policy shifted from perennial liability to new-found strength for the DPP was that the public had grown skeptical of the Ma administration’s claims that deepening integration with mainland China’s economy would bring economic benefits to Taiwan, albeit with long-acknowledged political risks. Growth was not the only politically salient economic concern. Amid worsening income distribution, income-inequality and economic insecurity have become major issues as well. Tsai and the DPP emphasized both during the campaign, and Tsai stressed economic reinvigoration, pension reform, improving the social safety net, and other issues of economic and social justice in her May 20, 2016, inaugural address.

Will Tsai’s government be able to deal with Taiwan’s daunting economic challenges effectively—and to the satisfaction of Taiwan’s voters? In this issue, Pochih Chen combines economic analysis and a long historical view to conclude that Tsai faces deep-rooted and intractable problems, and unreasonably high expectations. Chen attributes Taiwan’s stunning success as a newly industrializing country through the 1980s to a liberal trading order and international factor price equalization. As one of the few countries that took advantage of open markets in more developed countries, Taiwan reaped the gains of national income that came from exporting goods in which Taiwanese producers had a comparative advantage. Taiwan benefited from the increase in per capita income generated by the trade-driven pressure to equalize the price of labor cross-nationally in industries that produce traded goods. This resulted in Taiwanese workers’ wages rising up toward developed country levels. In more recent times, the same process has started to work against Taiwan, after Taiwan became a relatively high-wage country and China and other less-developed economies began to compete with Taiwan in the global marketplace. Finding new sources of growth in national income and wages is now more difficult. It requires developing higher-value-added industries and effective government policies to promote them. While the Tsai Administration appears to grasp some of the issues, it faces serious obstacles: widespread overestimation of the productivity and international competitiveness of Taiwan’s labor force; ingrained habits of relying on original equipment manufacturing (OEM); manufacturing and cost-cutting in export sectors; poor measurement and incentive structures for research and development; weak entrepreneurship; and underdeveloped financial institutions. Integration with the Chinese economy has compounded these difficulties, leading to excessive transfer of industry across the Strait and making Taiwan vulnerable to Beijing’s use of the economic leverage it has gained over Taiwan, including to political ends. Chen concludes that wise government policies—including efforts to develop new industries, foster a culture of innovation (which Hsiao also urges), and reform the financial sector— can address the most important problems, but success will not come easily.

In his article, Peter Chow sees international economic relations as a potential, if partial and difficult-to-achieve, solution to the economic challenges facing Taiwan. Chow contrasts Tsai’s agenda of integrating Taiwan with the global economy (which inevitably includes integration with China’s economy) with Ma’s policy of integrating Taiwan with China’s economy as a means to open up opportunities in the global economy. Chow argues that, despite these contrasting priorities, Tsai’s government can build on the gains Taiwan has made over many years. Through membership in the World Trade Organization (WTO) and associated plurilateral agreements, free trade and investment agreements with a handful of small states, the cross-Strait Economic Cooperation Framework Agreement and its numerous follow-on accords, more ad hoc arrangements with the United States and Japan, and a “functional approach” to increasing inbound and outbound foreign investment, Taiwan has participated in economic globalization and become deeply enmeshed in global value chains (the complex networks for producing relatively high-end goods that extend across many international borders). Membership in the WTO, the Asian Development Bank and, especially, the Asia-Pacific Economic Cooperation organization has helped Taiwan achieve—despite Beijing’s resistance—a level of international stature that could help it gain entry to emerging mega-regional trade blocs: the U.S.-led Trans-Pacific Partnership (TPP), the Chinese-led Regional Comprehensive Economic Partnership (RCEP, and, ultimately, a future Free Trade Area of the Asia-Pacific. Chow endorses the Tsai government’s vision of globalization, which includes ardent pursuit of TPP membership and a “new southward policy” (encouraging trade and investment with South and Southeast Asia) to deepen and secure Taiwan’s international economic ties and to offset risks that political conflicts would limit the economic benefits of cross-Strait cooperation.

Like her predecessors, Tsai Ing-wen must navigate the murky and treacherous waters of Taiwan’s external relations. The big issues are enduring ones: how to preserve or enhance Taiwan’s precarious international stature despite resistance and pressure from Beijing; how to maintain strong ties and trust with Taiwan’s indispensable supporter, the United States; how to build stronger connections with friendly or potentially friendly powers in the region, especially Japan; how to handle the nettlesome relationship with Taiwan’s important partner and existential threat across the Strait. With Tsai and the DPP in power, these familiar tasks present distinctive challenges and opportunities.

On cross-Strait relations, Tsai has staked out a position that is relatively accommodating by recent DPP standards but that takes a step back from Ma’s policies. Tsai has continued her predecessors’ insistence on her country’s sovereignty, and on the indispensability of democratic approval of any change to Taiwan’s status by the people in Taiwan. Tsai has promised to maintain the existing framework for relations with Beijing, and to pursue peace, stability, and development in cross-Strait relations. She has pledged to conduct cross-Strait affairs in accordance with the existing Republic of China constitutional order and the Articles Governing Relations between the People of the Taiwan Area and the People of the Mainland Area (the provisions adopted under President Lee Teng-hui as part of the initial opening to China in the early 1990s). She has said that she will “respect the historical fact” of the agreements reached and negotiations undertaken between the two sides since 1992. But she has stopped short of accepting a “one China” principle or the “1992 Consensus” favored by Ma and Beijing.

This has meant a cold shoulder for Tsai from Beijing, which had made acceptance of the 1992 Consensus the sine qua non for good cross-Strait relations, and which promptly suspended communi-cations between the two quasi-official bodies—Taiwan’s Straits Exchange Foundation and the PRC’s Association for Relations Across the Taiwan Straits—as well as the limited but recently growing government-to-government contacts. As Richard Bush notes in his article, Tsai’s victory has challenged some of Beijing’s recent assumptions concerning cross-Strait relations, including: that there is no fundamental, identity-based divide between the two sides of the Strait; that deepening economic integration and ongoing dialogue would lead ineluctably to unification; and that Taiwanese favor further improvement of cross-Strait relations.

A few months into Tsai’s tenure, it is uncertain how deep or how long the Beijing-imposed chill in cross-Strait relations will be. It does create a challenging environment for Tsai to engage in Taiwan’s long-running quest for international space—the subject of Jacques deLisle’s contribution to this collection. DeLisle examines the legacy that Tsai has inherited and the agenda she is poised to pursue, which include: limited participation in a handful of major established international organizations (most notably, the World Health Assembly and the WTO); seeking access to new and potentially important, primarily economic regimes (such as the TPP and RCEP); maintaining formal diplomatic relations with fewer than two dozen, mostly small states (and thus extending the “diplomatic truce” of the Ma years); pursuing a state-like role—and, therefore, stature—in addressing international disputes (primarily those over territory and maritime zones in the East and South China Seas); sustaining or enhancing robust informal ties with greater powers (principally the United States and Japan, but other Asian states as well); and taking unilateral steps to behave as if Taiwan were a fully accepted member of international regimes associated with major international norms (such as democratic values, human rights, and the environment). He concludes that near-term prospects for enhancing Taiwan’s international space are limited, given the line Beijing has taken on cross-Strait relations from the run-up to Tsai’s election through her early months in office. On the other hand, Beijing has not yet moved to squeeze Taiwan’s international space. The strong state of Taiwan-U.S. relations, along with the troubled state of U.S.-China relations, improve Taiwan’s prospects. Yet, uncertainties lie ahead on many fronts that matter for Taiwan’s search for greater international space and, in turn, security, including the trajectory of Beijing’s policy toward Taiwan, the U.S. election’s outcome and developments in Taiwan’s domestic politics.

Vincent Wang takes a relatively sanguine view of U.S.-Taiwan relations under Tsai, as does Richard Bush. They agree that Tsai’s 2015 pre-election trip to Washington and her moderate, pro-status quo positions on cross-Strait relations assuaged much, if not all, of the concerns that marred her visit—and led to an all-but-open endorsement of her op-ponent—four years earlier during her first, unsuccessful campaign for president. Wang argues that Tsai’s stance on cross-Strait issues was generally acceptable to U.S. officials and analysts who foresee neither a return to the chronic crises of the Chen years, nor a continuation of trends from the Ma presidency, which had begun to raise worries that the initially salutary rapprochement in cross-Strait relations might go too far and imperil U.S. interests. Wang forecasts the decline of a familiar and (for the U.S.) unhelpful dynamic of the Chen and Ma presidencies, when changes initiated by Taiwan prompted reactions from Beijing that altered cross-Strait relations and, in turn, triggered U.S. responses that generally sought to restore the status quo ante. With Tsai’s victory and inauguration, Wang argues that we have entered a phase when Beijing, Taipei, and Washington all find the status quo relatively tolerable, although far from ideal, and have no compelling reason to restart a cycle that could destabilize trilateral relations. Such an outcome is far from certain: Tsai could take status quo-threatening steps for domestic political reasons; Beijing might lose patience with the current cold peace in cross-Strait relations and increase pressure on Taiwan, or challenge the United States more broadly, and in ways that affect Taiwan, as the Obama Administration heads toward lame duck status; and the outcome of the U.S. elections could significantly change U.S. policy—and tempt China to be more assertive toward Taiwan—if Donald Trump wins. Wang advises the United States to engage in high-level strategic dialogue with Taiwan, attend to Taiwan’s defense needs through appropriate arms sales, support Taiwan’s membership in the TPP and international organizations, facilitate Taiwan’s contributions to bilateral, regional, and global agendas, and manage the South China Sea disputes (an area where the U.S.’s and Taiwan’s preferences are not well-aligned) in the aftermath of the July 2016 international arbitration decision that rejected positions partly shared by Beijing and Taipei.

June Teufel Dreyer foresees a deepening of Japan-Taiwan relations, albeit below the threshold of what Japan believes Beijing will find intolerable. Changes at the non-governmental or quasi-governmental and people-to-people levels began to occur immediately after Tsai’s election. Tsai had signaled interest in closer ties with a pre-election visit to Japan and, immediately after it, by appointing DPP heavyweights former premier and presidential candidate Frank Hsieh Chang-ting and former senior official and Chen Shui-bian confidant Chiou Yi-jen to top Japan relations posts. Tokyo reciprocated modestly with warmer-than-usual statements about Taiwan’s elections and bilateral relations. In enhancing ties with Japan, Tsai can build upon positive popular feelings toward Japan that date from Japanese colonial rule; memories of the support Japan offered during the Chiangs’ rule on Taiwan; the stronger links forged during Lee’s presidency, drawing on Lee’s personal connections to Japan and reinforced by Tokyo’s concerns about Chinese threats after the PRC-initiated cross-Strait missile crisis; and the progress made under Chen, with his “de-sinification agenda” at home, and deepening tensions in Japan-China relations. Relations with Japan have long been a partisan issue in Taiwanese politics, and under Ma the relationship took a step backward, with frictions exacerbated by the missteps of leaders and top officials on both sides. With the DPP back in power, Tsai emphasizing relations with Japan, and Japan’s relationship with China still deeply troubled, Taiwan has promising opportunities. Nonetheless, Dreyer points out, the Tsai administration must address a host of difficult bilateral issues, including ongoing disputes over fishing rights, the unresolved question of compensation for comfort women, concerns over food safety (specifically, imports from areas affected by the Fukushima nuclear disaster), complex economic issues (ranging from Taiwan’s bilateral trade deficit, to Japan’s possible support for Taiwan’s TPP accession, to investment relations between major electronics giants in the two countries), disputes over territorial sovereignty and related maritime rights in the East China Sea, and Japan’s still uncertain willingness to increase significantly its security cooperation with Taiwan—especially in the face of stiff Chinese opposition.

Like Japan and Taiwan, the United States and Taiwan have a relationship with deep and tangled roots that still shape relations today. In the final article in this issue, Arthur Waldron takes the historical view, addressing the legacy of the U.S.’s opening to the PRC in the 1970s and its persisting impact on Taiwan and U.S.-Taiwan relations. In Waldron’s assessment, when Richard Nixon and Henry Kissinger abandoned the U.S.’s 30-plus year ally, they expected that Taiwan would soon disappear, being absorbed by China as Taiwan capitulated in the face of what he calls the “shock and awe” of U.S. abandonment. Yet, nearly half a century later, a functionally independent Taiwan survives despite persistent pressures from Beijing, many slights by the United States, much American contribution to China’s rise as a formidable power, and Washington’s acquiescence in deeply problematic behavior by the Chinese regime at home and abroad. The expected impending demise of Taiwan was undercut by: post-Nixon era U.S. law (the Taiwan Relations Act) and policy (beginning under Reagan); the emergence of a remarkably strong Taiwanese identity, vibrant Taiwanese democracy, and relatively robust international stature that the United States failed to foresee; and Mao and Chinese leaders’ deep distrust of the United States, which, Waldron finds, led them to share information with the Chiang Kai-shek regime about the then-impending tectonic shift in U.S.-China relations. Waldron argues that Taiwan under Tsai Ing-wen is strikingly secure as an at least de facto independent state. But, Waldron concludes, Tsai’s Taiwan does face serious challenges and uncertainties, largely attributable to the lingering legacy of Nixon and Kissinger’s dashed expectations that they were creating a new, durable East Asian order centered on U.S.-China relations and with no place for Taiwan. These challenges include: increasingly assertive, even hostile, behavior by China toward many of its neighbors and toward the United States which, in worst case scenarios, risk war—even devastating war—for Taiwan and its neighbors; and well-founded uncertainty about the U.S.’s—and Japan’s—ability and will to provide Taiwan with the material means and credible commitments necessary for its security in the face of Chinese coercion.

In our book review section, William Stanton reviews Shirley Lin’s book, Taiwan’s China Dilemma: Contested Identities and Multiple Interests in Taiwan’s Cross-Strait Economic Policy. In another essay, Shawna Yang Ryan reviews Michal Thim’s Green Island: A Novel.

Overall, the contributors to this special issue of Orbis are guardedly optimistic about Taiwan’s prospects under Tsai and caution that we will not be able to answer many of the most important questions for some time. Tsai and the DPP’s victory have shown the health of Taiwan’s democracy, laid bare the weaknesses of one of its two major parties, and left open the question of whether its domestic politics have changed fundamentally. Tsai must govern a country that faces major, and closely interlinked, economic challenges at home and abroad with wise and ambitious policies—ones that will be very difficult to implement—she can do much to address. Many of Taiwan’s external relations—including those with the U.S., Japan and the international order—are in relatively good shape and have prospects for further improvement under Tsai. Beijing’s approach to cross-Strait relations in the Tsai era, however, present newly increased, as well as chronic and long-running challenges which keep Taiwan’s international standing and security precarious—both directly and through the influence Beijing wields with other states.

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