Taiwan- Japan Relations - From the Aspect of Economy

Chapter III: Competition and Cooperation between the U.S. and the PRC under the

4.2 From the Aspect of Economy

4.3.3 Taiwan- Japan Relations

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Cross-Strait relations are the most stable and peaceful they have been in the past 66 years.²²

In addition, since the existence of a stable foundation and mutual trust, President Ma was able to meet with mainland Chinese leader Xi Jinping in Singapore on November 7, 2015 to exchange opinions on consolidating Cross-Strait peace and maintaining the status quo in the Taiwan Strait. The meeting was significant for the peaceful development of Cross-Strait relations.

The Office of the President, Republic of China (Taiwan) announced four achievements of the Ma-Xi summit. First, it marked the first Cross-Strait leaders' meeting since Taiwan and mainland China came under separate rule 66 years ago, demonstrating to the world that the two sides have established a mechanism to resolve disputes in a peaceful manner. Second, this was the first time since the two sides reached the 1992 Consensus that the leaders of the two sides have met to reconfirm the shared political basis of Cross-Strait ties. Third, the meeting helped build a bridge between the two sides, establishing a new model whereby the two leaders can meet under conditions of equality and dignity. And fourth, the meeting also marked the first time Taiwan could directly convey to the leader of mainland China its concerns about the mainland's military deployment against Taiwan, as well as Taiwan's breathing room on the international stage, and demand that the mainland show goodwill through concrete actions.²³

4.3.3 Taiwan- Japan Relations

22 Office of the President, Republic of China (Taiwan), “President Ma meets U.S. Deputy Assistant Secretary of State and Senior Official for APEC Matthew J. Matthews.” op. cit.

23 Ibid.

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Although Taiwan and Japan have disagreements on the Sankaku islands dispute, generally speaking, Taiwan and Japan still remain close and have friendly relations.

On April 10, 2013, Taiwan and Japan signed a fisheries agreement, resolving disputes that had plagued Taiwan for 40 years. In addition, in September of 2011 the two countries also signed the Taiwan-Japan Bilateral Investment Arrangement, thus opening a new era in bilateral economic and trade relations. The ties between the two countries also have seen many important advances including the signing of an open skies agreement and a youth working holiday agreement. As for relations between the private sectors of the two nations, bilateral tourism between Taiwan and Japan accounted for 4.6 million discrete visits to Taiwan in 2014. In 2015, the total may exceed five million, which would be a record. All of these developments demonstrate the close and cordial bond between the R.O.C and Japan.²⁴

Taiwan and Japan share similar geographic characteristics, with both countries being subject to the threat of typhoons and earthquakes. Taiwan was shaken by a major earthquake on September 21, 1999 and also experienced devastating mudslides and flooding caused by Typhoon Morakot in 2009. In both instances, the government and people of Japan extended generous assistance. Following the March 11, 2011 Great East Japan Earthquake the R.O.C government immediately dispatched a search and rescue team to the disaster area, and the people of Taiwan enthusiastically donated goods and funds. The president said the expressions of generosity by both sides highlight a deep mutual friendship.²⁵

24 Office of the President, Republic of China (Taiwan), “President Ma meets Japan Interchange Association Chairman Mitsuo Ohashi.” Taipei, Taiwan. November 18, 2015. Retrieved 10 January 2016, from gov.tw/Default.aspx?tabid=491&itemid=36182&rmid=2355

25 Office of the President, Republic of China (Taiwan), “President Ma meets delegation led by Japan’s Iwate Prefecture Governor Takuya Tasso.” Taipei, Taiwan. November 10, 2015. Retrieved 10 January 2016, from

http://english.president.gov.tw/Default.aspx?tabid=491&itemid=36292&rmid=2355

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Japan is Taiwan's third largest trading partner and major source of foreign investment and technology, while Taiwan is Japan's fourth largest. Bilateral trade last year hit US$61.6 billion. In addition, over the past six decades the two countries have signed a total of 58 agreements. For example, the open skies agreement has not only boosted the number of flights between Taiwan and Tokyo's two airports, but has also increase person-to-person exchanges in tourism and culture.²⁶

4.3.4 Summary

After Taiwan withdrew The United Nations in 1971, Taiwan now is not recognized by most countries and international organizations (as a sovereign nation). The Taiwanese government has been seeking a title that can be accepted by The United Nations for reentrance, however, since the PRC insists on the “One China Policy,” many countries remain silent on this issue.

Although the Republic of China (Taiwan) is not recognized by most countries and many important international organizations, Taiwan still remains allies with 22 countries. In recent years, the Taiwanese government tried to participate in Non-Governmental Organizations (NGO) to break through its diplomacy dilemma. There are more than 60 countries setting up institute offices in Taiwan and maintaining close political, trade and culture relations even after breaking off diplomatic relations with Taiwan. Those institutes include the American Institute in Taiwan (AIT), Interchange Association, Japan (IAJ), Singapore Trade Office in Taipei, European Economic and Trade Office (EETO), German Institute Taipei, Bureau Français de Taipei and The British Office. Taiwan also has economic and cultural offices in the previously

26 Ibid.

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mentioned countries to deal with diplomatic and consular affairs. Through the process of participating with NGO’s, many countries also support the Republic of China to use Taiwan or Chinese Taipei as the title to participate in international affairs.

Currently the Sino-U.S relations is the highest priority for both countries, as for Taiwan, China is its biggest Trade partner and the U.S. is its most important security ally. Taiwan needs to have a full understanding of the U.S policy toward China, and how China may respond in order to avoid being marginalized.

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Chapter V

Potential Development of Cross-Strait Relations under the U.S. Rebalance to Asia Policy

5.1 The historical progression of Cross-Strait relations

The Cross-Strait policy is an unavoidable topic for Taiwan, the main reason is that the PRC has always claimed that Taiwan is part of China. As for China, the One China policy is one of the highest principles that they hold dear. Additionally, they also hope Taiwan in the future could be like Hong Kong and adapt the “One Country Two Systems”

policy as a political arrangement before reaching their end goal, which is unification.

It is well known that China has deployed missiles which are pointed directly at Taiwan as a means to threaten and intimidate from their independent intentions while at the same time, China has also taken advantage of Taiwan’s economic dependency on China.

From “A Message to Compatriots in Taiwan” in 1978, Ye Jianying’s 9 points in 1981, Deng Xiaoping’s 6 points in 1983, Jiang Zemin’s 8 points in 1995, Hu Jintao’s 6 points in 2008, we can tell that although the wording is slightly adjusted, there is actually no ambiguity regarding China’s intentions and its One China Policy.

Currently, the development of Cross-Strait relations is based on the 1992 consensus.

In July of 1987, the government lifted martial law in Taiwan and the Penghu archipelago. Later on in November of that year, Taiwan residents were also permitted to return to Mainland China to visit relatives for the first time. The progress of Cross-Strait relations thus proceeded from an initial state of military conflicts and stand-offs

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to a new stage of person-to-person interaction rather abruptly. In 1991 Taiwan set up its Straits Exchange Foundation (SEF) and the PRC established it’s Association for Relations Across the Taiwan Straits (ARATS) in order to create an institutionalized communication channel. However, the differences of opinion about the "one China"

principle have become more pronounced.¹

On August 1, 1992 former President Lee Teng-hui convened a plenary session of the National Unification Council (NUC). At that meeting they passed on the meaning of "one China," stating that: "Both sides of the Taiwan Strait acknowledge that there is only one China. However, the two sides have different opinions as to the meaning of 'one China.'" In talks held in Hong Kong at the end of October of 1992, Mainland China wanted to discuss how "one China" should be interpreted but no consensus was reached. On November 3 the SEF suggested that both sides express their interpretations of "one China" orally, and the suggestion was respected and accepted by the ARATS on November 16. After the 1992 Hong Kong talks, the following year Taiwan and Mainland China held the Koo-Wang talks in Singapore and signed four general agreements which launched a new era in Cross-Strait negotiations.²

However, after former President Lee visited the U.S. in 1995, Cross-Strait tensions escalated. During Taiwan's presidential election in 1996, the PRC fired two missiles that landed off the coast of Keelung and Kaohsiung that precipitated a crisis in the Taiwan Strait. In July of 1999 former President Lee proposed designating Cross-Strait relations as "special state-to-state relations," which was dubbed as "two states theory."

Feeling that the 1992 Consensus had been violated, Mainland China once again broke

1 Office of the President, Republic of China (Taiwan), “President Ma addresses Mainland Affairs Council.” Taipei, Taiwan, April 29, 2015. Retrieved 10 January 2016, from

http://english.president.gov.tw/Default.aspx?tabid=491&itemid=34609&rmid=2355

2 Ibid.

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off contact between the SEF and the ARATS. In the year 2000 Taiwan had its first transfer of power between political parties. The new president Chen Shui-bian did not endorse the 1992 Consensus. At the same time, he advocated a policy of "one country on each side" and launched a referendum seeking R.O.C membership in the United Nations. During President Chen's eight-year tenure, the PRC refused to continue institutionalized Cross-Strait negotiations.³

Taiwan's 2008 elections brought another transfer of political power. Four days after President Ma Ying-jeou was elected, on March 26, Hu Jintao and former U.S.

President George W. Bush proposed that "Mainland China and Taiwan should restore consultation and talks on the basis of the 1992 Consensus, which sees both sides a recognizing that there is only one China, but that they agree to differ on its definition." Hence, in May 2008 the SEF and the ARATS announced that they would resume the institutionalized Cross-Strait negotiations based on the 1992 Consensus.

In June, the two sides agreed to commence direct flights and allow Mainland Chinese tourists to visit Taiwan, which was a major step in Cross-Strait relations.⁴

5.2 Taiwan’s Cross-Strait Policy under President Ma Ying-jeou

5.2.1 President Ma Ying-jeou’s Cross-Strait Policy

After President Ma Ying-jeou took office in 2008, he has tried to maintain the status quo based on "no unification, no independence, and no use of force" in the Taiwan Strait under the framework of the R.O.C Constitution and to promote the peaceful development of Cross-Strait ties under the 1992 Consensus. Over the past eight years,

3 Ibid.

4 Ibid.

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the two sides have signed 23 agreements that are related to the livelihood of the public.

These 23 agreements include the three direct links and Cross-Strait direct air transport, tourism between Taiwan and China, food safety, medical and health cooperation, joint crime-fighting, and economic cooperation.⁵

In addition, President Ma Ying-jeou believes that if Taiwan can shelve its disputes and avoid provoking China, China will in turn through its goodwill, allow for Taiwan to have more international space unencumbered. It seems like for President Ma Ying-jeou, the China policy is more important than its foreign policy. As long as Taiwan accepts the 1992 Consensus, Taiwan and China can work together. Additionally, he also adapted that so-called Flexible Diplomacy and Diplomatic Truce policy which stopped the engagement of vicious diplomatic competition with PRC and avoided

“checkbook diplomacy.” The above-mentioned diplomatic policy also eased doubts of Taiwan being a troublemaker the U.S had. Despite the fact that President Ma Ying-jeou has still emphasized Taiwan’s interpretation of the so-called “One China” as being The Republic of China, which is totally different from PRC’s interpretation.

In the first term of his Presidency, President Ma Ying-jeou focused more on economic aspects of how dialogue with China could present Taiwan with opportunities, especially with regard to opening direct flights between China. Since Taiwan’s economic growth heavily relied on trade with China, and coupled with a strong desire to create a new era of peace and shared prosperity with China, President Ma did his utmost not to provoke China. In an interview to El Sol de Mexico on August 26, 2008, President Ma further mentioned that the two sides of the Taiwan-Strait have a special

5 Ibid.

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relation, but not anything that could be construed as being state to state relations.⁶ In an interview with CNN on April 30, 2010, President Ma said that Mainland China has been a threat to Taiwan for 60 years, and the reason his government decided to improve relations with Mainland China was to try to reduce the tension across the Taiwan Strait by means other than the military. So it was very important to ease the tensions and to reduce the atmosphere of hostility and the way of achieving it was not just to engage in an arms race.⁷

Generally speaking, President Ma Ying-jeou thinks that economic integration is the best way to solve political conflicts. Facing the pressure of re-election, President Ma Ying-jeou further stated the idea of “mutual non-recognition of sovereignty, and mutual non-denial of governing authority.” Additionally, he intended to expand on the idea of a peace dividend from solely an economical aspect and shift it into the political realm as well.

In President Ma Ying-jeou’s re-election inauguration speech in 2012, he once again reiterated that the government will pursue the development of Cross-Strait peace under the framework of the R.O.C Constitution, by maintaining the status quo of "no unification, no independence, and no use of force" in accordance with the "1992 Consensus,” whereby each side acknowledges the existence of "one China" but maintains its own interpretation of what that means. In addition, Cross-Strait relations would be promoted under the principles of addressing "easy issues before difficult ones," "urgent matters before non-urgent ones," and "economic matters before

6 Xian-jun Peng, “President Ma: Cross-Strait is not state-to-state relations, it is a special relations.,”

Liberty Times Net, September 4, 2008. Retrieved 10 January 2016, from http://news.ltn.com.tw/news/focus/paper/240207

7 CNN’s Amanpour, “Interview with Taiwan's Preisdent,” CNN, April 30, 2010. Retrieved 10 January 2016, from http://edition.cnn.com/TRANSCRIPTS/1004/30/ampr.01.html

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political ones."⁸

5.2.2 The Sun-Flower Movement

On March 18^th 2014, students broke into the Legislative Yuan and occupied the chamber for 23 days. They also occupied the Executive Yuan on March 23. Both occupations were triggered by the Home Affairs Committee of the Legislative Yuan to pass a bill on the Cross-Strait Service Trade Agreement (CSSTA) with China, which was designed to open up the service sector across the Taiwan Strait. The students’

occupation of parliament was a bid to prevent the passage of an agreement allowing for freer trade in services with China. They argued that the pact was negotiated in secret and would allow China to gain greater political control over the island. The students demanded government transparency and a review of the trade bill between Taiwan and China. “Oppose the Trade Pact, Save Taiwan” and “Protect our Democracy, Retract the Trade Pact” were the key slogans throughout the protest. One of their main demands was for a law allowing for greater public oversight of such Cross-Strait agreements, which was to also be implemented before this particular services pact was passed.

The CSSTA was negotiated and signed in Shanghai on July 21, 2013 by representatives from Taiwan’s Quasi-state agency, the SEF, and its Chinese counterpart, the ARATS. The CSSTA opens selected service-sector markets in Taiwan to mainland Chinese investment, and vice versa, within the context of the Cross-Strait Economic Cooperation Framework Agreement (ECFA). It aims to formalize existing business

8 Office of the President, Republic of China (Taiwan), “President Ma convenes press conference for local and foreign press to mark the inauguration of the 13^th-term president and vice president of the ROC.” May 20, 2012. Retrieved 10 January 2016, from

http://english.president.gov.tw/Default.aspx?tabid=491&itemid=27448&rmid=2355

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practices and lift trade restrictions between Taiwan and China. China would open a total of 80 market segments while Taiwan would liberalize 64 industries. As the smaller economy, Taiwan is expected to benefit more from China’s larger market. Many observers have projected that Taiwan’s financial and retail-related industries, which together compose roughly 25 percent of Taiwan’s GDP, would emerge as the primary beneficiaries.⁹

Taiwan’s service sector produces almost 70 percent of its GDP. However, it consists mainly of small- and medium-sized enterprises (SME). In contrast to their Chinese counterparts, who are usually larger, better-funded state-owned enterprises (SOE). This scale disparity threatens the Taiwanese SMEs and gives them a competitive disadvantage. In addition, other domestic barriers would remain after the CSSTA’s implementation. For example, in regards to e-commerce, Taiwanese portals, such as Yahoo and PChome would continue to be barred from entering China.

However, some Chinese firms such as Taobao.com had already been operating in Taiwan without any market restrictions. Also, local Chinese spas and hairdressers would be subject to a flat-tax scheme, while Taiwanese entrants may face higher operating expenses. The other stakeholders are the workers. The service sector in Taiwan employs nearly 60 percent of its workforce. The CSSTA could potentially affect roughly 2.85 million people’s livelihoods. With the average annual real salary in 2013 shrinking back to the level of what it was 16 years ago, at around US$14,400 in 1997 dollars, with lower-skilled workers in less competitive industries being already at risk. Younger workers may be greatly affected as well as many are experiencing a lack of job mobility and stagnation in entry-level wages which

9 JoAnn Fan, “The Economics of the Cross-Strait Services Agreement,” The Diplomat, April 18, 2014.

Retrieved 10 January 2016, from http://thediplomat.com/2014/04/the-economics-of-the-cross-strait-services-agreement/

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run approximately 38 percent below norm.¹⁰

The Sunflower Movement showed two main facts. Firstly, the movement was a sign of distrust of China by Taiwanese who feared that the increase of Taiwan’s economic dependence on China would hurt Taiwan’s national security. Secondly, many young students worried about their own futures, including the widening disparity between rich and poor, low salaries and skyrocketing housing costs. At the very beginning of the Sunflower Movement, students required political transparency, however, it became different as numerous political and social demands all converged together. The Sunflower Movement was comprised of four different elements, including Democratic reform, the anti-China factor or Taiwanese nationalism, anti-free

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