Games,Changes and Fears: Exploring Taiwan’s Cross-Strait Dilemma in the Twenty-first Century

Abstract

This article examines Taiwan’s cross-strait relations with China by analyzing the linkages between their respective security interests and free trade objectives in the twenty-first century. It argues that these entanglements induce a scenario akin to the prisoner’s dilemma that compels Taiwanese leaders and policymakers to preserve the Chinese-dominated cross-strait status quo. To enhance their political appeals during general elections, the major political parties in Taiwan are being forced to cooperate with each other, albeit artificially. By adopting a parallel, watered-down approach to sensitive political issues, particularly with respect to Taiwan’s sovereignty status, the omnipresent China factor is being legitimized further. Such an approach homogenizes the parties’ political agendas with respect to Taiwanese autonomy which leads to the island’s perpetual entrapment within the One-China trajectory. Using original and secondary sources in the empirical analysis of the security–trade nexus mainly from the Taiwanese perspective, the article highlights the slow yet steady co-optation of Taiwan’s sovereign interests within China’s sinicization project.

Keywords

Taiwan China cross-strait dilemma security–trade nexus political parties

Games, changes and fears…

When will they go from here?

When will they stop?

Macy Gray, 1999

Introduction

In the traditional version of the prisoner’s dilemma, an arresting police officer interrogates two suspects in separate rooms. They have two options: either implicate each other by confessing or cooperate with each other by remaining silent. Regardless of how the other reacts, each party improves his own position through confession. In the event that one of them confesses, then it will be in the best interest of the other party to confess as well to avoid greater penalty. However, if the other decides to remain silent, the one who confesses is rewarded with less punishment. Confession, therefore, becomes the dominant strategy for both suspects. Yet ironically, when the two parties decide to confess, the punishment is worse for both than when both keep quiet.¹

The concept of prisoner’s dilemma has some practical applications to Taiwan’s cross-strait relations with China in the twenty-first century. Consider the two major political parties in Taiwan: the Kuomintang Party (KMT) and the Democratic Progressive Party (DPP). Each party is looking for ways to enhance its relative political appeal in order to win over the electoral masses. Both parties are expected to decide on, and announce their respective cross-strait policies and strategies towards China. If the KMT accuses the DPP of pursuing a pro-independence policy that can potentially destabilize the relatively peaceful and stable cross-strait environment, the former wins over the voters at the expense of the latter. Similarly, if the DPP accuses the KMT of supporting the One-China principle which Taiwanese voters may view as an assault to Taiwan’s sovereignty, the former wins over the electorates at the expense of the latter. Here, the ‘accusation strategy’ is akin to the prisoner’s confession, while the ‘agreement strategy’ is parallel to the prisoner’s silence in the prisoner’s dilemma story. Suppose that the former is labelled as ‘cheating’, while the latter is labelled as ‘cooperation’. Cheating, therefore, becomes the parties’ dominant electoral strategy. However, the outcome when both parties cheat is worse for each party than the outcome when both parties cooperate. Such considerations are compelling the two parties to adopt a parallel, watered-down approach to handling difficult political issues—particularly the Taiwanese sovereignty—to minimize electoral risks. This dilemma further strengthens the prevailing status quo, which in turn, results in the continued imprisonment of Taiwan inside the ‘dragon’s den’.

In light of this, the article critically examines the process through which Taiwanese officials and policymakers have contributed to the continuation of Taiwan’s politico-diplomatic ‘imprisonment’ within the ever-progressing sinicization project.² The underlying assumption is that the preservation of the cross-strait status quo continues to imprison the Republic of China (ROC) within the People’s Republic of China (PRC’s) One-China trajectory. At the heart of the problem are uncertainties with regard to the real impact of cross-strait economic relations on Taiwan’s de facto sovereignty. On the one hand, the KMT believes that in order to protect Taiwan’s remaining political freedom the government must facilitate closer economic cooperation with China (Chow, 2011; Lee, 2010; Wang, Chen & Keng, 2010; Zhao & Liu, 2010). On the other hand, the DPP argues that such a strategy inevitably pulls Taiwan towards political unification with China (Clark & Tan, 2010, 2012; Hsieh, 2011; Rigger, 2010).

Meanwhile, from the point of view of non-state actors—from the elite business sectors worrying about their profits, to grassroots civil societies fearing for their jobs—revisionist policies are welfare-threatening. As such, political parties promoting a rather extreme approach to managing cross-strait relations that subverts the status quo are at risk of losing their electoral support base (Clark & Tan, 2010, 2012; Kastner, 2006, 2013). Taiwanese parties, therefore, tend to veer away from the debates and dialogues that require them to give direct comments about Taiwan’s de jure independence. Instead, a watered-down version of cross-strait rhetoric stripped of One-China or ‘Two Chinas’ undertone is preferred. Yet by doing so, Taiwan is perpetually ensnaring itself within the Chinese politico-diplomatic confinements.

Beyond the domestic level, it may be well argued that although there is a strong desire on the part of Taiwanese political parties to break Chinese stranglehold, certain structural limits in the international system prevent them from doing so. Hence, the article also explores some of the external factors that restrain Taiwan’s action, along with their possible consequences and ramifications to Taiwanese domestic politics.

The article attempts to answer the following sets of question. First, how do the entanglements between Taiwan’s security considerations, on the one hand, and free trade objectives, on the other, affect its cross-strait relations with China? Do they reinforce or weaken Taiwan’s quasi-sovereignty status in the international system? Second, what factors—both internal and external—influence Taiwan’s political and economic engagement strategies with respect to China? How do they affect Taiwan’s capacity for escaping Beijing’s One-China trajectory?

To answer these questions the paper analyzes Taiwan’s security and trade entanglements with China. The idea is to empirically explain the decision of Taiwanese leaders and policymakers to retain the island’s quasi-independent status instead of pursuing de jure sovereignty. Taiwan’s unique geo-political status compels its leaders to resign themselves to the uncertainties and vicissitudes of the established cross-strait environment in the hope of preserving its left-over sovereign space underpinning its de facto autonomy. However, such a decision further reinforces the status quo, forcing state managers to strategically balance the country’s geo-political strategies with its geo-economic interests. The Taiwanese dilemma, therefore, is two-directional. On the one hand, recalibrating the current arrangement by promoting either political unification or de jure independence invariably reduces Taiwan’s sovereign space given China’s aggressive promotion of One-China policy. On the other, pursuing either ‘warm’ or ‘cold’ economic relations with China also inevitably results to shrinking sovereign space given the likelihood of overdependence.

The article is divided into four sections. The second section discusses the results from key informant interviews (KIIs) conducted with three Taiwanese officials that focused on the paper’s three main themes: national security, free trade and the nexus between the two. The goal is to provide a general understanding of first, how Taiwan’s security interests and trade objectives are being linked together; and second, how these linkages determine the government’s political and economic engagement strategies with respect to China. The third section is divided into two subsections and investigates the internal and external factors influencing the Taiwanese dilemma respectively. The goal is to assess the potential consequences and ramifications of these factors to Taiwan’s domestic politics, on the one hand, and examine the country’s capacity to escape from China’s politico-diplomatic entrapment, on the other. The fourth section summarizes the article’s main points and concludes that Taiwan is trapped in what appears to be a perpetual prisoner’s dilemma.

Understanding Taiwan’s Security–Trade Nexus: Views from the Top

Table 1.

Summary of Key Informant Interviews*

	On National Security	On Free Trade	On Security-Trade Nexus
Informant 1 Taiwan WTO and RTA Center (Deputy Director)	Three ‘Ds’ in cross-strait relations (distrust, disengagement, distance) threaten national security	Trade is both politically and economically motivated	Free trade agreements must promote peace with China, integration with the US, and friendship with Japan
Informant 2 Chung-Hua Institution for Economic Research (CIER) (Associate Research Fellow)	Economic insecurity is a threat to national security	Trade is key to ‘normalization’ of cross-strait relations	Trade is tool for resolving Taiwan’s excessive dependence on China
Informant 3 Democratic Progressive Party (DPP) (Director of Department of China Affairs)	Free trade agreements must promote peace with China, integration with the US, and friendship with Japan	International trade is a national security issue that can be more effectively addressed through WTO than regional/transregional FTAs	The One-China policy is both an impetus and a constraint for Taiwan’s trade diplomacy agendas

Source: Author’s first-hand interviews with key informants.

Note: *Representatives from three different sectors participated in the interviews to provide comments and insights on the article’s three main themes, namely: national security, trade liberalization and security–trade linkages in Taiwan. These are the following: (a) Deputy Director at Taiwan WTO and RTA Center (hereafter, Informant 1); (b) Associate Research Fellow at CIER or Chung-Hua Institution for Economic Research (hereafter, Informant 2); and (c) Director of Department of China Affairs at DPP or Democratic Progressive Party (hereafter, Informant 3). In the first part of the interviews, the participants discussed their general views on the concept of national security in Taiwan. In the second part, they discussed this security concept in relation to the country’s participation in various free trade activities. And in the third part, the informants discussed the linkages between the country’s security considerations and free trade objectives.

On Taiwan’s National Security

Three key points emerged from the discussions concerning Taiwan’s national security: the cause of insecurity, the effect of insecurity and the goal of security. Prior to 2008, Taiwan adopted a number of politically sensitive programs that deviated from the general principles of the One-China policy. The segregating effect of the physical distance between Taiwan and China was aggravated by psychological barriers resulting in mutual distrust and disengagement. These three ‘Ds’—distance, distrust and disengagement—significantly contributed to the paranoia being felt by both the Taiwanese and Chinese officials due to behavioural uncertainties emanating from both sides of the Taiwan Strait. This mutual paranoia and suspicion have had a tremendous influence on the PRC’s attitude towards the ROC’s economic activities which the former sees as ‘sovereignty-upgrading’ mechanisms (Magcamit & Tan, 2015). As Informant 1 pointed out:

The Taiwanese government believes that the country must enjoy its freedom to pursue regional economic integration with other countries. The Chinese government, however, felt that a dialogue with Taiwan will be a necessary preliminary step. While Taiwan argues that it is not obliged to seek for permission from China regarding this issue, nonetheless, it recognizes the importance of accommodating the latter’s concerns with respect to One-China policy. Taiwan, therefore, makes the case that its pursuit of preferential trade, for example, must not be interpreted as rejection of One-China policy, and the best way to prove this is to show by example. The idea of ‘normalization’ of cross-strait relations is a non-political label that neither challenges nor accepts the One-China policy.³

Hence, Taiwan’s insecurity is largely induced by fears over cross-strait interactions. Taipei’s foreign economic policies are believed to be hijacked by Beijing to force the former to comply with the latter’s One-China doctrine thereby preventing the emergence of Two Chinas. Critics argue that such forceful exertion of Chinese influence over Taiwan’s foreign affairs in general threatens the latter’s national security. Accordingly, for most Taiwanese officials and policymakers, the China factor remains a serious impediment to Taiwan’s economic policymaking procedures. As Informant 2 stated:

China’s meteoric economic rise has made it difficult for other countries to conduct any type of business with Taiwan as they are now facing an ‘either–or’ situation—either they are with China or with Taiwan. The reluctance of third countries to engage Taiwan demonstrates the extent to which the Chinese economic influence is altering the former’s foreign economic policy options while simultaneously constraining the latter’s.⁴

Obviously, the way out for Taiwan is both challenging and difficult given China’s seemingly uncompromising views towards cross-strait management. While the island’s economic statecraft is designed to limit its excessive dependence on the Mainland to the extent of offering asymmetric concessions to prospective partners other than China, nevertheless, Beijing’s overwhelming presence significantly undermines Taipei’s freedom to navigate its own diplomatic space. In the words of Informant 3:

Liberty and freedom are the ultimate expressions of national security. The freedom and liberty to choose instead of being dictated by external forces can only be achieved through democratization of the political processes in the country. Taiwan is governed by law, by constitution. The DPP as a liberal party upholds liberal values and principles. It pushes the government to observe and implement the fundamental covenants of the United Nations including civil and political rights, as well as economic, social and cultural rights. The present government, however, is side-tracking the goal of achieving sovereignty from China.⁵

Overall, based on the statements made by the Taiwanese officials, China’s expanding zone of influence is contracting Taiwan’s de facto sovereign space. Taipei’s failure to pursue its political and economic agendas independently threatens the foundations of its national security. Securing Taiwan’s sovereign space, therefore, becomes crucial to achieving the freedom and liberty to realize its national objectives without the interference of other states particularly China.

On Taiwan’s Free Trade Activities

As argued earlier, China’s encroachment of Taiwan’s sovereign space poses significant threats to the latter’s national security. And for Taiwanese officials, free trade has been increasingly viewed as a key strategy for cultivating diplomatic relations with other countries and mitigating the island’s overdependence on the Mainland. The freedom to engage with prospective partners other than the PRC in various types of trade arrangement is deemed crucial for the expansion of Taiwan’s sovereign space. Based on the interviews conducted, free trade performs three important functions: as a platform for regional economic and political integration; as a key to cross-strait normalization; and as a tool for minimizing overdependence on China. These functions underline free trade’s reinforcement effects with respect to Taipei’s sovereign space amid threats being induced by the One-China policy. With regard to trade’s role as a platform for regional economic and political integration, Informant 1 commented that:

Economic integration must be differentiated from political integration. With respect to free trade agreements (FTAs), for example, some may be politically motivated, while others are economically motivated. In the case of China, FTAs being negotiated and concluded are designed to achieve political and strategic objectives rather than economic ones. In that sense, all Chinese FTAs are meant to serve political objectives, after all, everything is meant to protect the political agenda. In the case of Taiwan, however, this is not necessarily true. For instance, under the proposed US–Taiwan FTA, the US is only asking Taiwan to match its tariff rates. In doing so, Taiwan needs to harmonize its regulatory regimes to improve transparency necessary for maximizing its benefits, while minimizing the costs of concessions. The Taiwanese policymaking circles have agreed that although external political pressures play a crucial role in the inception of US–Taiwan FTA, however, expected economic benefits justify the need to enforce the said trade agreement. Taiwan’s chief economists and political analysts are very optimistic about China’s relaxation of its policies in relation to Taiwan in light of Hong Kong’s successful conclusions of bilateral FTA with Chile and New Zealand.⁶

In other words, limiting bilateral trade with China is similar to putting too many eggs in one basket which inevitably creates dependency problem for Taiwan. The risk of being captured by China in economic sense is quite high. Informant 1 further highlighted Taiwan’s unique case by comparing it with Mexico’s bilateral trade relations with the US:

In the case of US–Mexico bilateral trade, although eighty per cent of Mexico’s total export goes to the US, the absence of geo-political tension between the two makes it less risky. The opposite is true in the case of Taiwan and China since we have to prepare for the rainy days. We clearly need to reduce the high level of dependency on China by diversifying, that is, joining more bilateral and plurilateral FTAs.⁷

Meanwhile, the role of free trade in normalization of cross-strait relations is viewed in the context of Taiwan’s WTO membership. Prior to the country’s accession, much of Taiwan’s economic insecurities emanated from the most-favoured-nation (MFN) status accorded by WTO members to one another. The Taiwanese government, therefore, has deemed free trade as a national security issue that could be effectively addressed through WTO membership. During the negotiations, several trade experts had expressed scepticism towards the WTO, citing discouraging results from various econometric simulations. Yet 10 years after its controversial entry in the WTO in 2002 as a separate customs territory, new empirical studies have shown free trade’s positive impacts on the Taiwanese political economy.⁸ Similar to other countries that have adopted neoliberal economic policies, however, not all sectors in Taiwan have experienced positive growth including agriculture.⁹ Nevertheless, Informant 2 asserted that Taiwan’s acceptance to the WTO was a significant milestone in the country’s foreign affairs history, especially when viewed in the context of Beijing tight grip on Taipei’s diplomatic manoeuvrings:

On the one hand, Taiwan’s accession to the WTO facilitated the normalization of cross-strait relations. But while the WTO is aware of Taiwan’s discriminatory practices against China’s products, the latter does not file complaints to the Dispute Settlement Mechanism (DSM) since doing so would implicitly validate Taiwan’s claim as a legitimate sovereign state. On the other, the intensification of East Asia’s desire for establishing regional economic integration via FTAs, has given China a new tool for further isolating Taiwan from vital political and economic activities in the region. At the same time, the implementation of Economic Cooperation Framework Agreement (EFCA) between the two countries has resulted to overdependence on China.¹⁰

While multilateralism is still largely viewed as the optimal tool for economic statecraft, Taiwan’s relatively small size, however, substantially limits its influence over trade negotiations at the multilateral level. The second-best option for Taiwanese policymakers, therefore, is to engage more in bilateral and plurilateral FTAs. But the ubiquitous Chinese influence in the region has once again derailed Taiwan’s bids for preferential FTAs with other prospective partners.¹¹ As Informant 2 (2013) claimed further:

Taiwanese officials expected that the passage of ECFA would pave the way for more FTAs with different countries but failed to materialize immediately due to the ambiguity surrounding its sovereign status. In short, sovereignty still matters. Attempting to establish diplomatic relations with other countries seems futile when a powerful neighbour opposes it. WTO is becoming less and less of an issue when compared with preferential FTAs.¹²

Within Taiwan’s policy circles, the general consensus is that the country must continue to engage China while it attempts to establish its own FTAs with neighbouring countries. Although cross-strait relations have significantly improved after the restoration of three direct links in 2008—postal, transportation and trade—however, this should not give Taiwanese leaders a false sense of security. As Informant 3 (2013) stressed:

While the DPP does not oppose normalization of cross-state relations, nonetheless, it wants to establish relations with other states other than China. Although the US is adhering to One-China policy, however, it does not have a Once China principle since it does not support Taiwan’s unification with China for some politico-strategic reasons.¹³

Overall, based on these comments made by Taiwanese officials, free trade is a critical element of Taiwanese statecraft. Beyond classical economic considerations, FTAs are fuelled by vital politico-strategic motives that help broaden and deepen Taiwan’s sovereign space. To this extent, the whole process of free trade acquires a new ‘utility function’, that is, as a ‘sovereignty-upgrading’ mechanism (Magcamit & Tan, 2015). The last section of the interviews discusses the policy positions being endorsed by these various institutions with regard to Taiwan’s efforts at linking security issues and FTAs within the national security agenda.

On Taiwan’s Security–Trade Nexus

Informant 3 argued that in order to preserve Taiwan’s national security, cross-strait dialogues must promote peace with China, closer integration with the US, and friendship with Japan.¹⁴ Taiwanese think tanks believe that one way to reach these conditions is to vigorously incorporate the world’s three biggest economies when crafting ROC’s foreign trade policies both at the multilateral and regional levels. Informant 1 made a case for Taiwan’s active involvement in WTO processes vis-à-vis the need for serious partners to establish preferential trade with:

There are two types of WTO members: rule makers and rule followers. This has always been the unwritten rule. Taiwan is definitely not a rule making country. Rules are drafted by the G8 countries. Since Taiwan depends on trade with the rule making countries, the objective is to make money instead of distorting the money-making process. Therefore, it is a systematic issue and not a trade issue per se for as long as subsidies are kept at minimum. With respect to regional FTAs, it will be more advantageous to join the Trans-Pacific Partnership (TPP) than ASEAN since we should always aim high in order to facilitate domestic reforms. High standards must be used as benchmarks to solve for inefficiencies. In terms of coverage, ASEAN+N and TPP are almost the same. The passage of an East Asia free trade will undermine Taiwan’s need to join ASEAN+N. Despite the proliferation of regional and trans-regional FTAs, the WTO still remains as the optimum choice. It is important to note that the Doha impasse does not mean the death of WTO.¹⁵

Meanwhile, Informant 2 maintained that policy recommendations need to identify who the real stakeholders are. In the case of the Economic Cooperation Framework Agreement (ECFA), the communication between the government and the public has been unsuccessful as evidenced by contrasting views and lack of consensus about its significance across different sectors.¹⁶ Informant 2 also hinted about the influence of economic, as well as strategic incentives being derived from trade agreements with respect to the prevailing political climate in Taiwan:

For members of the opposition, ECFA is a politically sensitive topic affecting the country’s national security. For the local farmers, it is an economic issue threatening their livelihoods due to lack of capacity to compete with imported products. For ordinary citizens, it is a looming social concern that vindicates their distrust toward China. Although in general, the concern about China’s aggressive policy stance toward Taiwan has considerably declined over the past few years, the return of Democratic Progressive Party (DPP) to power might once again, aggravate cross-strait relations due to their explicit rejection of One-China policy. Despite President Ma’s declining popularity, the likelihood of DPP replacing KMT as the dominant political party in Taiwan remains slim given the significant strategic and economic considerations at stake.¹⁷

Informant 3, however, questioned such statements and claimed that the party now has a strong chance of replacing KMT considering the significant decline in the incumbent president’s popularity.¹⁸ Informant 3 argued that One-China policy is both an impetus and a constraint for Taiwan’s trade diplomacy agendas. As such, DPP is framing policies that are more amicable and less defiant towards the PRC, contrary to popular beliefs that it is espousing radical anti-Sino principles. Moreover, the DPP, according to Informant 3 espouses a human-centric security:

Human security in the domestic context is the security in income, gender equality, and labour rights. It puts more emphasis on the rights of the people and the communities. It places more attention on equality issues between men and women. The biggest security concern among Taiwanese is still economic insecurity, although relatively speaking they have better social security system as opposed to other countries. The continuous decline in government tax revenues adversely affects different sectors of the population.¹⁹

Overall, based on the comments provided by the informants, security considerations and trade agendas are fundamentally interlinked to each other. This is particularly relevant in the case of Taiwan given the geo-political context in which the country’s domestic and international political economy is embedded. The overarching China factor significantly restrains Taiwan’s de facto sovereign space, and in doing so, is undermining the latter’s national security. Harnessing the geo-political and geo-economic powers of FTAs, therefore, becomes a crucial element of Taiwan’s foreign policymaking. However, the One-China framework governing cross-strait relations can simultaneously stimulate and constrain Taiwan’s sovereign space. On the one hand, it can motivate Taiwan to enhance its diplomatic ties with other countries through FTA creation that minimizes dependence on China. On the other, China’s wherewithal to effectively employ ‘diplomatic blackmail’ against any county that violates its One-China principle by establishing state-to-state relations with Taiwan, implies that Taiwan’s foreign policies can only be applied exclusively in Chinese terms. This is the dilemma that is confronting Taiwanese political parties at present and the reason why they tend to have a homogenous stand on the sovereignty issue, that is, the freezing of Taiwan’s de jure independence.

Internal and External Factors Influencing the Taiwanese Dilemma

Several factors influence the capacity of Taiwanese political parties and their respective leaders for thawing the politico-diplomatic barriers induced by Beijing’s One-China policy. These are: popularity of nationalist objectives, viability of political unification, level of economic interdependence and atmosphere in the multilateral environment. The first and second factors represent internal constraints sustaining the Taiwanese dilemma, while the third and fourth factors deal with the external constraints reinforcing it. It is worth noting, however, that these factors are all interconnected and therefore tend to overlap. Together, they help explain the limits to the ROC’s political and economic engagement strategies with respect to the PRC that undermine its attempts to escape from the ever-progressing One-China trajectory.

Internal Factors

Popularity of Nationalist Objectives

Defending ROC’s political and economic autonomy against the backdrop of preponderant Chinese power demands a heightened sense of Taiwanese nationalism based on collective idea of civic commonality as opposed to ethnic, religious or linguistic ties (Drover & Leung, 2001). This notion became the basis of the ‘New Taiwanese’ rhetoric introduced by ROC’s former president, Lee Teng-hui in 1988 that symbolized the government’s reconciliatory efforts towards the mainland (Brown, 2004; Clark & Tan, 2010, 2012; Rigger, 1999). The new Taiwanese according to Lee is a ‘living community in which all the people commonly living in Taiwan struggled for and [were] dedicated to Taiwan and the Republic of China, irrespective of the time of coming to Taiwan, languages or regions’ (Drover & Leung, 2001, p. 22).

At the heart of the doctrine is the amalgamation of politics, ethnicity and economics manifested in the convergence between nationalist ideals and free trade objectives (Drover & Leung, 2001). But while free trade has been instrumental for reviving nationalist aspirations in Taiwan, at the same time, however, it significantly boosted China’s influence over the country’s internal and external affairs (Bolt, 2001; Clark, 2009; Clark & Tan, 2010, 2012; Gold, 2009, 2010; Hirschman, 1945; Wang, 2000). This has severely understated the importance of nationalist objectives in favour of short-term economic gains.

Different political actors have different views regarding the possible impact of cross-strait trade relations on Taiwan’s statehood. While the pan-green forces depict cross-strait engagements as threats to national security, the pan-blue forces highlight the security-enhancing features of such engagements. Despite the DPP’s warning about the imminent dangers being posed by deeper economic integration with China on national security, the KMT has still actively campaigned for enhanced Sino partnership to take advantage of the PRC’s economic boom (Chow, 2011; Clark & Tan, 2010, 2012; Lee, 2010; Wang et al., 2010; Zhao & Liu, 2010).

Therefore, it is interesting to see how ordinary Taiwanese view cross-strait relations. During the time of then-President Chen Shui-bian of the DPP, a survey conducted by the National Chengchi University (NCCU) in April 2007 revealed that cross-strait relations were viewed more as threats to national security instead of reinforcements. Results showed 61 per cent of the respondents demanding for regulations on cross-strait relations; 35 per cent requesting for loosened restrictions; and only 4 per cent favouring the current status quo (Clark & Tan, 2012). Following Ma’s election in 2008, a similar survey was conducted that saw the percentage of Taiwanese population wanting stricter regulations increased to 71 per cent while those calling for more relaxed policies decreased to 26 per cent (Clark & Tan, 2012). These figures underscore the largely pessimistic views being held by Taiwanese citizens towards ROC’s dealings with the PRC, especially after signing the agreement for the reopening of direct links to cross-strait relations. To some extent, these findings reflect the persistence of Taiwanese nationalism amid the overcoming China factor.

The passage of ECFA, however, has altered Taiwanese perception towards the Chinese government in general but not without the great polarization of local opinion. On the one hand, the influential business sectors along with the top political elites are largely supportive of the ECFA, highlighting its huge economic gains as the primary impetus for ratification of the agreement (Clark & Tan, 2012; Hsieh, 2011; Wang et al., 2010). On the other hand, parties opposed to any political unification plans, along with other local firms adversely affected by the agreement, argue that the ECFA symbolizes President Ma Ying-jeou’s long-term interest in selling Taiwan’s sovereignty by ceding all its political and economic authorities to the Mainland (Gold, 2009, 2010; Hong, 2012; Tien & Tung, 2011). Nevertheless, results from the surveys conducted by the Mainland Affairs Council (MAC) in 2010 indicated a generally favourable Taiwanese attitude towards the ECFA. Of the total number of respondents, 60 per cent agreed that ECFA has the potential to create long-term positive impacts to the economy; 23 per cent expressed less optimism about its intended effects; while the remaining 11 per cent were neither supportive nor antagonistic towards the project.

ECFA supporters argue that the citizens’ favourable view towards the agreement is largely driven by the satisfying conditions it generates. Among survey participants, 67 per cent expressed satisfaction with the ECFA and only 33 per cent claimed dissatisfaction (MAC, 2010). With regard to ECFA’s latent security threats against Taiwan’s sovereignty, 34 per cent believed that the agreement could undermine the country’s overall autonomy but a much larger 66 per cent downplayed the significance of these threats (MAC, 2010). Finally, with respect to ECFA’s role in Taiwan’s FTA promotion, 71 per cent of the respondents viewed the agreement as a necessary instrument for capturing more FTAs in the future, thus, implying its capacity for enhancing the country’s sovereign status (MAC, 2010).

These results suggest that Taiwan’s management style with respect to cross-strait relations is more fluid than what might have been initially expected. Taiwan’s pragmatic engagement approach with China has significant influence on the diplomatic climate between the two governments. The island’s speedy recovery from the global recession in 2009, coupled with the far-fetched warnings from the DPP with regard to the ECFA implementation, has further improved the Chinese image (Clark & Tan, 2010, 2012; Magcamit & Tan, 2015).

However, it is important to stress that the volatility of present conditions prevents Taipei from fully trusting in the future of cross-strait relations. The high level of hostility (67 per cent) felt by Taiwanese near the end of President Chen’s term in 2007, for instance, highlighted the lingering suspicions towards Chinese intentions. While this level of perceived hostility has diminished few months after President Ma’s assumption to presidency (53 per cent), the ongoing Chinese military operations involving contested islands in East and Southeast Asia continue to heighten anxieties over wider and deeper forms of cross-strait interactions (MAC, 2010).

For the DPP, nationalist objectives such as the quest for national sovereignty, identity, territory and ethnic justice, are all deeply interwoven into its democratization agenda (Clark & Tan, 2012; Rigger, 2010). Replacing authoritarianism with democracy requires a propagation of Taiwanese nationalism necessary for overthrowing a China-centric regime and declaring non-negotiable freedom from the Mainland (Gold, 1986; Wachman, 1994). The DPP officials expected that by leading the nation in the pursuit of independence, the citizens would acknowledge their efforts by giving them the votes they needed to win government seats (Clark & Tan, 2010, 2012). Conversely, the KMT leaders heavily relied on the expected spillover effects of Taiwan’s economic miracle to justify their position that favoured the maintenance of cross-strait status quo order (Clark & Tan, 2010, 2012). Hence, while the DPP was adamant in endorsing a state-to-state approach when dealing with the PRC; the KMT was cautious in implementing its own version of the One-China principle despite its statements suggesting that the ROC is the legitimate government of all China (Hsieh, 2011; Rigger, 2010).

The results of the 1991 elections, however, forced the DPP to take a more restrained rhetoric after suffering a landslide defeat against the KMT. Since the explicit denouncement of One-China policy proved to be electorally costly and politically infeasible at least in the short run, the DPP started to relax its policy on sovereignty and began to craft a new discourse emphasizing the country’s de facto, rather than de jure, independence from China (Clark & Tan, 2012; Rigger, 2010). This resulted to internal conflicts amongst the DPP factions which eventually led to defections of its pro-independence members and and the eventual establishment of the Taiwan Independence Party (Clark & Tan, 2012; Rigger, 2001; Wang, 2000).

The failure of nationalist objectives to bring about electoral success underlines their limits to securing Taiwan’s sovereign space. Extreme nationalist propositions in relation to Taiwan’s contested statehood yield low numbers of vote for the respective parties espousing them. This reflects the public’s fear that proposals for either complete unification or absolute independence severely undercut the existing cross-state stability stability. Interestingly, a huge segment of the voting population prefers the preservation of the status quo, or the so-called ‘normalization’ of cross-strait relations (Hsieh, 2002, 2011; C.W. Huang, 2009). As a result, Taiwanese political parties, specifically the KMT and the DPP, are being compelled to soften their nationalist objectives by taking a middle ground in attempts to placate the increasingly sceptic citizens and win their votes (Clark & Tan, 2012; Lin, 2001; Wang, 2000). But in doing so, the agendas designed to enhance Taiwanese politico-diplomatic sovereignty are substantially diluted if not completely eroded in favour of the status quo. The result is the homogenization of Taiwanese parties’ policy stance on de jure independence that further entraps Taiwan within the One-China trajectory.

Viability of Political Unification

On the one hand, a confident Taiwanese government engages in deeper and wider economic activities with China, thereby reducing the level of cross-strait tensions (Kastner, 2013). Heightened economic integration increases the costs of conflict for both countries, restraining Beijing’s hostile behaviour while expanding Taipei’s sovereign space.²⁰ This gives the ROC leaders a sense of assurance that they are still operating within the PRC’s ‘zone of tolerance’, and therefore, reinforces the perceived need to maintain the status quo. Pleased with the existing pro-status quo Taipei regime, Beijing begins to relax its militaristic policies towards cross-strait relations, expecting that the island will soon abandon its nationalist goal of complete autonomy from the mainland (Gartzke, Li & Boehmer, 2001; Kastner, 2013; Morrow, 1999).

On the other hand, a revisionist Taiwanese leadership questions the legitimacy of the existing status quo and threatens to establish a new form of cross-strait arrangement (Kastner, 2006, 2013). Such a regime is pessimistic about the effectiveness of bilateral economic ties in influencing the target state’s behaviour especially when dealing with a superpower neighbour.²¹ Economic partnerships at bilateral levels are not likely to succeed when the political space for cooperation remains hostile (Gowa, 1994; Pollins, 1989). Even if they endure these challenges and mitigate the existing conflicts in the short term, nonetheless, new forms of tension may still emerge somewhere between the medium- and long terms (Waltz, 1979). Such scenario, therefore, will inevitably lead to heightened tensions on both sides of the Taiwan Strait, and will compel China to re-employ militaristic strategies to counter secessionist movements (Kahler & Kastner 2006; Kastner, 2006, 2013).

This revisionist approach is best exemplified by Taiwan’s former President Chen when he articulated his idea about the presence of an independent country on each side of Taiwan Strait.²² Chen had not only abolished the National Unification Council (NUC) but also rallied to achieve membership status at the United Nations (UN) under the name of Taiwan (Clark & Tan, 2010, 2012; Kastner, 2006, 2013). Such policies underscored the revisionist sentiments of a DPP-led government and were symbolic expressions of the country’s sovereign aspirations. But despite his bold statements with regard to its pursuit of sovereignty, Chen still showed restraint by not issuing a formal declaration of independence to prevent further military backlash from China (Clark & Tan, 2010, 2012; Kastner, 2006, 2013).

Although economic integration may indeed embolden Taiwanese leaders to pressure Beijing to grant them full independence; however, such an attitude threatens several local interest groups benefiting from the improving cross-strait relations. This is especially problematic given Beijing’s strong resolve to uphold the One-China principle that undermines all considerations for the economic costs of war (Kastner, 2006, 2013). The anxiety induced by a revisionist ROC government thwarts all healthy cross-strait economic activities, thereby adversely affecting the growing number of domestic stakeholders (Clark & Tan, 2010, 2012; Kastner, 2006, 2013).

Stability in cross-strait relations, therefore, is a primary concern for influential business sectors that play a pivotal role during national elections. As a consequence, revisionist politicians are being compelled to moderate their nationalist discourse in order to protect their votes. Hence, intensifying cross-strait economic relations has a tendency to weaken the political allure of the DPP’s nationalist policies with respect to China. This became evident in the 2012 presidential elections when the DPP’s standard-bearer Tsai Ing-wen failed to convince Taiwanese voters that cross-strait relations would remain stable under her leadership. The outcomes of the event persuaded the party to reconsider and reformulate its approach towards the Mainland (Kastner, 2013). Thus, it may be argued that in the long run, there will be less incentive for Taiwanese politicians to launch strong pro-independence campaigns that are centred on nationalist agendas given their electoral costs to the parties espousing them (de Lisle, 2012). And again, by doing so, the chains that bind Taiwan within the One-China trajectory are being hardened as the policies towards independence are homogenized even further.

External Factors

Level of Economic Interdependence

Although economic engagement, particularly in terms of trade, is commonly framed as the superpowers’ strategy for extracting politico-strategic concessions from their respective targets, nonetheless, small powers have also utilized these linkages to inform, constrain and transform the latter’s behaviour (Kahler & Kastner, 2006; Kastner, 2006). Such is the case between Taiwan and China. There are two types of engagement strategy that strongly capture the dynamics of cross-strait relations between these two countries: conditional (tactical linkage) and unconditional (substantive/structural linkage).²³

Under conditional engagement, the initiator adopts a quid pro quo approach by compensating the target for every policy change that it makes through increased economic exchanges rather than punishing it with sanctions (Kahler & Kastner, 2006). However, there are a number of reasons why conditional engagement strategies, in general, are deemed less popular than economic sanctions. First, in terms of economic costs, inducements are generally costlier than sanctions. While sanctions are carried out only when the target fails to initiate the policy change, inducements are paid when policy shift does take place and will continue for as long as the target maintains its favourable behaviour (Drezner, 1999/2000). Second, offering inducements not only creates the perception that the target’s resolves are stronger than the initiator’s but also strengthens the former’s military capacity, thus, raising the incentives for maintaining the policy status quo (Drezner, 1999/2000). And third, the uncertainties of market conditions undermine credible commitments of both the initiators and the targets with respect to policy reforms that must be carried out once economic payoffs have been made (Drezner, 1999/2000). Despite such limitations, conditional engagement can still induce the desired policy change particularly in cases involving democratic nations given their strong credibility for complying with agreed-upon commitments (Kahler & Kastner, 2006).

Meanwhile, an initiator state employing unconditional engagement strategy does not rely on tit-for-tat but on the capacity of economic interdependence to influence the target’s policy behaviour, and to that extent are more passive (Aggarwal & Govella, 2013; Drezner, 1999/2000; Kahler & Kaster, 2006; Mastanduno, 1992). The idea is to entangle the target into the initiator’s economic activities up to a point where cessation becomes extremely costly for the former. In general, unconditional engagement performs three crucial functions: informing the target of the initiator’s precise level of resolve without resorting to militaristic actions; constraining the target’s policy dominion; and transforming the target’s policy behaviour and attitude (Drezner, 1999/2000; Kahler & Kastner, 2006; Kastner, 2006; Gartzke, Li & Boehmer, 2001). As such, the breadth and depth of economic interdependence, particularly with respect to trade, determine the likelihood of conflict between the initiator and target states when expected policy changes do not occur.

As mentioned earlier, the Taiwan case provides a vivid illustration of these two forms of economic engagement with respect to China. The reopening of direct links to cross-strait relations, along with the signing of the ECFA, highlights ROC’s attempts at conditional and unconditional engagements designed to inform, constrain and transform the PRC’s One-China policy.²⁴ China’s refusal to rule out the threat or actual use of force in pursuing its unification objective underlines the importance of Taiwan’s effective management of economic engagements to ensure its survival, at the very least as a de facto sovereign state. Indeed, the Taiwanese government has utilized the existing cross-strait economic interdependence as a bargaining chip in deciding its contested statehood. In attempts to harness the transformative effect of economic engagement as self-antidote against Chinese nationalistic goals, Taiwanese officials have set out specific preconditions for the reopening of cross-strait links to trade, transit and communications, namely: withdrawal of threat or actual use of force against Taiwan; removal of barriers to Taiwan’s diplomatic space and political liberation vis-à-vis democratization of the Mainland (Clark & Tan, 2012; Zhao & Liu, 2010).

However, China’s military and economic preponderance engenders a scenario in which cross-strait economic relations continue to intensify with or without the fulfilment of the aforementioned conditions. Notwithstanding the high levels of political risk involved, Taiwanese firms have continued to trade and invest more in China replacing the old ‘go slow, be patient’ approach with ‘active opening’ and ‘effective management’ mantras (Clark & Tan, 2012; Kahler & Kastner, 2006). Accordingly, strong lobbying efforts from local business communities in Taiwan have placed enormous pressure on the government to abandon such prerequisites being demanded from China prior to the legalization of direct cross-strait links (Clark & Tan, 2012; Wang et al., 2010; Zhao & Liu, 2010).

These calls have, to certain extent, resulted to the convergence of cross-strait policies, specifically with respect to economic issues being espoused by competing political parties in Taiwan. There are two main factors that have led to this convergence: the increasing enmeshment of Taiwan’s business interests with the Mainland affairs; and the rise of Taiwanese electorate favouring the status quo over independence and unification. Consequently, concerns over the adverse effects of excessive Sino-dependence on national security has gradually diminished in importance across Taiwan’s political gamut, forcing presidential candidates to embrace a modified two-state approach for managing cross-strait affairs (Clark & Tan, 2012; Kahler & Kastner, 2006; Wang et al., 2012; Y. Wu, 2001). Despite significant efforts in moderating the country’s reliance on the PRC, cross-strait trade and investment flows have continued to expand as ROC officials themselves began to realize the cost of restraining local business activities. Hence, even without gaining significant political concessions, Taipei’s economic compensations to Beijing continue to roll over.

Furthermore, Taiwan’s democratic society also makes it easier for China to link its politico-strategic motives with cross-strait economic interdependence.²⁵ Beijing’s wilful assertion of influence over business matters to undercut local support for pro-independence party such as the DPP, for instance, highlights such entanglements. The imbalanced trade relations between the PRC and the ROC generate asymmetric political effects which are further reinforced by institutional differences (Clark & Tan, 2012; Kahler & Kastner, 2006; Kastner, 2013). On the one hand, Beijing is waiting for cross-strait economic relations to weaken Taiwanese nationalism and identity, which will then diminish local resistance against its One-China policy.²⁶ On the other hand, Taipei is optimistic that Beijing will soon realize that its regional ‘hegemonic’ power is fuelled more by economic imperatives and less by nationalist rhetoric (Kahler & Kastner, 2006; Kastner, 2013). This will then compel the government to replace its militaristic approach with pacifist method for managing cross-strait relations. When the quest for economic interests leads to relaxation of Chinese nationalist objectives, allowing the peaceful settlements of political and ideological differences, Taipei’s gamble with Beijing would have then paid off (Kahler & Kastner, 2006; Kastner, 2013; Lee, 2010; Rigger, 2010; Zhao & Liu, 2010).

In addition, multilateralism also imposes significant constraints on Taiwan’s capacity for launching a conditional engagement strategy (Kahler & Kastner, 2006; Kastner, 2006). This is because China’s economic dynamism enables it to attract other countries that are willing to cultivate interdependence without demanding any politico-diplomatic concession. The constraints engendered by Taiwanese conditionalities are compelling the government to adopt unconditional engagement procedures wherein unrestricted cross-strait economic interdependence is expected to act as a pre-emptive measure against China’s military diplomacy. However, the authoritarian nature of the PRC’s political institutions implies that Chinese officials can easily circumvent the rules and procedures for managing cross-strait relations (Chow, 2012; Hong, 2012; Kahler & Kastner, 2006; Kastner, 2006; N. Wu, 2012; Zhao & Liu, 2010).

This view is particularly popular among Taiwanese oppositionist groups that are predominantly represented by the DPP. Despite the perceived ‘harmony’ of economic agendas between rivalling political parties, the reality is that there are still segments of Taiwanese population that have reservations towards the country’s deeper and wider economic integration with China. This argument is clearly illustrated by the dramatic turn of events that took place after the KMT’s ‘blitzkrieg’ passage of Cross Strait Services Trade Agreement (CSSTA) with China on 17 March 2014.²⁷ President Ma’s decision to cut-short a vital deliberation process in the Legislative Yuan concerning the controversial agreement has provoked the occupation of the parliament on 19 March 2014 by a multi-sectoral coalition led by student groups (Arrouas, 2014; Chung, 2014).

The demonstrators have demanded several conditions from the Taiwanese president: hold an inclusive citizens constitutional conference; reject the CSSTA in lieu of a monitoring mechanism for cross-strait agreements; pass a monitoring mechanism for Cross-Strait Agreements in the current legislative session; and for legislators from both parties to address the people’s demands (CALD, 2014). Thus, while big local business groups support unconditional economic engagement, the grassroots civil societies insist on the maintenance of regulatory conditions for facilitating cross-strait relations. The conflicts between these two segments of the population further side-tracks the respective policy strategies of Taiwanese political parties with respect to issues surrounding Taiwan’s quasi-sovereign statehood.

Atmosphere in the Multilateral Environment

The World Trade Organization (WTO), unlike any other existing international institutions, does not require potential members to be sovereign states to gain accession. This unique constitutional feature of the organization has enabled some type of ‘cross-strait co-existence’ between the ROC and the PRC within the same multilateral space where both parties act as co-equals or parallel members (Bush, 2011; Charnovitz, 2006; Cho, 2005; Hsieh, 2005; C.W. Huang, 2009). Hence, while Taipei’s WTO accession cannot be regarded as a bilateral accord with Beijing, nonetheless, it helps in facilitating some semblance of rule of law between the two parties. In addition, it allows the Taiwanese government to stand in an international tribunal thru the organization’s Dispute Settlement Understanding (DSU) when disagreements over WTO rules and procedures with other members arise (Charnovitz, 2006; Hsieh, 2005). As pompously stated in the 2001 MAC report (cited in Cho, 2005, p. 743):

Taiwan and mainland China will be two independent, parallel, and equal members. The WTO mechanism offers the two sides a new channel for communication, dialogue, and consultation. The two do not have to set any preconditions or prerequisites. They can conduct dialogue and consultation on mutually concerned issues based on the WTO rules and framework.

However, questions remain as to whether or not China intends to acknowledge Taiwan’s co-equal status within the WTO given its claim of legitimate authority over the island, along with its long-term goal of reintegrating it with the Mainland. From the Chinese perspective, Taiwan remains a province of China with or without peaceful unification (Clark & Tan, 2012; Lee, 2010; Zhao & Liu, 2010). As such, Beijing promotes a WTO framework with ‘One-China gestures’ by rejecting anything that connotes the presence of two Chinas (Cho, 2005, p. 751). Such gestures are intended to cast off any political implications that might arise from China’s compliance with the WTO rules in relation to Taiwan at the global level. In addition, it aims to emphasize that adherence to these multilateral agreements does not, in any way, nullify Beijing’s One-China principle. In short, these One-China gestures aim ‘to tell the world that interactions with Taiwan are not international affairs but internal matters’ (Cho, 2005, p. 752).

A concrete example is the ‘nomenclature war’ launched by China against Taiwan as a subtle form of protest over their parallel status in the WTO. For instance, China uses the name ‘Chinese Taipei’ instead of TPKM to refer to Taiwan in the WTO and insisted that all members must follow the same (Charnovitz, 2006; Cho, 2005). It did not hesitate from calling the attention of representatives from other states that made the ‘mistake’ of calling the island, ‘Taiwan’ during formal and informal sessions (Charnovitz, 2006; Cho, 2005). Moreover, China prefers to use the Chinese language when preparing official WTO documents involving Taiwan and rejects documents that bear the name of ‘Republic of China’ (Cho, 2005). Such gestures are meant to send the message that the island is part of China’s separate customs territories similar to Hong Kong and Macao (Charnovitz, 2006; Cho, 2005). Hence, from the Chinese standpoint, WTO dialogues between Beijing and Taipei are domestic concerns of a single country with several subsidiaries.

In July 2005, however, China has formally accepted Taiwan’s TPKM title but demanded the cancellation of diplomatic titles given to some members of the Taiwanese Mission (cited in Charnovitz, 2006, p. 417). The WTO Secretariat granted the appeal and removed these titles from the updated version of its Members Directory, thus provoking Taipei officials to accuse the organization of ‘throwing away its neutrality under pressure from China’ (Bishop, 2005). At present, only the top two officials of Taiwan’s Permanent Mission to the WTO are identified by their respective titles, while all lower-ranking representatives only have their names and areas of expertise listed (Charnovitz, 2006; Cho, 2005).

These nomenclature discriminations and One-China gestures towards Taiwan are intended to challenge the legitimacy of government’s equal standing in the WTO (Charnovitz, 2006; Cho, 2005). As far as Beijing is concerned, Taiwan’s WTO accession is solely based on its status as one of China’s separate customs and territories. Hence, it cannot and should not have a legal standing of its own within the said institution. Through these projections, Beijing is able to effectively portray its relations with Taipei as a local affair between the Mainland and one of its customs territories. China’s rejection of Taiwan’s independent legal status at the WTO explains its continuous refusal to conduct bilateral dialogues concerning cross-strait issues at the multilateral level.

Such an atmosphere in the WTO—the only multilateral institution that Taiwan has successfully acceded to thus far—severely undercuts the capacity of Taiwanese leaders and policymakers from either side of the political spectrum, to break free from China’s sinicization project. Indeed, the biggest delaying factors in Taiwan’s accession to the WTO that took 12 years were politically charged. On the one hand, were issues relating to its contested sovereignty, and on the other, were concerns relating to its volatile relations with China (Hsieh, 2005; C.W. Huang, 2009). When China renegotiated its WTO membership with the US after its temporary withdrawal following the Tiananmen Square incidence in 1989, the two parties agreed that Beijing would not block Taipei’s accession (C.W. Huang, 2009; Liang, 2002). In exchange, it was also agreed that China would be granted membership prior to Taiwan. Thus, aside from the domestic factors that constrain Taiwan’s march towards full independence are international conditions that seem to militate against such goal. In the end, Taiwan still remains trapped within the sinicization trajectory amid the omnipresent China factor.

Concluding Remarks

The entanglements between Taiwan and China’s national security interests, on the one hand; and free trade objectives, on the other, are coercing Taipei officials and policymakers to preserve the prevailing cross-strait status quo. In attempts to enhance their political appeals during national elections, the major political parties in Taiwan are being compelled to ‘cooperate’ with each other by promoting pro-status quo policies. This leads to the progressive homogenization of their respective policy postures towards independence, that is, the freezing of Taiwanese de jure sovereignty. The result is Taiwan’s continued ‘imprisonment’ within the PRC-configured One-China trajectory.

Taiwan’s decision to either accelerate or decelerate the pace of cross-strait economic interdependence depends on the level of security threat being induced by China. Success rests on the degree of importance that China places on cross-strait economic relations, on the one hand, and Taiwan’s resolves to terminate the agreements when desired policy changes with respect to cross-strait politics do not materialize, on the other. However, the Taiwanese government’s efforts at securing its sovereign space through economic engagements are thwarted by its lack of political freedom, if not, the will to cancel payoffs even when Beijing’s behaviour continues to violate prior conditions made. It would appear, therefore, that a consensus for adopting a moderate approach to achieve nationalist agendas between Taiwan’s two major parties has been reached. While general sentiments towards each other may be as capricious as the Taiwan–China relation itself, nonetheless, both parties have been consistent in applying the norm of moderation in managing cross-strait affairs.

Consequently, both pro-China and anti-China political factions are being restrained from adopting and implementing policies that have the potential to destabilize the ‘normal’ conduct of cross-strait relations. While a highly China-centric policy is condemned by citizens opposed to political unification with the Mainland, however, an extremely nationalistic policy is rebuked by sectors that see opportunities from healthy economic relations with Beijing. Such dilemma naturally leads to calls for ‘normalization’ of cross-strait relations. In the end, Taiwan is trapped in what appears to be a perpetual prisoner’s dilemma induced and preserved by the omnipresent China factor.

Footnotes

1.

For further discussion on the prisoner’s dilemma, see Kreps, Wilson, Milgrom and Roberts (1982), Milgrom (1984), Poundstone (1992) and Rapoport and Chammah ().

2.

Sinicization or Chinalization in this context refers to the policies of acculturation, assimilation or cultural imperialism of neighbouring cultures, specifically Taiwan, to China.

3.

Based on the author’s interview with a Deputy Director at Taiwan’s WTO and RTA Center on 17 April 2013 in Taipei, Taiwan.

4.

Based on the author’s interview with an Associate Research Fellow at CIER on 19 April 2013 in Taipei, Taiwan.

5.

Based on the author’s interview with a Director at DPP on 11 April 2013 in Taipei, Taiwan.

6.

Based on the author’s interview with a Deputy Director at Taiwan’s WTO and RTA Center on 17 April 2013 in Taipei, Taiwan.

7.

Ibid.

8.

Based on the author’s interview with an Associate Research Fellow at CIER on 19 April 2013 in Taipei, Taiwan.

9.

Ibid.

10.

Ibid.

11.

On 10 July 2013, a few months after the interviews were conducted, Taiwan signed a bilateral FTA with New Zealand. The Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation (ANZTEC) is Taiwan’s first free trade pact with a non-diplomatic ally. This was immediately followed by the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP), signed on 7 November 2013. It must be noted that these two bilateral trade agreements were signed after 2010, and therefore are outside the study’s scope. Nevertheless, their implications on Taiwan’s security and trade linkages will be briefly discussed in the succeeding sections.

12.

Based on the author’s interview with an Associate Research Fellow at CIER on 19 April 2013 in Taipei, Taiwan.

13.

Based on the author’s interview with a Director at DPP on 11 April 2013 in Taipei, Taiwan.

14.

Based on the author’s interview with a Deputy Director at Taiwan’s WTO and RTA Center on 17 April 2013 in Taipei, Taiwan.

15.

Based on the author’s interview with a Deputy Director at Taiwan’s WTO and RTA Center on 17 April 2013 in Taipei, Taiwan.

16.

Based on the author’s interview with an Associate Research Fellow at CIER on 19 April 2013 in Taipei, Taiwan.

17.

Based on the author’s interview with an Associate Research Fellow at CIER on 19 April 2013 in Taipei, Taiwan.

18.

Based on the author’s interview with a Director at DPP on 11 April 2013 in Taipei, Taiwan.

19.

Based on the author’s interview with a Director at DPP on 11 April 2013 in Taipei, Taiwan.

20.

For further discussions on the commercial liberal argument, see Mansfield and Pollins () and Polachek (1980). For the anti-commercial liberal arguments, see Ripsman and Blanchard (1996/1997, 2003).

21.

For a more in-depth analysis on great power politics, see Mearsheimer ().

22.

For more information on former President Chen’s leadership, see Clark and Tan (, 2012), Hsieh (2011), Lee (2010), Muyard (2012), Rigger (2010) and Wang et al. (2010).

23.

For further discussion on conditional and unconditional engagements, see Drezner (1999/2000) and Kahler and Kastner (2006). For tactical and substantive linkages, see Aggarwal and Govella (2013); and for tactical and structural linkages, see Mastanduno ().

24.

For a detailed discussion on three cross-strait direct links, see Chen (2012), Chow (2012), Clark and Tan (2012), Dittmer (2012), J.Y. Huang (2012), Muyard (2012), Wang et al. (), N. Wu (2012) and Zhao and Liu (2010).

25.

For a more detailed discussion on economic interdependence between democratic states and its impact on liberal peace, see Clark and Tan (2012), Gelpi and Grieco (2003), Lee (2010), Mansfield (1994), Oneal and Russett (1997), Papayanou (1999) and Pollins ().

26.

For more in-depth analysis on Taiwanese identity politics, see Chow (2012), Lee () and Zhao and Liu (2010).

27.

For more information about the protest against the CSSTA, see Democratic Progressive Party ().

References

Aggarwal

Govella

(eds) (2013). Linking trade and security: Evolving institutions and strategies in Asia, Europe, and the United States. New York: Springer.

Arrouas

(2014). The Taiwanese parliament is being occupied by protesters unhappy with a China-trade pact, 19 March. Retrieved 4 April 2014, from http://time.com/29771/taiwan-parliament-occupied-over-china-trade-pact/

Bishop

M.C.

(2005, June 29). WTO directory change angers Taipei. Taipei Times. Retrieved 12 January 2014, from http://www.taipeitimes.com/News/front/archives/2005/06/29/2003261310

Bolt

(2001). Taiwan–China economic cooperation: Ties that bind? In Klinker

(ed.), The United States and cross-straits relations: China, Taiwan, and the US entering a new century (pp. 194–219). Champaign: University of Illinois.

Brown

(2004). Is Taiwan Chinese? The impact of culture, power, and migration on changing identities. Berkeley: University of California Press.

Bush

(2011). Taiwan and East Asian security. Orbis, 55(2), 274–289.

CALD (2014). CALD statement on the railroading of Taiwan’s trade pact with China, 19 March. Retrieved 4 April 2014, from http://cald.org/site/cald/?p=7533

Charnovitz

(2006). Taiwan’s WTO membership and its international implications. Asian Journal of WTO and International Health Law and Policy, 1(2), 401–432.

Chen

(2012). ECFA and beyond: The paradigm shift of Taiwan’s National Defence Policy. In Chow

(ed.), National identity and economic interests (pp. 205–232). New York: Palgrave MacMillan.

10.

Cho

H.W.

(2005). China–Taiwan tug of war in the WTO. Asian Survey, 45(5), 736–755.

11.

Chow

(2011). The emerging trade bloc across the Taiwan Strait: The implications of ECFA and its aftermath for US economic and strategic interests in East Asia. In Clark

(ed.), The changing dynamics of relations among China, Taiwan, and the United States (pp. 255–276). Newcastle: Cambridge Scholars Publishing.

12.

Chow

(2012). The ECFA, its impact on cross-strait relations, and implications for the United States. In Chow

(ed.), National identity and economic interests (pp. 67–92). New York: Palgrave MacMillan.

13.

Chung

(2014, March 23). Anti-trade pact occupation of Taiwan parliament was months in the making. South China Moring Post. Retrieved 4 April 2014, from http://www.scmp.com/news/china/article/1455712/anti-china-occupation-taiwan-parliament-was-months-making

14.

Clark

(2009). Economic integration between China and Taiwan: No spillover into the identity and security realms. In Horowitz

Heo

Tan

(eds), Identity and change in East Asian conflicts: The cases of China, Taiwan, and the Koreas (pp. 71–90). New York: Palgrave Macmillan.

15.

Clark

Tan

(2010). Taiwan enters the 21st century: A rude awakening to the costs of success. In Lee

W.C.

(ed.), Taiwan’s politics in the 21st century (pp. 103–130). London: World Scientific Publishing.

16.

Clark

Tan

(2012). Taiwan’s political economy: Meeting challenges, pursuing progress. London: Lynne Rienner.

17.

de Lisle

(2012). taiwan’s 2012 presidential and legislative elections. E-Notes, Foreign Policy Research Institute, January 2012. Retrieved from https://www.google.co.nz/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=de%20lisle%202012%20taiwan

18.

Democratic Progressive Party. (2014). DPP strongly condemns recent KMT actions regarding the Cross Strait Services Trade Agreement. Retrieved 4 April 2014, from http://dpptaiwan.blogspot.tw/2014/03/dpp-strongly-condemns-recent-kmt.html

19.

Dittmer

(2012). Taiwan’s political economy in an era of cross-strait détente. In Chow

(ed.), National identity and economic interests (pp. 233–246). New York: Palgrave MacMillan.

20.

Drezner

(1999/2000). The trouble with carrots: Transaction costs, conflict expectations, and economic inducements. Security Studies, 9(1 & 2), 188–218.

21.

Drover

Leung

(2001). Nationalism and trade liberalization in Quebec and Taiwan. Pacific Affairs, 74(2), 205–224.

22.

Gartzke

Boehmer

(2001). Investing in the peace: Economic interdependence and international conflict. International Organization, 55(2), 391–438.

23.

Gelpi

Grieco

(2003). Economic interdependence, the democratic state, and the liberal peace. In Mansfield

Pollins

(eds), Economic interdependence and international conflict: New perspectives on an enduring debate (pp. 44–59). Ann Arbor: University of Michigan Press.

24.

Gold

T.B.

(1986). State and society in the Taiwan miracle. New York: M.E. Sharpe.

25.

Gold

T.B.

(2009). Taiwan in 2008: My kingdom for a horse. Asian Survey, 49(1), 88–97.

26.

Gold

T.B.

(2010). Taiwan in 2009: Eroding landslide. Asian Survey, 50(1), 65–75.

27.

Gowa

(1994). Allies, adversaries, and international trade. Princeton: Princeton University Press.

28.

Gray

Ruzumna

Lim

Wilder

(1999). I Try [Recorded by Gray, M.]. On On How Life Is [CD]. Los Angeles, CA: Sunset Sound Recorders.

29.

Hirschman

(1945). National power and the structure of foreign trade. Berkeley: University of California Press.

30.

Hong

(2012). The ECFA: A pending trade agreement? In Chow

(ed.), National identity and economic interests (pp. 39–66). New York: Palgrave MacMillan.

31.

Hsieh

(2005). Facing China: Taiwan’s status as a separate customs territory in the World Trade Organization. Journal of World Trade, 39(6), 1195–1221.

32.

Hsieh

(2002). Continuity and change in Taiwan’s electoral politics. In Hsieh

J.F.

Newman

(eds), How Asia votes (pp. 32–49). New York: Chatham House.

33.

Hsieh

(2011). The China–Taiwan ECFA, geo-political dimensions and WTO law. Journal of International Economic Law, 1(36), 1–35.

34.

Huang

C.W.

(2009). Bilateralism and multilateralism: Taiwan’s trade liberalization trajectory. The Hague Journal of Diplomacy, 4(1), 37–59.

35.

Huang

J.Y.

(2012). Democratic supervision of Taiwan–China agreements: On the ECFA and beyond. In Chow

(ed.), National identity and economic interests (pp. 15–38). New York: Palgrave MacMillan.

36.

Kahler

Kastner

(2006). Strategic uses of economic interdependence: Engagement policies on the Korean peninsula and across the Taiwan Strait. Journal of Peace Research, 43(5), 523–541.

37.

Kastner

(2006). Does economic integration across the Taiwan Strait make military conflict less likely? Journal of East Asian Studies, 6(3), 319–346.

38.

Kastner

(2013). Drinking poison to quench a thirst? The consequences of China-Taiwan economic integration. In Pempel

(ed.), The economy-security nexus in Northeast Asia (pp. 25–41). New Jersey, NY: Taylor and Francis.

39.

Kreps

Wilson

Milgrom

Roberts

(1982). Rational cooperation in the finitely repeated prisoners’ dilemma. Journal of Economic Theory, 27(2), 245–252.

40.

Lee

W.C.

(2010). Taiwan’s politics in the 2000s: An introduction. In Lee

W.C.

(ed.), Taiwan’s politics in the 21st century (pp. 1–22). London: World Scientific Publishing.

41.

Liang

(2002). China’s WTO negotiation process and its implications. Journal of Contemporary China, 11(33), 683–719.

42.

Lin

C.L.

(2001). National identity and Taiwan security. In Tan

Chan

Jillson

(eds), Taiwan’s national security: Dilemmas and opportunities (pp. 60–83). Burlington: Ashgate.

43.

Mainland Affairs Council. (2010). Survey on public views on the fifth Chiang-Chen talks. Retrieved December 23 2013, from http://www.mac.gov.tw/public/Attachment/07141750425.Pdf

44.

Mansfield

E.D.

(1994). Power, trade, and war. Princeton: Princeton University Press.

45.

Mansfield

Pollins

(2003). Economic interdependence and international conflict: New perspectives on an enduring debate. Ann Arbor: Michigan University Press.

46.

Mastanduno

(1992). Economic containment: COCOM and the politics of East–West trade. New York: Cornell University Press.

47.

Mearsheimer

(2001). The tragedy of great power politics. New York: W.W. Norton.

48.

Milgrom

(1984). Axelrod’s the evolution of cooperation. RAND Journal of Economics, 15(2), 305–309.

49.

Morrow

J.D.

(1999). How could trade affect conflict? Journal of Peace Research, 36(4), 481–489.

50.

Muyard

(2012). Taiwanese national identity, cross-strait economic interaction, and the integration paradigm. In Chow

(ed.), National identity and economic interests (pp. 153–186). New York: Palgrave MacMillan.

51.

Oneal

J.R.

Russett

(1997). The classical liberals were right: Democracy, interdependence, and conflict, 1950–1985. International Studies Quarterly, 41(2), 267–294.

52.

Papayoanou

P.A.

(1999). Power ties: Economic interdependence, balancing, and war. Ann Arbor: Michigan University Press.

53.

Polachek

(1980). Conflict and trade. Journal of Conflict Resolution, 24(1), 55–78.

54.

Pollins

B.M.

(1989). Conflict, cooperation, and commerce: The effect of international political interactions on bilateral trade flows. American Journal of Political Science, 33(3), 737–761.

55.

Poundstone

(1992). Prisoner’s dilemma: John von Neumann, game theory, and the puzzle of the bomb. New York: Doubleday.

56.

Rapoport

Chammah

(1965). Prisoners’ dilemma. Ann Arbor: University of Michigan Press.

57.

Rigger

(1999). Is Taiwan identity passé? Public opinion, party platforms, and national identity in Taiwan. In Chao

Clark

(eds), The ROC on the threshold of the 21st century: A paradigm re-examined (pp. 47–90). Baltimore: University of Maryland.

58.

Rigger

(2010). The Democratic Progressive Party: From opposition to power, and back again. In Lee

W.C.

(ed.), Taiwan’s politics in the 21st century (pp. 41–68). London: World Scientific Publishing.

59.

Ripsman

Blanchard

(1996/1997). Commercial liberalism under fire: Evidence from 1914 and 1936. Security Studies, 6(2), 4–50.

60.

Ripsman

Blanchard

(2003). Qualitative research on economic interdependence and conflict: Overcoming methodological hurdles. In Mansfield

Pollins

(eds), Economic interdependence and international conflict: New perspectives on an enduring debate (pp. 310–323). Ann Arbor: University of Michigan Press.

61.

Tien

H.M.

Tung

C.Y.

(2011). Taiwan in 2011: Mapping for a new political landscape and economic outlook. Asian Survey, 51(1), 76–84.

62.

Wachman

A.M.

(1994). Taiwan: National identity and democratization. New York: M.E. Sharpe.

63.

Waltz

(1979). Theory of international politics. Boston: Little, Brown.

64.

Wang

T.Y.

(2000). One China, one Taiwan: An analysis of the Democratic Progressive Party’s China policy. In Lee

W.C.

(ed.), Taiwan in perspective (pp. 159–182). Leiden: Brill.

65.

Wang

T.Y.

Chen

L.H.

Keng

(2010). Symbolic politics, self-interests and threat perceptions: An analysis of Taiwan citizens’ views on cross-strait economic exchanges. In Lee

W.C.

(ed.), Taiwan’s politics in the 21st century (pp. 159–184). London: World Scientific Publishing.

66.

(2012). Will economic integration lead to political assimilation? In Chow

(ed.), National identity and economic interests (pp. 197–204). New York: Palgrave MacMillan.

67.

(2001). Does Chen’s election make any difference? Domestic and international constraints on Taipei, Washington, and Beijing. In Alagappa

(ed.), Taiwan’s presidential politics: Democratization and cross-strait relations in the twenty-first century (pp. 155–192). New York: M.E. Sharpe.

68.

Zhao

Liu

(2010). Beijing’s shifting positions in the new era of cross-Taiwan Strait relations. In Lee

W.C.

(ed.), Taiwan’s politics in the 21st century (pp. 227–264). London: World Scientific Publishing.