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"Perspectives of the Cross-Strait Relations: View from Europe"

Papier présenté en participation au colloque : "Histoire et perspectives des relations dans le détroit de Taiwan: le point de vue européen". Organisé par l'Institut de relations internationales (IIR) de l'université de Chengchi (Taipei) et l'Institut des affaires asiatiques (IAA, HAmbourg)

"The impact of US, EU and Japan's interests on Cross-Straits relations and the future development of Taiwan's international status"

Sorting out the interests of the US, EU and Japan towards China Mainland and Taiwan looks first as an easy task for a European. Bizness is Bizness, and all other questions are uninteresting. That is what most of the public opinion think about that subject.

I have not been able to find anything like an opinion poll about the subject in Europe, nor in the USA. And if Mr. Google and his engine give lots of hits if you type in "American interests" and "Cross straits", he brings much less pertinent answers when you replace American by Japanese and only two if you ask for European interests. It is not a surprise. For the average citizen of the EU, there is absolutely no in depth thinking about the Chinese world. China is the "huge market" and Chinese illegal immigrants are numerous but they work hard and solve their communitarian problems "inside". Mainland Chinese and Taiwanese, lowest level laborers and top level scientists, tycoons and beggars are all the same. End of the story. Japanese are, in many respects, much closer to Chinese and have a more sensitive perception of a possible threat, just as well a same hope for a better cooperation.

The interests of a country, or of an union of countries are, however, defined at an upper level. Hopefully, one finds there a better knowledge of the past and present situation.

Concerning China, and this might be one of the main answers to the question of this conference : a European perspective of the Cross Straits relations, the perception of most of the decision makers has changed. The "huge market" has been a dream as early as the late years of the eighteen century and became paramount in the late nineties (of the 20th century). Because even decision makers dreams. The good thing with them is their ability to react quickly and change their minds when their dreams prove unrealistic. Their views on China Mainland have changed. They have now admitted that the promised huge buyer was in fact an average buyer and a formidable exporter, but also a formidable reserve of factory workers. And that the "would be" customer was in fact making and selling very cheap indispensable products used in everybody's every day's life. In the late eighties, an advertisement for the French ball pen maker Bic summarized all the dreams : a representative from Bic faced a Chinese top level executive. At the end, the Chinese official was just saying "I order one billion of those". Up to now, most of the supersize orders have failed to concretize. China is exporting more and more, and, if it imports more, the pace is continuously derailing towards an everyday expanding trade gap in favor of Beijing, except for Japan. But the moneymakers always need a dream to put in front of their auctioneers. They are now selling a new view of the Mainland, that becomes "the factory of the world". The way it is supposed to work is very simplistic. This "dream" factory is seen as a system where you input, at A point, money and desiderata's and that automatically outputs, at a B point that can be as remote as you like, the desired goods. Grossly speaking, Japan seems to have a widely similar view of it's primary economic interests in China.

The interests of the US, EU or Japan in Taiwan are seldom addressed and very, very few Americans or Europeans are able to say anything coherent about ROC and its whereabouts. At governments level, the story is somewhat different. The Western countries stood, for most of them, attached to Taiwan for very long. The USA waited as long as 1979 before establishing diplomatic links with Peiping. And, if Japan had opened those links earlier, many restraints had been observed and the first visit of a Japanese emperor in China had to wait until 1992, twenty years after the reestablishment of relations between the two countries. In a much more "realpolitik" way, due to Hong Kong related constraints, the United Kingdom established official links with Peiping as early as 1950, in the same batch than the Warsaw Pact countries. France, in 1964, thought it might success in establishing diplomatic relations with the Mainland while retaining those linking her to Taiwan. It failed, but that initiative paved a road that all the Western Europe nations took quickly.

Economic interests

As we said before, economic interests are the only important ones at first view. They are also the better known. However, it remains necessary to take a glance at this point, in order to make it better understandable.

Taiwan and China Mainland are both very important commercial partners of the G 7 countries. China is the 6th customer of the USA, 6th customer of the EU, 3rd customer of Japan. One tends to forget that the Mainland is also the 4th provider of the USA, 3rd provider of the EU and 1st provider of Japan. But, more than that, Mainland Chinese trade balance with US represents 20% of the latter's trade deficit. The unbalance with the EU is on the same scale, things being better for Japan. To fix things, the value of Chinese plus Hong Kong exports to the USA represents the GNP of Indonesia or Turkey. Chinese plus Hong Kong imports from USA are comparable to the GNP of Vietnam. That means that the import export ratio stands at 5 to 1 in favor of China.

But traditional commercial exchanges are not the only thing. If the general public and many technocrats, sometimes at the upper level, remain mentally locked inside a "huge Chinese market" view, most Western and Japanese entrepreneurs have, since years, changed their minds. As said before, lots of them acknowledge now China Mainland as the "World factory". The firms that make money in China are not those that are selling goods in China, but those that are importing "Made in China" stuff. This world factory is of such an importance that the world business cannot keep on without. China exported around 325 billions USD of goods in 2002 –i.e. 30% of it's GDP- and the value of its exports is increasing at a 20% annual rate. In the western supermarkets, Chinese goods are represented everywhere and they are now indispensable. Should one reason or another drive to a stop of the import of cheap Chinese stuff and their disappearance from the shelves of the rich countries shops, it would lead to a 1 or 2 % inflation of the consumer's basket. However, this predominance is not lifetime guaranteed. The factories are on the Chinese soil, the workers are Chinese, but the know how and the capital are sourced outside. Most of the industrial production could be transferred to another places in case of trouble.

The commercial exchanges with Taiwan are somewhat different. They are much more important in size that one could think, but they are also better balanced. Taiwan is the US 7th customer and 7th furnisher. More important, lots of Taiwanese exports towards the G7 countries are of Taiwanese conception and incorporate much more added value. In some areas, such as personal computing, the island is now the "lab of the world". Very critical items such as computer memory chips, are more or less a monopoly.

But, economically speaking, Taiwan, just like other parts of the Chinese world, is also an entry point and an intermediary towards the Chinese factory. At every level, Taiwanese capital, entrepreneurs and cadres play a very important role in the production of the "made in China" export goods. There we have a first hint at the question we are trying to solve. Should the Cross Straits relations come to deteriorate in some way, one could imagine the short/middle term impact on Mainland Chinese exports.

But, the commercial interests are not the only finance related point of interest. Peiping as well as Taipei detain a very important amount of foreign exchange reserves. The G7 countries are quite sensible and any big scale move of this reserves could be very detrimental for the World three main currencies, i.e. USD, euro and yen.

Other interests

The EU has little direct positive interests in either side of the Straits other than economical. One could just say that some European intellectuals really believed that China could be a strong ally in the anti-hegemony policy. USA and Japan are much more deeply involved and have very strong interests that are not only economical. Chairman Cox summarized the American interests as follows : " Today, even more than in 1979, Taiwan's security is critical to America's interests. Taiwan is now America's seventh largest trading partner, and buys far more from the U.S. than does the PRC. The sea-lanes surrounding Taiwan are vital to the economic health of Asia and to the sustained growth of U.S. exports to Asia. Perhaps most important of all, a democratic Taiwan stands as a living example to all of the people of China that they too can build a prosperous, peaceful democracy"

Even if the official recognition goes towards Peiping and "One China" policy, Washington has important commitments to Taipei. The Taiwan relations act, promulgated in 1979, has the force of a law in the United States. It has even been close to be replaced by a new formulation, the Taiwan Security enhancement act in 1999, that would have implied deeper military involvements, facilitating the weapons exports (such a move has been done later by the Bush administration) and, something that Peiping absolutely refuses, clearing the direct military contacts between ROC and the US. According to the TRA, the USA commit themselves to provide Taiwanese forces with the weapons it needs to defend it's status. The American implication has been clearly demonstrated during the 1996 missile crisis, as well as through the announcement of the new weapons deal of 2001 and following that, the announcement of a change in the procedures of attribution of new weapons markets. But the demonstration had started before, when the US deliberately broke the rules governing the weapons exports to Taiwan as they were defined by the Second Shanghai Common Communiqué. Even if the "strategic ambiguity" and the "one China policy" remains the official rule, and when the weapons delivery promised in 2001 take time to concretize, it is certain than the Bush administration makes Taiwan a part of its order of battle facing China Mainland seen as a strategic competitor and even a possible enemy.

But the Mainland is also of strategic interest for the US which continues to promote regional security dialogue. It started in this position as an "allié de revers" against the USSR during the Cold War era. It might become a partner in the anti-terrorist war. Peiping is also one of the cards that Washington uses to play in it's attempt to control the North Korean nuclear program.

Japan also retains strategic interests in the Straits area. The Senkaku Island problem is one of those. But the freedom of navigation is probably the most important thing for a country that depends on maritime transportation for a great part of it's vital needs. And it is impossible for Japan not to include in it's strategic thinking the interest of a Taiwan/Japan/US security triangle.

Apart those "positives interests", Japan, the US and even EU share lots of "negative interests" in the area. Seeing Mainland China as a threat and a superpower remains a very long term projection and a "possible". What is today and tomorrow, what is sure and realistic, is the threat that any major change in today's situation could involve. The Mainland is a proliferating nation, it does not respect intellectual and industrial property, it has taken too big a token in the world economy while showing unable to rein it's own situation. It is also a potential source for millions of economic migrants. This very burden is becoming more heavy everyday in the EU. As far as it remains under control, the situation, if perfectly unsatisfying, is bearable. Any major change to that could lead to unpredictable developments, and Western economies do not like that type of changes.

Taiwan also can be perceived as a threat, or a possible nuisance, to Japan and Western countries. If Peiping looks as the big that could eat the small, one can also consider the small as a uncontrollable teaser. Any decision taken in Taipei that could be considered as a declaration of independence is likely to put the fire in the Straits.

Some very active groups are also putting in front some "moral" issues whose preservation is considered as a part of their non material interests. The behavior of the Mainland towards issues such as human rights, political and religious freedom and the like is considered as unacceptable by some. Others tend to praise the fight of Taiwan against communism and it's accession to democracy.

Duality of interests

The problem with the Cross Straits relations is that nothing can be clearly defined. On one hand, the need to keep on trading with the Mainland, even if is not as beneficial as it seems at first look. At the other hand, the need to be careful not to help Peiping to become a dangerous competitor. Each country has it's own lobbies acting adversely. They can be divided into three types.

The economic lobbies think that the Mainland shall become the N°1 world economic power in the years to come. They then do everything to jump on the train. They are ready to pay the price for a partnership in this future wealth. The example of some of the EU declarations after the 6th Sino-European summit of Beijing, end of October 2003, is typical. Europe is ready to give access to Galileo program and soften the Chinese tourists control. Some even started to open a dialogue about weapons sales. In exchange, no facts, just a promise of dialogue about industrial property and such other topics. In a separate communiqué, the EU recalls that it remains involved (in words, but not committed to act) on the Human Rights, proliferation, pollution and others. On it's side, shortly before the meeting, Peiping published a paper reminding that there are "red lines" not to be crossed by the EU countries, such as the strict respect of the "One China" policy towards Taiwan and the prohibition of contacts with the Tibetan government in exile. One of the problems of the EU is it's lack of common foreign policy. Countries have very different approaches of the relations with the PRC and the ROC, depending on the weight of the inside lobbies.

The US are also very divided, even if the government keeps a very firm position concerning it's relations with the ROC. The pro-China lobby wants an improvement of the relations and pretend that any move towards Taiwan is detrimental to US economy, bringing no return. However, US employment pays a toll to it's inability to compete with Chinese factories. On the other hand, the pro-Taiwan lobby recalls that an emerging China could become a superpower and a major threat for the US, not only economically, but also militarily and politically. China was to be designated as the main threat in 2001 or 2002, but 0911 changed things. Some American strategists even came to think that Peiping could become an ally in the fight against terrorism. Japan also sees such conflicts between the same two tendencies. It's problem is that WWII stories are always bouncing back and oblige to much greater precautions. By example, Japan has, during the past years, always complied with the Chinese ukases in terms of Taiwan representation on it's soil. It has consistently refused to grant visas to high level Taiwanese representatives, even when they only wanted to attend meetings of organizations ROC belongs to.

Impacting the Cross Straits relations and defining the future development of Taiwan's International relations

As they have been defined above, the interests of the US, EU and Japan are, in today's situation, free from immediate danger. The main threat to them resides in a possible change of situation. And, in such a rather fragile context, major changes of situation are possible anytime and can be triggered by rather small affairs or misunderstandings. For this very reason, the Western powers are carefully monitoring the evolution of the Cross Straits relations and try to keep them going in a way that is conform to their interests. For the time being, that means preservation of the status quo, at least, and improvement of the relations, at best. Most Westerners believe that more relations, economic mainly, but also people communicating and traveling from one side to the other means less risks of confrontation.

Amongst the problems lies the very particular type of those relations. If the Mainland is diplomatically recognized, meaning that all the normal communications links are opened, it is perceived as a challenger, not to say more, and a challenger that, quite often, does not want to play the rules. Taiwan, a much smaller entity, is not a "true" state or nation, even if it usually behaves rather rightfully. That means that nothing can be done simply. Communications have to follow, at best, a "track one plus" channel. And no statement can be done putting things clear, no intermediation can be made as far as there is no possibility to put the two China at the same table in presence of a third party. Unlike Asia, Western countries like to see thinks clearly defined, and preferably written black on white. They feel quite uneasy when it is not possible.

In this respect, the impact of the US, EU and Japan interests on the cross Straits relations is hardly visible, except when the US are acting "strongly". Most of the time, actions take the form of a "non official" intermediation. When the relations between the two China seems to deteriorate, one can see (or imagine, as far as things remain covert) an intense activity of the parties, trying to soften the stance. In the past years, important moves concerning Taiwan, weapons sales or VIP visas mainly, have been carefully prepared. One knows that Peiping shall never miss an opportunity to argue. And it can also resort to retaliation, mostly against economic interests on the Mainland, but also by extending it's nuisance capability (pollution, proliferation, release of migrants).

The biggest risks for the US, EU and Japan interests on the Mainland lies in the refusal of the latter to abide to international rules. It extends from written rules, with a law enforcement, to good behavior non written items, such as refraining from some misconducts. The best way to oblige Peiping to respect the regulations is to oblige it to join as much international organizations as possible, in such a way that Mainland China finds more interest in playing the rules that in trying to cheat. Such a move is widely beneficial for Taiwan, knowing that the island is usually invited to join those organizations (if they are non political) once it's rival has opened the way.

The "what if " game

The future of Cross Straits relations and Taiwan international status is more completely dependant upon the main scenarios of evolution. Considering those scenarios, it is always interesting to play the "what if" game. Each of the possible developments would widely impact on the interests of the US, EU and Japan and should probably lead those countries to take different actions in order to improve or reestablish their situation.

"Two countries, two systems".

Under this title, one consider a declaration of independence that would be accepted by Peiping, and not lead to war acts and destructions. Today, it is not very likely, but "never say never". In the long run, it might even be good for the Mainland interests. Should it happen, it is likely to be a consequence of internal difficulties on the Continent that could prevent it from slamming shut an open door. This would mean a rebirth and a rechristening for Taiwan. The island would very quickly retake a normal international status, as a normal UN member. The possible will of some nationalists to regain the power over entire China, just like it was in the post 1949 era would be the only threat for the interests of the Powers. For them, the good status for Taiwan is something like Singapore or Switzerland status : a fully sovereign state, with no confliction relations with anybody. And also a very performing partner, with which relations are simple, without any external interference. For economic interests, but also for most of the other interests, this would be the very best scenario. The only and main restriction lies in the "difficulties" of the Mainland leading to such a drastic change, knowing that the same powers have even bigger economic interests there. If the rebirth of Taiwan as an independent state is mostly a consequence of a nation wide economic crash on the Mainland or a disappearance of the central power, US, EU and Japan might loose more than they earn.

Taiwan invaded

This scenario is that of a declaration of independence by Taiwan that would be followed by a successful intervention of the PLA, leading to an invasion of the Island and it's return to the status of a normal Chinese province. This scenario is always hanging over the heads. Such events would be an economical disaster at first hand. Destructions, but also complete loss of confidence, loss of Taiwanese management in the Chinese firms....

Strategically speaking, Japan would be the first loser. The apparition of a united China on it's South would mean, as said before, a risk for it's claimed sovereignty over the Senkaku, and for it's sea links. Worse than that, a victorious China would certainly feel more inclined to threaten Japan by reigniting the old disputes.

The USA would also feel strategic differences. First of all, the defeat of Taiwan should be a defeat for the US, and a loss of credibility towards it's other allies. It would also change it's strategic posture towards a Greater China, and also it's deployments in Japan and South Korea. Apart that, it would also provoke a great debate inside the US between those (the economic lobby) willing to cooperate with Peiping, whatever the wrongdoings, and those that cannot admit that.

Principally if the "war" has been fast and has provoked little losses, such a situation could be accepted by the rest of the world, and this would mean the end of Taiwan as an identity. But, the forced reunification could also be rejected. In this case, international pressure would escalate to try to revert to the status quo ante.

One country two systems

Mainland China is actively trying to persuade Taiwan to accept a "One country two systems status". This would mean the disappearance of Taiwan as a self entity, and the end of nation to nation international relations. As this change implies an acceptance from the Taiwanese side, the international community should have no reason to try to change it. It would just try to keep it's positions without losses on the two sides of the Straits, like it did in Hong Kong and Macao.

Status quo

Prolongation of the status quo is certainly one of the biggest fears for those in Peiping that want reunification. For the Western powers and Japan, it is already a "not so bad" situation. Using some precautions, it is today possible to act with Taiwan just as with an non pariah state. And the existence of Taiwan as it is now gives to the USA, but also to Japan and, in a lesser proportion, to the EU, a sometimes useful means of pressure on the PRC, but also on the ROC. The relations with the Mainland are not really affected as far as some "red lines" are not crossed.

Maodun, contradiction, is the word that applies the best on all that has been said before. Contradiction between the economic interests and the strategic interests, and even contradiction between the economic interests on the long term and in the short term. Contradiction between the desire of partnership with China and the fear to see it become a superpower. And also, contradiction between defending interests in Taiwan and interests on the Mainland. The only thing on which everybody agrees is that chaos on the Continent or confrontation across the Straits would be detrimental for each of the parts, and would even impact on the world wealth. For all those reasons, a bad status quo remains better than any conflict.

Nevertheless, there is room for improvement. For the US, EU and Japan, the best possible situation is probably "Two countries, two systems" if, and only if, this status can be attained peacefully. The problem is that the venue in the short term of this situation after a declaration of independence by Taipei would probably be the consequence of very disturbing and destructives internal events on the Continent. And everybody agrees that it is the worse that could happen to the PRC, it's partner's and all the region. For the Powers, the best possible solution then probably lies in maintaining (or helping to maintain) the status quo, a situation that could receive, day after day, subtle improvements in terms of international status for Taiwan, slowly driving to an indisputable independence.