An era of negotiation has succeeded decades of confrontation across the Taiwan Strait. The government of President Ma Ying-jeou has changed the tone of Taiwan's dealings with the mainland, and won Beijing's agreement to direct flights and increased tourism and trade. Yet Taiwan still relies on the United States for arms supplies and China has continued to hedge its bets by increasing its military capabilities to make it possible to accomplish reunification on its own terms.

The Carnegie Endowment and Taiwan’s Mainland Affairs Council hosted scholars from Taiwan, the United States, and China to discuss the political, security, and economic dimensions of the new situation emerging in this longtime hotspot.  David Shear, the Deputy Assistant Secretary of the Bureau of East Asian and Pacific Affairs, was the keynote speaker, and Carnegie’s Douglas Paal moderated the event.

Cross-Strait Relations: A Retrospective of the Ma Administration

Retired Rear Admiral Mike McDevitt from the Center for Naval Analyses moderated and Bernard Cole of National Defense University commented on a panel that assessed developments and trends in cross-Strait relations under the Ma Administration.

Chong-Pin Lin from Tamkang University, Bih-Jaw Lin from National Chengchi University, Robert Sutter from Georgetown University, and Chu Shulong from Tsinghua University also participated in this panel.

  • Domestic Politics: In order to continue the positive development of cross-Strait relations, it is critical for moderates on both sides, such as China’s Hu Jintao and Taiwan’s Ma Ying-jeou, to hold power, Chong-Pin Lin noted. He added that the mainland took the initiative by dropping its timetable for reunification and launching a goodwill campaign through frequent official trade visits to Taiwan. Subsequently, Taiwanese public opinion regarding mainland China has significantly improved in recent years.

  • Incremental Progress: Beijing has followed a strategy of “peace and engagement” toward Taiwan, and the recently signed Economic Cooperation Framework Agreement (ECFA) is both a natural result of this strategy and a building block for further progress, Bih-Jaw Lin argued. Chu Shulong suggested that in addition to providing a long-term framework for economic cross-Strait stability, the ECFA may eventually lead to a political agreement between China and Taiwan.

  • A Changing Status Quo: While positive momentum in cross-Strait relations will continue, the status quo will not remain the same, Sutter cautioned. He pointed out that China has consistently maneuvered to build up leverage and its increased influence vis-à-vis Taiwan is fundamentally changing the nature of that relationship. Cole added that the question of military balance across the Strait now favors Beijing and is effectively “done.” This development may also alter calculations and thresholds on all sides.

Keynote Address: David Shear

David Shear, the Deputy Assistant Secretary of the Bureau of East Asian and Pacific Affairs at the U.S. Department of State, outlined the Obama administration’s cross-Strait policy and identified possible areas for future progress in U.S.-Taiwan relations.

  • Positive trends: Shear welcomed both the ECFA and the general reduction in tensions across the Taiwan Strait, proclaiming that China-Taiwan relations were healthier now than at any time in the past decade.

  • Emphasis on free trade: The ECFA should aim to lower barriers to trade in Taiwan and increase market access for all parties, Shear suggested. He also argued that with the signing of this agreement with China, Taiwan should be free to negotiate other bilateral deals under World Trade Organization (WTO) rules.

  • U.S. Reassurance: Shear reaffirmed the U.S. commitment to support Taiwan across a broad spectrum of issues, from helping meet its defense needs and strengthening its negotiating position through arms sales to increasing official diplomatic exchanges and working to enlarge its international space. He closed by welcoming Taiwan’s dramatic evolution into what he described as a shining example of what it means to be Chinese, modern, and democratic.

The United States and Cross-Strait Relations

Carnegie’s Douglas Paal moderated a panel that analyzed the role the United States plays in the delicate balance across the Taiwan Strait.

Panelists included Arthur Ding of National Chengchi University, Cheng-Yi Lin of Academia Sinica, Dan Blumenthal of the American Enterprise Institute, and Guo Yongjun of the China Institute for Contemporary International Relations.

  • Unknown variables: Taiwan has historically served as a scapegoat or buffer in the constant flux of U.S.-China relations, stated Arthur Ding. Thus, any future resolution of the Taiwan issue may have significant and unpredictable impacts on U.S.-China relations. Taiwan’s clamorous democracy further complicates long-term U.S. calculations, argued Cheng-Yi Lin.

  • Dealing with China: Three of the panelists identified the underlying problem in the triangular relationship to be U.S. appeasement of China and its corresponding fickle support for Taiwan. Alternatively, mainland Chinese scholar Guo Yongjun emphasized the remarkable continuity in U.S. policy toward Taiwan and singled out arms sales as the major obstacle to smoother relations. Swaine critiqued both views, asserting that being tougher with China would not elicit its accommodation, and that neither simple continuity nor further arms sales offered a workable long-term solution.

  • Future Outlook: Despite the increasing sophistication of Beijing’s Taiwan policy, Cheng-Yi Lin insisted that the evolutionary process of political reconciliation must be free of coercion. He suggested implementing unilateral confidence-building measures as a possible gesture, while Blumenthal suggested other creative solutions, including the creation of a Chinese commonwealth. At the same time, Guo Yongjun warned against equating the current economic integration with eventual political integration.

Progress and Strategy in Cross-Strait Relations: Looking to ECFA

The Honorable J. Stapleton Roy from the Woodrow Wilson Center moderated a panel focusing specifically on the impacts of the recently-signed ECFA between Mainland China and Taiwan.

This panel also featured Alexander C. Huang from Tamkang University, Jinn-Yuh Hsu from National Taiwan University, Nancy Bernkopf Tucker from Georgetown University, and Ni Shixiong from Fudan University.

  • Economic costs and benefits: The ECFA is likely to encourage economic reforms in Taiwan, making it an increasingly attractive destination for foreign investment, Tucker noted. At the same time, Jinn-Yuh Hsu pointed to the potential negative consequences of the ECFA, including rising income inequality, particularly between the poor southern regions and the high-tech north. Paal added that trade adjustment assistance was a necessary measure, and that at a basic level, the ECFA would push Taiwan to increase its competitiveness.

  • Political implications: The signing of the ECFA has the potential to increase Taiwan’s diplomatic space, it strengthens the case that the island should be allowed to sign exclusive bilateral trade deals under WTO regulations, Tucker said. Several panelists agreed that while closer economic ties between China and Taiwan may further the development of more sensitive relations, they are no guarantee of peace or eventual political integration.

  • The role of the United States: Closer cross-Strait economic relations create the need for more U.S. engagement in the region, not less. Tucker argued that the United States must maintain a strong economic presence in the region, and that it should also restructure its economy to take advantage of Asian opportunities. Paal agreed, stating that the United States needs to “get its act together economically” and push forward with its own trade agreements with Taiwan.

Roundtable Discussion

Carnegie’s Douglas Paal moderated a roundtable conversation featuring scholars from both sides of the Straits as well as the United States.  Participants discussed some of the chief points they took away from the two day conference.

Roundtable participants included Tuan-Yao Cheng of National Chengchi University, Wen-Cheng Lin of National Sun Yat-Sen University, Bernard Cole of National Defense University, Michael Swaine of the Carnegie Endowment, Gang Lin of Shanghai Jiaotong University, and Ni Shixiong of Fudan University.

  • Pragmatism: Both sides of the Strait are becoming more flexible and pragmatic. China has demonstrated patience and the understanding that it is not feasible to hold political negotiations before the next Taiwanese elections, Gang Lin noted. Tuan-Yao Cheng agreed, suggesting that both sides would continue further negotiation on economic issues for the time being, as the Taiwanese public is not yet ready for political talks.

  • Transitional period: While the ECFA has increased speculation that economic integration would lead to political integration, Tuan-Yao Cheng suggested that a necessary intermediary step was social integration. Increasing social exchange would increase mutual understanding and gradually change thinking on both sides. Ni Shixiong also pointed to the ECFA as a way to help the United States, China, and Taiwan transition towards more mature, albeit complex, relations.

  • Strength of the U.S. commitment: U.S. participants repeatedly affirmed that the United States would honor its defense commitments to Taiwan and respond to any Chinese aggression across the Straits. However, the balance of power could shift as China gains more leverage, particularly in the aftermath of the financial crisis. Cole also made the important observation that the question of cross-Strait balance is really a subset of the larger strategic balance in Asia, and that the Taiwan issue must be analyzed in a regional context.