Publication: China Brief Volume: 3 Issue: 7

By Gordon G. Chang

Memo to the Pentagon: Don’t worry about defending Taiwan. Send the Seventh Fleet home because hostility across the Taiwan Strait will soon become a thing of the past. China will absorb the island republic in a couple years with the consent of its inhabitants.

At least that’s what celebrity consultant Kenichi Ohmae is now telling the world. In his newest book, The Emergence of the United States of Chunghwa, he says China is so strong that Taiwan will integrate politically with the Mainland in a Chinese federation. This will definitely occur by the 2008 summer Olympics in Beijing, he says, but will probably happen sooner, by 2005. Dr. Ohmae, who calls himself “a student of the borderless world,” sees the planet losing one more political barrier. The ongoing migration of business from Taiwan to the Mainland will, he predicts, be followed by an historic accommodation between Beijing and Taipei.

The prediction is an easy one for Ohmae, the former McKinsey senior partner who is also known as “Mr. Strategy.” This business guru became famous for his views that the nation-state should become a thing of the past. The global economy, he says, makes individual countries anachronisms. Regions–that is, groupings of states–are the way to go as they fit better into the world that we will see tomorrow.

So will we soon see the leaders of China and Taiwan shake hands as federation partners? Ohmae’s argument for an early political union rests on a simple thesis. Jiang Zemin, he notes, has already managed the reunification of Hong Kong and, after that, China’s accession to the World Trade Organization. So between now and the Olympics he has to find something to do in order to maintain his influence, and that something is the reunification of Taiwan and the Mainland. The Emergence of the United States of Chunghwa, which was released in Japanese late last year and in Chinese this past January, specifically states that Jiang would remain as president of the People’s Republic. As we know, he did not (and could not under the term limit of China’s constitution).

Apart from this one faulty argument, Ohmae provides virtually no analysis to support his bold prediction regarding the timing of integration. The book, however, does state that “sometimes things just happen.” This line suggests that the world famous guru, who by his own count has written more than a hundred books, may simply have run out of things to say.

In fact, at the current pace of cross-straits negotiation, it will be years, perhaps even decades, before the two sides can agree on political union–if they can ever agree at all. Even Ohmae seems recently to have acknowledged that he got his timing wrong by downplaying in public his comments on the date of unification. Could Mr. Strategy have made a monumental strategic mistake?

Perhaps not. He may be right, as improbable as his prediction might first appear. At the end of last month Lien Chan, the leader of Taiwan’s Kuomintang, said that he would, if elected president next year, make a trip to Beijing before he took office. The visit would be, in his words, “a journey of peace.” President Chen Shui-bian, however, has replied that such a visit would be “a journey of surrender.” In a sense, both men are right. As Chen notes, Beijing will not allow any visit from a Taiwan official unless the island accepts the “one China” principle. Acceptance of that principle means, as a practical matter, political integration under Beijing’s rule.

So events may prove Ohmae correct. What precisely does he mean by a “federation”? Unfortunately, Mr. Strategy, the man who has an answer for every occasion, does not enlighten us.

The closest he comes to an explanation is a simple analogy. The Emergence of the United States of Chunghwa likens Taiwan to a woman who does not want to get married. Ohmae then asks this imaginary woman: If a man tells you after we get married you can live with your parents and you don’t have to use my family name and you keep the money you earn, wouldn’t that be great?

No, it would not be. Mr. Strategy never tells us what the Taiwanese get out of his concept of federation. The Republic of China is already a sovereign country. It has its own currency, its own armed forces and its own government. The Taiwanese have almost everything they need. Ohmae talks about the Mainland becoming the dominant economy in Asia and, he then says, Taiwan needs to take advantage of this fact. But even if these propositions were true, Taiwan already has most of what it needs in this regard because it is in the World Trade Organization (WTO). Beijing, in reality, has little new to offer Taiwan, this “beautiful woman,” as Ohmae calls the island.

Moreover, a federation would just make matters worse for Taiwan. Because of the “one China” principle, Beijing will insist on political union as a condition for creating a federation. But WTO rules prohibit special treatment for domestic investors, which is what Taiwanese businesses would become under Mr. Strategy’s concept. This is not just a small oversight. This is a fundamental flaw in his thinking, a flaw so big that it makes his whole concept of federation meaningless.

With or without a federation, Taiwanese businesses will move across the Straits. Today, they are treated well because Beijing is trying to use them to pressure the government of Chen Shui-bian. If there were political union in the future, Beijing would no longer have a political need for these investors. Moreover, once Taiwan agrees to the “one China” principle it loses most of its bargaining power. As a practical matter, therefore, the final details of a federation may not be advantageous for Taiwan.

Even when a Taiwanese business gets special treatment, we need to examine exactly what happens. No one gets more special treatment than Wang Yung-ching of the Formosa Plastics Group, who can call up the leaders of China anytime. But his gargantuan investment in power plants in Fujian Province is on the rocks. Wang, Taiwan’s “god of management,” may have to write off billions of U.S. dollars because local officials failed to honor their power purchase agreement and the central government is restructuring the power sector. This appears to be a breach of a sovereign guarantee, although old Mr. Wang is not talking. And what has he gotten for all his efforts? Beijing is pressuring him to make investments in North Korea. That’s his reward for helping China?

Or how about the government of Singapore? It is another Chinese society that could be part of Ohmae’s Chinese federation. But Singapore had to abandon most of its showcase investment in the Suzhou industrial park even though Lee Kuan Yew had personally sealed the deal beforehand with China’s top leader, Deng Xiaoping.

If such big name, world-class investors are losing their shirts in China, then the concept of special treatment would seem to be vastly overrated. Taiwanese investors can tell a thousand stories of promises dishonored in China, even though the Taiwanese supposedly share the same culture with their Mainland brethren. Dr. Ohmae, the famous consultant, apparently knows little of business in the modern Chinese state.

As support for his federation concept, Dr. Ohmae cites the example of the Special Administrative Region of Hong Kong. Following reunification with the Mainland in 1997, Hong Kong “has not suffered,” at least according to Ohmae’s book. The author has apparently not witnessed what almost everybody else has seen: The tragic economic, political, and social decline of the former British colony. Recent history, which is after all our best guide to the future, suggests that Taiwan too will suffer after the establishment of a federation, just as Hong Kong has suffered since reunification.

It’s clear that the business guru does not grasp the general concept of business. His book says, for example, that if Taipei doesn’t establish the “Three Links,” the Taiwanese city of Kaoshiung will miss the opportunity to become a port for China. But even if Taiwan had 300 links with the Mainland, Kaoshiung would never fill this role. China is building deep water ports faster than Ohmae churns out books. Why would anyone want to ship through Taiwan when they can go directly to the Mainland? Ohmae obviously hasn’t noticed it yet, but that is precisely Hong Kong’s problem–it is losing its role as the gateway to China.

One of the problems with business consultants is that they ignore the world outside business. Is it really possible that the Taiwanese, who are creating the most exciting democracy on the face of the earth, would voluntarily accept the rule of the world’s largest authoritarian state? This is a point on which Ohmae is silent. Lien Chan might want to make his “journey of peace” and Kenichi Ohmae may call it a good strategic move, but the 23 million people of Taiwan will have the final say.

Gordon G. Chang is the author of The Coming Collapse of China, published by Random House.