ECFA and the Elections: Implications for Cross-Strait Relations

Publication: China Brief Volume: 12 Issue: 1

Taiwan's Choice for President Could Determine Whither Cross-Strait Relations

The signing of the Economic Cooperation Framework Agreement (ECFA) between the Chinese mainland and Taiwan in June 2010 signified landmark progress in cross-Strait rapprochement, which began in May 2008 when the Kuomingtang (KMT) came into power after eight years of being the opposition party in Taiwan. The ECFA has not only instilled new vigor into Taiwan’s economy, but also opened tremendous new opportunities for cooperation and prosperity between the Chinese mainland and Taiwan. Indeed, aiming at significantly reducing tariffs and commercial barriers, the ambitious accord marked a significant breakthrough in terms of the normalization, institutionalization and liberalization of cross-Strait economic relations. The future of this progress however probably depends on the outcome of the coming election in Taiwan irrespective of ECFA benefits, because of Beijing’s deep mistrust of the Democratic Progressive Party (DPP) and DPP candidate Tsai Ing-wen’s willingness to walk away from the “1992 Consensus,” Beijing’s precondition for cross-Strait negotiation.

ECFA and Cross-Strait Economic Integration

Several statistics illustrate the positive effects of ECFA. In 2010, cross-Strait trade volume hit a record high of $145 billion, up 36.9 percent compared to the same period a year earlier. Taiwan’s export to the Chinese mainland also reached the record high of $115 billion, up 35 percent as compared to the same period in 2009 (Ministry of Commerce, January 20, 2011). In particular, following the implementation of “early harvest” plan in January 2011, Taiwan’s export to the Chinese mainland in 2011 is expected to hit the record high of $120 billion (Commercial Times, December 15, 2011).
 
2010 also witnessed the dramatic increase in Taiwanese investment in the mainland, with total realized investment reaching $2.48 billion, up 31.7 percent as compared to the same period of 2009 (Ministry of Commerce, January 20, 2011). In addition, 2010 also saw normalization and institutionalization of cross-Strait tourism, with over 1.5 million Chinese mainland residents visiting Taiwan and over 5 million Taiwan residents visiting the mainland. Since May 2008—the first time mainland tourists were allowed to visit Taiwan—over 3 million mainland tourists have visited (Central News Agency, January 4, 2012).

According to a Peterson Institute for International Economics estimate, the implementation of ECFA will increase Taiwan’s 2020 GDP by about 5.3 percent from the current trend line [1]. Taiwan’s economy grew 10.47 percent in 2010, the record high in more than two decades (Central News Agency, February 1, 2011). Consequently, Taiwan was among the few economies that achieved double-digit economic growth in the wake of the global recession. The continuous global economic downturn in 2011 has lowered the demand for Taiwan’s exports, particularly in Europe and the United States, leading to a modest 4.38 percent growth of GDP in 2011. Analysts at Academia Sinica, Taiwan’s leading research institute, estimate ECFA will serve as the main driver of Taiwan’s exports in 2012 since the tariffs of more than 90 percent of the items on the “early harvest” list will be reduced to zero. As a result, Taiwan is expected to achieve a 5.15 percent growth in exports in 2012 and Taiwan’s estimated overall economic performance will still top the region (Central News Agency, December 29, 2011).

Moreover, ECFA also has opened the door for Taiwan to negotiate Free Trade Agreements (FTAs) with other regional actors, including Singapore, India, Philippine, Indonesia, New Zealand, South Korea and the United States; thus, in due time, it will lead to greater economic integration between Taiwan and the region [2]. Therefore, the ECFA has laid a strong basis for the co-development and co-prosperity of both sides across the Strait.

Challenges in Cross-Strait Relations in the Post-ECFA Era

The normalization, institutionalization and liberalization of cross-Strait economic and social relations have not only brought immense benefits to the people on both sides of the Taiwan Strait, but also greatly contributed to the peace and stability in East Asia. The Taiwan Strait has been turned from a potential flash point for conflict to a hub of development and prosperity. It should be noted that adherence to the “1992 Consensus”, as political leaders on both sides of the Taiwan Strait have repeatedly pointed out, has provided the core political basis for both sides to build mutual trust and embark on the historic rapprochement. Contrary to some assessments, the “1992 Consensus” remains one of the core principles of Beijing’s cross-Strait policy (“DPP’s Cross-Strait Policy Consistent with the ‘Status Quo’,” China Brief, December 20, 2011). The most recent example is a speech last month given by Jia Qinglin, Chairman of Chinese People’s Political Consultative Conference (CPPCC), in which he stated that the “1992 Consensus” was the consensus reached by both sides of the Taiwan Strait in 1992 that each side “orally expresses the insistence on the One China principle” (China Daily, December 19, 2011). Earlier, Wang Yi, Director of State Council’s Taiwan Affairs Office (TAO), had made it clear that, although Taiwan and the Chinese mainland “have different interpretations of the political meaning of One China,” both sides should “seek common ground while reserving differences” (qiutong cunyi), which is the “essence” of the “1992 Consensus” [3].

Looking ahead, however, there are still uncertainties and challenges clouding the trajectory of cross-Strait relations in the post-ECFA era, particularly in light of the current heatedly contested election.

First, the DPP’s unveiled intention of ditching the “1992 Consensus” highlights the potential perils in the DPP approach to cross-Strait relations. When the DPP released the long-awaited, cross-Strait part of the DPP’s 10-year policy guidelines last August, Tsai publicly and unequivocally denied the existence of the “1992 Consensus.” Calling the term “1992 Consensus” an “invention”, Tsai claimed she would instead advocate a “Taiwan Consensus”, making it clear, from Beijing’s perspective, that she and her party would be ready to shake the foundation of the recent improvement in cross-Strait relations (Taipei Times, August 24, 2011). Throughout the campaign, the DPP has consistently denied the existence of the “1992 Consensus”, and accused the Ma administration of selling out Taiwan’s sovereignty by negotiating with Beijing on the basis of the “1992 Consensus.” The DPP’s move to deny the “1992 Consensus” may come as little surprise given the DPP’s pro-independence orientation. If this position became policy, it would be most damaging to the hard-fought trust developing between Beijing and Taipei.

Ma Ying-jeou and his administration have disputed Tsai’s antagonistic characterization of the “1992 Consensus.” Indeed, Ma’s  administration has made a strong case that Beijing and Taipei had in fact recognized in 1992 the existence of the consensus of “One China with Respective Interpretations” (yige zhongguo, gezi biaoshu). Apparently, the two sides did not engage in talks sitting on air. It is that ambiguity, which leaves sufficient space for each side to negotiate without caving on principles. The consensus is the simplest benchmark to sustain a modicum of trust across the Taiwan Strait. Regardless the label, the existence of at least a tacit cross-Strait “consensus” cannot be denied [4].

The root cause of Tsai’s denial of the “1992 Consensus”, as Beijing sees it, lies in the pro-independence obsession of the DPP. Unsurprisingly, Beijing has responded to Tsai’s cross-Strait policies harshly, calling her statements “unacceptable” and questioning whether her policy reflects a hidden intention to pursue de jure Taiwanese independence (State Council, Taiwan Affairs Office, August 24, 2011).

Should the DPP prevail in the 2012 election, Beijing fears ideological belief and political calculation might drive a Tsai administration to adopt an “ABK” (all-but-KMT) approach to building a “Taiwan Consensus.” If that happens, it would severely damage the political basis of cross-Strait relations with the potential to send relations into a downward spiral.

Second, the DPP’s loathing of ECFA is no secret. The DPP had protested fiercely against ECFA before it was approved in the Legislative Yuan in August 2010. Last June, one year after the signing of ECFA, Tsai and the DPP strongly attacked ECFA as having damaged the interests of Taiwan’s farmers and fishers. Tsai has flip-flopped several times as to what she will do about the ECFA if she wins the election. Should she prevail, a Tsai administration might not dare to abolish the ECFA altogether, as DPP officials and pro-Green scholars would say privately [5]. Regardless, the DPP probably will exploit any negative economic repercussions of ECFA to roll back the agreement. Tsai has made it clear that if elected, she would scrutinize ECFA, handling the agreement  according to “international regulations and democratic mechanisms.” Moreover, she indicated her readiness to put the agreement to a referendum “if people think it is necessary” (Taipei Times, August 24, 2011). Indeed, Tsai already has capitalized on ECFA’s alleged negative impact on traditional industries and agriculture to popularize opposition to it. Predictably, a DPP victory in the 2012 election could mean ECFA’s implementation would face serious hurdles, reversing the momentum of cross-Strait economic integration.

Whither Cross-Strait Relations?

ECFA has spurred speculation as to whether it will lead to political dialogue, military confidence building talks and eventually a cross-Strait peace agreement. Last October, Ma briefly floated the possibility of a “peace agreement” in the next decade, only to be deterred by a lack of popular support. For Beijing, while peaceful reunification remains the ultimate goal, it is fully aware that there is still a long way to go before the conditions might be ripe for political and military dialogues. For the near term, Beijing will follow the gradualist principles of “economy first and politics later, and the easy part first and the difficult one later” (xianjing houzheng, xianyi hounan) and focus on substantiating the integration of the two economies (State Council, Taiwan Affairs Office, March 16, 2011).

A DPP victory in the 2012 election—for the reasons stated above—might derail those goals. The poll results on January 3, 2012, the last day polls are allowed to be released before the January 14 election, show Ma enjoys a narrow lead over Tsai and People’s First Party candidate James Soong a distant third.

Tsai’s approach to cross-Strait relations apparently also has upset Washington. During her September 2011 visit to the United States, Tsai reportedly failed to reassure the Obama administration about her reliability on maintaining cross-Strait stability if elected. After Tsai met with U.S. officials, a senior Obama administration official told a reporter in blunt terms that Tsai “left us with distinct doubts whether she is both willing and able to continue the stability in cross-Strait relations the region has enjoyed in recent years” (Financial Times, September 15, 2011). In private, Washington reportedly has urged Tsai on several occasions to accept the “1992 Consensus”, only to be rebuffed (United Evening News, December 25, 2011).  

How would Beijing deal with a Tsai’s victory? So far Beijing has been reticent to discuss publicly the prospects of a DPP victory. Beijing presumably worries a DPP victory would challenge further peaceful development of cross-Strait relations. Beijing believes the so-called “Taiwan Consensus” is a thinly-veiled appeal for independence, as the DPP insists Beijing renounces the use of force as a precondition for cross-Strait talks while asserting that all options for Taipei including independence should be open. These stances are diametrically opposite to Beijing’s core principle of “opposing Taiwan independence.” Unsurprisingly, Beijing regards the “Taiwan Consensus” as something utterly antagonistic. Beijing’s pessimism is evident in its warning and harsh criticism of Tsai’s 10-year policy guidelines. So far the official responses are still measured, with the TAO calling on Tsai to face new realities in cross-Strait relations and appealing to “not go backwards” (bu zou huitou lu) (State Council, Taiwan Affairs Office, August 24, 2011, July 28, 2011). Other commentators are less restrained in criticizing the DPP.

Some analysts might argue Tsai is much less radical than former DPP leader Chen Shui-bien. Being moderate and pragmatic, Tsai would not seek provocation and confrontation in cross-Strait relations [6]. Given Tsai’s declared cross-Strait policies, Beijing—based on its principles—has reasons to be concerned whether a Tsai administration would damage cross-Strait relations deliberately. It is likely that cross-Strait communications and exchanges would be shelved if Tsai, after elected, refused to accept the “1992 Consensus.” Cross-Strait relations also might cool down as tensions over sensitive issues concerning sovereignty and “international space” grow (Central Daily News, January 2, 2012). In sum, if Tsai gets elected, the current momentum of peaceful development in cross-Strait relations probably will slow because of mistrust. In that scenario, Beijing would be prepared to “bypass” Tsai to reach out to the opposition, as it did during Chen’s second term. Moreover, Beijing would try to reach a strategic understanding with the United States over the management of cross-Strait relations, as it did with President George W. Bush.

If  Ma wins reelection, Beijing—and hopefully the region—probably will read the result as a sign that cross-Strait stability can be expected. In this best scenario, though, Beijing also would be well-advised to avoid overly-optimistic expectations and impatience at the pace of forward movement in cross-Strait relations. To do otherwise will only hurt the goals Beijing holds dear. Even if Ma wins, his victory does not necessarily give him the mandate to move quickly on more sensitive issues such as military and political dialogues. How fast and far a new Ma administration and, for that matter, any administration in Taiwan, can go in cross-Strait relations will eventually be decided by the people in Taiwan. For now and the foreseeable future, the overwhelming majority of the Taiwan people would prefer status quo rather than immediate reunification or independence (China Times, December 17, 2011) [7]. Therefore, for Beijing’s leaders, a wise strategy would be to follow the patient wisdom of the ancient aphorism that says “where water flows, a channel can be formed” (shuidao qucheng), if they truly believe history is on their side.   

  1. Notes:
    Daniel H. Rosen and Zhi Wang, “Deepening China-Taiwan Relations through the Economic Cooperation Framework Agreement”, Peterson Institute for International Economics, Policy Brief, No. PB10-16, June 2010.
  2. Mignonne Man-jung Chan, “Implications of the ECFA for Taiwan, Cross-Straits Development and Regional Integration,” Prospects and Perspectives 2010, Taipei: Cross-Strait Interflow Prospect Foundation, Chapter 13, pp. 75-86; Chu-Chia Lin, “ECFA: Impacts and Implications,” Conference Paper for “The Relevance of the EU Experience in Conflict Transformation for the Taiwan Strait,” Chatham House and European Union Center in Taiwan, London, September 8-9, 2011.
  3. Wang Yi’s remarks when receiving the delegation of the KMT Youth Work General Association in Beijing, March 25, 2011, available at http://www.chinataiwan.org/wxzl/gtbwx/201103/t20110328_1800809.htm
  4. For a detailed account of the “1992 Consensus”, see Su Chi and Cheng An-kuo eds., “Yige Zhongguo, gezi biaoshu” gongshi de shishi [The Historical Facts of the Consensus of “One China with Respective Interpretations”], Taipei: Guojia zhengce yanjiu jijinhui [National Policy Research Foundation], 2002.
  5. Author’s interviews, Taipei, August, 2011.
  6. See, for example, Bonnie Glaser and Brittany Billingsley, “Taiwan’s 2012 Presidential Election and Cross-Strait Relations: Implications for the United States,” CSIS Freeman Chair in China Studies, Center for Strategic and International Studies, November 2011, Washington, D.C., p. 6.
  7. Richard Sobel, William-Arthur Haynes and Yu Zheng, “Taiwan Public Opinion Trends, 1992-2008: Exploring Attitudes on Cross-Strait Issues,” Public Opinion Quarterly, Vol. 74, No. 4, 2010, pp. 782-813.