TS-Hsu

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Taiwan-Mainland China Relations:

From Negative Isolation to Positive Transformation-

An Episode of History in the 21st Century

Presented to

Asian Approaches to International Negotiations: Borders and Territories

Honolulu, Hawaii, September 8-10, 1998

Paul S. P. Hsu

Senior Partner, Lee & Li, Attorneys-at-Law

Professor, National Taiwan University

Introduction

I assume the topic assigned to me should be addressed in future tense, or at least conditional sentence present tense, since, as all of you know, the two sides of the Strait have not yet decided to sit down at the negotiation table for many unsettled reasons. While we await this much talked-about and repeatedly delayed event, the irrepressible exchange of people across the strait continues to grow at an amazing pace. In contrast with the traditional way of looking at the "Taiwan Issue" as a problem that must be resolved to preserve the region's stability, I would like to suggest a wider context and vision in which we may work together to benefit all the parties concerned. The context I am suggesting in this remark is the Asia-Pacific region and the vision I am proposing is to make two parallel agendas that will create a dynamic framework in which Mainland China will be successfully developed, the Taiwan-Mainland China relationship will be bettered, and the Asia-Pacific economies will be enhanced. In short, my talk today examines the Taiwan-Mainland China dynamism through the Asia-Pacific community of the 21st century.

I. The Characteristics of Cross-Strait Relationship in a Nutshell

As of today, official cross-strait negotiations between both sides of the Taiwan Strait have yet to take place. In other words, the so called cross-strait "negotiations" are all informal in nature and are conducted through numerous seminars, conferences, and exchanges that take place in Taiwan, Mainland China, as well as third countries. While these "negotiations" gradually shape the mood and position on both sides of the Taiwan Strait, they are by no means formal and final. And then, of course, there are the so-called Koo-Wang talks between Taiwan's Strait Exchange Foundation and the Mainland China's China Association for Relations across the Taiwan Strait, which are considered a little more "formal" than "informal." It is also interesting to note that in the meantime, according to Taiwan's official records from 1987 to March of 1998, exchange of visits across the strait resulted in 272,818 visitors from Mainland China to Taiwan, and 1,863,351 visitors from Taiwan to Mainland China (Please refer to Attachment I). Taiwan authorities officially admit that the real figures far exceed the figures quoted above. These visits occurred even though the Taiwan government does not grant tourist visas to visitors from Mainland China, and despite the fact that the Mainland China government continues to follow a very restrictive approval process for its people to travel abroad as tourists. However, it is difficult to quantify how many discussions involving the cross-strait issues occur on these exchanges. It is safe to assume that such discussions take place all the time, although some issues are deliberately avoided in order to create a more cordial atmosphere. It is also interesting to note that there are two distinctly different modes in the content of discussion, i.e., the more "formal" settings where presumably records are being kept, and the "informal" settings where no records are kept. Of course, official statements made by political leaders and government officials to the public are quite another matter.

Among the fundamental differences in the two governments' official positions, advocates of "one country two systems" imply that PRC represents the sovereign of the "one country." On the other side, advocates of one divided China take the position that the Republic of China, established in 1912, and the People's Republic of China, established in 1949, are still both in existence. Without further explaining the official positions of the two governments on such fundamental differences, I would like to reflect some observations from many exchanges between both sides of the strait. In the more formal settings, sensitive issues are often deliberately avoided. A good example occurred during the Mainland China's Science and Technology Minister Ms. Zhu Lilan's recent visit to Taiwan to attend the seminar on Cross-Strait Science and Technology Exchanges in June of 1998. She referred to Taiwan as the "motherland's precious island" in her public speech and avoided any political statement on the status of Taiwan or Mainland China. In reference to the "motherland," she did not invoke any protest from the many Taiwan government officials present in the audience because the term "motherland" was left undefined, and could be interpreted as Republic of China, People's Republic of China, or simply China. It is clear to us that even in this more "formal" type of setting, representatives from both sides of the strait have deliberately avoided the sensitive political issues of sovereignty, jurisdiction, and the exact relationship between Taiwan and the Mainland China. There is also a clear indication that those involved in the cross-strait exchanges have reached an understanding that such sensitive issues should be left to the political leaders of both governments and the purpose of such exchanges is to create a cordial and friendly atmosphere. In the "informal" settings, the topics of interest during the exchanges are not subject to restrictions and cover almost everything in the fields of economic, science, culture, education, and even possibly politics.

To examine the economic interactions between Taiwan, PRC and Hong Kong, three important factors must be pointed out. First, Taiwan businesses have invested close to US$40 billion in Mainland China that is divided among approximately 40,000 projects. Second, Taiwan's trade surplus against Mainland China in 1997 amounted to US$18 billion, while Mainland China enjoyed a trade surplus of US$50 billion against the United States and US$36 billion against Hong Kong. Third, a substantial part of Mainland China's export trade is managed by Taiwanese companies, a fact not really known to the outside world.

II. The Current Dilemma

Since mid-1980s, economic, cultural, and social exchanges between Mainland China and Taiwan have increased markedly. Although a number of fundamental political issues are yet to be resolved, and occasionally harsh words have been exchanged by political leaders and government officials through third parties and the news media, a movement towards a peaceful resolution of the Taiwan issues seems prevailing.

To understand the current relationship between Mainland China and Taiwan, one must acknowledge the following issues:

1. Mainland China advocates "one country two systems" without qualifying whether the "one country" means PRC, or with the implication it stands for PRC, or with the implication it stands for neither PRC nor ROC, or, in the an unlikely event, it means ROC. Taiwan, on the other hand, assumes when Mainland China refers to "one country," it means PRC, and therefore, rejects the idea of "one country two systems." No serious attempt has been made to clarify the definition of "one country" since no formal negotiation has taken place on the issue.

2. Mainland China takes the position that if Taiwan is invaded by a foreign power, or if Taiwan declares independence, Mainland China will not rule out the possibility of using military force as a solution. However, Mainland China fails to clearly define the term "independence." In other words, no clear definition has been made as to whether the fact that Taiwan has never been subject to the jurisdiction and sovereignty of the People's of Republic China since 1949 is deemed "independence" of Taiwan. In the same token, no definition has been made as to whether the fact that most, if not all, of the people in Taiwan are not willing to be governed by the PRC government, which is known as a communist or socialist government at this point of time, falls into the definition of "independence" of Taiwan. At the same time, the present Government of Taiwan takes the position that although Taiwan is a part of China, that "China" is not PRC, but rather ROC.

3. Mainland China rejects the use of the name "ROC" in any context. Therefore, the internationally recognized name for Taiwan is "Taiwan" rather than "ROC." On the other hand, when "Taiwan" and "PRC" are mentioned in the same occasion, both Taiwan and Mainland China may consider that there is an implication of Taiwan's independence. Therefore, in many occasions, there is a preference by both sides of the strait to use "Mainland China" and "Taiwan" to avoid such an implication. The net result of this dilemma is that it caused tremendous confusion internationally. It has certainly caused confusion to many people in Taiwan as well. However, life goes on for the great majority of the people both in Mainland China and Taiwan. They have learned to ignore such arguments of names and titles, unless for practical reasons they have to deal with the different positions of both governments. Without political implications, ironically, people on both sides of the strait have little problem to consider themselves as Chinese, even though most people in Taiwan consider themselves as Taiwanese as well. When facing such arguments or dilemma, one has to develop a good sense of humor.

4. The official positions of both Mainland China and Taiwan are supportive of the re-unification of China. Taiwan qualifies the re-unification to be under a system of democracy, freedom, and equitable prosperity that will safeguard the rights and interests of all Chinese; in keeping with the global trends, Taiwan further argues that the nation should not be unified under the proven failure of communism (statement made by President Lee Tun-Hei on June 22, 1998). Mainland China so far has avoided defining the terms of re-unification by averting the identification of the types of political, social, economic, and legal system under which re-unification would take place. The general position is again "one country two systems."

5. When Mainland China refers to China as People's Republic of China established in 1949, Taiwan refers to China as Republic of China established in 1912. Thus, Taiwan now accepts the fact that there is a divided China and Mainland China rejects such position.

Although one can go on and on identifying more issues under such a dilemma, there are two sets of facts that both sides of the strait readily accept: there has yet to be any formal negotiations; and there seems to be no occasion insight for both governments to reconcile their differences. Suggestions have been made that perhaps it is better for the next generation of Chinese from both sides of the strait to resolve these differences.

III. The Future of the Asia-Pacific Region

Perhaps this is the right time for us to be laid-back and relaxed, and stretch our imagination towards the end of the first quarter of the 21st century. Let us imagine what the Asia-Pacific region will be like in the year of 2025. Let us imagine the setting of the Asia-Pacific region in the year 2025 as follows:

1.Asia-Pacific region has developed to a stage where there is free movement of capital, technology, and human resources without the need of any government interference or participation. The economic liberalization development in the Asia-Pacific region has began to take shape as a result of initiatives taken by the major capital exporting economies, including Japan, Korea, Taiwan, Hong Kong, Singapore, and perhaps other economies as well, depending on their respective speed of economic liberalization and accumulation of wealth.

2.In the year 2025, it has been proven that political interference has not been able to prevent private enterprises from developing and following their natural inclination for making profits. These private initiatives have gradually made political and nationalistic oriented policies less meaningful and have caused political considerations to be less influential factors than economic and business considerations.

3.In the year 2025, in order to maintain a balanced society, the economic and business considerations are necessarily of equal importance as freedom and democracy. Regardless of the finer details of any particular political system, people will continue to have the same concerns over issues such as environmental protection, education, the equal distribution of wealth, and the ways and means through which to express their needs and demands.

4.The continuous and steady development of the first quarter of the 21 century has enabled the individual, the family and the society to understand the importance of education. The development and the structuring of the educational system are no longer the prerogative and monopoly of the government. Therefore, massive human resources have been developed through the active participation in the educational activities by individuals, families, non-government organizations (NGO), and the society as a whole. The Asia-Pacific region has by then become, on the average, one of the most highly educated areas in the world, and the high quality of human resources has become a prime source of energy for the Asia-Pacific region's more developed and capital exporting economies.

5.Those Asia-Pacific economies that have focused on vast and continuous investment in the infrastructure, the upgrading of manufacturing plants and equipment, and high-tech research and development will become the world's most important sources of funding of capital. The speed with which such investments have borne fruit is attributed to the liberalization and internationalization of the financial and capital markets.

6.By the year of 2025, due to individuals' and business world's highly motivated entrepreneurial spirit, the private sector has steadily gained strength and influence. Combined with society's growing sensitivity to market needs, such strengths have contributed to the forward looking mentality of the academia and the government officials. Such a switch in mentality has resulted in the realization that any economic activity will not be a success without the active participation of the private sector. By the year 2025, a major change has occurred to the purpose and role of the government. The government has shifted from being a directional force to a more supportive role of meeting the needs and demands of private sector activities, thus becoming a truly service-oriented organization.

7. By the year 2025, a new generation of businessmen and middle class have been created as a result of steady development in the region. This new generation will not be nationalistic in the restrictive traditional sense. Instead, it will be self-confident, highly-motivated, and knowledgeable in the ways of both the East and the West. This new generation of businessmen has excellent personal and business connections all over the world and has therefore become the ideal partner for the western enterprises seeking development in the Asia-Pacific region.

This imaginary setting may sound familiar if one examines the objectives of APEC that has so far consumed a tremendous amount of energy and resources from all the APEC member economies during the past decade, and hopefully also for the next few decades to come. It seems we will have a common goal to march towards. I sincerely believe that the successful transformation of Mainland China will be essential to the successful development in the Asia-Pacific region if we share the same dream in this regard.

IV. The Transformations of the Mainland China

Let us then shift to the subject of the future development of Mainland China. In recent years, an enormous amount of research and analysis have been done on this subject. It has literally intrigued hundreds of research institutions and government agencies, and generated tons of research papers and numerous worldwide conferences and seminars. Despite the breadth of the subject, the most important issue is still the extent of effort the government authorities of Mainland China are willing to assert to enhance the future economic development and modernization of Mainland China. In this regard, of course, the most reliable sources of information are the words of Mr. Jiang Zemin and Mr. Zhu Rongji, the representatives of the new government of Mainland China that is committed to carrying out new reforms. According to statements made by Mr. Jiang Zemin and Mr. Zhu Rongji, the urgent reforms are focused on the following areas:

1. To restructure the unprofitable state-owned enterprises through closure, merger and acquisition, and different forms of "privatization." This of course will call for the building of the necessary legal and regulatory frameworks to facilitate this objective.

2. To enhance the financial structure of the state-owned banks that have suffered from non-performing loans.

3. To streamline government structure itself for the purpose of reforming the state-owned enterprises. In this regard, Mr. Zhu sets an aggressive timetable that completes the reform of the state-owned enterprises by 2000. At the same time, in the National People's Congress meeting in March 1998, Mr. Zhu insisted that the civil services must be substantially downsized from the current number of 8 million civil servants.

Mr. Jiang Zemin also pledged that Mainland China would work aggressively to transform itself into to a nation that is governed by rules of law. There are even some within Mainland China that suggest the best way to fight the rampant corruption within the government is to make the transition to democracy and allow the oppositions to check corruption in the political arena. Furthermore, the leaders of Mainland China are beginning to see the costly consequences from an old political system that fails to change in the face of economic liberalization, recently exemplified by the troubles in Indonesia. All in all, we begin to witness a strong trend in the making of rapid transformation of Mainland China's economic, social, legal, as well as political systems.

It is imperative for the whole world to welcome such transformation that is taking rapid steps in the Mainland China. A successful transformation will not only enhance the prosperity and well-being of the population in Mainland China, but also enhance the regional economic and social stability, which will inevitably have a positive influence on the security of the whole region and maybe the whole world.

Many have suggested, including prominent scholars and politicians, that Taiwan is the single most important issue existing in the relationship between Mainland China and the United States. In view of the above analysis, the so-called "Taiwan issue" is not only ill-defined but also too vague to offer any near-term solution. It is also highly questionable whether the governments on both sides of the strait are really seeking a near-term solution if such a "solution" could obstruct the ongoing and ever growing economic and trade interaction between Taiwan and Mainland China. Therefore, I suggest that the successful transformation of Mainland China is far more urgent and important than the so-called "Taiwan issue." I further suggest that if the whole world, including Taiwan, takes a friendly and constructive attitude towards the transformation of Mainland China, and provides the necessary assistance during the transformation, all other difficult issues will be ironed out in due course. In such a cooperative setting, the Taiwan government should offer itself as a reference to Mainland China and provide her knowledge from her own experience with social, economic, legal, and political changes during its transformation. Perhaps we can take it for granted that the ever growing exchange of visits between Taiwan and Mainland China already contains such intentions that, based on my own observation and experience, have been very constructive indeed. I urge that the governments of all concerned parties to adopt a friendly and constructive attitude towards the successful transformation of Mainland China into a modern society that is fully integrated with the world economy by any standard, in any context.

V. Agree to Disagree - Windows to A New Horizon

Let us take a moment to examine some of the following facts:

1. Mainland China and Taiwan are at a stage of separation.

2. Political differences between Mainland China and Taiwan are unlikely to be resolved in a short-run.

3. Keeping the status-quo does not seem to do any political damage to either side of the strait.

4. The rising private sector, with its capital, technology resources, and market share, plays an increasingly important role in the process of the economic development of any nation. From a private sector's perspective, the growth of business depends largely on a stable political, economic, and business environment.

5. The continued economic growth in Mainland China will eventually weaken the hold of its ideology over the market, and the subsequent economic reform in Mainland China will be a driving force to deepen its political re-engineering.

6. Taiwan's private business sector has already made major investments all over Mainland China in an astonishing number of projects by taking advantage of the linguistic and cultural homogeneity.

7. A stable environment, an equitable legal and regulatory framework, and the free movement of capital, goods, information, and people are the essential ingredients to an ideal investment environment.

8. In a world of ever-expanding networks of communication and transportation, the flow of goods, people, capital, and information has already reached beyond the traditional boundaries of national jurisdiction. Regional economic integration has become an inevitable trend.

Drawing from the above-mentioned observations, one cannot help but think there is a better way to deal with the cross-strait issues as they presently exist. Therefore, I propose two parallel agendas for your consideration:

1. AN AGENDA OF PRESENT DISAGREEMENTS TO BE AGREED UPON.

In other words, "an agreement to disagree" agenda. In this regard, it shall outline the present disagreements between the two sides of the strait and reach a consensus that these disagreements do indeed exist. Such "consensus" will be the first step in creating a more constructive atmosphere for both sides to deal with each other.

2. AN AGGRESSIVE AND CONSTRUCTIVE WORKING AGENDA TO ENHANCE THE CROSS-STRAIT EXCHANGES.

In this regard, the suggestion certainly does not propose we start over from scratch. Rather, the suggestion builds upon what is already happening across the strait in terms of economic, trade, cultural, educational, and social exchanges. The agenda to this effect could be potentially very interesting. In principle, such an agenda may be mutually acceptable by both sides of the strait because it preserves and enlarges important resources, such as human, capital, and technological resources, that will be needed for the future development of both Mainland China and Taiwan. One of the challenges facing all of us is to assure that during the rapid economic growth in Mainland China, all political, social, and economic problems that emerge are resolved with the experiences and know-how accumulated in Taiwan, United States, and other industrialized nations around the world. The content of such a constructive working agenda certainly may include reforms in the systems of the private ownership, privatization of state-run enterprises, equity and debt financing, and an equitable legal and regulatory framework. Furthermore, private sector resources and expertise can be channeled into this process to facilitate the reform process. In addition, Taiwan may use its resources and knowledge to ease the process of Mainland China's transformation. For example:

 How Taiwan's political, social and economic reforms can be used as a reference for the modernization of Mainland China;

 How human and capital resources can be utilized to transmit the ideas of modernization into Mainland China;

 How educational exchanges can be used to accelerate the ideas and concepts of modernization among Chinese intellectuals, a key step in facilitating and deepening the reform process in Mainland China;

 How to facilitate and fund projects of humanities and social science research on Mainland China; and

 How to facilitate training programs for technicians, managers, and professionals.

Another interesting item for this working agenda is the cultivation of entrepreneurs in Mainland China. The training and support for the emerging capitalists will subsequently foster a strong private sector and middle-class that would become the pillars of the continued economic growth of Mainland China.

I am optimistic that the constructive action agenda will result in a much longer list than that of the "agree to disagree" agenda. In fact, the outcome of the constructive action agenda will necessarily determine the fate of the other agenda. The reason is simple: since the items of the "agree to disagree" agenda are all thorny issues whose solutions rely on the interactions between the people of the two sides, the constructive agenda creates an indispensable interim basis on which such synergy may be fostered. Another purpose of using the dichotomy of positive and negative agendas is to draw attention, and shift more resources to the positive agenda.

As we have witnessed during the current financial and economic crisis that prevails in Asia, a stronger economy relies on a large percentage of small and medium size industries that do not rely on government handouts and support. To foster such a strong business sector, an environment of less government intervention and more private sector initiatives must be provided. All society and community require reforms in time of change. The reform and transformation of Mainland China should be of special concern to us all because of her size and influence in the future world economy and world security. This is why it is so important for all the nations in the world to support the transformation and reform of Mainland China in the years to come. In this regard, I am confident that Taiwan can play an important role in the future, and the existing statistics on economic and trade relationship between Taiwan and Mainland China are the strongest evidence yet.