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Key Conclusions of the Panel on Global Deployment and Cross-strait Economic and Trade Relations of the Conference on Sustaining Taiwan's Economic Development

  • Date:2006-07-28

Press Release

Key Conclusions of the Panel on Global Deployment and Cross-strait Economic and Trade Relations of the Conference on Sustaining Taiwan’s Economic Development

July 28, 2006

Delegates to the plenary session of the Conference on Sustaining Taiwan’s Economic Development on the morning of July 28, 2006 discussed the consensuses reached on 57 items by the Panel on Global Deployment and Cross-strait Economic and Trade Relations. The conferees reached a number of important conclusions, including eight concerning basic understandings, 32 addressing measures to strengthen Taiwan’s economic foundation and increase its advantages in global operations, and 17 regarding adjustments to cross-strait economic and trade policies.

During the plenary session, delegates also offered a number of dissenting recommendations. These included the establishment of business development departments under various ministries and ministerial-level bodies; legislation of a sunshine bill regarding lobbying for China; discontinuation of government entrustment of cross-strait negotiations to civil organizations; stipulation of conditions and methods of setting ceilings on local businesses’ investment in China; promotion of direct flights across the Taiwan Strait; as well as a demand that China recognize professional licenses officially issued in Taiwan. After soliciting the delegates’ opinions, the chairperson declared that they be entered into the record as “Other Opinions.”

In view of the complexity of factors underlying Taiwanese businesses’ global networking and Taiwan-China economic and trade relations, and considering the disparities in understanding of these matters by various sectors of society, it is necessary to first clarify a number of fundamental realities:

1. To meet the challenges of globalization, we must be bold in creating comparative advantages in pursuit of the sustainable development of Taiwan’s economy.

2. Taiwan must face the fact that the economic rise of China and India has greatly altered the global market. It must recognize the opportunities and risks that these changes present for Taiwan’s economic development. Only by paying due attention to risk management can the dynamic changes in the global market be transformed into long-term economic advantages.

3. The development of cross-strait economic and trade relations has positive and negative effects. Taiwan must address the pressing issue of how to minimize its negative effects while continuing to promote it.

4. The general risk posed by cross-strait economic activity and trade lies in the growing dependence of Taiwan’s economy on China’s market. The government must proactively take on the responsibility of risk management to effectively reduce the overall risk that may arise from the liberalization of cross-strait economic and trade relations.

5. There are three major factors underlying Taiwan’s growing dependence on the China’s market:

(1) Business development in Taiwan has relied heavily on contract manufacturing.

(2) Taiwanese businesses have become habituated to investing in China’s market due to its geographic proximity as well as linguistic and cultural similarities.

(3) The rise of nearby economic zones and new metropolises has weakened Taiwan’s overall competitiveness.

6. To ensure that cross-strait economic and trade relations are in line with Taiwan’s overall interests, it is imperative to address the question of how to induce Beijing to resume institutionalized cross-strait consultations and how to proceed with preparatory work.

7. In view of the disparity of views on cross-strait economic and trade policies, care must be taken to ensure that policy-making and systems design include frameworks conducive to coordinating the private and public sectors, formulating consensuses between the ruling and opposition parties, and pursuing common goals.

8. To enhance Taiwan’s global competitiveness and reduce its dependence on China’s market, efforts must be made in three areas:

a) Building on its current foundation, Taiwan should accelerate efforts to promote research and development, innovation, branding, and quality of service so as to boost added value in all industries and make the strongest possible effort to sharpen Taiwan’s overall competitiveness. Taiwan should also strengthen its ability to serve as a globally well-connected base for value-added services, manufacturing, and research and development.

b) Policies should be formulated to encourage enterprises to follow the “blue ocean” strategy, expand operations in parts of the world other than China, promote strategic global economic cooperation to break through the barriers preventing Taiwan’s participation in institutionalized regional economic integration, and reinforce Taiwan’s capability to serve as a bridge to link the world’s nations.

c) Premised on the imperative to put Taiwan’s interests first while maintaining a global perspective, efforts should be made to increase investment in Taiwan, create job opportunities, balance urban and rural development, and reduce income disparities.

Concerning strengthening Taiwan’s economic foundation and increasing its advantages in global operations, the following conclusions have been reached:

1. Businesses must sharpen their competitive edge, and stronger efforts should be made to attract foreign investment and encourage overseas-based Taiwanese businesspeople to redirect their investments to Taiwan. The government should continue to promote the upgrading and transformation of businesses, encourage investment in Taiwan, raise overall economic competitiveness, improve businesses’ regional competitive advantages, and attract investment in Taiwan by foreign and domestic firms. The latter goal may be advanced by establishing a platform for communications and investment information, as well as by creating effective mechanisms for attracting enterprises and a system for providing diversified incentives. In addition, effective steps should be taken to solve manpower problems of foreign businesses with investment in Taiwan and build a financial environment conducive to encouraging Taiwanese entrepreneurs to redirect their investments to Taiwan.

2. Taiwan should participate in international economic cooperation and help local enterprises globalize their operations. Measures to achieve these ends may include signing free trade agreements (FTAs) and bilateral tax agreements with strategic trading partners as well as closely monitoring the development of, and participating in, the economic integration of East Asia. Before political barriers to signing FTAs and participating in such economic integration have been removed, Taiwan should take a number of strategic actions. For example, it should utilize the mechanisms of the World Trade Organization and the Asia-Pacific Economic Cooperation to remove barriers to trade and investment. Further, the government should integrate resources to help Taiwan’s businesspeople deploy globally and diversify their foreign investments to include multiple markets.

Major conclusions reached concerning cross-strait economic and trade policies:

1. Mechanisms to manage risks associated with economic and trade relations across the Taiwan Strait should be strengthened. The government should annually conduct an assessment of, and publish a report on, cross-strait trade and investment, the contents of which should cover various macroeconomic indicators of both sides, a risk assessment of China’s financial, economic, and social situation, and potential impacts on Taiwan’s national security. In the event that abnormal conditions are found, immediate action should be taken to reduce risks to Taiwan’s economy posed by cross-strait trade and investment. In addition, in terms of exchanges of personnel, investment, finance, and technology, the government should establish an effective risk management mechanism to lessen the potential risks to Taiwan’s economy and financial sector. Further, the government should push for negotiations on law-and-order issues associated with cross-strait economic and trade relations, such as the personal safety of Taiwanese businesspeople in China and protection of their investment and intellectual property rights, and should demand that China make and fulfill promises concerning the above-mentioned matters.

2. As for the matter of Chinese nationals coming to Taiwan, priority should be given to liberalizing restrictions regarding persons engaging in legitimate business activities. Moreover, restrictions on local businesses inviting Chinese businesspeople to Taiwan should be loosened, and security measures associated with visits to Taiwan by Chinese businesspeople should be improved. In addition, to boost the volume of foreign visitors, Taiwan can be opened to Chinese tourists, predicated on the firm assertion of Taiwan’s identity as a sovereign nation and the implementation of related measures required to safeguard its national security.

3. Regarding China-bound investment—predicated on the continued implementation of government policies concerning risk management with the aim of ensuring that such investment is in line with Taiwan’s overall interests—when reviewing applications for approval of major investments in China, government authorities must give full consideration to several factors. These include the level of the applicant’s parallel investments in Taiwan, global deployment strategies, technology transfers, impact on local employees, financial plans, benefits to be gained by the investing parent company, and assessments of the impact the proposed investments would have on related businesses and Taiwan’s economy as a whole. Government approval must be followed up with monitoring and evaluation.

Proposals for China-bound investments involving technology transfers may be eligible for approval under the condition that such transfers do not jeopardize Taiwan’s technological edge, do not involve Taiwan’s core technologies, have already been developed by China, and are no longer banned internationally. Nonetheless, consideration must still be given to such factors as the effect that approval of investment applications may have on Taiwan’s business environment as a whole as well as on local employment.

4. Financial-sector interaction between Taiwan and China should be facilitated progressively, on the condition that the required financial supervisory mechanisms and firewalls have first been put in place, and that Taiwan’s national sovereignty and security are not jeopardized. Engaging in negotiations on an equal footing, the governments of the two sides should sign agreements to set up a cross-strait financial supervisory system.

5. Regular direct cross-strait flights should be initiated when conditions are appropriate in tandem with comprehensive planning and coordinating measures. Agreements concerning such flights must be predicated on maintaining Taiwan’s sovereignty, safeguarding its national security, and serving the nation’s greatest interests. After the signing of agreements reached through government-to-government negotiations on an equal footing, implementing direct cross-strait flights should be carried out in gradual stages so as to ensure orderly, steady progress.