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Taiwan’s Mainland Policy: Borrowing the Opponent’s Force and Using it as One’s Own – Turning the Threat of War into Peace and Prosperity

  • Date:2010-08-05

American Enterprise Institute Speech
Lai Shin-yuan, Minister, Mainland Affairs Council, Executive Yuan, Republic of China

Dr. Gary Schmitt, distinguished quests:

Good morning!

I would like to thank the American Enterprise Institute for inviting me here and giving me the chance to join this meeting of distinguished scholars and experts. It is a very special honor for me.

The purpose of my speech today is to highlight the main significance of recent developments in cross-strait relations. I will cover four aspects of this, namely: cross-strait negotiations; the cross-strait Economic Cooperation Framework Agreement (ECFA); the relationship of Taiwan’s soft power with cross-strait relations; and political and military issues of cross-strait relations.

1. Conducting cross-strait negotiations, to establish lasting peace and stability in cross-strait relations

First, let me briefly describe what the government of the Republic of China’s mainland policy has achieved in the past two years.

Since May 20, 2008, under President Ma’s leadership, the ROC’s mainland policy has sought to calm the previously angry waves and turbulent billows of the Taiwan Strait. In the language of popular music, we inherited a situation of "Dire Straits", and have been building a  "Bridge Over Troubled Water".

During these two years, we have been striving to tear down the walls of hostility that had been built across the Taiwan Strait over a long period. Step by step, we have carried out an arduous mission that could not have been accomplished in the past. By opening negotiation and dialogue, we have turned the formerly tense situation of cross-strait relations into a driving force for the national development of the Republic of China. We have made cross-strait relations into a vital force for building peace and harmony in the Taiwan Strait and the Asia-Pacific region.

The government of the Republic of China’s basic position has been to pursue cross-strait exchanges and interaction under maintenance of the status quo, with strict adherence to the mantra of “no unification, no independence, and no use of force.” We have advocated that both sides should put aside political disputes, and conduct negotiations in a pragmatic frame of thinking. We have insisted that negotiations be conducted on a footing of equality and dignity. And we have always acted under the principle of “putting Taiwan first for the benefit of the people.”

On this basis, we have held five rounds of high-level talks with mainland China, at which 14 cross-strait agreements have been concluded. The coverage of these agreements includes tourism, direct flights and shipping, postal services, food safety, finance, crime-fighting, fishery affairs, agricultural product inspection and quarantine, and product standards, metrology, testing and certification. At the 5th round of talks, on June 29 this year, we signed the Cross-Strait Agreement on Intellectual Property Rights Protection and Cooperation, and, most importantly, ECFA.

The results of these negotiations have alleviated the tense standoff that formerly marked cross-strait relations. They have generated cooperative ties that are beneficial to both sides. They have opened a historic new era of unprecedented positiveness in cross-strait relations. And by all of this, they have underpinned the prospects for peace and stability in the Asia-Pacific region.

The Mainland Affairs Council of Taiwan regularly commissions academic institutions to conduct public opinion surveys. Over the past two years, these surveys have shown a consistently high level of public support for institutionalized cross-strait negotiations. In poll after poll, we have seen close to 70 percent of Taiwanese approving of this as a means of solving problems arising from cross-strait connections. And in the latest survey, conducted last month, the public support for this was even more apparent, with 79.3 percent of the people expressing approval.

The public have also expressed high satisfaction with individual agreements. The signing of the IPR agreement was given an approval rating of 73.1 percent; the signing of ECFA was endorsed by 61.1 percent. These figures demonstrate that Taiwan government’s policy on the Mainland has earned wide approval from Taiwanese public opinion.

2. ECFA’s key importance to the further globalization of Taiwan’s economy

In this next part of my address, I will talk about ECFA. ECFA is the most important outcome of the cross-strait negotiations pursued by President Ma’s administration. It is also the cross-strait agreement that has received the most attention and discussion in international media.

ECFA was formally signed by the Straits Exchange Foundation (SEF) and the Association for Relations Across the Taiwan Strait (ARATS) on June 29 of this year. It has been widely welcomed around the world, with the United States, Japan, the EU, Germany, France, Singapore, New Zealand, Thailand etc., and WTO director-general Pascal Lamy among those expressing approval.

The signing of this agreement is a major step in the development of cross-strait relations. It provides a basic framework for establishing orderly interaction in cross-strait economic and trade affairs. There are three key aspects of ECFA that I would like to highlight for you:

(1) Firstly, ECFA possesses great significance for promoting the systemization of cross-strait economic and trade affairs and the globalization of Taiwan’s economy.

Taiwan is America’s 9th-largest trade partner and the world’s 17th-largest exporter. Globalization of Taiwan’s economy is vitally important for maintaining its competitiveness. But in the first eight years of the 21st century, Taiwan faced great difficulties on this front.

Firstly, the high level of hostility in cross-strait relations precluded the creation of institutional safeguards for cross-strait economic and trade activity. This increased the risks and costs for Taiwanese businesses, foreign businesses and foreign investors operating between the two sides of the Taiwan Strait.

Secondly, since other countries paid close heed to mainland China’s attitude, they shut Taiwan out when they actively pursued regional economic integration, and Taiwan was increasingly isolated.

But now ECFA has cemented a fundamental change in this situation. We believe that ECFA will bring greater stability and greater predictability to cross-strait economic and trade activity. It is a vital starting point for the Republic of China to set forth again on the path of economic globalization.

Let me put this in the context of the worldwide march toward regional economic integration. By 2020, it is highly likely that an extensive free trade area will have been established in the Asian region. ECFA will enable Taiwan to push forward with the international alignment of Taiwan’s economy. It will enable Taiwan to gain inclusion in regional economic integration. It will enable Taiwan to avoid being marginalized, and to keep a place in global industrial chains. This situation will be beneficial not only to Taiwan, but to all of our economic partners, too. American firms will be able to gain great advantage from it for their investment positioning in Asia.

(2) Secondly, ECFA will help Taiwan maintain its economic autonomy in the process of regional economic integration

There is a huge gulf in size between the economies on the two sides of the Taiwan Strait. Taiwan must have a safety valve to prevent excessive impact on domestic industries, with the social problems that could cause. Hence, when we negotiate ECFA, we insist on putting the words “taking into account each party’s economic conditions” in the preamble, to serve as a safety valve for Taiwan’s interests.

One of the concrete meanings of “taking into account each party’s economic conditions” is that, when ECFA is put into effect, consideration must be given to the special nature of cross-strait relations and the differences between the economic scale and industrial development conditions on either side of the Strait. This is to ensure that Taiwan’s sensitive, vulnerable industries are not severely impacted.

“Taking into account each party’s economic conditions” also means that our government can take account of actual conditions in reducing or eliminating barriers to cross-strait trade and investment. We can carry this out gradually, in cautious, carefully sequenced steps, to create a fair environment for trade and investment.

(3) Thirdly, ECFA’s early harvest program is an outcome of trade negotiations conducted in accordance with the principle of proportionality

The day before the signing of ECFA, the Wall Street Journal carried an editorial about it entitled “Taiwan’s Trade Harvest.” This was an accurate title, and an excellent choice of words. Taiwan certainly will be a beneficiary of ECFA.

Under ECFA’s early harvest program, Taiwan will gain greater benefit from early tariff reductions than mainland China. The list of items on which mainland China will drop its tariffs for Taiwan is twice as long as Taiwan’s corresponding list. Moreover, the application of these reductions to each side’s cross-strait exports will give Taiwan 4.8 times greater benefit, applying to export shipments worth US$13.8 billion versus imports worth US$2.9 billion.

This fairly reflects the current balance of trade across the Taiwan Strait, with Taiwan exporting roughly four times as much to mainland China as mainland China exports to Taiwan. Hence, it cannot be regarded as mainland China “granting favors” to Taiwan or any such thing. It is simply and evidently the outcome of trade negotiations conducted in accordance with the principle of proportionality.

In summary, ECFA has brought Taiwan back into the eyes of the world. It has refocused international attention on Taiwan’s economic importance, and on its credentials for becoming a regional economic and trade hub. In addition, we have designed a safety valve that greatly reduces potential shocks to our society from the process of regional economic integration. From Taiwan’s perspective, to borrow a phrase from domestic baseball, ECFA is a “combined achievement of offence-defense” agreement that provides for offensive and defensive needs equally well.

3. Taiwan’s soft power versus the Mainland’s rise

Next, I will say something about Taiwan’s soft power in its relationship to cross-strait relations. Soft power is Taiwan’s most precious asset for facing the trend of regional economic integration. It is also a very important bargaining chip when we conduct cross-strait negotiations.

According to a report by IHS Global Insight, America’s 110-year reign as the world leader in manufacturing output could be lost to mainland China as early as next year. Mainland China’s economic rise is an undeniable fact. While there are still countries that do not know how to respond to it, some may ask how Taiwan dares to sign an agreement like ECFA. Considering the massive gulf in size between the two sides’ economies, what are Taiwan’s calculations in making this agreement?

In particular, given mainland China’s unwavering political goal of unification, is the daring move of Taiwan a case of what the old Chinese saying calls “asking a tiger for its skin?” Is it a highly dangerous move?

My answer is: “Of course not!” The negotiation and signing of ECFA is not at all a dangerous move. On the contrary, it is a measure for reducing danger.

During the past two years, every action taken by Taiwan to improve cross-strait relations has been a step toward turning the threat of war into peace and prosperity. It is one of the most successful examples of this strategy in modern history.

If we look back over the history of mankind, we can see that many capitalist countries used to pursue trade expansion by exerting the power of their ships and guns to break down trade barriers. Many countries came into confrontation and resorted to arms because of tariff walls. It was these painful lessons that prompted the formation of GATT after World War Two, as a means of replacing confrontation with negotiation. Later, after GATT’s transformation into the WTO, the trend of regional economic integration took hold around the world, and free trade agreements (FTAs) came into proliferation.

That path from GATT to today’s spreading web of FTAs is a chronicle of mankind’s efforts over the past sixty years to avoid mercantilism-triggered war. Taiwan’s pursuit of institutionalized cross-strait negotiations, and its signing of ECFA and other agreements with mainland China, far from being a highly dangerous move, is in fact one of the most successful models of replacing confrontation with negotiation since the formation of GATT.

The signing of ECFA and other agreements with Taiwan has given mainland China an opportunity to show its positive face to the world. It has enabled Beijing to choose this regulated and orderly path of economic and trade systemization instead of using force to deal with the Taiwan Strait question. Taiwan has furnished the linchpin for turning the threat of war into peace and prosperity. President Ma’s Mainland policy is one of the finest blessings bestowed by the Chinese people on the whole of mankind in modern history.

What are Taiwan’s bargaining chips in negotiations with mainland China? For a start, there is the major role Taiwan plays in mainland China’s economy. The statistics speak for themselves: Taiwanese businesses have invested more than US$200 billion in mainland China; cross-strait trade is worth more than US$100 billion a year; and Taiwanese businesses employ more than 14 million workers in mainland China.

Besides this direct input into mainland China’s economic well-being, Taiwan’s role in the global economy is also a strong bargaining chip. Taiwan is the world’s 17th-largest exporter. We have a well established position and networks in markets worldwide. These are valuable counters for us at the negotiating table.

And then there is Taiwan’s status as a democratic nation. The workings of democracy mean that our government policy must be rooted in the will of the people. The will of the people is another important bargaining chip in Taiwan’s negotiations with mainland China.

Taiwan is drawing on all of these advantages to rationally respond to mainland China’s rise. We are also using these advantages to secure the most favorable negotiating outcomes for Taiwan, and at the same time to maintain Taiwan’s autonomy.

Taiwan is not “asking a tiger for its skin.” A more appropriate analogy can be taken from a tactic in the martial art of taiqiquan: “borrowing the opponent’s force and using it as one’s own,” which is also sometimes rendered in English as “using four ounces to deflect a thousand pounds.” That is how we are using wisdom to face up to mainland China’s rising power, drawing on its influence in the global division of labor to provide assisting force for Taiwan’s connection with global markets.

The fact that mainland China’s rise cannot be ignored gives Taiwan all the more importance in the global scheme of affairs. A few of our American friends seem to think that, because the situation in the Taiwan Strait is no longer tense, Taiwan’s status in US foreign policy is less important than before. I do not agree with this point of view. This kind of thinking is a throwback to a Cold War mindset.

In the past, Taiwan was called an “unsinkable aircraft carrier.” That was because, in the days when the world was divided into capitalist and communist camps, each shut off from the other, Taiwan’s geographic location put it in the front line of the capitalist world’s face-off with mainland China. But after the disintegration of the communist camp and mainland China’s launch of its reform and opening-up policy, Taiwan took on a completely different role.

Since the late 1980s, Taiwan’s capital, business people, technologies, and specialist personnel have played a significant part in mainland China’s economic rise. Taiwanese enterprises have taken their experience and well-honed know-how in global division-of-labor systems to mainland China. They have also contributed their good reputation, built up over many years of operating in global markets, to mainland China. These vital inputs from Taiwan have enabled mainland China to develop trade with other countries relatively smoothly. They have also been a key factor in mainland China emergence as the so-called “workshop of the world.”

The process of mainland China’s economic rise has in some respects repeated the Taiwan experience. This is the manifestation of Taiwan’s soft power. The participation of Taiwanese capital, business people, technology, and specialist personnel in mainland China’s economic transformation has amplified Taiwan’s influence within mainland China. It has also spurred a metamorphosis of the economic and trade realm in mainland China.

The Taiwan experience has hitherto served as one of the key factors in the transformation of mainland China’s economy and trade, and this role is set to continue in the future. Moreover, with the expansion and deepening of cross-strait contacts in the social, cultural and other spheres, the influence of the Taiwan experience in mainland China will not be limited only to the realm of economy and trade. The United States should attach importance to such influence, and further strengthen relations with Taiwan to support its positive effects.

Let me cite one example, as a concrete illustration of this idea. While American companies were angrily hurling accusations and complaints about IPR issues at China, this June Taiwan signed an agreement with mainland China that can give concrete IPR protection to our businesses. But more than this, I also noted that, in the process leading up to the signing of IPR agreement, mainland China dispatched no fewer than ten expert groups, including groups of academics, judges, and private specialists, to visit Taiwan’s IPR court. This is a significant manifestation of Taiwan’s soft power. It is also a demonstration of Taiwan’s influence in mainland China.

This presently unfolding aspect of the Taiwan experience is worthy of note by the Western world, led by the United States, as it learns how to do business with mainland China. US-led Western capitalism and mainland China’s state capitalism are competing in world markets, and Taiwan is in a prime position to benefit from this situation. Located on the western boundary of the Pacific Rim economic zone, facing the collision and contest between these two powerful forces, we are adept at picking what we need from both forces to augment Taiwan’s advantages.

This year, Taiwan’s economic recovery has been the strongest in the world. This is mainly thanks to the correctness of our Mainland policy, which has enabled us to provide the right basic conditions for leveraging the effects of Taiwan’s soft power. At the same time, we have also benefited from the support of the United States and other allies, which has enabled Taiwan to face mainland China tall and unwaveringly.

In face of mainland China’s economic rise, countries around the world need Taiwan to play this linchpin role. Conversely, Taiwan needs the support of its international friends, to ensure that it can continue to exert its influence on mainland China to best effect.

The ROC government has repeatedly requested the United States to continue and step up its arms sales to Taiwan. We have also contended against the US conferring with mainland China about such arms sales. Our purpose in making arms purchases is to bolster Taiwan’s self-defense capabilities. This is essential for giving us the confidence and conditions Taiwan needs for dealing and negotiating with mainland China.

4. Mainland China must forsake the thinking of using military force as a means of resolving cross-strait differences

This brings me to the fourth and final focal area of this speech: political and military aspects of cross-strait relations.

Here, I wish to state emphatically that mainland China must forsake the thinking of using military force as a means of resolving cross-strait differences. I have openly stressed many times before in other forums, and will stress it again here today: At present, the timing and conditions are still not ripe for the two sides of the Taiwan Strait to embark on political and military talks. A sense of urgency on one side alone cannot be sufficient reason for demanding the other side to meet its subjective expectations.

I will say again what I have said before: “Cadence and direction” are very important. What Taiwan’s 23 million people need is a compass for the development of cross-strait relations. We will act in accordance with our established objectives in pursuing stable and orderly progress in cross-strait relations.

I also must emphasize that the Republic of China is a sovereign and independent country. This is an established fact, which mainland China cannot deny. If cross-strait relations are to develop further, the Mainland will need to understand and face up to this fact. Most of all, mainland China will need to respect this fact!

Taiwan has four primary strategic objectives: First, to preserve our free and democratic system; second, to maintain the current state of peace and stability; third, to expand our participation in the international community; and fourth, to make our country safer and more prosperous. The Republic of China is a highly democratic sovereign nation. Taiwan’s future will certainly be decided by the democratic, freely exercised choices of its 23 million citizens. It cannot be decided unilaterally by mainland China.

Even though cross-strait relations have greatly improved, they are still heavily impeded by two factors. First, mainland China is still continuing to expand its military deployment against Taiwan. And second, the Mainland authorities are still not willing to change the policy and law that sanction the use of force against Taiwan. These are the obstacles to the development of cross-strait relations, and they need to be eliminated. Mainland China must change its thinking and adjust its policy. Only thus will the way be open for the two sides in the future to establish full confidence in each other. And only thus will the way be open for the achievement of true peace.

5. Conclusion: The outlook and challenges

In conclusion, I would like to point out that, though opportunity has now arisen for cross-strait relations to develop peacefully and stably, the train of ensuing challenges has only just begun. This is a task that both sides must address in concert.

Despite the closeness of contacts and dealings now taking place across the Taiwan Strait, there are still many different views within Taiwan about the development of cross-strait relations. This is a legacy of the acute confrontation and hostility that prevailed across the Strait in the past.

Our government has a responsibility to face up to and tolerate differences of opinion within our society. We strongly support that the government should continue to adhere to a high level of transparency in handling important cross-strait issues and conducting cross-strait policy. We need to initiate better communication and discussion of views, set up opinion spaces and platforms for public discussion, and take on board all shades of opinion within society. These can help us reduce contention and resistance, and boost the building of social consensus.

Let me close with an appeal to the American government. The US is a longstanding ally of the Republic of China. Our two countries should enhance substantive and effective official-to-official policy dialogue concerning the development of cross-strait relations and regional security issues. We need to work together to promote democracy, freedom, security and prosperity, and to propel cross-strait relations toward a new realm of true peace with reconciliation.

Ladies and gentlemen, thank you for your kind attention. As you are all experts in cross-strait affairs, I attach a lot of value to your feedback and advice. I look forward now to hearing your views and comments on what I have told you here today and the matters I have referred to.


The purpose of my speech today is to highlight the main significance of recent developments in cross-strait relations. I will cover four aspects of this, namely: cross-strait negotiations