For Taiwan, a Dilemma Over Identity, Economy and China

President Tsai Ing-wen of Taiwan addressed naval officers in July, about two months after she took office. Some fear Ms. Tsai’s recent phone call with President-elect Donald J. Trump will destabilize United States-China relations, while others see a welcome rethinking of Washington’s ties to Taiwan. Credit Office of The President Taiwan, via European Pressphoto Agency

Syaru Shirley Lin, a native of Taiwan, is a political economist who teaches at both the University of Virginia and the Chinese University of Hong Kong. Previously she was a partner at Goldman Sachs, where she was responsible for private equity and venture capital investments in Asia and spearheaded the firm’s investments in technology start-ups, including Alibaba. Her new book, “Taiwan’s China Dilemma,” published by Stanford University Press, focuses on the emergence of Taiwanese national identity and how it has influenced the island’s economic policy toward China over the past three decades.

In an interview following President-elect Donald J. Trump’s telephone conversation with President Tsai Ing-wen of Taiwan and his questioning of the One China policy that has long guided Washington’s dealings with Beijing and Taipei, Ms. Lin discussed this surprising break with protocol, Taiwan’s ambivalence toward economic integration with China and why the United States should review its approach to Taiwan.

Your book deals with the seeming contradiction of China and Taiwan developing closer economic ties, even as Taiwanese culture moves further away from China’s. How have those trends managed to emerge simultaneously?

Once China began to open its economy in the post-Mao era, cultural similarities and a common political objective of creating “one China” led to an explosion of economic relations across the strait. The Chinese economy was highly complementary to Taiwan’s, and a majority of Taiwanese considered themselves “Chinese.” Today, more than two-thirds of Taiwan’s outward foreign direct investment is to China, which is also Taiwan’s leading trading partner.

However, as cross-strait economic interdependence grew and as Taiwan began to democratize, the residents of the island began to debate what it meant to be Taiwanese, a topic that had been taboo for four decades under the authoritarian Kuomintang government. At first, Taiwan’s economic policy toward China oscillated between extreme restriction and extreme liberalization. Some Taiwanese believed supporting economic liberalization with China was a way of promoting unification, while supporting economic restriction with China was equivalent to preserving a separate Taiwan, whether that be simply autonomy or outright independence.

Syaru Shirley Lin. Credit Mark Edwards

As Taiwanese identity has consolidated, with more than 90 percent of Taiwanese believing they are in some way “Taiwanese,” a consensus has emerged that some degree of economic interdependence with China is unavoidable but that overdependence is risky. The extreme economic policy options have therefore lost support. However, support for closer economic relations does not extend to sociopolitical integration. In fact, only 1.5 percent of Taiwanese support immediate unification with China, with even less support among young people. But if Taiwanese identity is threatened it can become salient again, and extreme options may re-emerge. This was the case in 2014 when Taiwan’s largest student protest — known as the Sunflower Movement — successfully opposed a service trade pact that had been negotiated with China.

Do you see any way that Taiwanese identity could move closer to China’s in the coming decades?

There is an increasing gap between the Chinese identity that Beijing promotes and the identity Taiwanese have come to embrace, which is based on democracy, rule of law and freedom of speech and assembly. Beijing’s strategy of giving Taiwanese economic benefits so that Taiwanese will become more inclined toward unification has not been successful. So Beijing has increased its pressure by terminating official communications with Taiwan, reducing the flow of Chinese tourists and ensuring Taiwan is excluded from international organizations, even those that could benefit from Taiwan’s participation.

Nonetheless, it is entirely possible for this identity to swing back to become more Chinese. This will depend on the strategy Beijing employs, especially whether it can create a common identity that includes Taiwanese. But if Beijing stays the course by imposing economic and diplomatic sanctions while providing economic benefits to a select few, it will create more backlash and resentment — just as it has in Hong Kong. Alternatively, Beijing could choose to close the gap across the strait by fostering democratic values and allowing the emergence of civil society, but this seems highly unlikely at present.

What are the economic implications of the Trump administration for Taiwan?

Taiwan desperately needs to move away from manufacturing into high-end services. One problem is that Taiwan is unable to sign trade agreements with major partners because of Beijing’s objections. Part of Tsai’s platform was to join the Trans-Pacific Partnership in the second round and to conclude a Trade and Investment Framework Agreement with the U.S.

Trump’s skepticism about free trade agreements throws all of this into question. If the U.S. abandons negotiations on these agreements, Taiwan will become more marginalized, especially if it is excluded from the China-led Regional Comprehensive Economic Partnership.

Credit Stanford University Press

Your book focuses on the China-Taiwan relationship, but what do you make of the recent Trump-Tsai telephone call and the impact that could have on the cross-strait relationship?

The call President-elect Donald Trump accepted from President Tsai alarmed many experts. Some fear the call will destabilize U.S.-China relations, while others saw it as a welcome sign of upgraded U.S.-Taiwan relations. I do not believe there is evidence of a major policy change yet. But if Trump views Taiwan simply as a way to put pressure on Beijing, then that would mean Taiwan is regarded merely as a means to an end, rather than important to the U.S. in its own right.

I think that supporting a vibrant democracy and insisting on a peaceful solution to the Taiwan issue is an appropriate American objective. Washington has not reviewed its Taiwan policy since the Clinton administration, and the prospect that Taiwan and China will unify peacefully and voluntarily one day has diminished as the two societies grow further apart. Instead of just hoping that its present policy of dissuading both China and Taiwan from trying to change the status quo can continue indefinitely, the U.S. needs to review its policy so it will not be reacting to actions initiated by China as it becomes more assertive.

Is there a space for Ms. Tsai’s Democratic Progressive Party-led government to find a balance on cross-straits issues that Beijing can find acceptable? Or do you expect Beijing to be obstinate in its attempts to freeze out the D.P.P.?

Beijing is the key player in this Washington-Taipei-Beijing triangle because it is the party that most desires a change in the status quo. So far, Beijing has actively stonewalled the new Tsai administration, just as it did with the earlier D.P.P. government led by Chen Shui-bian from 2000 to 2008. Beijing’s refusal to acknowledge Taiwan’s elected leaders and its insistence on punishing the Taiwanese by reducing tourism and trade immediately after Tsai’s election will only discourage Taiwanese from reassuming a Chinese identity.

Tsai has already made compromises that go too far for many of her supporters. In her inaugural speech, Tsai referred to the Constitution of the Republic of China and the legislation governing cross-strait relations, both of which imply the acceptance of a “one China” framework. Tsai may not have room to move much further, especially if Beijing continues to freeze out the D.P.P.

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