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Text: The United States and Taiwan in 1998 Speech by Richard C. Bush, Chairman and Managing Director of the American Institute in Taiwan to the Taiwanese Chamber of Commerce of the San Francisco Bay Area January 9, 1999

BG9901E | Date: 1999-01-27

It is a great honor for me to speak this evening to your organization's
annual New Year's banquet. I would like to express my gratitude to
Dr. Hsieh for his gracious introduction, to the people who worked so
hard to prepared tonight's event, and to all of you for your warm
hospitality. I am privileged to have such good friends.

I must begin by paying tribute to your organization and the work that
you do. You both strengthen the community of Americans from Taiwan
and bind together the American people and the people of Taiwan. Taiwan
and the United States are linked by a dense web of human ties:
networks of kinship and commerce, of science and education, and of
culture and politics. Organizations like yours are important links in
the chains that connect Taiwan people in America to the villages, towns,
and cities of Taiwan. By your activities in the San Francisco Bay area,
you make it a better place to live. You exert extraordinary effort to
provide the American public, the American media, and the U.S. Congress
with a better understanding of Taiwan. In the process, you remind our
government of our ties to the 21 million people on the island of Taiwan.
You all should take satisfaction from the important role that you play.

It has now been more than a year since I became the chairman of AIT, and
a lot has happened in that time. I am constantly reminded of the strength
and vitality of Taiwan's democracy, the breadth and depth of the US-Taiwan
relationship, and the outstanding job done by AIT's employees and Taiwan's
representatives in the United States. My work is very demanding, but I
feel deeply honored to hold this position and hope I have made some
small contribution to US-Taiwan relations and to the welfare of the
people on Taiwan. I hope that I will be able to do so for some time to

This evening, I wish to give you a report on U.S. relations with Taiwan
during 1998. This was, I believe, an important year for strengthening
our bilateral relationship and restoring stability to the US-PRC-Taiwan
triangle. In order to explain why I come to this conclusion, permit me
to review the key developments of 1998.

Bilateral WTO Negotiations

The first major event of 1998 came on February 20th when my good friend
and counterpart, Representative Stephen Chen, signed the agreement
concluding the bilateral negotiations concerning Taiwan's accession to
the World Trade Organization. Any economy that seeks to join the WTO
must go through a two-stage process: first it must conclude market-access
negotiations with any bilateral trading partner that seeks negotiations;
second, the WTO itself must transform the resulting bilateral agreements
into a working party report and a protocol of accession that is presented
to the membership.

There were some people who believed that the United States for political
reasons did not want to conclude bilateral market-access negotiations
with Taiwan. That was not the case. Once Taiwan signaled that it was
prepared to meet American concerns, the two sides began intensive
negotiations in Washington. There was no guarantee when this round began
that the talks would result in an agreement, for the toughest issues of
any negotiation are left until the end. Yet through the dedication,
professionalism, and sincerity displayed by the two delegations, agreement
was reached.

The US-Taiwan bilateral agreement was a win-win outcome for the American
and Taiwan economies. American companies, exporters, and farmers
received or will receive new opportunities in the world's fourteenth
largest economy. Consumers in Taiwan will benefit as tariffs on
imported goods decline over the next few years. As Taiwan companies
are exposed more to global economic forces, they will become even more
competitive and successful than they already are. This is probably the
most important agreement signed between the American Institute in Taiwan
and the Taiwan Economic and Cultural Representative Office (formerly
CCNAA) since their establishment in 1979. And it was new evidence of
the U.S. government's policy to support Taiwan's entry into international
organizations where statehood is not a requirement for entry.

There is still a lot of work to be done on the substance of Taiwan's
multilateral accession package, but good progress is being made. As you
understand, a key issue is whether Taiwan will be able to enter the WTO
before the PRC, should Beijing's application face obstacles. The United
States' position is clear. It believes that the WTO would be stronger
if these two economies are members, that Taiwan's application and the
PRC's application should be examined on their commercial merits, and that
each application should be considered independently of the other. I would
remind you that the WTO is a multilateral organization, and the current
phase of Taiwan's entry is governed by consensus. U.S. support will not
assure Taiwan's entry, because we have only one vote. We remain
optimistic, however, that 1999 will be a good year for both Taiwan's and
the PRC's entry into the WTO, and hope that each will move quickly to
resolve the existing substantive problems in their respective

Taiwan's Performance During the Asian Financial Crisis

While we are in the area of trade and economics, let me briefly point to
a second development of 1998, and that is Taiwan's continued ability to
avoid serious damage from the Asian financial crisis. You are all aware
of the reasons for this achievement: sound economic fundamentals; wise
macroeconomic policies; huge foreign exchange reserves; and an industrial
structure composed primarily of small and medium-sized companies that
must survive based on their economic performance rather than on their
connections to government or banks. You also know that Taiwan has not
been totally immune to the crisis. For example, the New Taiwan Dollar
lost some of its value, and Taiwan's exports to the rest of East Asia
have fallen somewhat. Yet by and large Taiwan has performed extremely
well and maintenance of strong economic growth is the best way Taiwan it
can help its neighbors.

Active Development of US-Taiwan Ties

The bilateral WTO agreement is one example of another important
development of 1998, and that is the active development of US-Taiwan ties.
We have always had a robust and substantive relationship. Taiwan is
America's seventh largest trading partner. Taiwan is the fifth largest
source of foreign students in the United States, and those students go on
to play important roles in the scientific and technological interchange
across the Pacific. As evidence of that interchange, in 1998 AIT and
TECRO signed their one hundredth agreement in the science and
technological field. Taiwan is also a good global citizen and has
supported the United States in a number of arenas; aid for the Central
American countries hurt by Hurricane Mitch is a recent example. So there
is, as there has always been, a rich flow of people, goods, ideas, and
mutual interests between us. I would like to point to two particularly
important developments last year.

The first is in the area of arms sales. This past year, the U.S. side
suggested and the Taiwan side agreed that more attention was needed to
the software side of our security relationship. Taiwan has acquired a
large number of advanced systems from the United States in recent years,
and anytime there is a modernization of hardware, there is a need to
adjust training, logistics, recruitment, command and control, and other
systems to ensure that they are compatible. This is what we mean by
"software." Now, emphasizing software does not mean neglecting hardware
needs. Pursuant to the TRA, we will carefully consider Taiwan's requests
for defense articles and services. On the other hand, in the spirit of
the TRA, we do not want to sell expensive weapons systems without the
necessary institutional know-how. The United States hopes to provide
both hardware and software to create military capabilities and so enable
Taiwan to defend itself.

The second important event was the visit of U.S. Secretary of Energy,
Bill Richardson, to Taipei in November in order to give a speech at and
participate in a business conference. This was the first visit of a U.S.
Cabinet Secretary in four years, and Secretary Richardson brought a
high-level affirmation of the friendship between our two peoples.

President Clinton's Visit to the PRC

Some people may say that the biggest event in US-Taiwan relations was
President Clinton's visit in June to the PRC. In terms of media coverage,
the Clinton-Jiang summit was certainly the story that received the most
coverage. Moreover, some people believe that President Clinton's
statements concerning Taiwan in Shanghai represented a change in U.S.
policy, and a negative change from Taiwan's perspective. I strongly
disagree with that view, and believe that it reflects a misunderstanding
of the President's purpose. President Clinton - the same President
Clinton who sent two carrier battle groups to the Taiwan area in March
1996 - had no intention during his June visit to the PRC to either change
U.S. policy toward Taiwan or harm Taiwan's interests. Nor was that the
result of his statements. That is true for at least three reasons.

First of all, the three statements by President Clinton that have drawn
attention -- that the United States does not support two Chinas or one
China/one Taiwan, does not support independence for Taiwan, and does not
support Taiwan's membership in organizations for which statehood is a
requirement -- are by no means new. The statements concerning two Chinas,
one China/one Taiwan, and Taiwan independence were made for the first
time in July 1971 when Henry Kissinger made his trip to the PRC and were
reaffirmed by subsequent Administrations. They are part of the basis of
our relationship with the PRC. The statement concerning Taiwan's
membership in international organizations reflects U.S. policy since
1979 and was made explicit in 1994 in the Taiwan Policy Review.

Second, these three points are not the sum total of our policy towards
Taiwan. They are part of a package, and each element must be seen in
the context of the others. What are these other elements?

* A one-China policy as we define it.
* The three US-PRC communiqu?
* The Taiwan Relations Act, including its provisions regarding our
arms sales to Taiwan, which, by the way, President Clinton publicly
reaffirmed in his speech at Bei-da.
* An insistence that the future of Taiwan be determined peacefully.
* Encouraging the resumption of a substantive and constructive dialogue
without pressuring Taiwan to negotiate or serving as a mediator between
Taipei and Beijing.
* Support for Taiwan's membership in organizations for which statehood
is not a requirement, like the WTO, and support for its voice to be heard
in institutions where membership is not possible.

These various elements fit together as an integrated whole. Each
element was part of our policy before the June summit and are still
in place after the summit. President Clinton made reference to all
of these at various times during his visit and was merely reaffirming
the key principles of the US-PRC relationship, which is an appropriate
thing to do at a summit. And they are our policy, not what Beijing
wants our policy to be.

Third, it is important to understand the broader approach that the
United States has taken towards Taiwan for the last twenty years and
continues to pursue. That approach is to create an environment in the
Taiwan region in which positive change can occur. We have done this
in a number of ways, but one of these is to forge a positive US-PRC
relationship. This approach has been quite successful and has benefited
Taiwan. In the environment which the United States has helped shape,
there has occurred the spectacular democratic progress on Taiwan.
Taiwan's security has been preserved and enhanced. There has been
movement toward a durable peace and increased cooperation across the
Taiwan Strait. So this is not a zero-sum game. And having helped
bring about these positive developments, the United States is not going
to suddenly abandon them.

Resumption of Cross-Strait Dialogue

Actually, I would say that despite all the public attention received by
the Clinton-Jiang summit, the resumption of cross-Strait dialogue was a
more important event, and probably the most important event in US-Taiwan
relations in 1998. The United States has long encouraged discussions
between Beijing and Taipei because dialogue fosters an atmosphere in
which tensions are reduced, misperceptions can be clarified, and common
ground can be explored. One of the most salutary developments in East
Asia during the early 1990s was the beginning of a dialogue between
Taiwan's Straits Exchange Foundation (SEF) and the Mainland's Association
for Relations Across the Taiwan Strait (ARATS). Cancellation of the
dialogue in July 1995 aggravated the tensions of the time, for it closed
off a channel of communication.

Now, with the encouragement of the United States, the two sides resumed
dialogue through the visit of Dr. Koo Chen-fu, chairman of SEF, to
Shanghai and Beijing in October. The Administration is pleased with the
achievements of Dr. Koo's visit and the seriousness with which it was
conducted. The atmosphere between the two sides is much improved and
they reached a four-point consensus for future cooperation. For example,
Mr. Wang Daohan, the ARATS chairman, will visit Taiwan. We welcome
these developments and the meetings, contacts, and exchanges that are to

Permit me to restate the five principles that govern the United States
role in the Taiwan Strait issue:

* The United States insists that the Taiwan Strait issue be resolved
* The Administration believes that constructive and meaningful dialogue
is the best way to resolve cross-Strait differences.
* It believes that these differences should be resolved by the two sides
* The United States will remain even-handed in its approach to cross-Strait
dialogue, and not apply pressure to either side.
* The Administration believes that any arrangements concluded between
Beijing and Taipei should be on a mutually acceptable basis.

Taiwan's Election

The final important event in US-Taiwan relations in 1998 was the December
5th election. The election was significant for the United States not
because of the specific results but because it constituted a clear
maturation of Taiwan's democratic system and reflected a vibrant multi-
party system. The people's will was reflected in the results, and that
is always a good thing.

Now there are some who believe that Taiwan's democratic system undermines
the search for a durable peace in the Taiwan Strait. I disagree with
this view. I believe that Taiwan's democracy, the emergence of which
the United States strongly supported, contributes to peace and stability.
We believe that the people on Taiwan are wise and prudent enough to
support responsible approaches regarding Taiwan's future. We understand
that the results of cross-Strait dialogue must meet with the Taiwan
public's approval, but we also believe that any result that enjoys broad
support will be more lasting as a result. And, by the way, we believe
that Taiwan's democratization -- one of the most remarkable examples of
political progress in our time -- serves as a useful example for political
liberalization in the PRC, which was a major focus of President Clinton's


Looking back on a very busy and eventful year, what impresses me is the
strength of the US-Taiwan relationship and the resilience of the people
on Taiwan. The two sides have made significant progress in enhancing their
very substantive relationship. The improvement in US-PRC relations that
came with President Clinton's visit to the PRC did not damage Taiwan's
interests, and despite some initial fears, people on Taiwan took that
development in stride. And Dr. Koo Chen-fu's visit to the mainland
restored the momentum of cross-Strait relations. All of this gives me
confidence that 1999 will be a positive and successful year.