"United States Policy towards Taiwan" by Richard C. Bush, Chairman and Managing Director, American Institute in Taiwan, Joint Conference of the USA/ROC and ROC/USA Business Councils, November 19, 1999

BG9918E | Date: 1999-12-07

It is a great pleasure to attend the 23rd Annual Joint Business Council. This is one of the longest running regular U.S.-Taiwan meetings, and it continues to be an excellent venue for renewing personal relationships and expanding substantive knowledge. I myself have learned a great deal from the members of the panel who will speak on economic relations among the United States, Taiwan, the PRC, and Hong Kong. And I am always eager to hear the views of Harry Harding, Gerrit Gong, Ed Feulner.

David Laux and Paul Hsu have asked me to talk about U.S. policy towards Taiwan, and I will do so eagerly. A lot has happened since I spoke to you on this same subject two years ago. In the interim have occurred President Clinton's trip to the PRC in June 1998, Koo Chen-fu's own ice-melting visit in October last year, Secretary Bill Richardson's appearance before your meeting last November, and President Lee's statement that relations across the strait were a "special state-to-state relationship."

Before I review current U.S. policy, I would like to make some remarks of my own about cross-Strait economic relations and note their political significance.

Only twelve years after the real opening of economic ties, there are 30,000 Taiwan firms that have contracted for around $40 billion in investment in the PRC, with a gradual shift from small, single-proprietor enterprises to larger investments and joint ventures. There are even connections between state enterprises in the areas of oil and coal. The Tong Yi Company, for example, already has 70 factories on the mainland.

Over 200,000 Taiwan business people now live and work in the PRC, and they have established over 50 associations around the PRC to promote their interests. Some businessmen, I am told, have wives on both sides of the Strait, which is a novel kind of unification. More significantly, Taiwan-invested firms employ around 3 million Mainland workers, about 3 percent of the urban work-force. Thus, Taiwan helps Beijing realize its top objective, preserving social stability. To the extent that the native places of these employees is different from the site of the factory, which is often the case, Taiwan firms are probably also improving the standard of living in poorer parts of China.

Nowhere is cross-Strait economic integration more complex and more vital that in the information technology sector. Taiwan firms and their Mainland partners have moved beyond low-value products on which they concentrated less than a decade ago. As Taiwan's powerhouse computer companies move production of their low-end items offshore in order to stay competitive, the PRC is by far their overseas destination of choice. Taiwan firms are now producing 29 percent of their total global output - or US$ 10 billion annually on the Mainland. A key incentive is not just cheap workers but also high-quality engineers. This investment is reshaping the composition of cross-Strait trade, to the point that Taiwan exports of IT products now account for perhaps 40 percent of all exports to the PRC.

Business is only one dimension of cross-Strait interactions. Also significant are human contacts, scholarly and artistic exchanges, renewed religious ties, and the question of whether Taiwan might be a model for political development on the mainland. In all of these areas, including business, there are problems and ambiguities. Some in Taiwan ask, for example, whether Mainland firms will use cooperation with Taiwan partners to become competitors. Despite these questions, these ties are not trivial, for they are based on common interests and shared cultural heritage. They remind people on both sides that they have a stake in cooperation, that there are tangible reasons to avoid conflict, and that the common ground they share may serve as the foundation on which other forms of cooperation, including political cooperation, can be built.

The proliferation of cross-Strait ties and the shared interest they reflect provides a transition to my remarks on U.S. policy. At the time that these ties began, the U.S. Secretary of State George Shultz wisely recognized their significance and identified the U.S. response to them. In a speech in Shanghai, to which David Laux may have contributed, Secretary Shultz said:

We support a continuing evolutionary process toward a peaceful resolution of the Taiwan issue. The pace, however, will be determined by the Chinese on either side of the Taiwan Strait, free of outside pressure. For our part, we have welcomed developments, including indirect trade and increasing human interchange, which have contributed to a relaxation of tensions in the Taiwan Strait. Our steadfast policy seeks to foster an environment within which such developments can continue to take place.

I would argue that the policy that Secretary Shultz describes has been the approach pursued steadily and consistently by the United States for the last twenty years. It certainly has been the policy of the Clinton Administration.

The United States fosters a positive environment in a number of general and specific ways. Generally, we do it through:

* a robust set of bilateral alliances in East Asia;
* forward deployment of naval and air force units -- around 100,000 in number - in the East Asian region to deter aggression and foster stability;
* aggressive pursuit of global economic liberalization, which fosters interdependence among the countries of the Pacific Rim and gives all a stake in peace and stability;
* engagement of the PRC, in order to fully integrate Beijing in the international system and its rule-based regimes for preserving international peace and security, and to work closely with Beijing in resolving regional conflicts where we have common or parallel interests; and
* a strategic vision, that the best way to achieve our national interests is to be actively involved in the affairs of East Asia on the side of peace, prosperity, and humane government.

With respect to the Taiwan Strait issue in particular, this context-creating approach is manifested in the following ways:

* clear and consistent reaffirmations of our one-China policy as defined by the three communiques, which remains the cornerstone of the Taiwan-PRC-U.S. relations that has fostered peace and stability and facilitated the remarkable evolution on Taiwan itself;
* an insistence, expressed most recently by President Clinton to Jiang Zemin in Auckland in September, that the Taiwan Strait issue should be resolved peacefully;
* continued arms sales to Taiwan, pursuant to the Taiwan Relations Act, to ensure that the island's armed forces have a sufficient self-defense capability.
* a confidence that the two sides have the creativity to resolve this issue on their own, without U.S. Government mediation;
* a refusal to pressure either side to accept any arrangements that it does not believe are in its interests;
* an understanding that any arrangements between Beijing and Taipei should be on a mutually acceptable basis, and not be imposed on one side by the other;
* an understanding that because Taiwan is a democracy, any arrangements between the two sides ultimately have to be acceptable to the Taiwan public; and
* a willingness to support any outcome voluntarily agreed to by both sides of the Taiwan Strait.

I believe strongly that friends in Taiwan need to look at the totality of U.S. policy - all these elements together - and not focus excessively on single elements. It is not constructive to take a couple of words out of context and conclude either that the United States is acting against Taiwan's best interest - which it is not - or that Washington is going to take full responsibility for the island's future - which it is not. I believe strongly that this comprehensive U.S. policy, which promotes peace and stability, is good for Taiwan. But I think people on Taiwan shouldn't take my word for it. Rather they should study the totality of U.S. policy and come to their own conclusion. If they do not agree with my assessment, our channels of communication are good enough that we can discuss it. I am confident that in the end, their conclusion will be the same as mine. I am confident that they will also reject the views of those Americans who claim that the Administration is appeasing Beijing. That claim is both profoundly false and also very irresponsible, for it fosters unnecessary and unjustified fears among people on Taiwan.

Similarly, I don't think that friends in Taiwan should automatically conclude that because this or that proposal seems to be good for Taiwan that it really is. Nor should they infer that because the Administration opposes such a proposal that it is anti-Taiwan. I refer specifically to the Taiwan Security Enhancement Act. The title sounds good, but there is a danger that the bill, if it became law, would hurt Taiwan's security rather than help it. I would suggest that people on Taiwan read the Taiwan Security Enhancement Act carefully and make their own decision as to whether the changes that it requires and the larger political consequences would, on balance, benefit Taiwan. Ultimately, Taiwan's security depends not only or even primarily on its arms purchases and military readiness. Even more important is the ability of both sides to promote an atmosphere that reduces tensions and makes military conflict unlikely.

By the way, I do not take seriously the PRC complaints that the United States bears some responsibility for the lack of progress in cross-Strait relations. Beijing, for example, claims that U.S. arms sales reduce Taiwan's incentive to negotiate. But I can find no evidence to support such a hypothesis. Indeed, it is my personal view that Taipei is more likely to engage the Mainland if it has a certain sense of security, which U.S. weapons help provide. Also, I think PRC policies and behavior themselves affect Taiwan's desire to creatively resolve cross-Strait differences.

Realistically, Taiwan cannot ignore its neighborhood, and it must acknowledge that its neighborhood is not completely quiet and stable. The PRC is there; it won't go away. As I discussed at the outset, Taiwan has already recognized that the Mainland represents an opportunity in economic terms. And it is my impression that most elements of the political spectrum on the island understand that Taiwan cannot close itself off from its neighborhood. The challenge is for both sides to work out how to be good neighbors. Taiwan cannot afford not to prepare for the worst, and the United States will act according to the TRA to help it prepare. Yet Taiwan need not act in a way that excites the worst fears and misperceptions of the other side, because that may increase tensions across the Strait. Instead it should strive for the best and work to bring it about. Taiwan has already contributed to economic growth and social welfare on the Mainland, and it serves as a good example of democracy in action. With creativity, prudence, and political will, it can help foster a more peaceful neighborhood, assuming that the other side is equally creative and forthcoming.

As Taiwan seeks creatively to build a better neighborhood, in the hope that the other side will reciprocate, it should do so not with apprehension but confidence. That Taiwan has made such remarkable achievements over the past few decades warrants such confidence. Having met challenges in the past, Taiwan can meet the challenges that are still to come. Having overcome obstacles in the past, it should be able to overcome the obstacles that they are yet to face. When predicaments do occur, it is all too easy to lose one's confidence. Yet I think if the people and authorities on Taiwan step back and look at what they have accomplished in spite of the difficulties, this record of achievement should more than balance any new sense of anxiety. Of course, one should not get over-confident, but neither should one be excessively anxious.

Nor should Taiwan feel any doubt about the policy of the United States. The United States has worked for more than five decades to foster a peaceful and prosperous East Asia. The framework established twenty years ago for the conduct of U.S. relations with Taiwan and the PRC has worked very well. On the basis of that framework, we hope that the progress achieved so far can be consolidated in the near future.