U.S.-Taiwan Relations: Yesterday, Today and Tomorrow Remarks by AIT Director Stephen M. Young at the American Chamber of Commerce in Taipei

OT0606E | Date: 2006-05-11

Introduction

President Johnson, Director Vuylsteke, ladies and gentlemen!  It is a real pleasure to appear before you today to deliver my first major public address as AIT Director.  It is fitting that I do so, because the American Chamber of Commerce is one of those few organizations in Taiwan, along with TAS, that is a critical partner of ours in serving the interests of the American people here.  Your challenges are our challenges; your successes, ours.  I hope to continue the very close cooperation with you that all my predecessors have forged.  And I particularly hope you will take the opportunity of the Q&A period today to let me know how I and my very able staff at AIT, particularly in the commercial, economic and agricultural offices, can serve you better.

I want to speak today about U.S.-Taiwan relations over the past sixty years.  But first, with your indulgence, I'd like to share a small anecdote.  When I was posted to AIT as a junior officer, 25 years ago, I had the honor of serving under the Institute's first director, Chuck Cross.  A former Ambassador to Singapore, Chuck was completing a distinguished thirty year career in the Foreign Service.  I attended his farewell reception in fall of 1981, and I still remember well how he described his first assignment, like mine, to serve in Taiwan.

It was in 1949, and he was to work in our small consulate here.  But somewhere along the line, his superiors in the Department noticed the rapid deterioration of conditions on the mainland, and called him in to inform him that they had decided Taipei was too uncertain a post for a first-tour officer.  They were considering sending him to someplace safer, and mentioned the possibility of a posting either in Saigon or Seoul.  Chuck, a decorated Marine veteran of World War II, told us at his farewell that he had decided to speak up.  He told his bosses that while he might be inexperienced in diplomacy, he was certain that "Taiwan was going to be just fine."  He got the assignment, and I am here today to tell you I am with Chuck Cross as I begin my tour as AIT Director:  Taiwan is STILL going to be just fine!

In light of this story, I think it is important to remember where Taiwan was 40-50 years ago, how far it has come since then, and use that as context to consider how this island will manage the multiple challenges it faces.  In discussing our relations over the past five decades, I want to highlight three themes:  democracy, economic development and security management, and one overriding thesis:  that the U.S. has consistently been a close partner of Taiwan in its remarkable evolution, and will continue to be so in the future.

A Brief Historical Review

Going back to 1950, the Nationalists had been defeated by the communists on the mainland and had retreated to Taiwan.  The historical record suggests that the U.S. government was prepared to stand aside if the PRC had attacked.  But the onset of the Korean War changed all that, as America began to see the defense of Taiwan as important to U.S. strategic interests.  Throughout the fifties, security was a key element in our relations, especially after we signed the Mutual Defense Treaty in 1954.  Two crises over Quemoy and Matsu in the fifties raised the specter of direct conflict between the United States and China over Taiwan during those early years of the Cold War.  At the same time, we provided developmental assistance that amounted to $100 million annually by 1965, then a remarkable thing happened.  The U.S. determined that Taiwan had made such successful use of this aid that we graduated the island from this program.

In the sixties my father's work as a U.S. military officer brought me to the beautiful island of Formosa for the first time as a teenager.  He was assigned to be a military adviser to the Taiwan army in 1963.  I remember the pungent impressions of Kaohsiung in those days, of ox carts, honey pots and pedicabs in streets still mostly devoid of cars, while in the countryside beyond one saw bent farmers and water buffalo dotting an endless horizon of rice paddies.  The Love River at that time was little more than an open sewer.  In 1963, 6000 Taiwan students were studying in the U.S., a statistic I'll compare later with subsequent figures.  At the same time the signs of change were evident.  I remember my dad bought several cases of canned mushrooms to take back to the states when we left here in 1965, evidence of the food processing industry which was one of the island's early engines of growth.  Back in those days, "Made in Taiwan" was something of a joke, suggesting how little we understood the development track this place was already on.

The seventies were dominated by America's halting attempts at reconciliation with the mainland, what many called in those days "Red China."  Our refusal to abandon security commitments to Taiwan delayed full normalization until January 1979, but it still came as quite a shock to the island.  A variety of strategic considerations dictated the U.S. decision to shift relations from Taipei to Beijing.   After the switch, Taiwan's economy still kept chugging along, with textiles and calculators dominating the export market.  At the time of the break in formal relations, there were 17,000 Taiwan students in the States.

As I returned in the early eighties to work in the newly-founded AIT issuing visas to some of those students, we were engaged in redefining our terms of reference with Taiwan.  The U.S. was concerned that its actions not undercut the normalization agreement with the PRC, but it was equally determined to maintain vibrant economic, cultural and academic ties with Taiwan, and to ensure Taiwan's continued security.  There was still plenty of vitality to our informal ties.  In 1981 we issued over 60,000 nonimmigrant visas, of which over 5000 were for students.  The first democratic rumblings were stirring Taiwan's authoritarian, one-party system, encouraged by the visionary policies of Chiang Ching-kuo and vigorously supported by American friends of Taiwan from all walks of life.  Taiwan was now becoming a leading global computer parts manufacturer, and no one joked about "Made in Taiwan" anymore.

In the nineties, Taiwan achieved its bold transformation into one of Asia's most successful emerging democracies.  It is important to recall that this was a peaceful transformation.  That isn't something to take for granted.  Let me be clear:  democratization isn't easy.  One has only to look at such current examples as Nepal or Belarus -- or Kyrgyzstan, with which I am somewhat familiar -- to recognize how difficult this can be.  Furthermore, Taiwan accomplished this despite significant pressure and interference from China, including missile tests in the Strait in 1996 which prompted a U.S. decision to deploy two aircraft carrier battle groups into the area.  Four years later, on the eve of the island's 2000 presidential elections, the PRC published a shrill White Paper on Taiwan widely taken to be an effort to intimidate Taiwan's voters as they prepared to cast their ballots.  Suffice it to say Taiwan's voters were not deterred from voting their conscience, and the result was the first democratic political transition in the history of Chinese civilization.

Meanwhile our substantive ties continued to expand, evidenced by a peak issuance in the mid-nineties of 366,000 non-immigrant visas, while a total of 37,000 Taiwan students were enrolled in America's finest schools.  Another remarkable thing happened there:  more and more of those students were coming back home, typically with an advanced degree in computer sciences or electrical engineering and a few years of work experience in their hip pocket.  This "reverse brain-drain" contributed to Taiwan's hi-tech industries' production of laptops and semiconductor chips, making Hsinchu the Silicon Valley of Taiwan; or was Silicon Valley the Hsinchu of the U.S.?

With the dawn of a new millennium, Taiwan faces new challenges, including the consolidation of democracy and coping with the rise of China.  As has been the case since the early fifties, America continues to be this island's steady partner as it navigates these dangerous waters. We have had our disagreements, as close friends inevitably do.  President Chen's recent trip to Latin America in which he chose not to transit the U.S. is a case in point.  But such issues can never be allowed to distract us from our enduring common interests.

I'd like to turn to those three themes I spoke of at the beginning of my talk now.

Democracy

Taiwan has rightfully been applauded for its conduct of free and fair elections, for the vitality of its free press, and for its protection of its people's civil liberties.  As part of the ongoing task of consolidating its achievements in democracy, now might be the time for all of Taiwan's political leaders to focus more on strengthening institutions.  In particular, the island could usefully concentrate on what political theorists call "good governance" -- that is, ensuring that the political system is delivering the goods its electorate wants, doing the people's business.

A two-party system is emerging here.  As an American friend of Taiwan, I see this as both a familiar and a welcome development.  Now is the time for all of Taiwan's current and aspiring leaders to take stock and ask where the current system might be strengthened to the advantage of all.  The various parties, while continuing to engage in the natural competition for voter approval, might well look for ways to enhance the spirit of bipartisanship, acting for the common good of all Taiwan's citizens.

I have recently been reading the history of America's early years, when following enactment of our constitution, we founded the first federal government in the 1790's.  It was a time of great expectations in our young democracy, led by our revered first president, George Washington.  But bitter rivalries in his first cabinet, especially between two great but philosophically very different founding fathers, Thomas Jefferson and Alexander Hamilton, gave rise to what was to become our two-party system.  Early American newspapers were sharply divided into political camps, with more opinion than fact to be found in their hotly read pages.  Quarrels about the appropriate relationship between state and federal power inflamed public opinion.

But America's founders opted to set a high bar to constitutional change, while encouraging public debate and judicial review to develop consensus about the meaning of the constitution as written.  In fact, there have only been 17 amendments to the U.S. Constitution since the Bill of Rights was enacted in 1791, and one of them simply repealed another.  America is still refining our democratic system over 200 years later, and we still face significant challenges.  But we have been fortunate that our founding fathers bequeathed to us a durable constitutional framework.

To repeat, democratization is not easy, and can never be taken for granted.  But I believe it is still the greatest political system on earth.    In any case, we Americans are deeply impressed by Taiwan's democratic development.  I encourage our Taiwan friends to maintain faith in your people's wisdom and creativity, and keep on building your remarkable democratic tradition!

Economic Prosperity

I've been struck by the amount of gloom and pessimism on the state of Taiwan's economy that I have encountered in the eight short weeks I've been back here.  I do not want to underestimate the challenges.  After all, this is the most competitive region in the world, led by China's double digit growth.  But let us remember where Taiwan is coming from. Looking at this island today makes me marvel at the changes from forty, twenty or even ten years ago.  The gleaming steel and glass monuments to architectural and economic creativity in the island's cities are marvels the whole world admires.  Just look at Kaohsiung's Love River, which as a result of democratic Taiwan's environmental focus has become a lot cleaner than what I remember as a boy in the sixties; or Taichung's bustling new Science Park, which challenges the claim that this island's economy is hollowing out; or the hum and bustle of Taipei's city streets, which recently inspired the New York Times to single out Taipei as one of Asia's most vibrant centers of nightlife.  And don't forget on May 21st you can climb up Taipei 101's stairs for charity!

With a GDP of over $350 billion, and still growing annually at some four percent, with the TAIEX at a five year high and a per capita income of over $15,000 -- on a par with that of some Western European countries and exceeding that of several Eastern European nations -- it is a bit hard for me to fathom the pessimism here.  In fact, sometimes I half-suspect Taiwan's business community relies on a certain amount of creative pessimism as a motivator to work even harder at building the island's cutting edge economy.  Whatever the background, Taiwan's economic achievements still rightfully elicit the admiration and envy of the world.

The United States has made its contribution to this growth, with over $50 billion in two way trade last year. To put that in perspective, this was seven times greater than in 1978, and a staggering 250 times bigger than in 1963, when I first visited the beautiful island of Formosa.  At the same time, Taiwan has become the second largest per capita foreign consumer worldwide of U.S. Agricultural products.  And lest you think student exchanges are lagging, I'm happy to report we issued over 15,000 student visas in 2005, making Taiwan the 6th largest source of foreign students to the U.S.  Hopefully some of Taiwan's future leaders in business, academics and government -- like so many of their predecessors -- are hard at work in America's university libraries as we speak.

Our interaction with Taiwan has evolved as our two economies have grown closer together.  We strongly supported Taiwan's entry into WTO, and have encouraged its active contribution to that organization.   Our bilateral Trade and Investment Framework Agreement (TIFA) talks offer us a real opportunity to review at high levels our entire trade relationship and look for ways to remove obstacles and expand opportunities for our business community.  In the near future, Karan Bhatia, the Deputy U.S. Trade Representative will travel to Taiwan for the next round of TIFA meetings to enable us to make further progress on our full agenda of bilateral trade issues.

Among issues of particular importance to us are better enforcement of intellectual property rights (IPR) laws, continued modernization of the financial sector, Taiwan's active contribution to a successful conclusion of the Doha Development Round, liberalization of government procurement practices, and reform of Taiwan's pharmaceutical pricing regulations.  AmCham's role in all this is vitally important, and we pay close attention to your annual White Paper, which is due out in a few weeks.  The Taiwan authorities should likewise continue and strengthen their direct dialogue with you on the business climate here, especially as you prepare for your annual "door knock" visit to Washington next month.

Security

Security remains a key element of U.S.-Taiwan relations.  Ever since we sent the 7th Fleet into the Taiwan Strait in 1950, the U.S. has maintained an abiding interest in preserving this island's freedom.  A central issue between us and the PRC has been our insistence that this island not be threatened or coerced into any arrangements with its huge neighbor.  We refused to sacrifice that commitment when negotiating the normalization of U.S.-China relations, and in fact we have steadily refined our security ties with Taiwan since 1979, consistent with the provisions of the Taiwan Relations Act (TRA).  In fulfilling the U.S. commitment under the TRA, we currently have extensive -- though unofficial -- military cooperation with Taiwan.  In addition to significant arms sales, the U.S. Government works closely with Taiwan's military establishment to support their efforts to embrace a defensive strategy that promotes stability.

But Taiwan is at a crossroads here.  It cannot allow the otherwise healthy competition between political groupings to stand in the way of providing its citizens with an adequate defense.  That is why I have urged all sides of the political spectrum to work together on passing and implementing an appropriate defense budget within the context of their vibrant political system.  This is not about specific weapons systems so much as it concerns the overall commitment to a strong defense.  While we think that Taiwan needs to increase defense spending overall, we do not advocate one funding mechanism over any other - that's up to the Taiwan people.  We do believe, though, that Taiwan cannot afford to sacrifice readiness to acquire new weapons; defense spending must address both in a balanced way.  I am encouraged by recent signs that the main political parties seem to be putting aside their differences to forge a new consensus on defense spending.

Coping with a Rising China

This brings me to the immense challenges and opportunities, posed by the need to cope with the rise of China in the 21st century.  As the recent Hu Jintao visit to the United States underscored, there are opportunities and challenges for the U.S. as well.  My country's most senior leaders have referred to the complexity of U.S.-China relations, acknowledging that none of us can foretell what the future might bring.  But we are committed to pursuit of a constructive and cooperative engagement with China aimed at promoting its transition into what Deputy Secretary of State Robert Zoellick last fall characterized as a responsible stakeholder in the international system.

This is tough work, but the stakes couldn't be higher.  Will modern China become a respected world citizen, contributing to global stability in an ever more-connected world?  Or will it be a source of regional and global tension?

Many of the answers can be found right here in the way Taiwan and China manage to define their relations.  While welcoming recent efforts by the PRC to foster dialogue with some Taiwan parties, we have made plain that China should initiate a direct dialogue with Taiwan's elected leaders.  Above all, U.S. policy has consistently made plain our opposition to any threats or resort to force to compel Taiwan's acquiescence to one-sided accommodation.  If greater attempts, on both sides, are made to define win-win solutions to economic and social engagement, the future will be bright.

If, on the other hand, the two sides engage in zero-sum calculations, and particularly if China chooses to use its new-found strength to threaten the freedoms Taiwan holds so dear, or Taiwan seeks to undermine the status quo which, however imperfect, has allowed this island to prosper in peace for so long, then even an inveterate optimist like me will find it difficult to turn aside pessimism.

I would like here to take a moment to comment on the question of cross-Strait trade and investment.  I know this is a topic of considerable interest to you as AmCham members.  Should there be any limits?  Are there security implications?  What about direct flights?  Greater tourism?  I think these are all fair questions, and they should be subject to serious democratic debate - which I am happy to say, is happening today.  The voice of the international business community should be heard in these debates.  Whatever the precise policy that emerges, it must surely recognize the central role that cross-strait economic activity plays in ensuring Taiwan's continued economic vibrancy and bolstering Taiwan's ability to compete with other East Asian economies.

One more question that is often posed to me... whether time is on China's or Taiwan's side in this "great game."  I know that for some the steady growth of China's economic and military clout leads to the belief that China holds the advantage, that Taiwan's negotiating power will steadily decline.  I do not share that belief.  For I am convinced not only that Taiwan can continue to look effectively to its own interests based upon the growth model that has served it so well over the past fifty years; more fundamentally, I believe the changes occurring in China will lead inevitably to the political opening up of that great country.  It may not happen tomorrow, or next year, but the pressure to democratize and provide the people of China the same degree of political freedom they increasingly enjoy in the economic sphere is going to eventually change the basic calculus of cross-Strait relations.  Taiwan's successful democratic transition offers a powerful model to the people of China in this historic process.

Conclusion

Taiwan has come a long way in the last half-century, and has much to be proud of.  Whether in ensuring its security against external threats, supporting the economic miracle of Taiwan's transition from a developing economy to a global technology leader, or in transforming an authoritarian system into a shining beacon of democratic freedom, America has been Taiwan's strongest supporter, and that will continue.  So long as this island continues to fully exploit its most valuable resource -- its energetic and talented people -- I will remain optimistic that Taiwan can continue to turn the many challenges it faces into opportunities.  And throughout it all, the people of Taiwan can count on the people of the United States to stand squarely with them.

Thank you, and now I would like to take your questions.