1 Overview of Taiwan’s Development and Implications for Relations Across the Straits.

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Overview of Taiwan’s Development and Implications for Relations Across the Straits

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Historical Background—Japan’s colony 1895 Annexation of Taiwan by Japan

following China’s defeat in Sino-Japanese War

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Historical Background—Japan’s colony 1895 Annexation of Taiwan by

Japan following China’s defeat in Sino-Japanese War

Contrast between European- and Japanese-style of colonial rule Japan

Geographic proximity Higher degree of integration with

Japanese economy, especially after 1930

Colonial bureaucracy staffed by Japanese

Policies benefitted Japan Promoted primary education

but had to study Japanese Promoted adoption of

modern agriculture techniques but had to supply Japan with sugar, rice

Higher degree of penetration/control of colonial society

Close relations between Japanese business and colonial state within colony

Large Japanese repressive apparatus

Office of the Governor-General in the Japanese colonial government (now Taiwan‘s Presidential Office )

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Historical background

Political uncertainty during civil war1945 defeat of Japan in WW II1947 February 28th Incident1949 Declaration of Martial Law in Taiwan

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Historical background--economic development 1950 Korean War 1954 US-ROC Mutual Defense Treaty

US Aid to Taiwan; land reform; industrial policy

1950s-1980s: “economic miracle”: growth with equity Export access to US market

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Taiwan’s Path of Industrialization in the 20th Century

1895-1945(period of Japanese

colonialism)

1950s - 1960 ~1960 - 1972 1973 -

Commodity Exports

combined w/Primary ISI

beginning in ‘30s

Primary ISI Primary EOI

1960 “Statute for Encouragement of Investment”

Secondary ISI combined w/Secondary EOI

High tech

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China’s Path of Industrialization in the Late 20th–Early 21st C

1952-1978 1979-1995 1995-present

Primary & Secondary ISI (Planned Economy

= Extreme ISI)

Virtually autarkic

State monopoly over foreign trade through foreign trade corp’s

“airlock”

Primary EOI &

Continued Secondary ISI

High tariff barriers, quotas, licienses,

“off-sets”—technology in

exchange for access

Increasing global integration

WTO 2001Deepening of EOI & ISI

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Terms

Autarkic: denoting a closed economy that does not rely significantly on trade and particularly avoids imports

ISI: import-substituting industrialization EOI: export-oriented industrialization Primary: low-tech, low-capital intensity labor intensive

ex: toys, shoes, garments, consumer electronics Secondary: higher-tech, higher-capital intensity

capital intensiveex: automobiles, machinery

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Historical background—changing political situation

1971 PRC takes up China seat in UN 1972 Shanghai Communique 1972 first step expanding elections to national

representative bodies in Taiwan 1977 Emergence of “dangwai (outside the party)”

especially in local elections 1979 Normalization of US-PRC Relations; US

derecognition of Taiwan 1979 Taiwan Relations Act

Peace reunification, US support for Taiwan defense

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Democratization

1986 Democratic Progressive Party formed Tolerated by KMT under Chiang Ching-kuo

1987 Lifting of martial law in Taiwan and open emergence of Taiwan identity

1990s: increasing economic integration of Taiwan and mainland China

1992 New, full legislative election for Taiwan 1996 First direct Presidential election in Taiwan: Lee

Teng-hui (KMT) PRC missile tests in Taiwan Straits in lead-up to election.

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Democratic consolidation

2000 Election of Chen Shui-bian of the Democratic Progressive Party (DPP) with pro-independence platform Election of opposition democratic

consolidation—1 indicator

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Democratic consolidation

2004 Election “Pan-Blue” vs. “Pan-Green” “Pan-Blue (KMT, People First Party) leading in polls Apparent assassination attempt on Chen Shui-bian

Re-election of Chen (“Pan-Green”) concurrent with “defensive referendum” “demand that China should renounce the use of force against

the island” Chen: “rising Taiwan consciousness”

2004, 2008, 2012 Legislative elections—”Pan-Blue” wins more seats

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Subsequent elections

2008 Election 2012 Re-election

Ma Ying-jeou (KMT)

Closer ties with Mainland Three “no’s”

No independence No unification No use of force

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Reform of Legislative electoral system From

Single, non-transferable vote system To

Dual ballots Single member districts by winner-takes-all Nationally by proportional representative with party

lists

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Review: Economic Integration of China and Taiwan How and why is it emerging?

enabled by certain political initiatives driven by economic complementarities

Geographic proximity Exchange rates

1980s appreciation of New Taiwan Dollar Stricter environmental regulations in democratizing Taiwan

Ex: electro-plating arsenic in ground water Land values increase in Taiwan in 1980s Upward pressure on wages in Taiwan in 1980s

facilitated by linguistic and cultural affinities

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Taiwan and China Economic Interdependence & Relative Political lndependence

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“Status-quo”

Taiwan Opinion Polling Independence even if war with China

Agree 26.7% Disagree 73.3%

Unification even if two sides incompatible Agree 24.3% Disagree 75.7%

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Origin of Direct Foreign InvestmentCumulative 1990-2004

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Trade follows investment