The Heritage Foundation

Asian Backgrounder #132

August 24, 1994

August 24, 1994 | Asian Backgrounder on

Taiwan Should Be Allowed to Join the World Community

(Archived document, may contain errors)

No. 132 August 24, 1994


INTRODUCTION The Republic of China on Taiwan (ROC) could qualify easily for membership in nu- merous international organizations. It is a functioning multiparty democracy with a 1993 gross national product of over $220 billion. It has foreign exchange reserves of over $85 billion and a per capita income of $ 10,000 for its 21 million people. I The ROC's democratic system is similar to that of other developed countries, and it has scru- pulously observed and upheld United Nations standards of human rights, education, and international behavior. The ROC also has consistently offered its technical advice and fi- nancial assistance to various international agencies and developing countries. Yet Taiwan is not a member of key international organizations. The United Nations, the International Monetary Fund (DAP), the World Bank, and the General Agreement on Tariffs and Trade (GATT) have kept their doors closed to Taiwan. 2 It is officially recog- nized by only 29 countries, generally small developing nations, many of which are de- pendent on Taiwan for aid. Despite long-standing political and economic ties to the United States, it enjoys only unofficial relations with its former Cold War ally. The U.S.-Taiwan relationship, established by the Taiwan Relations Act (TRA) in 1979, has sustained the ROC's economic growth and security since the U.S. de-recogni- tion of Taiwan as the government of 0 China and the establishment of U.S. diplomatic relations with the People's Republic of China in 1979. 3 The ROC has worked to better

1 United States Department of Commerce, Taiwan: Fact Sheet, 1994. See also, Richard D. Fisher, Jr., and John T. Dori, U.S. and Asia Statistical Handbook, 1994 Edition (Washington, D.C.: The Heritage Foundation, 1994). 2 71be ROC was expelled from the United Nations in October 197 1, from the HVIF in April 1980, and from the World Bank in May 1980. The ROC had been an observer to the GATT from 1965 to 1971 but was ejected when the PRC was admitted to the. U.N. in 197 1. 3 "The Taiwan Relations Act," Public Law 96-9, April 10, 1979. Ile TRA set the framework for U.S.-ROC relations

the economic relationship by trying to reduce, or at least to hold steady, its persistent trade surplus with the United States. Market access agreements were crafted, and the ROC pledged to phase out controls that were skewing the bilateral trade balance by keeping the New Taiwan Dollar's value down against the U.S. dollar. The economic relationship continued to expand throughout the 1980s, culminating in President George Bush's decision to dispatch U.S. Trade Representative Carla Hills to Taipei to open trade talks and urge greater American access to major Taiwanese infra- structure projects. By sending a cabinet-level official, the White House conveyed a clear and powerful message that the U.S. wanted to participate in Taiwan's economic develop- ment and redefine the bilateral relationship. The Hills visit marked a new maturity in the relationship. At the same time, Presidents Ronald Reagan and George Bush worked to bolster the ROC's defensive posture in proportion to the mainland's growing military capabilities. In 1992 President Bush decided to sell Taiwan 150 F-16 fighter aircraft in response to the Chinese purchase of SU-27 fighter jets from Russia. The ever-expanding economic ties between the United States and Taiwan require an expansion of Washington's relationship with Taipei. Redefining the relations between Taiwan and the U.S. would not change the existing relationship between the U.S. and PRC because it would not challenge the PRC's position as the one government of China or move to replace it -in international organizations. It would indicate to Beijing, how- ever, that the U.S. continues to expect a peaceful unification between the PRC and Tai- wan and will maintain relations with both sides until this outcome is reached. In redefining the relationship, the U.S. must recognize that a new political climate ex- ists on Taiwan. In order to communicate any American policy shift effectively, the U.S. must have contact with the all segments of the ROC government-not just the ruling Kuomintang (KMT) party. Taiwan is, after all, a growing democracy, and ignoring those outside the current ruling party could hamper U.S. influence and prestige in the future. Direct communication with the opposition would not weaken Washington's one-China position; it would further legitimize Taiwan's democratic progress. For its part, the KMT government's failure to pursue more aggressive efforts to ad- vance Taiwan's international standing contributed to its loss of ground to a vocal opposi- tion which advocates Taiwanese independence. The status quo in U.S.-Taiwan relations also gave the opposition a political pretext for criticism of the KMT-led government. The independence movement derives support from the mainland's campaign to prevent Taiwan from participating in the international community. Accordingly, the opposition feels that present KMT one-China strategy should be discarded in favor of formal inde- pendence. The Taiwan independence movement, although supported by a relatively small seg- ment of the population, threatens to shatter the uneasy peace between Taiwan and the PRC. Beijing continues to assert its right to reunify Taiwan by force if necessary and maintains that a declaration of Taiwan independence would be justification for an armed

after the switch of official U.S. relations to the PRC in 1979. response. Beijing's refusal to renounce the use of force puts the democratic government on Taiwan in danger. A clearly defined and effectively communicated U.S. policy to- ward Taiwan will reassure both Taipei and Beijing of Washington's commitment to a one-China policy and serve to ease suspicions between the two sides. Thus, President Clinton should:

V Support Taiwan's efforts to participate in the United Nations system.

V Conduct cabinet-level economic and educational exchanges with Taiwan.

V Support membership by Taiwan in the General Agreement on Tariffs and Trade (GATT).

V Support the People's Republic of China's entry into the GATT.

V Allow Taiwan to purchase U.S. military equipment as needed to maintain deter- rence against the mainland.

V Permit U.S. representatives to hold direct meetings in government offices with their Taiwanese counterparts.

V Support Taiwan's participation in such international economic organizations as the International Monetary Fund (W, the World Bank, and the Organiza- tion for Economic Cooperation and Development (OECD).

V Allow the ROC to change the name of its representative offices in the U.S. to "Taipei Economic and Cultural Office."

V Increase U.S. contacts with Taiwan's opposition parties.


The Republic of China on Taiwan (ROC) developed from a poor, agriculture-based economy with per-capita income below $50 in 1950 to a robust, export-driven system with an average income of over $ 10,000 in 1993. 4 Now ranked as one of Asia's "four ti- gers," the ROC is a modem economic powerhouse with close ties to the U.S. economy. Currently, the United States is Taiwan's I!rf est foreign investor and trading partner, buy- ing 25 percent of the island's total exports. In fact@ Taiwan is now the sixth-largest trad- ing partner of the U.S., close behind Germany and the United Kingdom. It is the thir- 6 teenth-largest trader in the world, with foreign exchange reserves of over $85 billion. The economic miracle is only part of Taiwan's success story. The ROC also has evolved into the first truly democratic system in China's 3,000-year history. The leaders of Taiwan have engineered a virtually bloodless political transformation from authoritar-

4 Taiwan: Fact Sheet, 1994. 5 Bob Sutter, "raiwan: Recent Developments and U.S. Policy Choices," CRS Issue Brief, updated May 26,1994, p. 1. 6 Taiwan: Fact Sheet, 1994. ian rule to a work- ing democracy with legalized op- position parties PEOPLES Inse and a vociferously REPUBLIC OF CHINA free press. 40 In 1987, Presi- Ke ng dent Chiang . . .. ...... . .... . Taipei Chingkuo ended the state of emer- gency under which the Ta Kuomintang had governed since Hualien 1948. He also eased restrictions REPUBLIC OF CHINA on Taiwan's news- . .... . (rAIWAN) ''PW papers and was the first to allow . .... ..

T ROC residents to Tai Nan visit the mainland.

. ....... .. The political at- mosphere has Z. grown even more -,V open in the last six years under the leadership of President Lee 100 Nau*W Miles Teng-hui, the first native-bornTai- wanese to hold that office. The KMT remains the ruling party with an increasing mem- bership of native Taiwanese. The KMT received about 53 percent of the vote in December 1992's Legislative Yuan elections. This election was the first Legislative election following the 1991 retirement of senior lawmakers first elected on the Chinese mainland in the 1940s. Since this his- toric election, the political scene in Taiwan has been in flux, with a decidedly more Tai- wanese content. The KMT's dominance in local politics also continues, although it has been weakened by factional in-fighting and the growing popularity of the largest opposi- tion party, the Democratic Progressive Party (DPP). The KMT retained a majority of the seats in February 1994's mayoral and council elections, losing ground mainly to inde- pendent candidates who split from the KMT rather than to the DPP. 7

7 Jeremy Mark, "raiwan's KMT Solidifies Dominance With Strong Showing in Local Elections," The Asian Wall Street Journal Weekly, February 7. 19%. p. 3. @o C @B H


The ROC government and people of Taiwan have long been friends of the United States. Yet, in April 1994, only days after signing into law the 1994 Foreign Affairs Authorization Act, which recommended upgrading U.S. ties to Taiwan, Bill Clinton re- fused ROC President Lee Teng-hui's request to stay overnight in Hawaii on his way to visit Central America. 8 Instead, to avoid angering the People's Republic of China, Presi- dent Lee was allowed only a 90-minute refueling stop. 9 On May 16, 1994, the State De- partment followed this shoddy treatment of Taiwan's President with a statement that the Foreign Relations Authorizations law would not change U.S. policy regarding Taiwan. Such political slights could affect the efforts of U.S. businesses t6 take part in the ROC's ongoing $300 billion inflastructure development project. Taiwan's extraordinary economic growth in the past decade is proof that a free enterprise market system is the best growth strategy for developing countries and offers a model for reform on the main- land. But despite the ROC's adoption of a new copyright law, an export monitoring sys- tem designed to intercept pirated goods before shipment, and new environmental protec- tion laws, last year the U.S. slapped Taiwan with trade sanctions. This April, sanctions were imposed on certain Taiwanese exports to the U.S. in retaliation for the illegal trade in rare animal parts used in traditional Chinese medicines on Taiwan and the mainland. 10 More damaging to Taiwan's prestige and its attempt to become a founding member of the World Trade Organization (WTO) 11 was the recent decision by the Clinton Admini- stration to continue the investifation, initiated in May 1993, into the ROC's intellectual property rights (IPR) abuses. I In contrast, it was not until June 30, 1994, that the U.S. notified the PRC that it had been placed on the United States Trade Representative's list of "priority countries" accused of violating 1PR agreements with the U.S. 13


American economic and political interests in Asia are served by stability in the Tai- wan Straits. President Clinton should fashion a policy that supports Taiwan's effort to enhance its international standing. Failure to do so could weaken those in Taiwan who favor eventual reunification with the mainland and strengthen those who seek an inde- pendent Taiwan. The PRC has stated repeatedly that it will not tolerate the establishment of an openly independent government on Taiwan. It is therefore in the U.S. interest that President Clinton enhance the ROC's international standing while bypassing the quarrel- some issue of @identity and politics that embitters the PRC-ROC relationship.

8 Foreign Relations Authorization Act, Fiscal Year 1994 and 1995, issued April 25, 1994. 9 Julian Baurn,"Fast Friends:'Far Eastern Economic Review, June 9,1994, p. 18. 10 Tom Kenworthy, "President Imposes Sanctions on Taiwan," 77m Washington Post, April 12, 1994, p. C 1. 11 The World Trade Organization will replace the GATT in 1995. 12 Susumu Awanohara,'Triends LikeThese," Far Eastern Economic Review, May 13,1993, p. 74. 13 Thomas L. Friedman, "China Faces U.S. Sanctions in Electronic Copyright Piracy," 77m New York Times, July 1. 1994, p. 132. The U.S. should maintain its commitment to a one-China policy as enunciated in the 1979 Normalization Communiqud with the PRC. 14 Creating a new U.S. policy that deals both with the growing discontent among Taiwanese over their international stand- ing and with the sensitivities of the PRC will pose a major challenge to American diplo- macy. Yet it is a challenge that should be met. Taiwan can become a productive member of many international organizations. It could become one of the main architects of a policy to renew and revitalize the World Bank and RvIF, discussed at the recent G-7 meeting, by being both a model and a willing financier for market-led development. 15 The cur- rent government of Taiwan is committed to economic development and political liberali- zation in Asia and is a model for economic and political reform on the mainland. It also is committed to eventual reunification with the mainland. All of these are in the interest of the United States.

Given Asia's skyrocketing growth, a main goal of the U.S. should be to encourage U.S. businesses to expand operations in the region. Countries that promote free trade and eliminate trade barriers offer promising opportunities for U.S. business. Taiwan fits this pattern. It has opened its economy to foreign investment and, with its own invest- ment and advice, is a major driving force in economic expansion in Southeast Asia. It is also actively engaged in promoting freer trade in the Asia Pacific Economic Coopera- tion (APEC) forum. Perhaps of greatest long-term significance is Taiwan's role in assisting in the develop- ment of an entrepreneurial class in the PRC. As an entrepreneurial class grows on the mainland, its values and influence will continue to erode the Communist Party's hold on the economic and political Iffe of the country. Increasing the American presence in both Taiwan and the PRC chips away at barriers created to block foreign influence and ad- vancement in both systems. The U.S. can play a key role in this process by enhancing its engagement with the ROC. Taiwan's ability to expand relations with the PRC is linked directly to the ROC's posi- tion in the international community. Although the ROC currently maintains full diplo- matic relations with only 29 nations, a program of pragmatic diplomacy, or substantive relations without diplomatic recognition, begun in 1991 has increased Taiwan's interna- tional presence. Taiwan now has over 90 representatives in over 60 countries with which it does not maintain diplomatic relations. This flexibility has strengthened the ROC's po- sition in the international community and bolstered its position vis-a-vis the Chinese mainland in their bilateral talks.

Under the aegis of pragmatic diplomacy, Taiwan in 1991 took the first steps toward es- tablishing contacts with the mainland by setting up the Straits Exchange Foundation (SEF), charged with managing the growing Taiwanese tourism and investment pouring into the PRC. The benefit of a more stable and interactive relationship was not lost on the PRC; later that same year, Beijing responded by establishing the Association for Re- lations, Across the Taiwan Straits (ARATS).

14 U.S. DepaMent of State Bulletin, Vol. 79 (1979), p. 2,022. 15 Hobart Rowen, "Pledging a Stronger G-7," 77se Washington Post, July 14,1994, p. A23.


To advance American goals, Congress took steps this year to improve ties with the people of Taiwan and their democratically elected government. The 1994 Foreign Rela- tions Authorization Act contains provisions for upgrading relations with the ROC, advo- cating high-level visits with Taiwan, and supporting Taiwan's entry into "multilateral or- ganizations to which the United States is also a member.,' 16 A variety of bills have also been introduced in the House of Representatives and the Senate, as well as in several state legislatures, voicing support for Taiwan's participation in various international or- ganizations, advocating an end to the limitations on U.S. arms sales to Taiwan estab- lished by the August 1982 Communiqu6 with the PRC, and calling for cabinet-level ex- 17 changes withTaiwan. In fact, as of June 1994, thirteen U.S. state legislatures had passed resolutions supporting the ROC's United Nations bid. Dealing with BeUing. Opponents of such legislation assert that the U.S. needs to maintain the status quo in Asia. They argue that the U.S. should avoid jeopardizing rela- tions with the PRC so quickly on the heels of the contentious most-favored-nation de- bate. Their concern is that China will react adversely to any improvement in U.S.-ROC relations, possibly complicating resolution of the North Korean nuclear crisis, bilateral trade negotiations, and proliferation issues. This argument ignores the fact that current U.S. policy toward the PRC and Taiwan no longer serves American interests. The U.S. simply cannot allow the PRC to dictate American policy toward Taiwan. The PRC's threats of economic retaliation against U.S. businesses operating in China merely serve to emphasize that this is a regime which fol- lows codes of international conduct only when it suits its own narrow political ends. President Clinton must not kowtow in the face of PRC pressure and threats on this is- sue. He must privately, but fmnly, convey to Beijing both his commitment to a one- China policy and his determination to upgrade relations with Taiwan. He also should communicate that access to the U.S. consumer market is a key factor behind the PRC's economic growth; it now relies on the U.S. for a full 35 percent of its annual exports. Upgraded relations with the ROC would bring U.S. policy into line with the reality and importance of Taiwan's economically and politically vibrant society. Many Asian nations already have initiated more direct contact and improved their overall relations with the ROC; and over the past several years, President Lee Teng-hui has visited South Africa, Thailand, Indonesia, and Malaysia under the guise of "vacation diplomacy." Although most of these host countries maintain close ties to Beijing, none has suffered serious repercussions for its relations with the PRC. Even in Taiwan itself, where the effects of the PRC's isolation tactics are felt most keenly, government offi- cials have continued their efforts to expand Taiwan's international presence. Bolstered by Taiwan's growing international acceptance, ROC President Lee forcefully and pub- licly refuted Chinese explanations of the April 1994 murder of 24 Taiwanese tourists at

16 Foreign Relations Authorization Act, p. 87, sec. 508. 17 U.S. Senate Resolution 148-Relative to Taiwan, passed by unanimous consent on Senate Floor June 10, 1994. China's Qiandao lake, with the end result of an expanded investigation and apology from Beijing. 18 Taiwan's ability to enhance its international standing, however, will be limited if the ROC is forced to depend on its present international support, which consists mainly of Southeast Asian and Latin American countries intent on attracting aid projects from the ROC. In the long run, this sort of support will not be enough to allow Taiwan's participa- tion in international organizations. The key factor is American support. The recommen- dations of an inter-agency review of Taiwan policy remain on President Clinton's desk, but it is uncertain whether the Administration will act to implement its various proposals. To be effective, the review of U.S. policy toward Taiwan should:

V Support Taiwan's efforts to participate in the United Nations system.

Taiwan's participation would benefit the U.N. system, in part because the ROC is a large, prosperous democracy with values similar to those espoused in the U.N. Char- ter. It would allow Taiwan to develop contacts with other member countries and foster expanded foreign assistance programs. Participation by the ROC also would more ac- curately represent the post-Cold War international climate. The ROC reacted to the post-Cold War climate in 1991 by ceasing to proclaim pub- licly its right to represent all of China. Beijing, which has not exercised control over Taiwan since the end of the Chinese civil war on the mainland in 1949, has yet to show similar good faith by declaring its intent to settle the issue of reunification in a peaceful manner. Taiwan's positive impact on the U.N. system would be felt immediately. Its ability and willingness to support U.N. programs financially and to provide first-hand devel- opment assistance would be valuable assets. When Taiwan was expelled from the U.N. in 197 1, it bore a full 4 percent of that institution's budget; the PRC pays just 0.077 percent today. Finally, participation in the U.N. system would underscore inter- national acceptance of the ROC's many accomplishments, thus slowing demands for independence and easing tensions with the mainland. Dual participation, albeit with some inequality of representation, could provide Taiwan and Beijing with a forum for informal contacts and talks.

V Conduct cabinet-level economic and educational exchanges with Taiwan.

The ROC is America's sixth-largest trading partner, with a bilateral trade surplus of over $8.8 billion in 1993.19 Each year thousands of Taiwanese exchange students study in the U.S., and a growing number of Americans make Taiwan their place of business or study. However, the restrictions placed on U.S. diplomatic contact with the ROC imply that the relationship is unimportant and further complicate practical difficulties in resolving disputes. Cabinet-level exchanges would facilitate resolution

18 Jeremy Mark, "In Response to Suspicious Deaths of Tourists, Taiwan Will Ban Visits by Tour Groups to China," A Supplement to 77se Asian Wall Street Journal Weekly, April 18, 1994, p. 13B. 19 United States Department of Commerce, ITA, Taiwan: Key Issues, 1994. of disputes on issues like intellectual property protection and enhance cooperation on issues like international narcotics control.

V Support membership byTaiwan in the General Agreement onTariffs and Trade (GATT).

The ROC applied for membership in the GATT in January 1990. In September 1992, the GATT ruling council set up a working party to handle the issue of Taiwan's accession to the trade agreement under the name "Chinese Taipei." The U.S. could deal more effectively with such issues as the trade imbalance, intellectual property rights, and industry protection were Taiwan in the GATT and other multilateral insti- tutions.

Under the current timetable set by an ROC cabinet-level task force, Taiwan will pre- sent its protocol for entry into the GATT in October 1994, with the goal of acceding to the GATT by the end of the year. Doing so will allow Taiwan to become an origi- nal signatory to the WTO, which will replace the GATT in 1995.

V Support the PRC's entry into the GATT system.

The PRC also has become an important trade partner of the U.S. Bringing it into the GATT system will further dilute the artificial controls placed on the economy and trade system by the Communist leadership. It also will help the U.S. hold the PRC to promises made over market access, IPR violations, and infant industry protection. And it will afford another international forum wherein the PRC and ROC can build ties and establish a framework for eventual reunification.

V AllowTaiwan to purchase U.S. military equipment as needed to maintain deterrence against the mainland.

The U.S. continues to have an interest in peaceful resolution of the Taiwan issue by the Chinese themselves. Accordingly, the U.S. continues to have an interest in the maintenance of Taiwan's deterrent capabilities. Clinton, sensitive to this fact, has forged a compromise with those in Congress who favor unrestricted U.S. arms sales to Taiwan. The deal "leaves the 1982 Communiqui in effect but permits Taiwan to buy a number of new weapons systems" made necessary by China's military modern- ization. 20

Bearing in mind Taiwan's strategic location astride Asia's vital commercial arteries and the fact that a stable, secure Taiwan contributes significantly to Asia's economic dynamism, Clinton should reserve the U.S. right to supply further weapons and tech- nology if changes in the regional security environment require it.

V Permit U.S. representatives to hold direct meetings in government offices vAth theirTaiwanese counterparts.

20 Peter H. Stone, 'Vail to Arms for Taiwan," National Journal, May 5, 1994, p. 1075. The restrictions forbidding U.S. officials to meet theirTaiwanese counterparts on of- ficial premises is a leftover from the days when China was regarded as a potential part- ner in the Cold War against the Soviet Union. The sheer volume of trade and invest- ment that flows between the U.S. and the ROC warrants an end to this restriction. This is not an issue of high-level diplomatic contact; it is an issue of promoting better com- mercial ties commensurate with the importance of America's economic relationship with the ROC.

V Support Taiwan's participation in such international economic organiza- tions as the International Monetary Fund (IMF), the World Bank, and the Organization for Economic Cooperation and Development (OECD).

Since the 1988 decision to participate alongside the PRC in the Asian Development Bank (ADB), Taiwan has shown remarkable flexibility and pragmatism in its partici- pation in international organizations. 21 The recent decision by Taiwan to be recog- nized as "Chinese Taipei" at the November 1993 Asian Pacific Cooperation meeting in Seattle once again allowed for simultaneous, if somewhat unequal, representation from both sides. Participation in the RVIF, World Bank, and OECD should be worked out under the same sort of compromise system. Not even the PRC could argue rationally that the ROC would not be a solvent, pay- ing member of the international financial community. In addition, Taiwan's member- ship in international economic institutions and development organizations would in- crease the ROC's accountability in such areas as currency market reform and create binding environmental responsibilities-two areas where conflict currently exists in the U.S.-ROC relationship. V Allow the ROC to change the name of its representative offices in the U.S. to "Taipei Economic and Cultural Office.,,

The present name of the ROC's representative offices-Coordination Council for North American Affairs (CCNAA)-does not match the substantive nature of U.S.- ROC relations. Allowing this sort of name change would represent greater respect for the ROC and fortify the KMT against the opposition.

V Increase U.S. contacts with Taiwan's opposition parties.

These opposition parties represent a growing portion of the ROC's 21 million resi- dents who are tired of the seemingly ineffective attempts by the KMT to increase Tai- wan's international presence and respect. The U.S. does not support the Taiwanese in- dependence platform on which many of these parties, including the Democratic Pro- gressive Party, were founded. But increasing American contacts with these groups is necessary, as the KMT no longer can claim to represent all of Taiwan and thereby con- trol the calculus of U.S. decision-making toward the ROC.

21 In 1986 the ROC protested the PRC's entry into the ADB by boycotting meetings for two years. However, after receiving encouragement from the U.S. and other important allies, they returned in April 1988 to participate under the narne "raipei, China." Ultimately, of course, the question of Taiwan's identity-whether it will be a way- ward province or a nation-state-will be decided not by Washington, but by Chinese on both sides of the Straits. The U.S., however, while bypassing the quarrelsome issue of identity and politics, can and should strive to end Taiwan's fifteen-year exclusion from the world community. Brett C. Lippencott Policy Analyst

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