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50 Taiwan Development Perspectives 2009
China economic sphere and eventually to the East
Asian community. The ultimate goal is the establishment
of long-term multilateral arrangements. Institutionalization
of cross-Strait economic relations can be
the stepping stone for the realization of Taiwan’s pivotal
role as the resources manager and coordinator for
East Asia. Hopefully, an agreement can be signed to set
up a Chinese common market for the benefit of both
Taiwan and the People’s Republic. Note that the institutionalization
of trade does not equate to the institutionalization
of politics. Economies are influenced by markets,
while politics is shaped by democratic process.
The EU is a clear example of this. Taiwan is an independent
and sovereign democratic nation where the
people have the final say.
The normalization and institutionalization of trade
between Taiwan and China would be helpful to Taiwan’s
internationalization and would also help stop
Taiwan from being marginalized. The US and ASEAN
have already made their stance clear by saying they
wanted Taiwan to sign a trade agreement with China
first before they would consider signing free trade
agreements with Taiwan. We should bear this in mind
because other nations may harbor the same expectations
toward Taiwan. If Taiwan were marginalized while
other countries enjoy preferential treatment such as zero
tariffs as a result of the agreements they ratified with
other nations, Taiwanese manufacturers would lose
their international competitiveness and would have to
either close down or move all of their business operations
to China. The result of this would be a Taiwan
even more reliant on China economically and a government
with even more China-leaning policies.
Taiwan’s participation in international organizations:
The People’s Republic should promise not to oppose
Taiwan’s participation in international organizations.
The promise is proof of China’s goodwill toward
Taiwan. It helps build Taiwan’s trust in the People’s
Republic. It also helps remove Taiwan’s doubt that
China would ruin Taiwan politically as well as economically.
In fact, closer economic cooperation will
ensure a win-win situation across the Strait by bringing
economic prosperity and decreasing political tension
and conflict, which will further contribute to the regional
stability in East Asia and convince the world of a
peacefully rising China.
V. Conclusion
Taiwan’s economy has slowed down since 2000.
The slowdown can be attributed mainly to its sluggish
domestic demand with low domestic consumption and
investment. It was the growth of foreign trade that
supported the growth of the Taiwan economy. However,
a global financial crisis hit Taiwan in the third quarter
of 2008. A small open economy like Taiwan is heading
for a once-in-a-century financial disaster.
Taiwan’s top money-earning items of export are
ICT products, which are sensitive to global demand
fluctuations and bear huge inventory costs. The sharp
drop in the export orders for these products after the
third quarter of 2008 signifies the suppression of export
trade as the engine of economic growth for Taiwan.
The performance of Taiwan’s economy in 2009
may be depressing but challenges may bring opportunities.
Taiwan can stimulate domestic demand by enforcing
expansionary fiscal and monetary policies to
cope with sluggish domestic and foreign demand in the
short run. That may halt the economy from falling into
recession. In the long run, however, the economy has to
undergo a further structural transformation, modernization
of the service sector in particular, to increase aggregate
productivity and create more job opportunities.
International trade sustains Taiwan’s economic
growth. Taiwan therefore needs a forward-looking
economic strategy with a global perspective. The strategy
must be one that helps prevent Taiwan from being
marginalized as Asia is being economically integrated.
Taiwan should actively participate in the process of
Asian regional cooperation and integration. It also
needs to join international organizations. Maintaining