The Effect of International Relations on Cross-Border Economic Ties: A Case Study of Taiwan's Economic Policies toward China

By Chen, Chien-Kai | International Journal of China Studies, April 2016 | Go to article overview

The Effect of International Relations on Cross-Border Economic Ties: A Case Study of Taiwan's Economic Policies toward China


Chen, Chien-Kai, International Journal of China Studies


1.Introduction

There have been various studies about the effect of cross-border economic ties on international relations. While some argue that there is a positive relationship between them, others cast doubt on such a relationship. However, it is worth noting that, though a very important research topic, the exploration of whether economic interdependence among countries leads to peace constitutes just part of the research on the relationship between cross-border economic ties and international relations. To have a more comprehensive understanding of this relationship, we have to study not only the effect of the former on the latter but also vice versa as well. Here, the conflict-prone relations between China and Taiwan since 1949 and the growing economic ties across the Taiwan Strait since the late 1980s have arguably made the case of China-Taiwan relations one of the best for studying the aforementioned relationship. Yet, while there have been many works examining the effect of so-called "cross-strait economic ties" on China-Taiwan relations, there are relatively few studies focusing on the effect of the latter on the former.

Therefore, to enrich the research on the relationship between cross-border economic ties and international relations in general and that between China-Taiwan economic ties and their political relations in particular, I conduct in this paper a case study of the effect of China-Taiwan relations on Taiwan's economic policies toward China during the previous two administrations of Taiwan (i.e. the Lee Teng-hui Administration from 1988 to 2000 and the Chen Shui-bian Administration from 2000 to 2008). The findings of this paper reveal that international relations do have an effect, though a very complicated one as shown in the case of China-Taiwan relations, on cross-border economic ties. Also, in terms of the study of China-Taiwan relations, the analysis conducted in this paper uncovers a more comprehensive picture of how China-Taiwan relations affect their economic ties than the previous and sometimes conflicting findings which, as this paper will demonstrate, just tell us part of the whole story. Here, it is worth pointing out that this paper does not intend to argue that the effect of China-Taiwan political relations on their economic ties outweighs the effect of the latter on the former. There is no doubt that the question of whether and how economic ties between China and Taiwan would lead to peace in the Taiwan Strait is worth exploring for both academic and practical purposes. However, that being said, it is equally important to know that any understanding of such a relationship would be incomplete without some understanding of the effect of China-Taiwan political relations on their economic ties as well as the recognition of the fact that such a relationship is actually a two-way one.1

More specifically, this paper finds that, first of all, the Taiwanese government throughout the period between 1988 and 2008 cared about both of the negative effect of cross-strait economic ties on Taiwan's national security and their positive effect on its economic development. Second and most importantly, while the Taiwanese government under normal circumstances tended to weigh very positively the economic benefits brought to Taiwan by its economic ties with China and therefore tried to find a good balance between the negative and the positive effects of cross-strait economic ties, it unequiv- ocally weighed the negative effect of cross-strait economic ties on Taiwan's national security much more than their positive effect on Taiwan's economic development and therefore tried to impose more restrictions on cross-strait economic ties when China-Taiwan relations turned extremely tense (i.e. Lee's policy of "no haste, be patient" in 1996 following the 1995-1996 Taiwan Strait Crisis, and Chen's policy of "active management and effective opening" in 2006 following the introduction of the Anti-Secession Law by China in 2005). …

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