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As Asia builds economic ties, Taiwan sidelined by China

Taiwan watches as Asian neighbors ink trade deals, lower tarrifs, and get access to Chinese loans for growth.

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The current government under President Ma Ying-jeou thinks boosting trade with China is the answer. Mr. Ma has ruled out political unification, but is aggressively pursuing closer economic links. Under Ma, Taiwan inked deals on cross-strait shipping and air and tourism links last year, binding Kaohsiung and other ports more closely to their Chinese counterparts. (Before, all ships had to pass through Hong Kong or another third location).

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Now Ma is pushing a trade pact with China, called the Economic Cooperation Framework Agreement. The pact would scrap tariffs on some goods like petrochemicals, as a possible first step toward a broader cross-strait free trade agreement.

The government argues that such a deal could add nearly 1.4 percent to Taiwan's gross domestic product. And it says other countries won't consider free-trade deals with Taiwan unless the island first lowers cross-strait trade barriers – thanks to Chinese pressure, and multinational firms' own preferences.

"They won't move [on trade pacts] before we reach an agreement with China," says vice foreign minister Andrew Hsia, at a recent forum in Taipei.

But the opposition is crying foul. It, too, backs closer cross-strait economic ties, but warns about the risks of playing into China's unification strategy – by which a "one-China market" paves the way for political union.

Ma's embrace of the "one China" principle is what has allowed cross-strait talks to shift into high gear, they note. The pro-independence opposition rejects that principle as a dangerous concession.

It also wants the details of any cross-strait trade pact made public and subject to referendum. "The government needs to tell its people what is the political price made for this deal," the party wrote in a recent newsletter.

Back at the port, pragmatic optimism

From the vantage of balmy Kaohsiung Port, though, the whole debate seems distant. The port, along with Taiwanese shipping firms, has already steamed ahead with a pragmatic, "If you can't beat 'em, join 'em" strategy.

For Mr. Shieh, cooperating – not competing – with China will help revive this once-mighty port. He says direct shipping links will boost the port's trans-shipment business.

"For a long time our government put restraints on our business, so Kaohsiung didn't benefit from China's rise," said Shieh. "But last year the government removed those limitations, so we can compete more fairly with other international ports."

Kaohsiung Port is reaching out to Chinese counterparts on investments and new shipping routes. Shieh hopes to combine China's production muscle with the edge that Kaohsiung Port still holds in logistics, port infrastructure, and value-added services.

And he thinks a trade pact will bring benefits, too. "We hope for more positive developments in the Taiwan Strait," says Shieh. "It will be good for both sides' people, shipping companies, and business."

Shieh strikes an optimistic note. But even he acknowledges that Kaohsiung Port's global heyday – and by extension, Taiwan's heyday as an export powerhouse – is likely gone for good.

"We probably can't make it back into the top three," says Shieh. "Our goal is to rejoin the top 10."