Online Extra: Q&A with Taiwanese Prime Minister Chang

He talks about his hopes that WTO membership will open a dialogue with the mainland

Taiwan's entry into the World Trade Organization marks a milestone for a country that has long struggled to carve out international recognition in the face of Beijing's hostility to its very existence. Indeed, the WTO will be the only prominent international body, other than the Asia Pacific Economic Cooperation Forum (APEC), in which Taiwan has full membership.

In an interview with BusinessWeek Asia Regional Editor Mark L. Clifford, Prime Minster Chang Chun-hsiung made it clear that Taipei wants to use WTO membership as a way of opening a dialogue with China. Although cross-Strait trade and investment is booming, Taiwan has virtually no official contacts with the mainland. Indeed, China has steadfastly refused to talk to Taiwan since the inauguration of Chen Shui-bian, who took office 18 months ago as Taiwan's first opposition president.

Beijing is demanding that Taiwan reaffirm its commitment to an informal 1992 understanding that the two sides agree that there is but "one China." Taipei rejects that demand, saying that it would amount to surrendering its sovereignty before talks begin.

Although worried about the impact of mainland investment, Chang promised that Taiwan would not block any mainland imports on national-security grounds. And Chang predicted that relations with the mainland will be "more orderly and friendly" under WTO. That's despite recent warnings from China that it won't talk, WTO or no WTO, without Taiwan's acceptance of the one-China principle. Yet Chang stressed that "the real solution to our problems is when we are able to conduct negotiations on an equal basis," something that China has steadfastly refused to do. Chang said that because Taiwan is a democracy, the government "cannot act unilaterally" on the one-China issue, and he blamed China for the slow pace of cross-Straits negotiations.

BEIJING'S CLOUT. Chang said that, with Taiwan's WTO membership expected to be approved by the World Trade Organization's General Council at the November meeting in Qatar, Taiwan's Legislative Yuan is expected to formally approve the agreement on Nov. 16. The ratification will then be submitted to the WTO and formal membership will take place in January. China is expected to formally join in December.

In an example of the intense power politics that accompanied negotiations, Beijing successfully used its allies in the WTO to delay Taiwan's entry until after China entered. That's despite the fact that Taiwan completed all the needed bilateral agreements with trading partners more than two years ago. If normal procedures had been followed, Taiwan would have been admitted in 1999. Also in deference to China, Taiwan is joining the organization not as a nation, but as the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu. Still, China until very recently fought for language that would affirm this customs territory was part of the People's Republic of China.

Chang spoke to Clifford in Taipei on Nov. 1. Edited excerpts from their conversation follow:

Q: What will be the biggest benefits of WTO accession for Taiwan?

A: Taiwan is an export-oriented economy, so we hope that after we join the WTO we will be able to work in an international environment that is fair, just, and stable. We will gain [permanent] most-favored-nation treatment. We will be able to join in the formulation of international trade regulations, and we will be able to resolve trade disputes under the WTO's Dispute Settlement Body.

Q: What will be the most difficult aspects of WTO membership?

A: After our market is opened, we will loosen our restrictions on agricultural imports. We will reduce tariffs and subsides for agricultural products. Therefore, our farmers are sure to feel a severe impact. Our farmers are small-scale and have high costs. It will be difficult for Taiwan to compete with products from abroad. We have estimated that about 100,000 farmers will lose their jobs.

Q: How will this affect relations with the mainland?

A: Since Taiwan and mainland China will both become WTO members and become two economies under an international organization and interact under a common regulation under the organization, we are expecting there will be more orderly and friendly ties under WTO [membership].

After we join the WTO, we will gradually open trade, investment, and cross-Strait remittances from the other side, and we will even allow direct investment form the mainland into Taiwan. It is very important to note that cross-Straits issues cannot be resolved under the WTO framework. [They] have to be resolved through negotiation and communication on both sides.

Mainland China is our most important outbound-investment site and the mainland market is second only to the U.S. as an export market. However, currently there are no investment negotiations or investment guarantees. It is a very unhealthy environment. We hope that when we both become WTO members, we will be able to conduct more orderly and more healthy interactions. However I want to stress that the real solution to our problems is when we are able to conduct negotiations on an equal basis.

Q: Is that possible as long as China insists on the "one China" 1992 consensus?

A: Our problem is that we have different interpretation as to the 1992 consensus. On the Taiwan side, our interpretation of the 1992 consensus is to set aside any dispute and continue with our interactions. We want to stress that the consensus is that there is no actual consensus. We would like to continue with our discussions on an equal footing.

Q: Are the Chinese ready to do that?

A: We have been having our different opinions with the other side for a very long time. We think it is very important that we set aside any differences for the time being, or we might lose the opportunity to have an understanding with the other side.

Q: What can you offer the other side?

A: It is impossible for us to resolve our differences overnight, so it is very important that we can sit down and talk. The Taiwan side will not set any prerequisites for our negotiations. We think as long as we can sit down, we can reach an agreement.

Q: Will you invoke national-security reasons (which are permitted under WTO rules) to exclude any Chinese products?

A: We will not use the exclusion clause against mainland China. Mainland investors are certainly going to come to Taiwan after WTO accession, but we already have a national-security mechanism in place. For example, we have a national [stock-market] stabilization fund. We will prevent non-economic factors from disrupting Taiwan's financial markets. Also, any investments from mainland China will have to seek authorization from our administration before they are allowed.

We are certainly worried that mainland China will use the opportunity of a more liberalized situation after we join the WTO to sabotage Taiwan's market. We have to take necessary measures to prevent these sorts of things from happening. We will be very careful in protecting our stock and real estate markets.

Q: When will you have the three links (direct transportation, postal, and telecommunications ties) with mainland China?

A: The three links are not necessarily related to WTO. I think the most difficult issue will be the transportation link. Both sides will have to conduct negotiations regarding this issue. Since the launch of transportation links will rely on cross-Strait negations, the success of such links is not entirely in the hands of Taiwan.

Q: Is the government feeling pressure from business to act more quickly to establish the three links?

A: Our DPP [Democratic Progressive Party] government has showed repeatedly our goodwill to the other side, hoping for a peaceful and stable relationship. Taiwan has done all that it can do. The fact that there are no cross-Strait negotiations is nothing Taiwan can control.

Taiwan is already a diversified democracy. Any government policy will have to seek consent from the people. The government cannot act unilaterally disregarding people's will. If the one-China principle means the "one country, two systems" formula [similar to that applied in Hong Kong and Macao], it will be very difficult to seek acceptance from our people. The majority of Taiwan people still resist this formula.

Q: Is pressure from the mainland getting more intense?

A: I think that it is very clear that mainland China has been putting a lot of pressure on Taiwan, but our government will still maintain its longstanding mainland policy.

Mark L. Clifford is the co-author, with WTO Director General-designate Supachai Panitchpakdi, of the forthcoming WTO and China: Changing China, Changing World Trade (John Wiley & Sons; December 2001).

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