State and business in Taiwan’s economic diplomacy under the Lee Teng-hui administration and the implications for current cross-strait relations

I would like to thank the anonymous reviewers of CRIF for their invaluable advice; Prof Peter Ferdinand and Prof Shaun Breslin for their supervision while I did my PhD at Warwick; Dr Philip Towle for his long-term friendship since I did my M.Phil at Cambridge; Prof Don Norton for his edit; Mr and Mrs Hsi-Ching Su for their funding; Mr Kuang-Hsiung Cheng for his generosity; Mrs Hsiu-Chu Ho Liaw for her maternal love; last but not least, Ms Sharlene Cheng for her long-lasting support.

Abstract

This study suggests that a modified theory of new classical economics is useful in assessing Taiwan’s economic diplomacy during both the Lee Teng-hui and current administrations by means of a holistic perspective (levels of analysis). ‘Business‘ is the independent variable in the analysis. The theory of new classical economics implies that the utilities of Taiwanese investment are more effective than the contradictory political objectives of the Taipei government. The impact of business on the result of economic diplomacy is the unintentional easing of tensions across the Taiwan Strait while Taiwanese businesses have pursued profits. Collectively, businesses have strengthened the security of the Taiwanese state, while the Taiwanese government has pursued inconsistent policies (other variables) since President Lee took office. The holistic perspective is heuristic for understanding and explaining Taiwan’s economic diplomacy during the Lee Teng-hui administration. This approach produces the recommendation that the government provide disinterested and effective judicial systems and conclude investment guarantees, double taxation and free trade agreements to help Taiwanese businesspeople. In a wider context, Taiwan’s economic diplomacy aims not only to serve the interests of the government or state but also to further the interests of the Taiwanese state as a whole, including all residents of Taiwan.

Notes

I would like to thank the anonymous reviewers of CRIF for their invaluable advice; Prof Peter Ferdinand and Prof Shaun Breslin for their supervision while I did my PhD at Warwick; Dr Philip Towle for his long-term friendship since I did my M.Phil at Cambridge; Prof Don Norton for his edit; Mr and Mrs Hsi-Ching Su for their funding; Mr Kuang-Hsiung Cheng for his generosity; Mrs Hsiu-Chu Ho Liaw for her maternal love; last but not least, Ms Sharlene Cheng for her long-lasting support.

¹ For the system and individual levels, see: Liaw; Liaw et al (2012).

² This is the former title of the Taiwan External Trade Development Council (TAITRA).

³ For 1995–1996 Taiwan Strait Crisis, see Zhao (1999).

⁴ Interview with Dr Chih-Cheng Lo, 15 April 2002. He once served as chairman of MOFA’s Research and Planning Board.

⁵ In fact, President Lee did use the reason of ‘losing money’ to call for people not to invest in China.

⁶ See Table 1. Taiwan’s growing trade surplus with China has been depicted as overdependence.

⁷ In Hong Kong, the term ‘hollowing out’ is used. The Japanese have also recently been concerned about hollowing out.

⁸ The plan involved most departments of the Executive Yuan, including the MOEA, the Ministry of Foreign Affairs, the Ministry of the Interior, the Ministry of Finance, the Ministry of Education, the Ministry of Transportation and Communications, the Council for Economic Planning and Development and the Overseas Chinese Affairs Commission, the Central Bank of China, the National Science Council, the Council of Agriculture, the Council for Labour Affairs and the Government Information Office, as well as a variety of major industrial and commercial associations.

⁹ The two plans were their major economic plans when the two premiers were incumbent. See Lin (1996, 168); also see Xu and Li (1991, 9).

¹⁰ Interview with Lee Kao-Chao, Council member, Council for Economic Planning and Development, Executive Yuan, 26 April 2002. Also interview with Dr Su Chi, former chairman, Mainland Affairs Council, Executive Yuan, February 2002.

¹¹ Interview with Lee Kao-Chao, Council member, Council for Economic Planning and Development, Executive Yuan, 26 April 2002.

¹² Interview with Lee Kao-Chao, former Council member, Council for Economic Planning and Development, Executive Yuan, 2 July 2008.

¹³ See Table 2.

¹⁴ Interview with Lee Kao-Chao, 2 July 2008. Also interview with Chi Schive, 9 July 2008. Chi Schive was the initial designer of the APROC Plan.

¹⁵ The Asian Financial Crisis nevertheless helped a minority of Taiwanese businesspeople in Indonesia to make profits with cheaper local labour and raw materials, as the appreciation of Indonesian rupiah made the costs of local businesses more competitive for exports. Interview with Paul Liang, Executive Vice President, Chinatrust, 20 May 2002.

¹⁶ Although Lee Teng-hui reiterated that he was against reunification after he stepped down in 2000, he upheld the Guidelines for National Unification (Guojia tongyi gangling) when he was in power. Interview with Lee Kao-Chao, 2 July 2008, and Chi Schive, 9 July 2008.

¹⁷ Interview with Chi Schive, 9 July 2008.

¹⁸ Interview with Chi Schive, 9 July 2008.

¹⁹ Lee was persuaded to do so by Chen Pochih and another think-tank member. Interview with Lee Kao-Chao, 2 July 2008.

²⁰ Interviews with local Chinese from Guangzhou, Guangdong in 2003 and Taiwanese businesspeople in 2002 and 2006 and on 17 February 2013.

²¹ Interview with Sylvan Lee in January 2013.