Cross-Strait Relations in a New Era of Negotiation

David B. Shear
Deputy Assistant Secretary, Bureau of East Asian and Pacific Affairs
As Prepared For Delivery
Remarks at the Carnegie Endowment for International Peace event
Washington, DC
July 7, 2010

Minister Lai, Endowment Vice President Paal, distinguished guests: it is a real honor to be invited to speak at this forum at such a crucial, hopeful, time in the development of cross-Strait relations. For decades, formulating and speculating about "cross-Strait crisis scenarios" formed a cottage industry in Cold War studies. Is it too bold to hope that developments in recent years may herald the creation of a new cottage industry: "cross-Strait opportunity scenarios?"

Reduced cross-Strait tensions through dialogue and people-to-people interaction has been a goal of the United States for decades, and I believe we can take some of the credit for helping to lay the positive foundations that have made the recent dramatic breakthroughs in cross-Strait ties possible. Our "one China" policy based on the three U.S.–China Joint Communiqués and the Taiwan Relations Act has successfully guided our relations with Taiwan and the People's Republic of China for more than thirty years. Our policy is based on a few simple principles. Let me list them:

  • We do not support Taiwan independence.
  • We insist that cross-Strait differences be resolved peacefully and according to the wishes of the people on both sides of the Strait.
  • We welcome active efforts on both sides to engage in a dialogue that reduces tensions and increases contacts of all kinds across the Strait.
  • We are opposed to unilateral attempts by either side to change the status quo.
  • We are fully committed to meeting our obligations in the Taiwan Relations Act, including making available to Taiwan articles and services necessary to enable Taiwan to maintain a sufficient self defense.

I strongly believe that our policy, applied consistently and even-handedly administration after administration, has helped ensure Taiwan's prosperity and has advanced its democratic development. At the same time our approach has allowed us to nurture constructive relations with the PRC.

Recent Cross-Strait Developments
I think it is fair to say that cross-Strait economic and cultural relations are healthier than they have been at any time in the last several decades. Direct travel, shipping and postal service are now routine. There are now more than 270 direct flights per week between Taiwan and the Mainland. More than one million Mainland tourists are expected to visit Taiwan this year. Financial and investment ties continue to deepen and law enforcement cooperation is increasing. By facilitating cross-Strait contacts, all of these developments help further regional peace, stability, and prosperity.

The signing of the cross-Strait Economic Cooperation Framework Agreement (ECFA) last week in Chongqing accelerates this positive trend. The ECFA will lower or eliminate tariffs on hundreds of commodities. It will also provide a framework to facilitate cross-Strait investment and to liberalize cross-Strait financial services. Future negotiations may add to the scope of the agreement by increasing the number of tariff reductions and liberalizing trade in services.

Our experts have not had a chance to fully review the ECFA agreement in detail so we cannot comment on its specific contents. We welcome, however, the increased trade and people-to-people ties that will necessarily result from this agreement. The United States welcomes increased economic integration and lower barriers to trade throughout the world as a proven means to enhance growth and prosperity. Open, fair trading environments are good for U.S. firms, good for the United States and good for the global economy. Just last week, President Obama announced that he was launching an initiative to complete the U.S.-Korea Free Trade Agreement. The United States has been at the forefront in calling for lowering trade and investment barriers throughout Asia. As the ECFA develops in the months and years to come, it can help make that goal a reality.

Another important goal of ECFA should be to make Taiwan a more attractive place to trade and invest by lowering non-tariff trade barriers in Taiwan and by facilitating efforts by American and other foreign firms to base regional operations in Taiwan. If ECFA is to be a truly successful arrangement, firms from the United States and other countries must also be able to benefit. It is interesting to see that Taiwan officials already are urging U.S. companies to explore investments on Taiwan to take advantage of the increased market access to China that ECFA is expected to bring. The ECFA hopefully will help stimulate an overall increase in the U.S. economic presence in the region, including greater U.S. exports to both Taiwan and China.

Taiwan's Role in the International Community
Taiwan understands that ECFA is not just about cross-Strait relations. President Ma has emphasized that he hopes Taiwan will be able to enter into new trading arrangements with other trading partners now that the ECFA has been signed. Under WTO rules, any WTO member is free to negotiate trade agreements with other members as long as WTO standards are met, and we believe that Taiwan should be able to do that. Such accords will enhance the trade ties Taiwan already enjoys through its membership in the WTO and APEC. The resulting growth will ultimately benefit all the economies of the region, including both Taiwan and China.

Indeed, beyond trade, we hope to see Taiwan become more fully engaged on a broad range of international issues, ranging from trade to health to the environment. Taiwan has shown again and again that it can play an important role in the international community. After the devastating earthquake in Haiti, Taiwan sent teams into Haiti to help with rescue efforts and to dispatch considerable amounts of aid. We were pleased to help facilitate Taiwan's efforts, including by linking up Taiwan rescue teams with American and other international teams. Taiwan is playing a more significant role in global health issues due to its participation in the last two years as an observer in the World Health Assembly, the ruling body of the World Health Organization (WHO) – an outcome the United States is proud to have helped bring about. Taiwan is already a member and full participant in key economic bodies such as the Asian Development Bank, APEC and the World Trade Organization, where Taiwan has been a consistent advocate for trade liberalization. We strongly support Taiwan's meaningful participation in all appropriate international organizations where Taiwan's expertise can benefit the global community.

U.S. –Taiwan Economic Relations
Taiwan is one of our most important economic partners. It is our 9th largest trading partner, larger than Italy, India or Brazil, with two-way trade amounting to over $46 billion last year. The United States is the largest foreign investor in Taiwan with cumulative direct investments of over $21 billion.

Recent statistics indicate our trade is growing at a brisk rate in 2010, as both the United States and Taiwan recover from last year's economic downturn. We have an excellent economic relationship, but it can and should get better.

As I have already noted, Taiwan has made clear it aspires to free trade agreements with a number of countries, including the United States. The United States has no plans to begin talks with Taiwan about an FTA at this time. Instead, we are seeking to deepen our bilateral economic cooperation and resolve trade and investment issues through our Trade and Investment Framework Agreement (TIFA) process. We have had many successes over the years including Taiwan's accession to the WTO's Government Procurement Agreement last year and a dramatic improvement in Taiwan's protection of intellectual property rights.

Despite our excellent relations, I am disappointed by the lack of progress the United States and Taiwan have made on trade issues in the past two years. We have a number of concerns about Taiwan’s restrictions on the import of certain U.S. beef and beef products as well as unnecessarily burdensome import and quarantine measures. These measures have been implemented despite our having agreed to a bilateral protocol on beef last October that was consistent with science, with international guidelines, and with Taiwan’s own risk assessment which determined that U.S. beef is safe. Taiwan’s failure to implement this bilateral agreement has complicated our trade relationship.

On the other hand, it is important for the United States and Taiwan not to let the dispute over beef imports overshadow our excellent trading relationship. President Ma has stated that it is important for Taiwan to improve its trading relations not just with China, but with the United States and other partners as well. I couldn't agree more. Taiwan and the United States have an important trade and investment agenda and we hope to be able to work together with Taiwan to reinvigorate the TIFA process and enable us to hold the next TIFA meeting as soon as possible.

U.S. –Taiwan Relations
The people of the United States and the people of Taiwan are bound by common values. Americans are deeply impressed by Taiwan’s open, cosmopolitan, and exuberant democratic polity and society, by its economic vitality, and the warmth and friendliness of its people. I first visited Taiwan in 1978 and 1979 as a student at Taiwan University. The neighborhood near Heping Donglu and Xinyilu where I lived at the time has undergone profound physical changes. So too have Taiwan’s political and economic systems evolved, an evolution that has reinforced the physical transformation the island has undergone as a result of its phenomenal economic growth since my first time there thirty years ago. The great American historian of China Joseph Levinson once said that the fundamental problem reform-oriented Chinese intellectuals of the late-19th and early 20th centuries faced was this: “How can one be both Chinese and modern?” Taiwan’s political, social, and economic development over the past 60 years has demonstrated that one can not only be Chinese and modern, but that one can be thoroughly democratic as well. The whole modernizing world can learn from this. Through ECFA, improved bilateral ties throughout the region and with traditional partners like the United States, and involvement in international and regional organizations, Taiwan is making a statement that it is an important and valued member of the international community. The United States is greatly encouraged by this, and we hope to see these developments continue.

The Future of Cross-Strait Ties
The tremendous increase in wealth and prosperity that East Asia has witnessed in the last decades was not a matter of just good luck, but of hard work, pragmatic diplomacy, and wise leadership among all concerned. The most recent development in the East Asian success story has been the rapprochement between Taiwan and the PRC. Both Taiwan and the PRC deserve credit for the steps taken in the past two years to increase contacts, find common ground, and lower tensions. The relationship between Taiwan and the PRC is still evolving. The scope of future economic and political interaction will be determined by the people and leadership on both sides of the Strait, in accord with Taiwan's thriving democratic processes.

By any account, the progress we have seen in cross-Strait relations over the past two years is unprecedented. As the title of this conference suggests, we are truly in a new era, one warmly welcomed by the United States. We encourage both Taiwan and the PRC to continue their efforts to expand and develop their peaceful ties.

Thank you very much.