China, Taiwan, and the World Trade Organization

Even before the recent U.S.-China spy plane standoff, many observers have called a conflict between mainland China and Taiwan the most likely scenario in which the United States could be drawn into a major war. This continuing risk and the complex history and diplomacy among the People's Republic of China (PRC), Taiwan, and the United States keep relations across the Taiwan Strait continually in the news.

With the election in the spring of 2000 of Chen Shui-bian--a former advocate of Taiwan's formal independence from China--as Taiwan's new president, many anticipated a chill in Taiwan-PRC relations. Some in China have expressed doubts about Chen's ultimate objectives, but relations have not obviously deteriorated. In fact, China and Taiwan have initiated new journalist exchanges, and Taipei has allowed the Chinese press to establish new offices in Taiwan. ¹

On the economic front, Beijing and Taipei are expanding contacts. Taiwan and China have agreed to direct shipping between some of Taiwan's outlying islands and the mainland. More importantly, both Taiwan and China are likely to join the World Trade Organization (WTO) in the near future. Each has sought membership in the world trading system for more than a decade, but Taiwan's application process is now essentially complete, and the PRC's membership bid is approaching completion. Despite some early objections, Beijing seems prepared to support Taiwan's membership in the WTO provided that the PRC is allowed to enter first; Taiwan has publicly supported China's effort to join the trading system. According to published reports, China is likely to complete its negotiations on membership this year, opening the door for mutual membership of the "two Chinas."

These economic issues often receive limited attention in a discussion dominated by weapons sales and territorial claims, but in the end, they may prove at least as important to establishing a stable, peaceful relationship between Taiwan and China. Although progress in other areas often proves elusive, economic ties have expanded robustly during the past decade despite ongoing tensions between Taipei and Beijing. Membership in the WTO for each could serve to expand cross-strait commerce further as well as establish a formal consultation and binding dispute settlement process accessible to both Taiwan and China. In short, commercial ties--although often overlooked by Western analysts--may have greater potential to transform relations between Taiwan and China than the more frequently discussed diplomatic and military avenues.

Economic Ties Today

Since the government of the Republic of China was forced to retreat to the island of Taiwan after the Communist takeover of mainland China, the relationship between Taipei and Beijing has been almost uniformly hostile. For many years, each claimed to be the legitimate government of all of China and battled over control of small islands between Taiwan and the mainland. Their respective militaries continue to view each other with great suspicion and hostility.

On the political front, the future continues to appear difficult. Although a few efforts have been made at establishing direct contacts, Taipei and Beijing have little formal direct dialogue. ² China continues to regard Taiwan as merely a renegade province destined to reunite eventually with the mainland through political or military means. In Taiwan, however, Taiwan and China are increasingly seen as having separate and distinct destinies. As Chen's election demonstrated, since Taiwan switched to democratic elections in the 1990s, Taiwan's leaders seem to be advocating a vision of Taiwan's future that is increasingly independent of China--although they stop short of formal declarations of independence that would likely spark Beijing's wrath. This approach seems to reflect the feelings of Taiwan's public--a majority of Taiwanese residents stop short of advocating formal independence; nevertheless, an equally large number oppose putting Taiwan under Beijing's control. ³

Based on these military and political realities, one might expect that commerce between Beijing and Taipei would be quite limited. In this area, however...