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In this paper, I address the question of whether growing economic ties between China and
Taiwan will lead to peace in the Taiwan Strait by examining the relationship between Taiwans
domestic politics and China-Taiwan economic exchanges and its resulting impact on ChinaTaiwan relations. I argue that the growing economic ties between China and Taiwan will lead to
a relatively peaceful Taiwan Strait; Taiwans domestic politics is the key intervening variable that
links the former to the latter. Taiwans growing economic ties with China have politically
benefited Taiwanese politicians who have pro-China attitudes and advocate a reconciliatory
China policy. The resulting increase in the power of these politicians in Taiwans domestic
politics will in turn have a positive effect on China-Taiwan relations. 1
The Taiwan Strait is one of the flash points of todays world. The current conflict between
China and Taiwan originally began in 1949 when Chiang Kai-Shek and his followers fled to
Taiwan after their defeat by the Chinese communists in the Chinese civil war, which erupted
immediately after the end of World War Two. Several cross-strait crises have occurred since then,
and the conflicts between China and Taiwan have continued into the early 21st century. While it
seems that there is no ultimate solution to the Taiwan problem in the foreseeable future, one
development across the Taiwan Strait that catches many experts attention is the drastically
growing economic ties between China and Taiwan. Many people believe that this development
has a positive effect on the China-Taiwan relations because, according to the liberal view,
economic ties among states will lead to peace. If this argument is correct, we may be able to see
more peaceful relations between China and Taiwan in the future as the economic exchanges
between them grow.
In this paper, I deal with the question of whether economic ties between China and Taiwan
will lead to peace in the Taiwan Strait by examining the relationship between international
relations and domestic politics. Specifically, I believe that Taiwans domestic politics is one of
1
I would like to thank Professor Joseph Fewsmith of the Department of Political Science at Boston University,
Professor William Grimes of the Department of International Relations at Boston University, Professor Dave
Benjamin of the International College at University of Bridgeport, and the anonymous reviewers for their comments
on the previous drafts of this paper. I also want to thank Eddie Sobenes and Meng-Tsu Yu for helping me edit and
revise the paper.
When Taiwans domestic politics is taken into account, I find that the growing economic ties
between China and Taiwan do have a positive effect on cross-strait relations. This paper is
divided into three parts. First, I will discuss the literature concerning general arguments about
economic ties and peace and what scholars have found about the case of the Taiwan Strait.
Second, I will examine why Taiwans domestic politics is one of the keys to understanding the
development of relations between China and Taiwan. In the third part of this paper, I will link
cross-strait economic ties to China-Taiwan relations through Taiwans domestic politics,
especially focusing on how growing economic ties led to the emergence of change in political
coalitions in Taiwans 2000, 2004 and 2008 presidential elections; and how this change impacted
cross-strait relations.
Literature Review: Economic Ties and Relations between China and Taiwan
The effect of economic ties on war and peace is a popular topic in the field of international
relations. However, findings concerning the relationship between economic ties and peace vary.
According to liberals (e.g., Oneal et al. 1996; Oneal and Russett 1999; Russett and Oneal 2001),
economic ties between states lead to peace. Liberals make three broad points (Kastner 2006, 320).
First, the costs of waging a war against your economic partner are very high. Simply speaking, if
you fight against a state with which you trade and in which you invest, you actually fight against
yourself because a war between you and that state must have a negative effect on your own
economy. Second, economic ties change states preferences. When economic ties between two
states become stronger and these two states become more economically interdependent or even
integrated, economic interests compared with other national interests such as military buildup
become the most important. Third, strong economic ties make non-military threats such as
economic sanctions credible. Therefore, when there is a conflict between two states that have
strong economic ties, a non-military threat is more likely to be the choice.
There are realist theories contradicting the liberal views mentioned above, such as the
relative gains theory (Grieco 1998). Based on this theory, for a state that is asymmetrically
dependent on another state, the fact that it gains relatively less while its partner gains relatively
It is called the hollowing out theory. For a discussion about this theory, see Deng, Ping. 2000. Taiwans
Restriction of Investment in China in the 1990s: A Relative Gains Approach. Asian Survey 40(6): 971-973.
3
In this paper, I argue that the emergence of Taiwanese identity in Taiwans domestic politics changes the essence of
the conflict between China and Taiwan. However, I will not discuss how and why Taiwanese identity emerges. For
the discussions about Taiwanese identity, see Chu, Yun-Han. 2004. Taiwans National Identity Politics and the
Prospect of Cross-Strait Relations. Asian Survey 44(4): 497-503; and White, Lynn. 2004. Taiwans External
Relations: Identity versus Security, in The International Relations of Northeast Asia, edited by Samuel Kim,
Lanham, MD: Rowman & Littlefield Publisher Inc: 306-308.
A Pan-Green
Pro-Taiwanese Identity President
A Pan-Blue
Pro-Chinese Identity President
The Economic Ties across the Taiwan Strait, Taiwans Domestic Politics, and China-Taiwan
Relations
After discussing why Taiwans domestic politics now plays a key role in peace or war in the
Taiwan Strait, it is time to shift the focus to the main question of whether the growing economic
ties between China and Taiwan will lead to peace in the Taiwan Strait. Based on what has been
discussed about the relationship between Taiwans domestic politics and China-Taiwan relations,
it is reasonable to argue that in order to examine whether Taiwans economic ties with China
leads to peace we must explore whether Taiwans growing economic ties with China politically
benefit pro-Chinese nationalism politicians in Taiwans domestic politics, especially in
presidential elections.
To probe the relationship between the economic ties across the Taiwan Strait and Taiwans
domestic politics, we should first address a key question: does international economy really have
an effect on domestic politics? According to Ronald Rogowski and Jeffry Frieden (Rogowski
1989; Frieden & Rogowski 1996), the answer is yes: trade or economic openness will create
political cleavages in domestic politics, leading to conflicts between the people who benefit from
the openness and the people who do not. Three phenomena should be found here (Rogowski
1989, 4-5). First, the people who benefit from the economic openness will try to press the policy
makers for more openness, while those who do not benefit from or are harmed by the openness
will try to press the policy makers to resist more openness. Second, those who enjoy a sudden
increase in wealth because of the openness will be able to expand their political influence. Third,
the policy makers will try to respond to the pressures from those who benefit from the openness
and those who do not.
When it comes to the case of Taiwan, we do find that growing economic ties between China
and Taiwan has created a political cleavage. There are obvious economic winners and losers in
Taiwan as the economic ties between China and Taiwan grow: while the capitalists who invest in
The idea about the so-called cross-strait common market was actively advocated by Mas electoral partner in
2008 who is Taiwans current vice president, Hsiao Wan-Chang. For more details of cross-strait common market,
see the web pages of the Cross-Strait Common Market Foundation (http://www.crossstrait.org/index.php). For the
discussion about the latest development of this issue, see Zhao, Hong and Tong Sarah. Taiwan-Mainland Economic
Cooperation Framework Agreement (ECFA): Implications for Cross-Strait Relations. EAI Background Brief No.