Drinking poison to quench a thirst?

Despite what at times has been an extremely tense political relationship, economic ties between the People’s Republic of China (PRC) and Taiwan have grown rapidly since the 1980s. Bilateral trade flows ballooned from less than US$1 billion per year in the mid-1980s to over US$120 billion by 2010. ¹ Many estimate that accumulated Taiwan investment in the PRC far exceeds US$100 billion. The PRC is Taiwan’s largest trading partner and, by far, the primary destination of the island’s outbound foreign direct investment. Economic integration across the Taiwan Strait proceeded even though former Taiwan presidents Lee Teng-hui (1988–2000) and Chen Shui-bian (2000–2008) were deeply skeptical that expanding economic ties with the PRC benefit Taiwan economically or politically. The current Ma Ying-jeou (2008–present) administration, on the other hand, unambiguously welcomes cross-Strait economic integration. Since becoming president, Ma’s government has signed numerous economic agreements with Beijing. These agreements have—among other things—opened direct shipping and air transport links with the PRC, opened Taiwan to PRC tourists, and increased financial cooperation between the two sides. In the summer of 2010, the two sides signed a more sweeping Economic Cooperation Framework Agreement (ECFA), which provides a roadmap for future negotiations over cross-Strait economic liberalization and includes an “early harvest” list of products subject to accelerated tariff reduction schedules. ²