Cross-Strait trade has become a controversial political issue in Taiwan. During the last two decades, Taiwan’s degree of dependency on cross-Strait trade continuously increased from 4 per cent in 1990 to more than 23 per cent in 2010 (Taiwan Mainland Affairs Council 2011). In the same period, Taiwanese capital constantly flowed into China. The investment dependency ratio, calculated by dividing Taiwan’s investment amount in China by Taiwan’s total overseas direct investment amount, augmented from less than 20 per cent to more than 80 per cent (Lin and Hu 2011). The expansion of cross-Strait trade and capital flow has instigated political debates on developmental strategy and national identity in Taiwan. In 2010, the signing and ratification of a free trade agreement titled the Economic Cooperation Framework Agreement (ECFA), a major economic and cross-Strait policy of the Ma Ying-Jeou administration, triggered large-scale protests. The DPP Chairperson, Tsai Ing-Wen, the leader of the opposition, criticized the ECFA, claiming that it would lead to increasing income inequality, particularly among peasants and workers (Taipei Times, 27 April 2010). In 2014, the Cross-Strait Agreement on Trade in Services, another open trade policy, led to the occupation of the Legislative Yuan by the student-led ‘Sunflower’ movement in protest against the pact. The expanding economic integration with China has also given rise to some unintended social consequences. For example, the unemployment rate rose from about 1.5 per cent in the early 1990s to more than 4 per cent in the last decade; the Gini coefficient, a popular index of income inequality, also amplified from 0.31 to higher than 0.34. In addition, the number of families under the official poverty line doubled in Taiwan during the same period. As Figure 10.1 illustrates, Taiwan’s rising poverty rate is robustly associated with the trade and investment dependency ratios on China in the last two decades. Most families in poverty suffer from unemployment and lower income as a result of factory closures and the importation of low cost manufactured goods and agricultural products from China. Cross-Strait economic integration has produced winners and losers and has reshaped the distribution of wealth in Taiwan. On the other hand, some scholars have found that class voting has influenced Taiwan’s electoral turnouts during the last decade. Hu et al. (2009) examined the Taiwan Social Change Survey (TSCS) datasets between 1992 and 2004, and

discovered that before 2000, pan-green voters mainly came from the selfemployed and upper-middle classes, while pan-blue voters were mainly administrators, peasants and workers. This finding is consistent with the observation that Taiwan’s middle classes were the main supporters of the political opposition in the process of democratization (Hsiao 1989; Huntington 1991). However, after 2000, workers and peasants switched their political affiliation to the pan-green camp, while the upper-middle class, mainly capitalists and managers, shifted their support to the pan-blue camp (Lin and Hu 2011). The changes in class politics have also been reflected in the turnouts for local elections during the last decade. Figure 10.2 illustrates the voting turnouts for the 1998 local election and for the 2004 and 2012 presidential elections at county level. Electoral districts that were won by the (blue) Chinese Nationalist Party (KMT) are marked in white, and electoral districts that were won by the (green) Democratic Progressive Party (DPP) are marked in dark grey. As Figure 10.2 shows, deepening class cleavages have reshaped the geographical distribution of pan-green and pan-blue voters. Paralleling the other developing countries under democratization (Huntington 1991), in the late 1990s, the DPP candidates won the majority of the middleclass votes in large cities. In contrast, at least starting with the presidential

election in 2004, the DPP government has mainly been sustained by voters in southern Taiwan who, to a great extent, are blue-collar workers and peasants, while employers and the middle classes overwhelmingly shifted their support to the KMT. The new political landscape, which partially reflects the geographical distribution of social classes, has been taken for granted and dubbed ‘blue sky (north), green earth (south)’ by the mass media in Taiwan. It seems that there was a ‘class realignment’ of Taiwan politics around 2000-2004. Since this realignment occurred, the social foundation of the green and blue parties has gradually approached the left-wing-right-wing cleavage in Western democracies. Although the ‘class voting’ phenomenon was confirmed by a recent survey in 2010 (Lin and Hu 2011), without a commitment to socialist ideology and organizational supports from trade unions, it is difficult to explain why the DPP became more attractive for workers and peasants during the last decade (Chang and Chang 2010). Although some of the recent social surveys have provided evidence of the rising working-class identity and the relative deprivation of the workers (Lin 2013), it is difficult to sustain the argument that a working class is forming as a result of increasing class consciousness in Taiwan. As some authors have argued, one possible origin of Taiwan’s new ‘class politics’ is the China impact through economic integration (Wong 2010; Lin and

Hu 2011). This chapter investigates the relationship between cross-Strait trade and class inequality in Taiwan. According to the literature on open economy politics (OEP), for a relatively advanced economy, the adoption of an open trade policy by a developing economy increases the income gap between employers and employees as well as the wage gap between skilled workers and unskilled workers. The deterioration of income distribution creates coalitions of social classes for and against expanding trade relations. The relationship between the cross-Strait open trade policy and the deepening class cleavages in Taiwan is a typical case of OEP theories. In this study, I use a pooled dataset from two national surveys conducted during 2010-2013 to demonstrate the relationships between cross-Strait trade, income inequality and class voting. The statistical results support the contention that cross-Strait trade has changed life chances and material returns for different social classes. With regard to income distribution, the employers and the middle classes have benefited from cross-Strait trade, but the self-employed, the peasants and the workers have not. The deepening of income inequality has also influenced people’s opinions on open-trade policies: i.e. in the case of the ECFA, the employers and the middle classes have welcomed the policy but the peasants and the workers are sceptical of it. Finally, mediated by the different cross-Strait trade policy preferences, class backgrounds have influenced people’s voting behaviour in Taiwan’s recent elections.