Taiwan and the Future of the Cross-Strait Services Trade Agreement

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Taiwan and the Future of the Cross-Strait Services Trade Agreement

The protests over the past week leave Taiwan in an awkward position.

Taiwan and the Future of the Cross-Strait Services Trade Agreement
Credit: REUTERS/Stringer

Taipei, Taiwan — After months of simmering tensions between Taiwan’s ruling Kuomintang (KMT) and the opposition Democratic Progressive Party (DPP) backed by members of civil society, the debate over the Cross-Strait Services Trade Agreement (CSSTA) has finally reached a breaking point. During the past week, demonstrators – whom media outlets continue to misleadingly refer to only as “students” – successfully occupied the Legislative Yuan and Executive Yuan, managing to hold off police attempts to evict them from the former for almost a week. Yet amidst the commotion and calls to either renegotiate the agreement article by article or disband it in its entirety, three key issues have fallen by the wayside: the legality and implications of reneging on a bilateral agreement, the significance of international image and reputation for diplomatic relations, and most importantly, how to design feasible and effective ways to protect the most vulnerable members of Taiwanese society.

When the KMT concluded negotiations with the mainland and signed the CSSTA last July, it marked the beginning of a series of orthodox democratic attempts to force the ruling party to take into consideration the concerns of opposition lawmakers, labor groups, and civil society. Lobbying, public hearings, and tame demonstrations, all standard fare in today’s representative democracies, had limited impact. Brawling between politicians in the legislature, a local tradition, was equally ineffective. In effect, the domesticated backlash has thus far allowed the government to appear democratic while simultaneously pushing a run-of-the-mill neoliberal agenda supported by conservative lawmakers, the mainland Chinese government, and powerful business interests on both sides of the strait. The move by the ruling party to sign the agreement without prior consultation was admittedly undemocratic – even by the weakest standards of what constitutes democratic policymaking behavior. Nevertheless, it was successful, and therein lies the crucial issue whose implications must be now be reckoned with.

For months, demands for an article-by-article review of the agreement have been the central focus of opponents’ strategic roadmap. In theory, such a review would have major benefits in that the impacts of each article for specific sectors of society and the economy could be analyzed and the democratic process would be utilized. In practice, however, it is not a feasible option for three reasons. First, the agreement would remain indefinitely vulnerable to political impasse. Protracted negotiations would increase the potential for ultimate failure as well as the opportunity cost for legislators who have remained predominantly focused on promoting or opposing the agreement instead of on alternative political engagements. Second, renewed renegotiations with the mainland would be required. Proponents have long suggested that article-by-article discussion would legally force a return to negotiation with the mainland over the agreement, and only recently have opponents finally begun to come to terms with this reality. This realization should have come long ago. Had the agreement’s detractors accepted this earlier on, their energy could have been focused on more realistic and creative approaches to confronting the issue. Third, failure to implement the agreement may invite a confrontational reaction from Beijing and, perhaps needless to say, will not result in any further concessions in Taiwan’s favor. As with any bilateral agreement, it is the expectation of both parties that signing will be followed by political and logistical implementation. Not fulfilling this expectation will be seen as either ineptness or resistance on the part of the Taiwan government, which may provoke confrontation with the mainland. As historical evidence can attest, such a situation does not bode well for the future of cross-strait and regional relations. In short, the threadbare article-by-article renegotiation model forwarded by opponents is fruitless and poorly conceived, as it implies a return to negotiations with Beijing that are unlikely to be advantageous for any members of Taiwanese society.

Yet the deleterious effects of failure to implement the CSSTA would not only be domestic or bilateral; the international implications would be equally grave. Taiwanese history over the past decades has represented an arduous struggle for diplomatic recognition. Indeed, it is the foundation upon which almost all of the island’s foreign policy depends. Reneging on a bilateral agreement, such as the CSSTA, would serve as a clear indication to the international community that the local government lacks the capacity to effectively engage in international relations. The logic runs like this: If Taipei cannot succeed in fulfilling an already signed trade agreement with its closest neighbor and most significant trading partner, the risks involved for other countries in deepening economic ties with Taiwan may outweigh the potential benefits. For better or worse, international image and reputation are key to diplomatic relations. Should Taiwanese lawmakers fail to push through the agreement at this late a stage in negotiations, they are shooting themselves in the foot.

Yet the most potent criticism of the CSSTA is not that its proponents neglected to use the democratic process in its signing but the fact that the agreement may well have serious negative impacts on certain members and sectors of Taiwanese society. Given that the explicitly stated purpose of the agreement is to open the gates to cross-strait investment, opponents envision a flood of Chinese businesses entering the Taiwanese market and competing with Taiwanese local businesses. The fear of an economically powerful neighbor is a rational one. Latin American countries, for example, have long had to cope with the challenges of living under the shadow of U.S. economic and political influence. Though the analogy may seem far-fetched, the ongoing impasse in cross-strait relations is not altogether different.

Today, in Taiwan, the fear and uncertainty over the CSSTA is palpable. None can predict with accuracy how exactly it will affect local industries. The most critical issue is ensuring that the most vulnerable sectors of the economy and members of society are not negatively impacted by the CSSTA. The first step is to accept the reality that the agreement has already been signed into law and may be pushed through the Legislative Yuan or handed off to the Executive Yuan for final approval. The second and most vital step will then be to design and implement a system of safeguard mechanisms to guarantee that select sectors and groups will be sheltered from the hypothetical storm of Chinese investment.

There is good news and bad news. The good news is that implementing such safeguards is a real possibility both legally and logistically. Forward progress on the issue will rest heavily on Article 8 of the agreement, which stipulates that both parties can call for negotiations in the event of a service industry sector or population being negatively impacted. Blueprints for these safeguard mechanisms should take advantage of the wealth of issue- and industry-specific domestic and international expertise that is available to assess the policy impacts of the bilateral free trade agreement. The plans should provide quantifiable limits on acceptable CSSTA-inflicted impacts, clear guidelines on measurement of these impacts, and details on how the government will respond when impacts exceed stated limits. Moreover, they should also outline a plan for periodic reassessment of the safeguard mechanisms to ensure that they can adapt to changing economic and political trends. The other good news is that guaranteeing the continued wellbeing of Taiwanese society is an issue that can be agreed upon. At least in principle, KMT and DPP lawmakers, business and labor groups, and activists of all stripes express interest in the island’s economic and social development, and many are committed to investing significant time and effort into the issue.

The bad news is that it will require a concerted effort amongst these diverse interests. Whether or not the capacity to do so in contemporary two-party democracies has all but vanished is difficult to say. Given that it is in the best interest of all parties involved to overcome this obstacle, the possibility is there, and now is the time to take advantage of it. How the debacle will play out in the coming days and weeks is anybody’s guess. Yet the realization that there are opportunities for basic agreement on the creation of safeguard mechanisms may bring some focus and rationality to the seemingly intractable dispute. This should come as a breath of relief for all those so deeply invested in its outcome.

Jonathan Spangler is a doctoral student with the International Doctoral Program in Asia-Pacific Studies (IDAS) at National Chengchi University in Taipei, Taiwan. He is also a member of the South China Sea Research Team at the Center for Security Studies (CSS), based at the Institute of International Relations (IIR), and a research assistant at Academia Sinica. The views expressed in the analysis do not necessarily reflect those of the institutions with which he is affiliated.