Taiwan Election: The Strait is Wide but the Emperor is Still too Close

The sweeping victory of Tsai Ing-wen and the Democratic Progressive Party in Taiwan’s Jan. 16 elections was far more than just a rejection of a divided Kuomintang and an indictment of the recent performance of the luckless outgoing President Ma Ying-jeou.

The election of Taiwan's first female president was a reaction against the aggressive nationalism and authoritarian posturings of Chinese leader Xi Jinping. It was a rebuff to the naïve mainland belief that Taiwan could be regained through further increasing dependence of China via free trade, tourism and ethno-cultural exchanges. It has been described as a sea change in Taiwan's posture towards the mainland, with the possibility that there is no going back.

The depth of the loss extended deep into Taiwan’s body politic. While the presidency has changed parties before, the KMT has always controlled Taiwan’s Legislative Yuan, but this time it did not even get one third of the legislative seats. In power politics that means the party does not have enough seats (one-third) to resist any motions to recall current president Ma Ying-jeou. By a quirk of arrangements, this new legislature takes its seats on February 1, whereas Ma won’t step down until May 20.

On other fronts, James Soong, the presidential candidate of the People’s First Party (PFP), failed in his 3rd bid for the presidency since 2000 but his candidacy did serve the purpose of gaining 3 at-large seats for his party in the legislature, where the new kid on the block is the New Power Party (NPP), an activist party that sprung from the recent Sunflower Movement of 2014 and has a lot of new blood including colorful heavy metal rock performer Freddy Lim. That party gained three district seats and two at-large seats.

Eighteen parties had been in the running for the 34 at-large seats in the legislature, but only four passed the high bar of 5 percent needed to gain seats. In descending order, they are the DPP 18, the KMT 11, the PFP 3, and the NPP 2. That high bar may be a factor Taiwan needs to consider lowering in the future for greater participation, but the fact that 14 additional parties had a message that they felt was different from the mainstream is a plus for a democratic state.

Export dependency hasn’t changed

Amid all of Ma’s efforts to deepen economic ties and even meet with Xi in Singapore, one fact has gone largely unnoticed. Despite the KMT’s honeymoon with Beijing, and the very rapid growth until quite recently, of the mainland economy, Taiwan’s export dependence on it has been virtually unchanged for more than a decade.

Fluctuating around 38-40 percent, it is still about the highest in the world and long a cause for unease among Taiwanese. But even that level in practice overstates dependence given that a high proportion of those exports have been high-tech components for products such as iPhones that are subsequently exported from China. Indeed, while assembly operations in China have hurt low-end manufacturing in Taiwan, Taiwanese firms have been major beneficiaries of the relatively cheap land and labor on the mainland. Taiwan’s manufacturing expertise has helped drive China’s exports but provided big profits for Taiwan firms, much of which has been kept offshore rather than either re-invested or repatriated.

The current contraction in Taiwan’s exports is as much due to global demand as China’s domestic demand. That the sharpest fall has been in sales to China is probably due to relocation of plants from China to Vietnam and elsewhere as manufacturers have sought cheaper locations.

No love for ‘Mother Country’

Twenty years now of Taiwan-mainland economic interaction and the presence of hundreds of thousands of Taiwanese on the mainland have done little to make them love the “mother country.” Commercial opportunities are many but a presence on the mainland is a constant reminder of the superiority of Taiwan whether in terms of pollution, political freedom, cultural activity or the rule of law.

The partial opening of Taiwan to mainland tourism has also made the latter aware of the differences between the two.

More recently still, Beijing’s sustained undermining of Hong Kong’s autonomy has added to wariness of too close dependence and scepticism of any mainland promises of complete autonomy in return for acceptance of Beijing’s version of the One China principle. Tough talk from Beijing always has negative impact on Taiwan.

Beijing aims for foot, fires

Although during this election, there was none of that, events in Hong Kong and China’s aggressive policies over the South and East China seas had a similar impact. In addition, the recent apparent kidnapping of five Hong Kong-based booksellers, one of them a British citizen who appears to have been taken from Hong Kong territory itself, has been greeted with alarm in Taiwan. (Three of the Hong Kong citizens disappeared over the border in Shenzhen, the fifth, a Swedish citizen, was kidnapped from his apartment in Thailand.)

Mainland animosity to Japan in particular is not reflected in Taiwan which was far better ruled by the Japanese than in the early years of KMT rule.

Events on the mainland have made Taiwanese more aware of the need to develop economic relations with other countries, a contrast to Ma’s focus on cross-straits issues. Whether Tsai can maintain stable cross-straits relations while reaching out to a world now becoming less enthralled by the China’s status and growth, remains to be seen. The economy faces challenges from its narrow base, competition from Korea and Japan and from mainland companies, often using technology in practice stolen from Taiwan.

New regional friends?

But all of the regional neighbors such as Vietnam and the Philippines are keen for Taiwan to be more engaged. The DPP is also less likely to provide the silent support that the KMT has done to Beijing’s imperialistic claims to the whole South China Sea, claims which date back to the 1930s when the KMT was in power on the mainland.

In contrast to the independence rhetoric of disgraced former President Chen Shui-bian and even of Lee Teng-hui, Tsai’s cautious approach to mainland issues should get her regional respect, as well as US and Japanese backing. All have every interest in Taiwan’s survival as a de facto independent entity, but also one which does not provoke an aggressive Beijing.

In economic policy terms, this should mean greater efforts to liberalize the local services sector, long a bastion of vested interests protected from foreign competition by old rules and a KMT-oriented bureaucracy. Despite the recent export slump, Taiwan’s external position remains immensely strong. Imports have fallen faster than exports and the current account surplus has surged. Foreign reserves are US$429 billion and net private sector foreign assets at least as much again. However as elsewhere in east Asia, an aging labor force and weak service industries create obstacles to growth.

Big stimulus not in the cards

Fiscal caution is inbuilt so grandiose projects as a means of stimulus are out, particularly as pension and welfare spending is set to rise as the population ages. Allowing more of the 500,000 foreign workers to stay indefinitely would help as would a more liberal immigration policy, particularly recognizing the Austronesian as well as Sinic roots of Taiwanese people.

With reporting by Jerome F. Keating in Taipei