Repudiation of the 1992 Consensus Will Set Back Cross-Strait Economic and Trade Relations
China Times editorial (Taipei, Taiwan, ROC)
December 6, 2011
Summary: On Thursday, Hon Hai Group Chairman Terry Gou threw his support behind Ma Ying-jeou. He is worried that next year's general election could be an upset. He even said that "many companies have two different strategies planned, just in case." The next day, Delta Electronics chairman Bruce Cheng joined the ranks of Taiwanese entrepreneurs backing Ma Ying-jeou. Guo and Cheng are not what would traditionally be referred to as "Blue-oriented Enterprises." Yet they spontaneously expressed identical sentiments. Therefore attention should be paid.
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On Thursday, Hon Hai Group Chairman Terry Gou threw his support behind Ma Ying-jeou. He is worried that next year's general election could be an upset. He even said that "many companies have two different strategies planned, just in case." The next day, Delta Electronics chairman Bruce Cheng joined the ranks of Taiwanese entrepreneurs backing Ma Ying-jeou. Guo and Cheng are not what would traditionally be referred to as "Blue-oriented Enterprises." Yet they spontaneously expressed identical sentiments. Therefore attention should be paid.
Terry Gou said that next year, when another tsunami strikes, Taiwan's economy will face 10 meter waves, not one meter waves. Turbulent times requires a skilled helmsman. What businesses fear the most is uncertainty. If President Ma wins a second term, businesses can plan for the future. But if a change in ruling parties takes place, businesses may need to wait until May of next year before taking action. "This will result in a deadly window." Companies have responded to the two possible outcomes of next year's presidential election by mapping out two different business strategies. Bruce Cheng said he feared a change in ruling parties would make it impossible for him to respond to changes in the international situation. That was why he supported President Ma's reelection.
The Democratic Progressive Party ruled for eight years. Even if the DPP returns to power, it will continue to support business and economic development. So why are domestic enterprises worried? Actually, everyone knows why, but nobody is willing to say so out loud. The problem is the DPP's cross-Strait policy, particulary its refusal to recognize the 1992 Consensus. The DPP's cross-Strait policy could completely sabotage 16 cross-Strait agreements reached over the past three years, including ECFA, overnight.
Contrast this with the 2000 general election. The global economy was sound. Taiwan's economy and stock market were sound. Few people worried about the downside risk. The Mainland had an economy worth only 1.1 trillion. Taiwan had an economy one fourth the size of the Mainland's. The Mainland was of much less economic significant to Taiwan than it is today. Back then, it was merely a manufacturing base. Back then, there were no "Mainland tourists."
Today however, the Mainland has an economy worth 5.8 trillion, It is the second largest economy in the world. Today Taiwan's economy is only 7% the size of the Mainland's. The Mainland is not merely the world's factory, its is also the world's fastest growing consumer market. It is the world's largest market for automobiles, LCD TVs, and PCs. Exports from Taiwan to the mainland and Hong Kong increased from 20% to 40%. During the financial tsunami, purchases made by Mainland purchasing groups enabled Taiwan companies to emerge from the shadow of the recession. Millions of Mainland tourists visit Taiwan each year. The finance industry has high hopes for a "green passage." It is conducting follow-up consultations, preparing to increase the number of items on the ECFA checklist.
As we can see, Taiwan's economic and industrial relationship to the Mainland is very different from what it was 12 years ago. Taiwan is much more economically dependent upon the Mainland than it was in the past. This is why the business community is so worried. A global economic downturn next year is inevitable. Economic forecasts for next year have been revised downward. Europe will experience nearly zero growth. The US will experience one to two percent growth. Mainland China meanwhile, will experience 8 to 8.5% growth. Taiwan faces harsh economic challenges next year. If cross-Strait relations change, Taiwan's economy may tank. The DPP's cross-Strait policy will surely force changes upon cross-Strait relations.
DPP presidential candidate Tsai Ing-wen refuses to recognize the 1992 Consensus. She relentlessly trumpets her "Taiwan consensus." But three years of warming cross-Strait relations, including various agreements and ECFA, are all rooted in the 1992 Consensus. The Mainland has made clear that "rejection of the 1992 Consensus will destroy the foundation for all subsequent agreements." The DPP's "Taiwan consensus" is sheer solipsism. It could set cross-Strait relations back decades. Once cross-Strait relations have been set back, Mainland capital will swiftly evaporate, and Taiwan's future will be jeopardized. This is why the business community is worried.
These concerns have gradually had an impact. First when Ma and Tsai's poll numbers were deadlocked. Taiwanese stocks plummeted to a new low, below 6800. The decline exceeded those in neighboring countries. Market players were concerned that Tsai might be elected. The cross-Strait economy was discounted. The world's six major central banks joined forces to rescue the market. This meant another global financial crisis was gaining momentum. This meant the economic situation was unlikely to improve next year. Business leaders then proceeded to make their views known. They said if Tsai Ing-wen was elected, she might harm Taiwan's economy. Tsai Ing-wen held an emergency press conference the day before the debate. She declared that "anything can be discussed between the two sides." She promised she would not abruptly terminate any previously signed cross-Strait agreements. She tried to reassure the public that a change in ruling parties would not undermine cross-Strait relations.
The main concern of outside observers was that Tsai Ing-wen would terminate ECFA and its accompanying agreements. They were afraid. The Mainland might not explicitly terminate the agreements. But it might refuse to implement them. The agreement would amount to nothing more than a piece of paper. The Mainland would refuse to honor the remaining items on the ECFA checklist. The number of tourists would diminish. Purchasing groups would cease arriving. The green channel eagerly anticipated by the financial sector would vanish. Tsai Ing-wen's only response to these business and market concerns was wishful thinking and hollow assurances of "consultation and dialogue."
The debate was an ideal opportunity to reassure doubts about the DPP. But Tsai Ing-wen offered nothing but platitudes. She reiterated her intention "to promote equitable economic and trade relations, under the aegis of multilateral organizations." This is sheer chutzpah. Since when has Taiwan had the wherewithal to dictate terms to these multilateral organizations? Besides, multilateral organizations such as the WTO are gradually being replaced by bilateral frameworks such as FTAs. Yet the DPP insists that "although there may have been 1992 talks, there was no 1992 consensus." The DPP insists that "the 1992 consensus was merely a consensus between the Kuomintang and the Communist Party." The DPP continues to issue statements denying the existence of the 1992 Consensus. No wonder Terry Gou said many businesses have prepared two sets of responses. The DPP and Tsai Ing-wen -- are you listening?