Besides the power politics in the U.S.-China-Taiwan triangle, economic interdependence and Taiwan’s domestic politics start to become significant factors in cross-strait relations after Taiwan’s democratization. As to the effect of economic interdependence, the IR liberal theorists suggest the trade-promote-peace hypothesis to depict a relationship between economic
interdependence and the potential for conflict (Keohane & Nye 1977; Oneal & Russett 1999). In cross-strait relations, does the increasing level of economic interdependence influence negative- or-positive patterns of cross-strait relations? This is one of the questions that this chapter aims to answer.
Based on Keohane and Nye’s (1977: 12-13) theory, there are two elements in the concept of economic interdependence which are sensitivity and vulnerability. Sensitivity is related to the cost of change, and is usually measures by the amount of trade flows across borders. In other words, the latent assumption of sensitivity is that the greater the amount of trade flow is, the more costly it is to disrupt the trade relations. It is reasonable to say the concept of sensitivity is to capture the opportunity cost to interfere the trade flow across borders. Therefore, in cross- strait relations, it is reasonable to expect a more cooperative development with the increasing level of cross-strait trade flow. Vulnerability, on the other hand, is related to the ability to offset or endure a costly change. In other words, how efficient a state can self-adjust to the costly change is what the concept of vulnerability want to capture. However, this concept may be not easy to measure. Since Taiwan’s asymmetric dependence on China is evident, Taiwan may be more vulnerable than China when facing the threat to cease the economic tie. In other words, the asymmetric dependence can also works as a leverage to induce cooperation, so the effect of
dependence in cross-strait relations should also be considered. In this chapter, both elements (sensitivity and vulnerability) in the concept of economic interdependence will be examined.
The relationship between economic interdependence and the potential for conflict has been confirmed in Oneal and Russet’s (1999) empirical study. However, the validity of the trade- promote-peace hypothesis has been criticized from both the theoretical and empirical aspects. From the theoretical aspect, the realists argue that it is very likely that the causality between trade interdependence and peace is a spurious relationship since it fails to consider the relative gains problem, the security externality problem, hegemonic stability, and alliance relationships (Gilpin 1981; Gowa 1995; Grieco 1988). In other words, without controlling for the effect of power politics at the international level, the causal relationship between economic
interdependence and peace may be biased. From the empirical aspect, Taiwanese scholars also argue that some important variables are omitted, like Taiwan’s domestic politics characterized by the struggle between the pro-unification and pro-independence positions or China’s strategy to transform the economic tie into a political leverage (Chu 1997; Tung 2003). More importantly, the pacifying effect of economic interdependence is also conditioned by the salience of trade and trade symmetry in a bilateral relationship (Barbieri 2005). Thus, based on what the relevant studies suggest, the validity of the trade-promote-peace hypothesis in the Taiwan Strait can be confirmed only when the three following factors are controlled: (1) the international power politics, (2) the salience and symmetry of economic interdependence, and (3) Taiwan’s domestic politics.
For controlling for the three factors, the model in this chapter includes the strategic interactions in the U.S.-China-Taiwan triangle, Taiwan and China’s dependence on cross-strait trade flow, and Taiwan’s election cycle to analyze cross-strait relations. First, the strategic
interactions in the U.S.-China-Taiwan triangle help control the United States and China’s political leverage in cross-strait relations. Second, economic interdependence is not be a single variable in this chapter, and will be operationalized by two variables, Taiwan’s and China’s dependence on cross-strait trade flow.46 This way of operationalization can help control the different level of salience and symmetry for Taiwan and China. Third, Taiwan’s election cycle helps capture the changing political dynamics in Taiwan. More importantly, the model in this chapter also helps figure out a critical question: What is the relative importance of international versus domestic factors in influencing cross-strait relations?
For answering the question more properly, China’s domestic politics should also be controlled. Since China is still a single-party regime, the power transition within the CCP is the most important factor of policymaking.47 Therefore, in the following analyses, the term of the highest body within the CCP, the National CCP Congress, will be included to control the change of China’s domestic politics.Although the highest status of the National CCP Congress only exist in theory, the top leadership in the CCP still need the approval of the National Party
Congress. More importantly, the political agenda of the ten-year term of China’s leadership after Deng goes along with the seven plenums of the Central Committee within the five-year cycle of the National Party Congress.48 In short, the National CCP Congress may not as important as it
should be, but its cycle may include some information about the power transition of the CCP. As to the effect of election on military conflicts, empirical studies of foreign policy suggest a correlation between election cycle and conflict. Regarding the rationale behind the
46 See Chapter2 for details.
47 Based on Geddes’s (1999) standard and Linz and Stepan’s (1996) classification, it is reasonable to define China as a single-party regime.
48 Wu (2005b: 59) also suggests that the role of the CCP party congress can be seen as the presidential elections in Taiwan and the United States
causality, Mansfield and Snyder’s (1990; 1995; 2005) studies suggest that the war-prone tendency of the democratizing states comes from politicians’ utilization of nationalist emotion and prestige strategy for winning elections. On the other hand, about the timing to engage a military conflict, empirical studies show that the closer to elections, the more likely a conflict will occur. Taiwanese scholars, like Wu (2011), have argued that the aggressive behavior is more likely to take place at the end of the election cycle in Taiwan, but cross-national studies show that aggressiveness tends to occur at the early stage of the election cycle (Gaubatz 1991). In other words, both studies reveal that aggressive behaviors tend to occur in a shorter period before and after elections. In the case of cross-strait relations, based on the nature of Taiwan’s domestic politics, Taiwanese politicians’ position on the “one China” issue may be influenced by the timing of election easily. First, Taiwanese politicians may have the incentive to utilize Taiwan’s sovereign issue, like to emphasize the independence status of Taiwan, for winning voters’ support during the election, which may agitate China. Second, after winning the election, Taiwanese politicians may need to compromise or tune down the electoral tension on the
sovereign issue to avoid further conflicts with China. From the cases of the 1996 crisis and Chen Shui-ban’s referendum strategy for reelection in 2004, it is easy to assume that the approach of Taiwanese election causes a conflictive tendency in cross-strait relations due to politicians’ calculation in the campaigns. However, the validity of this assumption may be questionable, and this chapter aims to use statistical analysis to test it.
According to the summary of the relevant literature, this chapter will test the following hypotheses with statistical analysis.
Based on the conflictive nature between Taiwan and China on the sovereignty issue, the positive development of Taiwan’s dependence on cross-strait trade flow leads to the positive development of Taiwan’s behavior toward China, and the positive development of China’s dependence on cross-strait trade flow leads to the positive development of China’s behavior toward Taiwan.
Based on the conflictive nature between Taiwan and China on the sovereignty issue, the negative development of Taiwan’s dependence on cross-strait trade flow leads to the negative development of Taiwan’s behavior toward China, and the negative development of China’s dependence on cross-strait trade flow leads to the negative development of China’s behavior toward Taiwan.
H2 Electoral Tension Hypothesis
The closer Taiwan’s presidential and parliamentary elections are, the more likely a negative development of cross-strait relations will occur.
Besides the hypotheses about positive-or-negative patterns of cross-strait relations, the existing literature mentions less about the stability of state behavior. In general, I hypothesize a relationship between uncertainty and behavioral instability for cross-strait relations. Any behavior disrupting the status quo creates uncertainty for decision-makers and then leads to behavioral instability because the original behavioral patterns are not sufficient to respond the change. Following this logic, I hypothesize that the positive development of economic
interdependence leads to stability while the approach of Taiwan’s general elections leads to instability for cross-strait relations.
Given that economic interdependence is a general trend in cross-strait relations, the positive development of Taiwan’s dependence on cross-strait trade flow leads to a lower volatility of Taiwan’s behavior toward China, and the positive development of China’s dependence on cross-strait trade flow leads to a lower volatility of China’s behavior toward Taiwan.
Given that economic interdependence is a general trend in cross-strait relations, the negative development of Taiwan’s dependence on cross-strait trade flow leads to a higher volatility of Taiwan’s behavior toward China, and the negative development of China’s dependence on cross-strait trade flow leads to a higher volatility of China’s behavior toward Taiwan.
H4 Electoral Instability Hypothesis
The closer Taiwan’s presidential and parliamentary elections are, the higher volatility of cross-strait relations is.