In his first year in office, Taiwan President Ma Ying-jeou has kept his promise to ease tensions with the island's longstanding rival, China. Beijing and Taipei have signed several historic agreements opening up direct transport links, allowing mainland Chinese tourists to visit Taiwan, and calling for financial cooperation. Taiwan also recently announced Chinese would be allowed to invest in Taiwan for the first time. On May 12, TIME's Jim Erickson, Michael Schuman and Natalie Tso sat down with Ma to talk with him about China, the economy, and Taiwan's future.TIME: Tell us what you thought about your first year in office.
Ma: Well it was a tough year for us. When we first took office we were faced with high prices of raw materials and oil, followed by the financial tsunami and economic downturn. We took measures to rescue the banking industry. We also reduced the inheritance tax from 50% to 10%. That has had an affect on Taiwanese capital outside of Taiwan. In recent months, that capital has been coming back. We also distributed shopping vouchers to our citizens. That was a very successful program. We also will inject about $20 billion for public construction. (Read TIME's interview with Ma after his election in 2008.)
T: Has the amount of attention spent dealing with the crisis set back initiatives you wanted to take the first year?
M: We wanted to see a growth rate of 6%, keep the unemployment rate below 3%, and boost annual per capita GDP to $18,000 within four years. The economic crisis disrupted all of these goals. But we continue to work to revitalize the economy. We still have a long way to go. But that's OK, because we believe the Taiwanese have the perseverance and work ethic to make the economy come back.
T: What kind of lessons have you learned from the crisis?
M: We were hard hit by the shrinkage of the export market in the U.S. and Europe, because exports account for 64% of our GDP growth. So one lesson we learned is we should diversify our export markets we need to look to emerging markets and oil-producing countries. Secondly, we should diversify our export industries we depend so much on IT industries. Third, we have designated six industries as future flagship industries: green energy, tourism, biotechnology, refined agriculture, and the cultural and creative industries. We are keenly aware these industries in 5 to 10 years will be the major industries of the world. Not only do we have to revise our economic policy, but also our political and security policy, so that is why I started to reform our China policy.
T: You have been talking about an Economic Cooperation Framework Agreement (ECFA) with China. What do you want to achieve with that?
M: The ECFA will be different from a normal free-trade agreement. It will take the form of a framework that will identify the types of items we will negotiate over time. We want to negotiate with the mainland about some of the products we consider most urgent. For instance, pertrochemicals, auto parts, textiles, these products constitute a large percentage of our exports to the mainland. Beginning next year, the same products from (Southeast Asian countries) will have no tariffs, but ours will face tariff rates from 5% to 15%. That will kill our industries. The mainland has already indicated interest in signing an agreement with us. In the last year we've signed nine agreements focusing on air transport; a financial supervisory mechanism covering stocks, futures and insurance companies, which will be negotiated in the next couple of months; also food safety, postal cooperation, a joint effort to combat crime and judicial assistance. These are all milestone agreements. (Read about new business deals between China and Taiwan.)
T: There's a substantial part of the Taiwanese population that is concerned economic integration with China will mean political integration. How can you help them understand that you can, as you have said in the past, "manage" the sovereignty issue, without actually settling it?
M: We started to manage the sovereignty issue as early as 1992. At the time, China said we have to observe the One-China principle. We said we can accept the One-China principle but our definition is different from yours. We accept that principle not because we want to please them, but this is what our constitution says, and our constitution was adopted in 1946, three years before the Chinese communists came into power...we don't recognize the mainland as a nation nor do they recognize (Taiwan) as a nation. So what I have called for is that we continue to have mutual non-recognition. We cannot recognize each other on the legal level. But we could have a policy of non-denial on the de facto level.
T: There's still a percentage of population of fearful that you're selling Taiwan out.
M: We conduct opinion polls to see whether they trust us and the majority does.
T: But there are still fierce protests.
M: Some, but not everyone.
T: Is there progress in winning some of them over?
M: Look at what happened when we allowed mainland tourists to come to Taiwan last year. Opponents said they wouldn't come. In the beginning, only a few hundred came a month, but now we have about 3,000 daily. Many of our attractions are crowded with mainland tourists, and some are big spenders. People generally believe that this is in our interest to have them here. The other thing is mainland capital. Of course there are people who fear mainland capital will ruin our capital market but we'll regulate the different industries, so we [will open up] bit by bit. Taiwan is a country that depends so much on international trade and investment, you can't really have an isolationist policy.
T: Do you think the steps you've taken have helped reduce the impact of the economic crisis?
M: If we had not done things like opening up direct transportation links to the mainland, we'd suffer more. Cost reduction is very important for businessmen. For the shipping industry, they [previously] had to move goods to China by stopping over in a tiny town in Okinawa and paying $5,000 to $10,000 to get a chop to say they've been though a third place. We've done this stupid thing for more than 20 years, and that little town has got a windfall, but now it's changed.
T: Where are you on the military issue? You have previously said you could not negotiate with China until they removed their missiles [targeting Taiwan], but you seem to have relaxed that.
M: No, I haven't relaxed that. We still want them to remove the missiles. But if the two sides are to negotiate a peace agreement, the requirement on the removal of missiles obviously should not apply to the negotiations for cross-strait flights.
T: Do you hope to have talks with China about the military?
M: No, I don't think that's very urgent.
T: So no peace agreement this year?
M: No, I don't think so, do you know why? We have already made it very clear last year when I took office, that I'll have a mainland policy, which is under the framework of our constitution and which is based on three principles: no unification, no independence, and no use of force. By no unification I mean no unification talks with the mainland during my term. The second is no independence. Of course Taiwan has autonomy because we elect our own president, parliament and run our own business, but the independence I talk about is de jure independence. I won't do that, and we oppose the use of force.
The reason is to assure the other side, as long as we're not taking a policy to pursue de jure independence that's a reason for the mainland to use force against us we will maintain the status quo, which reflects what the mainstream public opinion has been for more than 20 years. That is one of the reasons I was elected last year, unlike my predecessor who opted for a pro-independence policy which caused Taiwan a lot of trouble.
T: Do you think China will pressure you to change the political status quo?
M: Of course they hope we'll do it faster. Obviously they understand it is not a very urgent issue in the eyes of the Taiwanese people. You see, up to now, only one year into my presidency, people still have a lot of doubts about China. They fear their way of life is not something [China] can accept, particularly in terms of freedom and democracy, so obviously the time has not come for the two sides to negotiate something called unification. But on the issue of security, two years ago, [China President] Hu Jintao formally extended an offer to Taiwan, that we should sign a peace agreement. At the time, I was running for president, and I responded positively. But I think that we want to make it clear this is not an agreement on Taiwan's future buy rather it is a security issue. Taiwan's future is related to unification and I made it very clear that I won't touch that issue during my presidency.
T: How would you like China relations to progress in the next year?
M: We're now on the right track. Many American experts on China relations say relations between China and Taiwan are the best in 60 years. China can have a friendly relationship with Washington and Taipei and vice versa. A year from now, we certainly hope to achieve something on the ECFA issue and further normalize our relations with the mainland.
Secondly we hope we can avoid the marginalization of Taiwan as a result of regional economic integration in Asia. If we are able to have the ECFA with China, I think the pressure on our trading partners will be reduced. Many countries with whom we don't have diplomatic ties come to us now and say they feel a bit relieved, that if Beijing is ready to improve relations with you, why can't we? Taiwan is no longer a flashpoint in East Asia, and that's what we want. Opinion polls show the majority, sometimes a great majority, support our policies, but we still need to talk to our opposition. They always believe we are selling out Taiwan, but I keep telling everyone, "Listen, we're not selling out Taiwan, the only thing I sell out is Taiwan's fruit to the mainland."