Taiwan May Ease Mainland Trade Ban

A high-level Taiwanese panel began a three-day review of the island’s economic future Friday amid signs that the government is about to abandon increasingly futile efforts to limit commercial ties with mainland China.

The meeting, which comes as Taiwan appears to be heading for its first recession in more than three decades, was called by President Chen Shui-bian to explore ways of reinvigorating what only a year ago was widely viewed as one of East Asia’s most vibrant economies. But interest has focused on the government’s restraints of trade ties across the Taiwan Strait--policies viewed by a growing number of analysts as outdated, ineffective and damaging to the island’s future.

Sources following the debate believe that the panel of business and political leaders will urge an immediate easing of restrictions on trade with and investment in mainland China. Chen has pledged to implement recommendations of the panel.

Although the review is considered too sensitive to discuss publicly, a high-level government source involved said Friday, “It’s inevitable that policy is going in the direction of greater engagement with the mainland.”

Taiwan has restricted contacts with mainland China since the Nationalist armies of Chiang Kai-shek fled to the island in 1949 after losing a civil war against the Communists.

Although political tensions linger and Beijing has occasionally threatened to use force to reunite Taiwan with the mainland, China’s booming domestic market has proved too much for the island’s business community to resist.

About 800,000 Taiwanese entrepreneurs, owners of small businesses and young executives, lured by the potential financial gains and the glitz of cities such as Shanghai, have skirted or ignored Taipei’s official bans on direct trade with and personal travel to the mainland. Estimates of Taiwan’s cumulative capital investment in mainland China run as high as $70 billion.

“The forces for more social and economic contact across the Taiwan Strait come from the bottom up,” noted a senior government official who declined to be identified. “The people’s wishes will always overwhelm government policies they don’t believe in.”

Political analysts believe that greater trade will help reduce tensions across the strait--long considered one of the world’s potential hot spots. President Bush pledged in April that the United States would do “whatever it took to help Taiwan defend herself.” Just last week, two U.S. aircraft carrier battle groups conducted a one-day exercise in the South China Sea.

Speaking to a group of businesspeople here Friday, House International Relations Committee Chairman Henry J. Hyde (R-Ill.) echoed Bush’s commitment on Taiwan, declaring, “We must protect it.”

Pressures to ease restrictions stem mainly from Taiwan’s business community, which is frustrated by the choice of either sidestepping the law or forsaking potentially lucrative investments. As operating margins shrink in today’s business climate, the costs of skirting the law--usually by traveling or shipping through Hong Kong--have become an added burden.

The restrictions also have limited the access of Taiwan’s globally competitive high-tech industries to the mainland’s low-cost production facilities and reduced the island’s attractiveness to foreign companies as a regional business center.

Limits on capital flows diminish repatriation of profits, while an arduous visa process for most mainlanders prohibits Taiwanese companies from tapping China’s skilled labor pool for work on the island.

Despite all this, allowing greater ties with mainland China remains a politically volatile issue.

Hard-liners within Chen’s Democratic Progressive Party and followers of former President Lee Teng-hui want greater political distance between Taiwan and the mainland. They believe that deepening commercial involvement gives China dangerous political leverage that could easily compromise the island’s sovereignty.

Chen’s government also faces pressure from trade unions fearful that the migration of manufacturing jobs to the mainland will accelerate. About 300 union workers demonstrated Friday outside the building where the conference convened.