By Angela Luh
Staff Writer

For the first time since the end of the civil war in 1949, China and Taiwan held direct talks this February in what seemed a sure indication of improved relations between the two long-time rivals. While few countries formally recognize Taiwan as an autonomous state, Taiwan has the unique position of having its own government and a democratic electoral system. These vast institutional and cultural differences have created long-term divisions in Taiwan’s domestic politics along what could be generalized as pro-China and anti-China lines. In light of their political tensions, the February meeting was a significant milestone for Cross-Strait relations. For China, the meeting demonstrated Taiwan’s willingness to cooperate in increased interregional trade. For Taiwan, it was a gesture of China’s recognition of its sovereignty.

Hardly a month later, things quickly turned south.

Many factors coalesced to spark the Sunflower Student Movement, one of the largest and longest protests in Taiwan’s history. As part of the Economic Cooperation Framework Agreement (ECFA) signed between China and Taiwan in 2010, the Cross-Strait Service Trade Agreement (CSSTA) opened Taiwanese services to Chinese investment, affecting domestic sectors like telecommunications, financial services, tourism and travel. Opposition in Taiwan toward the CSSTA was predictable. As with all free trade agreements (FTA) in which one economy is far more dominant than the other, Taiwanese dissenters feared that Chinese investment would leave Taiwan disproportionately dependent on the Chinese economy. FTAs typically benefit large firms and corporations while effacing small and medium-sized enterprises (SME), and thus, it was expected that opposition would be carried out by Taiwan’s sizable SME sector as well as other businesses that stood to lose from the FTA.

What wasn’t expected was the extraordinary scale of the protest.

On March 18, over 100,000 protesters across Taiwan, many of whom were students and graduates from Taiwan’s most prestigious universities, bypassed security forces to occupy the Legislative Yuan (parliament), effectively halting all government functions. The protest, termed the Sunflower Student Movement, began in part over the Kuomingtang (KMT) government’s attempt to pass the CSSTA on March 17 without a clause-by-clause review by the opposing Democratic Progressive Party (DPP). Opponents criticized the government for circumventing a democratic review of the agreement and for the lack of transparency in the legislature over the issue. Many others viewed further economic integration with China as a capitalist assault on Taiwan’s vulnerable domestic companies. But as the movement escalated and gained momentum throughout Taiwan and even worldwide, the protest shifted its focus to a far more resonant and contentious point: the fate of Taiwan’s independence in the hands of a rising China.

China’s rapid economic expansion and its aggressive stance in the East and South China Seas have left many of its neighbors nervous–but none more so than Taiwan. While China maintains that Taiwan is a breakaway province, the international community widely views it as an independent state. Taiwan has a grand international presence; currently, it has informal relations with 57 countries. Domestically, many Taiwanese, particularly those of the younger generation, are resolute in distancing themselves from Chinese culture and politics, arguably in an attempt to bring clarity and validity to Taiwan’s ambiguous international status. The desire for Taiwan’s continued de facto independence is common ground for Taiwanese civilians, even across party lines. Framing the protest as a defense of Taiwan’s autonomy was critical in mobilizing massive public support for the Sunflower Movement.

On a global scale, the support was also slanted in favor of the Taiwanese student protesters. Aside from viewing the parliamentary process as a breach of democracy and denouncing the government’s subsequent forceful restraint of protesters, observing countries fear a change in the status quo of East Asia. Some see Taiwan as a democratic beacon amid a region that is gradually becoming inextricably dependent on communist China. From a strategic standpoint, however, Taiwan is an entry-point for countries like the United States to insert their foreign policy and economic interests. Moreover, Taiwan’s “independence” is crucial in subduing what scholars have termed China’s “new assertiveness.”

The extreme lengths of the protest and the marred reputation of the Taiwanese government have suspended Cross-Strait dialogue on political issues for the time being. In straddling the fine line of interdependence, Taiwan recognizes the urgency of a boost to their floundering economy but also keenly resists over-reliance on China, which could leave Taiwan vulnerable to unification. Taiwanese business owners and government officials, who make up the majority of the pro-CSSTA constituency, have argued for stimulus through increased Chinese investment, but the dominant Taiwanese audience has decided that the cost of losing domestic sectors to Chinese infiltration outweigh the benefit of higher-valued industries.

Although the protest accomplished what it sought to do, Taiwan faces a number of political and economic challenges in its near future. Its economy is heavily export-oriented and trade-dependent, led by a high-tech sector that faces competition from advanced economies like Japan, the United States, South Korea, and increasingly from China. Its reliance on trade signals that Taiwan will inevitably need to secure an FTA with China. In addition, Taiwan needs as much foreign investment as it could receive to reposition its industries. With countries like South Korea signing numerous FTAs in the past few years, demand for Taiwanese goods will decline, as about 60% of South Korean exports overlap with Taiwan’s.

In the short-term, it is imperative for Taiwan to elevate itself on the international stage. Its overall positive political image when compared to China’s–as seen last year when Taiwan pledged twice the foreign aid for Typhoon Haiyan that a vindictive China did–will work in its favor to garner international support in future Cross-Strait conflicts. Regionally, Taiwan should forge closer relations with South Korea and Japan to discourage them from entering in multilateral agreements with China. Should it be excluded from major trade blocs, Taiwan will risk losing its competitive advantage, not just in regards to China but with its trading partners around the world.

Photo by Jeffrey Cuvilier


By Andrew Kim
Staff Writer

Despite China’s average per capita income–$1,000 compared to the U.S. average of $50,000– many economists say that the nation may soon become the world’s largest economy by sheer size. However, its long-term economic future is still cloudy and the country must significantly raise the living standards of hundreds of millions of its citizens in order to establish a truly strong, vibrant middle class. Judging by current indicators, especially the recent “FORBES Global 2000” report, that future may come much sooner than previously thought.

The FORBES Global 2000 is a list of the world’s largest public companies, as measured by certain criteria such as revenues, assets, market value and profits. Weighing the four categories equally, researchers have found that for the first time ever, China is home to the world’s three biggest public companies and five of the top 10 in the rankings. The top of the list is dominated by banks. Currently, the state-controlled Chinese bank ranks number one, China Construction Bank ranks number two, Agricultural Bank of China ranks third and Bank of China is fourth. The traditionally dominant winner (the United States) did not necessarily get pushed to a lower tier, being that the top five companies, in terms of market value, were American: Apple, Exxon Mobil, Google, Microsoft and Berkshire Hathaway.

While the United States accounts for the other half of the top 10 spots, the annual snapshot of today’s globalized business landscape still reflects the underlying changes in power dynamics between the East and the West. The United States holds onto the overall crown, given that it is the country with the most Global 2000 companies: 564. While Japan follows with 225, China (mainland and Hong Kong combined) added 25 to this year’s list, which was more than any other country. When changing total counts to reflect regional differences, Asia came in the lead with 674 companies, and North America came in second with 629.

What is truly remarkable is the sudden growth of Asian and predominantly Chinese companies, given that North America had over 50 percent more than Asia’s total number just over a decade ago. Moreover, the emerging markets of the Middle East, and Central and South America also gained significant headway throughout the last decade with 265 percent and 76 percent growth respectively.

When taking into account how the future IPO (Initial Public Offering) of the Chinese company Alibaba in American markets may be the biggest tech IPO in history (bigger than Twitter or Facebook), this trend is one that does not seem to be stopping.

In order for the trend to gain more significant headway, China’s government needs to enhance economic reform efforts, which by all measures and indicators it seems bent on doing. According to a publication by Bloomberg, the world is likely to see developments in the nation; predictions for change include: stronger anti-corruption reform, greater investment in technology and military, and massive public investment in Chinese universities.

By the last measure, it seems as though China is winning. The Chinese government has announced hundreds of millions of dollars to fund new investments in the C-9 (the top nine universities in China), and one simply needs to take a look around his or her college campus today to notice the plethora of international students from China. While the influx of international students will add to the diversity of a college campus and produce benefits in many intangible ways, it should be noted that the vast majority of such students will return back to their home country after graduation. In this regard, China will only continue to gain a massive influx in human capital over the coming years, with its collegiate population not only internationally cultured and educated, but also literate on matters regarding the economy and finance. As the traditionally Western dominant sectors of finance and business become more internationalized, it seems as if it is only a matter of time before China rises and maintains its position at the top.

Photo by Wikimedia


By Robin Kunst
Staff Writer

With the EU parliamentary elections only weeks away, it is time for a critical analysis of the direction of the EU. The financial pressure in the aftermath of the fiscal crisis has challenged the process of European integration. Propelled by the media, protests can be heard, blaming the better off countries–especially Germany–for their current crises.

It is true that the economically more stable countries give recommendations to countries like Greece on how to balance their national budget, and the European Central Bank (ECB) demands austerity measures as conditions for loans. This and the common perception that most of the pressure to save crisis-ridden countries has fallen on the middle classes adds to the widespread frustration with the EU.

While the crisis led to more cooperation among foreign leaders, something has been ignored – the will of the people. EU critics have been arguing for years that the power distribution in favor of the European Council, comprised of heads of states, at the expense of the European Parliament, the only part of the EU that is directly elected, causes a democratic deficit. As a result of the crisis, this deficit reached a new level. Bailout measures and institutions initiated to save the value of the euro turned into permanent mechanisms that are under no democratic or public oversight whatsoever.

The ECB already influences national economies by dictating conditions of austerity and a balanced budget. The creation of the permanent European Stability Mechanism (ESM), which was created in May 2010 and was just extended last year, reinforces this new framework of economic governance. The ESM is the permanent crisis solution for members of the Eurozone; it is a financial institution in Luxembourg over which neither the European Parliament nor national parliaments have any control. The same is true for the Troika – the body comprised of the ECB, IMF and EU Commission. These bodies do not have to justify their policy recommendations and conditions in front of any democratically elected institution. Their bureaucracy oversees and determines austerity and reform measures in Greece, Ireland, and Portugal – the three EU countries suffering the most economically. The decisions made by Troika and the ESM have far reaching consequences for the individual countries, as well as for the EU as a whole and all its citizens. It remains questionable as to why they are not held accountable for their actions as national leaders and parliaments would be.

Recent court decisions have dealt with this question. In Germany, the Federal Constitutional Court doubted the admissibility of the ECB’s unlimited ability to purchase government bonds of illiquid countries. The German court came to the conclusion that the decision should be made by European Court of Justice. The European Court of Justice now has to determine if ECB’s actions are legal in the European context. This referral of the decision to the European Court of Justice is a step forward, as it makes the EU more democratic by giving the European Court the ability to check its financial institution. However, this decision has been met with skepticism by European advocates.

The court’s ruling has been criticized by many German and EU politicians, who claim that it hinders European stability and integration efforts. These politicians intentionally ignore the fact that national courts are not bound by any obligation to obey a certain party’s idea of what is best for their nation regarding this European issue. Moreover, the courts simply decide according to their conscience to decide what is legal, as national constitutions intend. Critics conveniently oversee the fact that the EU Commission and Council intentionally break the rules of the Maastricht Treaty, which actually prohibits countries from providing guarantees on behalf of other defaulting countries by making themselves liable. By doing so, the EU politicians just add to the growing public frustration with its representatives and encourage the Euro-skeptic perception of the technocratic, contradicting nature of EU bureaucracy. These claims are usually brushed aside with the argument that the Eurozone crisis demanded exceptional measures.

It is clear that at the beginning of the crisis, when their monetary union began to crumble, urgent measures had to be undertaken in order to restore economic stability within the European Union. Nevertheless, these decisions and institutions, born out of the need for immediate action, must adopt democratic forms to be legitimate instruments for continued European integration and expansion. Unfortunately, national leaders in the EU take the lead in the decision making process and thus undermine the European Parliament’s authority.

Hope lies in the upcoming elections where, for the first time, the newly directly elected European Parliament will determine the President of the Commission, the EU’s executive leader who is in charge of initiating legislation and overseeing its implementation. Before, the office simply rotated among the various countries. Now, all major European parties will promote top candidates, and the party with the most votes will provide the President of the Commission. This gives more legitimacy to the office of the President and also allows for a different perception of the election. The role of the Commission and Parliament will now be given more meaning and legitimacy, and the Parliament’s say in decisions will not be so easily ignored. For the first time, decisions can be made together in a cooperative European context. National leaders will be forced to find ways to promote their domestic political interest against the backdrop of a European framework. They will have to justify their decisions not only in front of their national constituency, but also on a European platform.

Even if the upcoming elections are a step towards overcoming growing public frustration with the EU, the Eurozone crisis still aggravated the gap between rich and poor. It has led to the rise of nationalistic groups, especially in richer countries, who demand the return to their former national currencies. These voices take advantage of a growing anti-European sentiment, which is tied to the economic downturn. Populists continuously argue for dissociation from European unity, which encompasses fiscal and economic interrelationships. Right-wing parties are experiencing a remarkable upswing, as demonstrated in the latest municipal elections in France. The ruling Socialist Party under President Hollande suffered a stinging defeat against the conservative opposition, and the right-wing extremist Front National performed surprisingly well. However, a break with existing interrelationships and European treaties would only exacerbate further economic downturns and cause defaults of entire national economies. It remains to be seen how growing frustration with the system will play out in the future, especially in regards to further national elections that might indicate satisfaction or discontent with the current policies of the EU. It is clear though, that with growing anti-European sentiment, Brussels has to face yet another challenge in the upcoming elections.

Image by TPCOM