Taiwan's National Development Conference: Proposed Policy Changes and Implications for the United States

Taiwan's National Development Conference: Proposed Policy Changes and Implications for the United States

97-268 F
February 24, 1997
CRS Report for Congress
Received through the CRS Web
Taiwan’s National Development Conference:
Proposed Policy Changes and Implications for the
United States
(name redacted)
Senior Specialist in International Politics
Foreign Affairs and National Defense Division
Summary
Taiwan’s National Development Conference of December 1996 set forth policy
changes important to Taiwan, the People’s Republic of China (PRC), and the United
States. If implemented, these changes could exacerbate cross-Strait tensions and
complicate U.S. efforts to develop constructive engagement with the PRC while
sustaining close ties with Taiwan. Prospects for Taiwan’s implementing the changes are
mixed. U.S. options for dealing with the emerging situation range from quiet diplomacy
to direct U.S. mediation of Taiwanese-mainland differences.
Introduction
A multi-party National Development Conference (NDC) met in Taipei on December
23-28, 1996, marking a milestone in Taiwan’s decades-long transformation from
authoritarianism to democracy.1 Leaders from all major political parties, along with
relevant experts, charted policy proposals in three major areas:
! relations with the PRC across the Taiwan Strait;
! political reforms of Taiwan’s national, provincial and local governments;
! economic changes designed to strengthen the island’s international competitiveness.
At the NDC, the ruling Nationalist Party leadership under President Lee Teng-hui
agreed on most major issues with the leadership of the main opposition party, the
Democratic Progressive Party (DPP). The consensus formed what a senior Nationalist
1 For background see Taiwan, CRS Issue Brief IB96032.
Congressional Research Service ˜ The Library of Congress

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party representative called a “grand coalition” likely to dominate politics in Taiwan for the
foreseeable future.2
NDC proposals on economic reform were not controversial. Those dealing with
cross-Strait relations were criticized by Beijing but represented the consensus view in
Taiwan. Proposals on political reform were controversial both in Taiwan and in the PRC.
Prospects for implementing the policy proposals of the NDC are mixed. If proposals
in the areas of cross-Strait relations and political reforms are carried out, the likelihood of
a strong counteraction from Beijing increases. This would seriously complicate U.S.
interests in calming recent tensions in the Taiwan Strait and in concurrent U.S. efforts to
develop constructive engagement with the PRC while sustaining close U.S. ties with
Taiwan.
Context of Taiwan-PRC-U.S. Relations.3 This triangular relationship was seriously
strained following Taiwanese President Lee Teng-hui’s June 1995 visit to Cornell
University; Beijing’s subsequent use of intimidation tactics, including ballistic missile tests
and live-fire military exercises, before Taiwan’s legislative and presidential elections in
December 1995 and March 1996, respectively; and the strong U.S. response to Beijing’s
tactics, including the sending of two aircraft carrier battle groups to the Taiwanese area
in March 1996.
Since mid-1996, U.S. and PRC leaders have markedly improved the atmosphere if
not the substance of U.S.-China relations.4 Nevertheless, Beijing and Taipei remain locked
in an intense competition for international recognition and support. In January 1997,
Beijing vetoed a UN Security Council resolution in support of a peacekeeping force in
Guatemala due to Guatemala’s close relationship with Taiwan. After negotiations in
which Guatemala reportedly agreed to moderate support for Taiwan, Beijing approved the
UN peacekeeping plan for Guatemala.5
U.S. policymakers have repeatedly called for improved cross-Strait dialogue in order
to ease tensions between Taipei and Beijing in line with U.S. interest in regional peace and
development. The increasingly “zero-sum game” quality of Taipei-Beijing competition for
favorable attention from the United States and other powers also makes it difficult for U.S.
policymakers to take initiatives in support for one side for fear of alienating the other.
Most recently, for example, Taiwanese officials have pressed the case to their U.S.
counterparts that they expect the United States to beef up its official dialogue with Taipei
as the Clinton Administration carries out a series of high-level meetings with PRC leaders
over the next year.6
2 Comments by senior Nationalist Party official, made at Heritage Foundation Seminar on
Taiwan, February 6, 1997.
3 For background, see Taiwan, CRS Issue Brief IB96032.
4 See China-U.S. Relations, CRS Issue Brief IB94002.
5 New York Times, January 21, 1997, p 8.
6 Author’s consultations, Washington, D.C. December, 1996, January 1997.

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In spite of U.S. positions and policies, Taiwanese-PRC political dialogue remains at
a standstill. Each side maintains political positions that appear unbridgeable, although
economic, cultural, and other contacts continue to develop significantly. In particular,
Chinese officials have said privately that Beijing is so distrustful of Lee Teng-hui that the
PRC is prepared to wait until the end of Lee’s term before working with a more responsive
successor. Taiwanese officials say they are prepared to wait for Beijing to alter its stance,
and have focused their attention on the changes announced at the end of the National
Development Conference in late December.
Background and Results of the Conference.7 The National Development
Conference was called for by President Lee Teng-hui in his inaugural speech last May.
President Lee wanted the conference to define the future course of Taiwanese politics and
policy. After some delay — the conference had been planned to begin in September —
170 members of Taiwan’s political elite and relevant experts met for five days beginning
on December 23, 1996. The three major parties — the ruling Nationalist Party, the
opposition Democratic Progressive Party (DPP), and the opposition New China Party —
nominated their own delegates. Meetings occurred prior to the formal conference where
party delegates mixed with scholars and other experts to work out proposals for
consideration by the full body. In the end, the conference agreed on proposals in two main
areas — cross-Strait relations and economic policy. On the third major area of concern
to the conference — reform of Taiwan’s government structure — Nationalist and DPP
leaders were in agreement, while New China Party leaders disagreed.
On cross-Strait relations, there was consensus in support of Taipei’s current policy
toward the mainland. The delegates emphasized that Taiwan is one of two “equivalent
political entities” that make up China; that Taiwan has its own sovereignty and is not a part
of the PRC; and that Taipei will never accept the “one China-two systems” approach that
Beijing is using to incorporate Hong Kong and proposing as the basis for Taiwan’s
reunification with the mainland. The delegates also supported ongoing Taiwanese efforts
to join international organizations like the IMF, the World Bank, and the World Trade
Organization; further, they held that rejoining the United Nations was Taiwan’s “long
term” goal. They added that the burgeoning cross-Strait economic relations (about $30
billion in annual trade and $30 billion in cumulative Taiwanese investment in the PRC)
should not be allowed to jeopardize Taiwan’s national security. This suggested that the
Taiwanese government may take some steps to curb such investment and trade in certain
cases.
Economic goals endorsed by the conference did not generate much controversy. They
involved improving government efficiency; balancing the budget in five years; reducing
gradually the national debt; expanding the tax base; combining the business and personal
income taxes; gradually raising real estate taxes; and privatizing state- owned enterprises.
The controversial Taiwanese government reforms, which may require constitutional
amendment, called for a freeze in provincial government elections and efforts to reduce
and eliminate provincial government offices and functions said to be duplicative. The
7 See coverage in Free China Journal, January 4, 1997, as well as Far Eastern Economic
Review, January 9, 1997 and January 17, 1997. Taiwan officials reviewed the results of the NDC
at a seminar at the Heritage Foundation on February 6, 1997.

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President and the Legislature both were slated to get more power. The National
Assembly, the national body which amends the constitution, and the national watchdog
agency (the Control Yuan) were proposed to lose power. The changes proposed for the
Taiwanese provincial government triggered the most controversy as Provincial Governor
James Soong, and much of his administration, resigned. Soong also resigned from his
senior leadership position in the Nationalist Party. In January, Soong resumed his duties
pending approval of his resignation by the Premier.
Reaction. U.S. media and official comment virtually ignored the Taiwanese
developments. Some Clinton Administration officials nonetheless were privately concerned
about the direction of Taiwan’s policies and possible adverse PRC reaction. These
concerns reportedly were raised with senior officials from Taiwan visiting Washington for
the National Prayer Breakfast during early February 1997.8
PRC officials and official media have remained generally low keyed, although pro-
PRC media in Hong Kong criticized the results of the conference and what they mean for
Taiwanese-mainland relations.9 On January 29, 1997, Beijing’s People’s Daily, also
warned generally that China would not “stand idly by” as Taiwan implemented the NDC
proposals in a move toward Taiwanese “independence.”10 Some U.S. specialists have
judged that the Hong Kong accounts reflected prevailing views of Chinese officials
concerned with Taiwan.11 They surmised that Beijing is trying to avoid direct comment
in its own name for now. The PRC officials are presumably waiting to see if the
Taiwanese authorities actually implement the changes proposed by the National
Development Conference. PRC officials may also judge that prominent public complaints
from Beijing now would only increase the incentive for Taiwanese officials to carry out
their proposed reforms.
Beijing’s complaints continue to focus on President Lee Teng-hui. As reflected in the
pro-PRC Hong Kong media, Lee is charged with steering the Nationalist Party away from
its past emphasis on Chinese reunification and toward closer collaboration with the DPP,
a party which advocates Taiwanese self-determination. The criticism states that Lee and
his Nationalist Party allies have come together with the DPP leadership as the
overwhelmingly dominant force in Taiwanese politics, and that they have set forth a
political and governmental reform agenda in the National Development Conference that
will be implemented over the next year or so.
Beijing appears to fear that Lee and his allies will eliminate institutions and political
structures in Taiwan that reflect its status as a province of China, and will support
institutions and political structures in Taiwan that will boost Taiwan’s stature as an
independent government in world affairs. The criticism sees President Lee and his
Nationalist allies working closely with the DPP leaders to ease out the remaining leading
8 Consultations by author, February 7, 1997.
9 See notably Hong Kong Wen Wei Po editorial, January 3, 1997, replayed by Foreign
Broadcast Information Service, January 3, 1997.
10 People’s Daily editorial, January 29, 1997.
11 Author’s consultations with ten U.S. specialists on Taiwan, Washington, D.C., January-
February 1997.

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politicians in the Nationalist Party who were born on the mainland or whose families came
to Taiwan with Chiang Kai-shek in 1949. Provincial Governor Soong is the most
prominent of such “mainlander” leaders in Taiwanese politics today.
Outlook. It is unclear when, and if, Beijing will react more directly and strongly to
the changes in Taiwan. Some U.S. specialists think that President Lee and his allies have
chosen a “good time” to begin to carry out these changes, since the PRC leadership is
currently preoccupied with issues like Hong Kong’s reversion and the approach to the
Chinese Communist Party’s 15th Congress in late 1997. Presumably, Beijing has little
desire to complicate these delicate processes with a flare-up in cross-Strait tensions that
could involve the United States and possibly other powers. Perhaps, reflecting this
assessment, PRC spokesmen currently note in reference to changes in Taiwan that changes
on the island do not alter Taiwan’s status as “a province of China.”12 At the same time,
Chinese officials sometimes offer the private view that cross-Strait economic and other
exchanges, and China’s rising importance in world affairs, offset these negative trends in
Taiwan and make Taiwan’s reunification with the mainland “only a matter of time.”13
Moreover, there are still some obstacles for President Lee and his allies to overcome
in trying to carry out their reforms. Heading the list is Governor Soong and many of the
28,000 Taiwan provincial government officials who spend a budget of $13 billion a year.
Any significant government structural changes will probably require constitutional changes
enacted by the National Assembly. Some assembly members’ enthusiasm for the reforms
endorsed by the National Development Conference has been reduced because the
Conference also called for substantial weakening of the powers of the National Assembly.
Several specialists in Washington feel that the Conference’s success in carrying out
these ambitious reforms depends heavily on President Lee’s and his DPP counterparts’
ability to maintain party unity and discipline, especially in votes in the National Assembly.
If Lee succeeds in having the reforms implemented, the specialists note, Beijing may feel
it has no choice other than to respond directly and strongly to these steps which it views
as moving toward Taiwanese “independence.”
U.S. Policy Approaches. U.S. policy approaches appear to depend in part on
circumstances surrounding the proposed reforms in Taiwan’s government and its stance
on cross-Strait relations. If the reforms are delayed because of opposition from Governor
Soong, provincial legislators, National Assembly members or others in Taiwan, there may
be less likelihood of a harsh response from Beijing. In this case, U.S. policymakers in
Congress and the Clinton administration may feel little need to go beyond continued
private and public statements advising moderation and restraint on both sides in the
interests of easing tensions and resuming cross Strait political dialogue.
If the reforms are implemented and Taiwan adheres to its stated position on cross-
Strait relations, Beijing may feel compelled to react more strongly in order to dissuade
Taiwan from further steps toward “independence.” In this case, some U.S. policymakers
may show strong support for Taiwan, while others may want to take a stronger stance
stabilize the situation. One dilemma in this situation is that both Beijing and Taipei will be
12 Discussions with PRC government officials, Washington, D.C., January-February, 1997.
13 China conference, William and Mary University, February 8, 1997.

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acutely sensitive to any sign of the U.S. siding with one against the other. It is difficult to
imagine a public stance that the U.S. could take under these circumstances that would not
at least temporarily damage U.S. relations with Beijing, Taipei, or both.
Of course, Beijing may respond moderately to the Taiwanese reforms as they are
implemented. Unlike PRC judgments during the period of harsh rhetoric and military
actions in the Taiwan Strait following Lee Teng-hui’s visit to Cornell University in 1995,
mainland China leaders may see their interests better served by a low-keyed approach.
Such moderation would avoid further alienating the Taiwanese people; it could also reflect
PRC optimism that economic, other cross-Strait exchanges, and other factors will
eventually lead to Taiwan’s reunification with the mainland. U.S. policy under these
circumstances might not have to change substantially from current advocacy of cross-
Strait moderation and dialogue.
A more active U.S. approach designed to avoid renewed crisis in the Taiwan Strait
might involve U.S. mediation. Such mediation is opposed by many U.S.-China specialists
who recall the disastrous results of U.S. negotiating efforts to end the Chinese civil war
in the 1940s, and who judge that U.S. interests are likely to suffer since U.S. negotiators
are almost certain to alienate Beijing or Taipei. Other observers judge that the danger of
renewed military conflict in the Taiwan Strait is rising because of conflicting trends in
Taiwan and on the mainland. The danger that this conflict could directly involve U.S.
forces was illustrated by the deployment of two U.S. aircraft carrier battle groups to face
PRC military intimidation efforts in the Taiwan area in 1996. As a result, they feel, U.S.
policymakers may need to take risks associated with mediation, rather than face those of
direct U.S. involvement in miliary conflict in the Taiwan area.

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