Taiwan: Overall Developments and Policy Issues in the 109th Congress

Taiwan: Overall Developments and Policy Issues in the 109th Congress

Order Code RL33510
Taiwan: Overall Developments
and Policy Issues in the 109th Congress
Updated September 17, 2008
Kerry Dumbaugh
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division

Taiwan: Overall Developments
and Policy Issues in the 109th Congress
Summary
U.S. officials saw relations with Taiwan as especially troubled during the 109th
Congress in 2005-2006, beset by the increasing complexity and unpredictability of
Taiwan’s democratic political environment as well as by PRC actions underscoring
Beijing’s assertion that it had the right to use force to prevent Taiwan independence.
In his second term that began in 2004, Taiwan’s President, Democratic Progressive
Party (DPP) member Chen Shui-bian, increasingly flouted commitments made to
U.S. officials and disavowed key concepts long embraced by his Nationalist Party
(KMT) opponents — the “status quo” that there is only one China and Taiwan is part
of it — and instead adopted the more provocative position that Taiwan’s “status quo”
is that it already is an independent, sovereign country.
Two developments concerning Taiwan were particularly nettlesome to U.S.
policymakers in 2005-2006. The first was Beijing’s enactment on March 14, 2005,
of a ten-article “anti-secession law” aimed at reining in Taiwan independence
advocates. While much of the law spoke of conciliatory measures — such as
encouraging cross-strait economic and cultural exchanges and resumption of direct
trade, air, and mail links — Article 8 of the anti-secession law specifically authorized
the use of “non-peaceful means” to reunify Taiwan with China. U.S. officials termed
the PRC anti-secession law counterproductive, particularly given improvements in
a range of Taiwan-China contacts since December 2004.
The second irritant was President Chen’s decision early in 2006 to scrap two
defunct but politically important symbols: the National Unification Council (NUC)
and the Guidelines on National Reunification (GNR). Chen’s original statement to
this effect, made on January 29, 2006, was a surprise to U.S. officials, who responded
by publicly reiterating the U.S. “one-China” policy and by exerting behind-the-scenes
pressure in Taiwan to forestall the action. But President Chen toughened his rhetoric
in ensuing weeks and reportedly made his final decision that the NUC and GNR
should “cease” at a special meeting of Taiwan’s National Security Council on
February 27, 2006. Chen linked this decision specifically to the PRC’s anti-
secession law targeting Taiwan.
In response to these two events and to other political developments in Taiwan
(notably a series of corruption scandals involving Chen administration officials and
the president’s family members, leading to plummeting political support), the Bush
Administration appeared to dial back its original public enthusiasm for supporting
Taiwan initiatives. While still pursuing a closer U.S. relationship with Taiwan, U.S.
officials and some Members of Congress spent 2005-2006 balancing criticisms of the
PRC military buildup opposite Taiwan with periodic cautions and warnings to the
effect that U.S. support for Taiwan was not unconditional, but had limits. This
report will no longer be updated.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Key Issues During the 109th Congress
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PRC Anti-Secession Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Abolishing the National Unification Council and Guidelines . . . . . . . . . . . 2
U.S. Expectations for Clarification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
History of the NUC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Decision-making Process and Motivations . . . . . . . . . . . . . . . . . . . . . . 4
Criticism and Other Reactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disappearance of the “No Force” Pre-condition . . . . . . . . . . . . . . . . . . 6
“Constitutional Re-engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
New Electoral Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
State-Run Enterprise Name Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Taiwan Corruption Scandals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Economic and Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Taiwan-U.S. Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
U.S. Arms Sales to Taiwan and Taiwan Defense Budget . . . . . . . . . . . . . . . 9
Taiwan-Mainland Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Increased Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Private Sector Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Opposition Party (KMT) Visits to China . . . . . . . . . . . . . . . . . . . . . . . 12
Policy Trends in 2005-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Taiwan Provocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Increasing Pressure for U.S. Involvement . . . . . . . . . . . . . . . . . . . . . . 13
Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Appendix: Chronology of Key Developments 2005-2006 . . . . . . . . . . . . . . . . . 17

Taiwan: Overall Developments
and Policy Issues in the 109th Congress
Introduction
Taiwan-U.S. relations during the 109th Congress in 2005-2006 continued to be
plagued by a number of factors, including: mistrust between the Bush and Chen
Administrations; adoption of an “Anti-Secession Law” by the People’s Republic of
China (PRC) aimed at Taiwan; growing PRC missile deployments opposite the
Taiwan coast; actions by President Chen Shui-bian’s administration that were
increasingly provocative to the PRC; corruption scandals involving senior Taiwan
administration officials; a decline in the extent to which Taiwan appeared willing to
fulfill U.S. expectations about its own self-defense; and the sheer volatility in
Taiwan’s domestic political environment. These and other issues posed challenges
to U.S. policy and Members of Congress. For additional information on U.S.-Taiwan
relations, see CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political
Relations; and CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990.
Key Issues During the 109th Congress
PRC Anti-Secession Law
Early during the 109th Congress, on March 14, 2005, the PRC adopted a ten-
article “anti-secession law” aimed at reining in Taiwan independence advocates.1
While much of the PRC law adopted then speaks of conciliatory measures — such
as encouraging cross-strait economic and cultural exchanges and resumption of direct
trade, air, and mail links — Article 8 of the anti-secession law specifically authorizes
the use of “non-peaceful means” to reunify Taiwan with China. According to Article
8:
In the event that the “Taiwan independence” secessionist forces should act under
any name or by any means to cause the fact of Taiwan’s secession from China,
or that major incidents entailing Taiwan’s secession from China should occur,
or that possibilities for a peaceful reunification should be completely exhausted,
the state shall employ non-peaceful means and other necessary measures to
protect China’s sovereignty and territorial integrity.
American observers and U.S. officials termed the PRC’s” anti-secession law”
counterproductive, particularly given improvements in a range of Taiwan-China
1 The measure was adopted by the PRC’s National People’s Congress. For the full text, see
[http://www.china.org.cn/english/2005lh/122724.htm].

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contacts since December 2004. Many saw the anti-secession law as a clear signal of
China’s potential rising military threat to Taiwan and feared it could significantly
raise tensions across the Taiwan strait. Critics also feared the law could be used to
harass independence advocates in Taiwan by, for example, labeling them “criminals”
and demanding their extradition from third party countries. For their part, Taiwan
authorities denounced the enactment of the law and temporarily suspended further
talks with Beijing on holding direct-charter cargo and holiday passenger flights
between the two sides. Chen’s 2006 decision to abolish the NUC and its guidelines
was the first policy decision he specifically linked to the 2005 PRC anti-secession
law.
Abolishing the National Unification Council and Guidelines
Many observers saw Taiwan President Chen Shui-bian as having shifted his
policy stance beginning in 2006 in favor of more active pro-independence positions
that were aggravating to Beijing and problematic for U.S. policy. One key such
controversy during the 109th Congress came as a result of President Chen’s
announcement on February 27, 2006, that Taiwan’s National Unification Council
(NUC) would “cease operations” and the Guidelines on National Unification (“the
Guidelines”) would “cease to apply.”
President Chen first mentioned he was considering scrapping the NUC and the
Guidelines on January 29, 2006. That statement was a surprise to U.S. officials, who
responded by publicly reiterating the U.S. “one-China” policy.2 A senior Taiwan
official in charge of cross-strait policy initially sought to soften the edges of Chen’s
January 2006 statement by saying that any decision was still a long way off.3 But
President Chen toughened his rhetoric in ensuing weeks, reportedly telling a visiting
U.S. congressman that the NUC and its guidelines were “an absurd product of an
absurd era” that should be abolished. The DPP’s Central Standing Committee voted
on February 22, 2006, to endorse the NUC’s abolishment.4 Chen reportedly made
his final decision that the NUC and GNR should “cease” at a special meeting of
Taiwan’s National Security Council on February 27, 2006.5
In the weeks following President Chen’s initial statement, there were
widespread press reports, which remained officially unconfirmed, that the White
House had quietly sent at least two and perhaps four special envoys to Taiwan to
2 The United States officially reiterated its policy in a press statement on January 30, 2006,
listed at [http://www.state.gov/r/pa/prs/ps/2006/60047.htm].
3 Joseph Wu, Chairman of the Mainland Affairs Council, at a February 2, 2006 news
conference. Magnier, Mark and Tsai Ting-I, “Taiwan official seeks to recast Chen’s
stance,” LA Times, February 3, 2006.
4 Dickie, Mure and Hille, Kathrin, Taiwan’s president labels unification body ‘absurd’,”
Financial Times, Asia, February 23, 2006, p. 2.
5 Chang, S.C. “President decides to cease NUC’s operation,” Central News Agency,
February 27, 2006.

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express grave U.S. concerns and to seek to head off the NUC decision.6 While this
effort reportedly proved unsuccessful, the softer formulation of the language in
Chen’s February 27, 2006 announcement — that the NUC and GNU would “cease”
functioning — was seen as a compromise worked out with Washington to assuage
strong U.S. concern over the cross-strait implications of “abolishing” both entities,
a decision that at least one PRC scholar opined could result in a “non-peaceful”
response by Beijing.7 According to one Taiwan news report, the compromise
language was reached on February 25, 2006, after “several weeks”of negotiations
between Washington and Taipei.8
U.S. Expectations for Clarification. In the days after President Chen
announced the “compromise” position on the NUC, Taiwan news accounts and a
story by the Voice of America (later corrected) reported that some key Taiwan
officials were maintaining that there was no difference between “cease to function”
and “abolish.” Reacting to the press accounts, U.S. officials issued a highly unusual
written statement on March 2, 2006, stating “We expect the Taiwan authorities
publicly to correct the record and unambiguously affirm that the February 27
announcement did not abolish the National Unification Council [and] did not change
the status quo....”9 According to a State Department official, the March 2 statement,
along with an earlier January 30 statement, represent the “coordinated, fully cleared
viewpoints” of the United States on the NUC decision.10 President Chen did not
provide these assurances until June 8, 2006, when he issued them publicly to
Raymond Burghardt, the chairman of the de facto U.S. office for Taiwan, the
American Institute in Taiwan (AIT).
History of the NUC. Long non-functional (the NUC last met in 1999), the
NUC and GNU had political significance largely as symbols of Taiwan’s
commitment to eventual cross-strait unification. One of four institutions under the
direct authority of Taiwan’s president, the NUC was established in 1990 under a
KMT government by executive order of Taiwan President Lee Teng-hui, then head
of the KMT. On February 23, 1991, the NUC adopted a set of Guidelines for
National Unification which reaffirmed Taiwan’s status as part of China (meaning the
Republic of China, not the PRC) and laid out the process by which unification with
China should be achieved. Although prospects for implementing the guidelines
6 Reports have named the two as National Security Council Asia specialist Dennis Wilder
and State Department Taiwan officer Clifford Hart. Tkacik, John, “Chen lets off steam,”
Wall St. Journal Asia, March 1, 2006, p. 13.
7 Chang, S.C., “PRC scholar warns of ‘non-peaceful response’ to Chen’s NUC game,”
Central News Agency, Taipei, February 23, 2006.
8 Cody, Edward and Faiola, Anthony, “Chen plans debate on Taiwan charter,” Washington
Post, p. A13, March 14, 2006. After his January 29th statement, President Chen asked
Taiwan’s National Security Council (NSC) to study the proposal and report to him on the
political and legal ramifications by February 27, 2006. The NSC proposed that the NUC
should cease to function.
9 The statement was released by Deputy Spokesman Adam Ereli on March 2, 2006. Full text
can be found at [http://www.state.gov/r/pa/prs/ps/2006/62488.htm]
10 Author’s conversation with a State Department Taiwan expert, March 10, 2006.

CRS-4
seemed remote (among other things, the initial phase required the PRC to implement
“both democracy and the rule of law” before consultations on unification can begin),
the “unification” focus of the guidelines appealed to KMT conservatives and
reaffirmed the KMT’s long-standing “one-China” policy.11 When Chen Shui-bian
became the first pro-independence DPP party candidate elected as Taiwan’s president
in 2000, he pledged five things, including that the abolishment of the National
Unification Council and Guidelines “will not be an issue.”
Decision-making Process and Motivations. It is not certain whether
the NUC decision grew out of a quiet, deliberative decision-making process within
a close group in the DPP “pan-green”coalition or whether it was born wholly intact
on January 29, 2006, when President Chen made his original reference to scrapping
the advisory body. What is clear is that Chen’s January 2006 statement appeared to
catch most observers by surprise, including high-ranking members of the DPP. The
United States officially stated that it had not been informed or consulted prior to
Chen’s statement.12 Taiwan’s Premier Su Tseng-chang, addressing the Legislative
Yuan (LY) about the NUC decision, told Taiwan lawmakers that he had known
nothing about the president’s plans to scrap the NUC before Chen’s public proposal
to do so over the Chinese New Year.13 Vice President Annette Lu publicly denied
any involvement in the NUC decision-making process.14
In another development suggesting that the NUC statement was largely a Chen
initiative, Taiwan officials and other observers initially offered multiple and
somewhat inconsistent arguments in response to the Chen announcement. On
February 1, 2006, Foreign Minister Huang Chih-fang described Chen’s January
announcement as a response to a recent LY resolution demanding the dissolution of
all ad-hoc commissions with no legal basis.15 DPP Chairman Yu Shyi-kun reportedly
argued that “The abolition [of the NUC] serves to help maintain the cross-strait status
quo.”16 (The DPP’s Central Standing Committee voted on February 22, 2006, to
endorse the NUC’s abolishment.17)
Likewise, President Chen’s motivations for the NUC decision were the subject
of much speculation. Some argued they were primarily driven by domestic political
11 For the full text of the guidelines, see [http://cns.miis.edu/straittalk/Appendix%2059.htm].
12 In a January 30, 2006 press briefing, Deputy State Department spokesman Adam Ereli
responded to a question on the statement with, “we certainly weren’t expecting it and we
weren’t consulted about it. So I’d say it was a surprise.”
13 The Premier reportedly made that comment on March 6, 2006 in response to a question
by Legislator Su Chi. “Opposition says Taiwan has ‘puppet Cabinet,’” The China Post,
March 7, 2006.
14 Ko Shu-ling, “NUC like something rotten in the fridge: Lu,” Taipei Times, March 9, 2006.
15 Wu, Sofia, “Chen’s speech has nothing to do with status quo change: Minister,” Central
News Agency English News, February 1, 2006.
16 “DPP resolves to call for abolition of NUC,” China Post, February 23, 2006.
17 Dickie, Mure and Hille, Kathrin, Taiwan’s president labels unification body ‘absurd’,”
Financial Times, Asia, February 23, 2006, p. 2.

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concerns, pointing out that both Chen’s and the DPP’s popularity ratings had sunk
to dismal levels in 2005 while opposition KMT chairman Ma Ying-jeou’s had
soared. The NUC decision, according to this view, undermined the KMT politically
and enhanced Chen’s own stature with the DPP’s radical base.18 Others claimed that
the NUC decision was just another demonstration of President Chen’s propensity for
“calibrated provocation” on issues involving the PRC and Taiwan’s political status.19
Whatever the motivations, the NUC decision appeared to serve multiple purposes:
it reminded both the PRC and the United States that Taiwan is an independent actor
with its own policy agenda; by redefining the public political debate, it distracted
attention from the DPP’s poor showing in local December 2005 elections; and it put
the KMT on the political defensive.

Criticism and Other Reactions. Members of the “pan-blue” KMT
opposition coalition denounced the NUC decision as an unnecessary provocation to
Beijing and a strain on U.S.-Taiwan relations. KMT head and potential presidential
candidate Ma Ying-jeou accused Chen of ignoring important economic and social
problems in his focus on sovereignty issues.20 The KMT initiated the first of several
recall petitions for President Chen for a vote in the Legislative Yuan, while the
People First Party (PFP) announced it would appeal to the Council of Justices to
impeach the president. The KMT also held a mass parade on March 12, 2006, to
protest the NUC decision.
Not surprisingly, PRC officials warned President Chen not to abolish the NUC
and strongly criticized his ultimate decision to cease its operations, saying it was “a
dangerous step toward the path of Taiwan independence.”21 By many accounts,
though, PRC reaction to the NUC decision was muted when compared to Beijing’s
previous reactions to provocative developments in Taiwan. In a statement on
February 26, 2006, for instance, the PRC’s Taiwan Affairs Office repeated the
warnings against moving toward independence that it had made in a 2004 statement
criticizing Chen Shui-bian’s re-election, but it avoided repeating the earlier
statement’s threat to “crush [moves toward independence] at any cost.”22 According
to some accounts, PRC officials appeared to be counting on U.S. pressure to mitigate
President Chen’s actions. In response to a U.S. reaffirmation of the “one-China”
policy, for instance, a Foreign Ministry spokesman on February 28, 2006, urged the
United States to “take practical actions” to oppose independence initiatives in Taiwan
18 “This is the situation in Taiwan...,” The China Post, March 8, 2006.
19 “A calibrated provocation: Taiwan and China,” The Economist, March 4, 2006
20 Han Nai-kuo, “KMT head urges president to focus on improving people’s livelihood,”
Central News Agency English, March 5, 2006.
21 In FBIS OSC Analysis: “PRC condemns Chen’s scuttling of NUC, looks to U.S. for
support,” CPF20060301329001, February 28, 2006, citing a Xinhua reference to a statement
by President Hu Jintao on February 28, 2006.
22 FBIS “PRC warns Chen on plan to abolish NUC,” CPF20060227515022, February 27,
2006.

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and to “refrain from sending the wrong signals to Taiwan independence separatist
forces.”23
Other critics of the NUC decision maintained that “ceasing operations” of the
NUC violated President Chen’s 2000 inaugural pledge and was a dangerous and
unnecessary provocation to Beijing that unilaterally changed the “status quo” in the
Taiwan Strait. But the decision’s supporters asserted that Beijing’s increasing
missile deployments opposite Taiwan and its adoption of an “Anti-Secession Law”
in 2005 (see below) violated the “no use of force” condition under which Chen’s
original pledge of 2000 was made. The NUC decision re-energized the “deep
greens” in Taiwan — those who strongly favor independence — who began calling
for the establishment of an “Anti-Annexation Commission” and who staged a series
of mass parades under the theme “Defending Democracy and Opposing
Annexation.”24
U.S. policymakers repeatedly affirmed their belief that the NUC had not been
abolished, merely frozen.25 But some U.S. policymakers wondered about the
prospects for other unexpected Taiwan policy initiatives, particular further moves
away from the “five noes” pledge. Some suggested, as did Senator John Warner at
a hearing of the Senate Armed Services Committee, that “if conflict were precipitated
[in the Taiwan Strait] by just inappropriate and wrongful politics generated by the
Taiwanese elected officials, I’m not entirely sure that this nation would come full
force to their rescue if they created that problem.”26 According to U.S. officials, the
central issue for American policy throughout the NUC remained the credibility of the
Taiwan government’s past and repeated promises, sometimes referred to as the “five
no’s” or the “four no’s and one without,” to abstain from changes to the “status
quo.”27
Disappearance of the “No Force” Pre-condition. In the wake of the
NUC decision, Taiwan officials began emphasizing what they termed the “pre-
condition” (if Beijing did not intend to use military force against Taiwan) that
accompanied Chen’s 2000 “five no’s” pledge. President Chen himself, in an
23 FBIS op. cit., February 28, 2006.
24 Taiwan Solidarity Union (TSU) legislator Tseng Tsahn-deng called on President Chen to
form the commission in a press conference at the Legislative Yuan on March 8, 2006, saying
that “the president’s decision to cause the National Unification Council to cease to function
doesn’t go far enough.” Shi Hsiu-chuan and Jewel Huang, “TSU asks Chen to form ‘Anti-
Annexation Commission,’” Taipei Times, March 9, 2006.
25 Former Deputy Secretary of State Richard Armitage echoed these U.S. sentiments after
a March 2006 trip to Taiwan, saying that in the U.S. view the NUC could “re-function
again” if necessary. “U.S. thinks NUC not abolished,” The China Post English, March 10,
2006.
26 From the Senator’s statement at a hearing of the Senate Armed Services Committee on
March 7, 2006, in response to a comment by Admiral William J. Fallon, USN Commander
U.S. Pacific Command, that the United States was “trying to walk a thin line” on the Taiwan
issue.
27 Author’s conversation on March 6, 2006, with an official of the U.S. Department of State.

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interview with a Japanese newspaper, reportedly said that the “pre-condition” for the
“five no’s” already had disappeared: “China legislated the Anti-Secession Law last
year to lay the legal groundwork for an armed invasion of Taiwan. In the past six
years, China’s intention to launch an armed attack has become very clear.”28 Others
in Taiwan echoed this sentiment more strongly, saying that “Now that one of the
‘five no’s’ has disappeared, so do the remaining four.”29 This argument raised
difficult challenges for U.S. policymakers who repeatedly emphasized the U.S.
expectation that the status quo be maintained and that Chen abide by his pledges.
“Constitutional Re-engineering.” Another potential implication of the
NUC decision in 2005-2006 concerned constitutional reform — one of six reform
priorities President Chen had advanced for the remainder of his term. The issue was
particularly sensitive as constitutional reform offered a number of opportunities for
changing the status quo, including: enshrining the “state-to-state” formula and
making changes to the official name of the Republic of China (violating two of
President Chen’s remaining “four no’s”); changing Taiwan’s official borders and
flag; and adopting a new constitution for a “Republic of Taiwan.”
Although President Chen and other Taiwan officials reiterated that
constitutional reform would follow specified procedures and would not make
changes to the political status quo,30 other Taiwan officials suggested more radical
changes might be possible — such as deleting reference to “unification” in the
constitution; adding a section forbidding changes to Taiwan sovereignty, including
forbidding PRC “annexation”; and permitting a referendum on Taiwan independence
or unification (another of President Chen’s “five no’s” pledges).31 On March 13,
2006, President Chen told the Washington Post that in constitutional reform, “we
should adopt an open attitude regarding these sensitive issues of whether to change
the national moniker, national territory, or national flag.”32
New Electoral Rules
In 2005, Taiwan adopted new electoral rules for its legislature, adopted under
an amendment to Taiwan’s constitution. The new rules, scheduled to go into effect
for legislative elections in January 2008, halved the size of the legislature to 113
members from its former size of 225 and increased the term of office from three
28 Interview conducted by Kiichiro Wakayama for Tokyo Yomiuri Shimbun, published
March 4, 2006. Translation gist in FBIS, JPP 20060306026001.
29 Quote by Huang Chao-tan, president of the Taiwan Independence Alliance, Opposition
lawmakers decided to freeze an arms purchase from the United States...” The China Post,
March 2, 2006.
30 On March 5, 2006, Vice Premier Tsai Ing-wen stated that President Chen would not
violate his ‘five no’ promises, including not declaring independence and not changing
Taiwan’s name. Wu, Sofia, “China’s offer to contact die-hard pan-greens helpful,” Central
News Agency, March 5, 2006.
31 DPP Legislator Wang Hsin-nan made the proposals in a meeting on drafting a new
constitution.
32 Transcript of Washington Post interview on March 13, 2006.

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years to four. The new rules also instituted a new single-member district system
employing two ballots for voters, similar to systems used in Germany and Japan: one
to be cast for a candidate and one to be cast for a political party. The new system was
thought to favor larger, well-organized parties and to put smaller parties and fringe
elements at a disadvantage.
State-Run Enterprise Name Changes
In another provocative move, in August-September 2006, Taiwan’s Premier
disclosed that the government would be changing the name of Taipei’s Chiang Kai-
shek International Airport to the “Taiwan Taoyuan International Airport” as a result
of a proposal put forward by the Ministry of Transportation and Communications.33
After that, the government continued a quiet and intermittent campaign to replace
references to “China” with “Taiwan” on Taiwan’s postage stamps and in the names
of Taiwan’s state-run entities — such as China Shipbuilding Corporation (changed
to CSBC Corp., Taiwan) and Chinese Petroleum Corporation (to “CPC Corp.,
Taiwan). The campaign, called the “rectification campaign,” was criticized by both
the KMT opposition party and by former President Lee Teng-hui of the pro-
independence Taiwan Solidarity Union (TSU) party as well as by U.S. officials.
Taiwan Corruption Scandals
In 2006, the administration of President Chen Shui-bian suffered grievous
damage from allegations of corruption by President Chen’s family members
(including allegations against his wife, Wu Shu-chen) and by government officials
close to the president. The most damaging of these began in early May 2006, when
the Taipei district prosecutor’s office started investigating allegations that President
Chen’s son-in-law, Chao Chien-ming, had profited in an insider trading scheme
involving the Taiwan Development Corporation. Chao was arrested on May 24,
2006. The following day, the Vice Chairman of the National Science Council was
taken into custody on suspicion of a profiteering scandal involving the award of a
contract to reduce vibrations from a new high-speed railway line in Taiwan County.
The scandals helped worsen Chen’s abysmally low approval rating, put at 16%
in one survey on May 19, 2006.34 In an effort to save his presidency, Chen on June
1, 2006, delegated authority for “day-to-day control” of the government to Premier
Su Tseng-chang and accepted the resignations of a number of his key advisors.
Taiwan’s opposition parties, however, called for Chen’s resignation, and on June 27,
2006, held a vote on a recall initiative in the legislature. Chen survived that recall
effort (it failed to get the 2/3 majority of 147 votes needed to pass), as well as a
second on October 13, 2006 (receiving 116 votes) and a third on November 24, 2006
(which received 118 votes).
33 Premier Su Tseng-chang, in “Taiwan pushes for renaming of Chiang Kai-shek Airport,”
Asia Pulse, September 1, 2006.
34 This result was obtained in a survey by Shih Hsin University. According to two separate
polls conducted by the Chinese language daily the China Times and by Taipei’s United
Daily News in late June 2006, Chen’s approval rating hovered in a 19%-22% range.

CRS-9
Economic and Trade Relations
Taiwan-U.S. Trade and Investment. Taiwan was the United States’ ninth-
largest overall trading partner, with two-way trade in 2006 valued at $62 billion, and
the sixth-largest destination for U.S. agricultural exports, about $2.5 billion annually.
In addition to agricultural goods, Taiwan’s U.S. imports included industrial raw
materials and machinery and equipment; its exports to the United States were largely
electronics and consumer goods. Once Taiwan’s largest trading partner, the United
States was surpassed by China and Japan and is now Taiwan’s third-largest trading
partner, supplying 11% of Taiwan’s imports and absorbing 14% of its exports. The
U.S. trade deficit with Taiwan increased by 19% from 2005-2006, reaching $15.2
billion in 2006.35
Special 301 Watch List. Taiwan has struggled for years with serious
problems protecting intellectual property rights (IPR). As a result, during the 109th
Congress in 2005-2006 Taiwan remained on the U.S. “Special 301 Watch List”
pursuant to provisions of the Trade Act of 1974. The U.S. Trade Representative
(USTR), however, determined that the Taiwan government continued to make
progress in improving its IPR regime in 2005-2006. In particular, Taiwan amended
its pharmaceutical law in 2005 to provide protection against unfair commercial use
of test data that pharmaceutical companies submitted for market approval, and it
increased raids and seizures against producers of counterfeit goods.
Free Trade Agreement (FTA). As it had in past years, Taiwan continued
to seek a Free Trade Agreement (FTA) with the United States during 2005-2006,
arguing that its status as a major trading partner of the United States justified an FTA
on economic grounds. President Chen and other Taiwan officials also made the case
that Taiwan needed an FTA with the United States to counteract China’s growing
economic dominance. U.S. officials cited a number of obstacles to an FTA with
Taiwan over the near term — not only trade matters, such as Taiwan’s poor record
on intellectual property rights (IPR), but also complicated political issues involving
both Taiwan’s and U.S. relations with the PRC. Taiwan’s FTA aspirations had
supporters in the 109th Congress, several of whom introduced measures regarding an
FTA for Taiwan.36
U.S. Arms Sales to Taiwan and Taiwan Defense Budget
Taiwan’s inability to take full advantage of a substantial U.S. military support
package approved for sale in 2001 became an increasing irritant in Taiwan-U.S.
35 According to the American Institute in Taiwan (AIT) in 2008,
[http://www.ait.org.tw/en/economics/]
36 H.Con.Res. 342, (Rep. Andrews), introduced on February 15, 2006; H.Con.Res. 346 (Rep.
Ramstad), introduced on February 16, 2006; December 18, 2007; and S.Con.Res. 84 (Sen.
Kyl), introduced on March 28, 2006, all expressed congressional support for the opening of
FTA negotiations with Taiwan.

CRS-10
relations during the 109th Congress.37 Political infighting blocked legislative
consideration of the arms procurement budget for purchasing much of the U.S. arms
package.38 In particular, members of the opposition “Pan Blue” coalition in Taiwan’s
Legislative Yuan lodged objections over: the multi-billion (U.S.) dollar cost of the
package (which the Taiwan government had pared back on several occasions in an
effort to win support); whether the types of weapons in the package met Taiwan’s
defense needs; the compatibility of the proposed purchases with Taiwan’s military;
and whether Taiwan companies could benefit or participate. In addition, some
members in the “Pan-Blue” opposition objected to Taipei’s decision to keep
submitting the procurement budget as a free-standing “special defense” budget rather
than as part of Taiwan’s overall annual defense budget. Commenting on the
stalemate on October 20, 2005, Taiwan’s President Chen Shui-bian said that the
Legislative Yuan’s continued boycott of the special defense budget was jeopardizing
Taiwan’s future.39
As early as 2002, U.S. officials had begun voicing concerns over what they
described as weaknesses in Taiwan’s self-defense and a lagging pace to Taiwan’s
arms purchases. According to a DOD report to the 109th Congress, the balance of
military power in the Taiwan Strait was steadily tipping further in the direction of
PRC superiority.40 As the defense budget stalemate in Taiwan continued, some U.S.
officials and Members of Congress began to question Taiwan’s level of commitment
to its own defense, implying that perhaps U.S. policy should be reassessed
accordingly.41 U.S. military experts in 2005-2006 reportedly grew more concerned
about the prospect of conflict scenarios in the Taiwan Strait that unfold faster than
the United States’ ability to respond — scenarios that place further importance on the
37 For further information, see CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since
1990, by Shirley Kan.
38 In 2003, Taiwan’s legislature did approve $800 million for the purchase of the four Kidd-
class destroyers. On December 8, 2005, the first two of these (now designated Keelung
class) arrived at the Suao naval base in northeastern Taiwan after having been refurbished
in South Carolina, reportedly by a Taiwanese work crew. The two destroyers were
commissioned in a December 17, 2005 ceremony in Keelung. Taipei Times, December 19,
2005, p. 3.
39 For a more complete discussion, see CRS Report RL30957, Taiwan: Major U.S. Arms
Sales Since 1990, by Shirley Kan.
40 For text of the 2005 DOD report, see [http://www.defenselink.mil/news/Jul2005/
d20050719china.pdf].
41 In a 2005 speech to the U.S.-Taiwan Business Council-Defense Industry Conference 2005,
Ed Ross, Director of DOD’s Defense Security Cooperation Agency, strongly criticized
Taiwan’s foot-dragging on passage of the defense budget, saying it was reasonable in such
a situation to question the level of U.S. commitment to Taiwan’s self-defense. “Perhaps
because America has moved with speed to meet the new [PRC military] challenge, many of
Taiwan’s friends in the United States regret that Taipei has failed to respond in kind.”
Statement by Clifford Hart, Jr., Director, Office of Taiwan Coordination, Department of
State, in remarks to the U.S.-Taiwan Business Council Defense Industry Conference,
September 12, 2006.

CRS-11
preparedness of Taiwan’s own military forces.42 Members of the 109th Congress
acted on their own concerns, in several instances writing letters to Taiwan officials
urging an end to the impasse on the special defense budget or an increase in Taiwan’s
regular defense spending. Criticism also came from the Taiwan side, as Taiwan
officials periodically accused the U.S. Navy of deliberately trying to subvert progress
on the 2001 diesel-electric submarine sale by over-inflation of estimated construction
costs and onerous funding requirements.43
Taiwan-Mainland Relations
Increased Contacts. Succeeding Taiwan governments since 1987
incrementally have eased long-standing restrictions on contacts with the PRC.
Several significant such decisions during the 109th Congress involved establishment
of direct charter flights between the PRC and Taiwan. On January 29, 2005, Taiwan
and the PRC launched the first non-stop (although temporary — only during the
weeks surrounding the Lunar New Year holiday on February 9, 2005) direct charter
flights flown in 55 years between the two adversaries. With the PRC’s enactment of
the anti-secession law in March 2005, Taiwan officials put a temporary hold on
further direct-flight talks. On November 18, 2005, this suspension was lifted, and
Taiwan and the PRC reached agreement to offer cross-strait flights for the Lunar
New Year from January 20-February 13, 2006. On June 14, 2006, Taiwan and China
simultaneously announced that they had reached agreement to allow up to 168 direct
annual round-trip charter passenger flights between China and Taiwan, shared evenly
between mainland and Taiwan airlines, during four public holidays and for other
special occasions.44 The flights began with the 2006 Mid-Autumn Festival.
Private Sector Exchanges. Meanwhile, unofficial Taiwan-PRC contacts
and economic ties continued to grow during the 109th Congress. E v e n w i t h t h e
official restrictions maintained on investment and trade with mainland China, Taiwan
businesses were increasingly invested across the strait, although the exact figures
remained unclear. Taiwan-China trade also increased dramatically during this period,
so that China (along with Hong Kong) came to surpass the United States as Taiwan’s
most important trading partner. According to Taiwan’s Bureau of Foreign Trade,
Taiwan’s total bilateral trade with the PRC reached $64.44 billion from January —
September 2006, accounting for 20.4% of Taiwan’s total foreign trade.45
This increasing economic interconnectedness with the PRC put special pressure
on Taiwan’s DPP government in 2005-2006 to further accommodate the Taiwan
42 Interview with former U.S. Government official, July 5, 2006.
43 Minnick, Wendell, “Taiwan claims U.S. Navy is sabotaging SSK plans,” in Jane’s
Defence Weekly, February 15, 2005.
44 The four holidays are: Lunar New Year, Tomb Sweeping Day, the Dragon Boat Festival,
and the Mid-Autumn Festival.
45 According to the Foreign Board of Trade, cited by Agence-France Presse in Taiwan News
online, March 3, 2005, [http://www.etaiwannews.com]. See also CRS Report RL31749,
Foreign Direct Investment in China, by Dick Nanto and Radha Sinha.

CRS-12
business community by easing restrictions on direct travel and investment to the
PRC. But such accommodations remained worrisome to the DPP’s pro-independence
political base in Taiwan, who believed that further economic ties to the mainland
would erode Taiwan’s autonomy and lead to a “hollowing out” of Taiwan’s industrial
base.46 Thus, each Taiwan decision on economic links with the PRC in 2005-2006
represented an uneasy political compromise.
Opposition Party (KMT) Visits to China. In addition to adopting the anti-
secession law, PRC officials during the 109th Congress sought to increase pressure
on the Chen government by inviting Taiwan opposition leaders to visit China and
meet with PRC President Hu Jintao in Beijing. Both Taiwan’s Nationalist Party
(KMT) chairman Lien Chan and People First Party (PFP) chairman James Soong
accepted these invitations, making eight-day visits to China in April and May 2005.
While some viewed the visits as a positive development for Taiwan-PRC relations,
others saw them as Beijing’s effort to exploit Taiwan’s internal political divisions
and further isolate President Chen.47 Some critics — in Taiwan and elsewhere —
accused Lien and Soong of helping the PRC more successfully to “sell” to the world
its claim that the intentions of its March 2005 anti-secession law were peaceful.48
At least half a dozen more Taiwan political groups undertook unofficial visits
to China after the Lien-Soong visits, and on August 16, 2005, KMT Chairman Lien
Chan further announced the formal start of grass-roots exchanges between KMT and
CCP officials from six different locations on each side, with Taiwan party officials
from Keelong, Hsinchu, Taichung, Changhua, Tainan, and Kaohsiung; and CCP
party officials from Shenzhen, Xiamen, Suzhou, Qingdao, Ningbo, and Fuzhou. U.S.
officials warned Beijing against using the party-to-party visits to drive a wedge
between Taiwan’s political parties, and stressed that Beijing should be talking to
President Chen and the elected Taiwan government.
Policy Trends in 2005-2006
When it first assumed office in 2001, the Bush Administration articulated
policies in Asia that were more supportive of Taiwan and less solicitous of
engagement with China than those of previous U.S. Administrations. But since then,
although U.S.-PRC relations remained remarkably smooth, other factors — the
PRC’s anti-secession law, Taiwan’s internal political divisions, and what was viewed
46 For instance, there are reportedly about 300,000 Taiwan citizens now living and working
in Shanghai.
47 “It’s classic divide-and-conquer strategy: Assemble the most allies possible and isolate
your enemy.” Jean-Philippe Beja, senior fellow at the Center for International Studies and
Research in Paris. Cited in Magnier, Mark and Tsai Ting-I, “China Tries New Tactic with
Taiwan,” Los Angeles Times, April 29, 2005, p. A-3.
48 According to Shen Dingli, a PRC foreign policy expert at Shanghai’s Fudan University,
“These invitations for Taiwanese to visit help China regain the international high ground in
cross-strait matters. And it deflects international focus from the anti-secession law.” Ibid.,
Los Angeles Times, April 29, 2005.

CRS-13
as President Chen’s more assertive and divisive push for separate Taiwan status —
began to pose growing problems for this U.S. policy approach.
Taiwan Provocations. Faced with competing pressures and with continuing
transformations in both the PRC and Taiwan systems, Bush Administration officials
in 2005-2006 at times appeared to be trying to rein in President Chen and seemed to
place more public caveats on U.S. support for Taiwan. Administration officials were
seen as particularly miffed by the National Unification Council controversy in the
spring of 2006, which caught U.S. officials by surprise and raised new concerns for
the White House about the credibility of the Chen administration. The
uncharacteristically pointed language in the State Department’s written March 2,
2006 statement directed at Taiwan appears to validate this view.49
During this period, U.S. officials and Members of Congress faced increasing
pressure to take any number of actions. These pressures included: to reassess the
fundamentals of U.S. China/Taiwan policy in light of changing circumstances; to
reinforce American democratic values by providing greater support for Taiwan and
possibly support for Taiwan independence; or to abandon Taiwan in favor of the
geopolitical demands and benefits of close U.S.-China relations.

Increasing Pressure for U.S. Involvement. For the most part, Taiwan
and PRC officials long have maintained that the United States should remain
uninvolved in issues concerning Taiwan’s political status. But prior to and during
the 109th Congress, U.S. officials came under subtle but increasing pressure from
both governments to become directly involved in aspects of cross-strait ties. PRC
officials late in 2003 began quietly urging the United States to pressure Chen Shui-
bian into shelving plans for an island-wide referendum. In 2004, they pressed U.S.
officials to avoid sending the “wrong signals” to Taiwan — defined as those
encouraging independence aspirations. Members of the Taiwan government began
suggesting to U.S. officials that the Taiwan Relations Act needed to be strengthened
or reevaluated, and sought U.S. support for Chen’s constitutional reform plans. In
the month between Chen Shui-bian’s January 2006 statement that he would consider
“abolishing” the National Unification Council and his February 2006 announcement
that the NUC would “cease” its operations, several rounds of meetings and talks
between U.S. and Taiwan officials were credited with the subtle but politically
important rhetorical change.
49 The March 2 statement reads: “We have seen reports that senior Taiwan officials have
said, with respect to the National Unification Council, that there is no distinction between
‘abolish’ and ‘ceasing activity’ and that the effect of Taiwan’s action earlier this week was
to abolish the Council. We have been informed, however, that the reports misquoted
Taiwan officials. We expect the Taiwan authorities publicly to correct the record and
unambiguously affirm that the February 27 announcement did not abolish the National
Unification Council, did not change the status quo, and that the assurances remain in effect.
Our understanding from the authorities in Taiwan was that the action Taiwan took on
February 27 was deliberately designed not to change the status quo, as Chen Shui-bian made
clear in his 7-point statement. Abrogating an assurance would be changing the status quo,
and that would be contrary to that understanding. We believe the maintenance of Taiwan’s
assurances is critical to preservation of the status quo. Our firm policy is that there should
be no unilateral change in the status quo, as we have said many times.”

CRS-14
Taiwan’s supporters within the U.S. Congress continued to press for more
favorable U.S. treatment of Taiwan and for Taiwan’s inclusion in some capacity in
international organizations like the World Health Organization. Congressional policy
initiatives included efforts to raise the level of U.S.-Taiwan military engagement and
to reinforce or expand on U.S.-Taiwan ties. The House passage of the Tancredo
Amendment on June 28, 2006 (see Legislation below) was a strong signal that
sentiment in the 109th Congress appeared to be leaning toward more direct and less
secretive U.S.-Taiwan interactions.
Legislation
P.L. 109-102 (H.R. 3057). Appropriations for Foreign Operations, Export
Financing, and related programs for FY2006. The House version provided
presidential authority for NATO allies, major non-NATO allies, and Taiwan to waive
the prohibition of Economic Support Funds (ESF) for signatories to the International
Criminal Court who do not have exempting agreements with the United States.
Introduced in House June 24, 2005 (H.Rept. 109-152). House passed the bill,
amended, by a vote of 393-32 on June 28, 2005. Referred to the Senate Committee
on Appropriations on June 29, 2005, and ordered reported, amended, on June 30,
2005 (S.Rept. 109-96). The Senate passed the bill, amended, on July 20, 2005 (98-
1), including a provision to provide ESF funds to Taiwan for the purposes of
furthering political and legal reform. The Senate asked for a conference. Conference
Report H.Rept. 109-265 was filed on November 2, 2005, including the two Taiwan
provisions in the House version and the Taiwan provision in the Senate version. The
House adopted the Conference Report on November 4, 2005 (358-39) and the Senate
on November 10, 2005 (91-0). The bill became P.L. 109-102 on November 14,
2005.
P.L. 109-163 (H.R. 1815). Authorizing appropriations for the Department of
Defense for FY2006. Introduced April 26, 2005. H.Rept. 109-89. The final Act was
the result of a conference. Sec. 535 provides incentives to cadets and midshipmen
to study key languages, including Chinese; Sec. 1211 prohibits the Secretary of
Defense from procuring any goods or services from a “Communist Chinese military
company,” except on a waiver for national security reasons; Sec.1234 states the sense
of Congress that the White House should “quickly” present to Congress a
comprehensive strategy to deal with China’s economic, diplomatic, and military rise,
including specific mention of what areas such a strategy should address. In
conference, the House receded on several key measures in its bill: on a measure to
mandate “at least” one class field study trip annually to both Taiwan and the People’s
Republic of China (PRC) by military education classes of the National Defense
University; on a measure to require regular senior U.S. military exchanges with
Taiwan military officials; and on a measure to prohibit the Secretary of Defense from
procuring goods or services from any foreign person who knowingly sells to the PRC
items on the U.S. munitions list. House action: After Committee and Subcommittee
mark-ups, reported (amended) by the House Armed Services Committee on May 20,
2005 (H.Rept. 109-89). Referred to the House on May 25, 2005, and passed by a
vote of 390-39. Referred to the Senate Armed Services Committee on June 6, 2005.
Senate action: On November 15, 2005, the Committee was discharged, the Senate

CRS-15
considered the bill under unanimous consent, and the Senate passed the bill after
incorporating the language of S. 1042. Conference action: Conferees filed a
conference report on December 12, 2005 (H.Rept. 109-360), and the House passed
it on December 19, 2005 (374-41). The Senate agreed to the Report by voice vote
on December 21, 2005, and the President signed the bill into law on January 6, 2006,
with a clarifying statement ([http://www.whitehouse.gov/news/releases/2006/01/
20060106-12.html]).
P.L. 109-364 (H.R. 5122 — Hunter). National Defense Authorization Act for
FY2007. Conference Report H.Rept. 109-702 was filed on September 29, 2006. The
House passed the Conference Report on September 29, 2006 (398-23), and the
Senate by unanimous consent on September 30, 2006. The bill was presented to the
President for signature on October 5, 2006, and became P.L. 109-364 on October 17,
2006. As enacted, the Conference Report contained none of the measures on Taiwan
that the House passed in its version of the bill. These were: requirements that the
National Defense University (NDU) include visits to both the PRC and Taiwan as
part of the course of military study; that senior military officer and official exchanges
be held with Taiwan; and that the United States not procure goods or services from
any foreign entity who knowingly sells to the PRC items on the U.S. munitions list.
Section 1221 of the House bill required the United States to submit to Taiwan plans
for design and construction for diesel electric submarines, subject to the provisions
of the Arms Export Control Act (22 U.S.C. 2751 et seq.) and any other export control
law of the United States.
The House version of the bill was introduced on April 6, 2006. The House
Armed Services Committee reported its version (60-1) on May 5, 2006 (H.Rept. 109-
452), and the House passed the bill (amended), including the Taiwan measures, on
May 11, 2006 (396-31). It was later passed on May 11, 2006, by a vote of 396-31.
The Senate bill (S. 2766) contained no Taiwan provisions. On June 22, 2006, the
Senate struck all after the enacting clause and substituted the language of S. 2766,
passing that measure by unanimous consent, necessitating a Conference.
H.R. 5672 (Wolf). Science, State, Justice, Commerce, and Related Agencies
Appropriations Act, 2007. The House Appropriations Committee reported an
original measure on June 22, 2006 (H.Rept. 109-520). On June 28, 2006, the House
passed the Tancredo amendment (H.Amdt. 1124) to prohibit the State Department
from spending funds to enforce long-standing “guidelines” for official U.S.-Taiwan
relations. (Among other things, the 1979 guidelines prohibit U.S. Executive Branch
officials from meeting with Taiwan officials in U.S. federal buildings or from
corresponding directly with Taiwan officials unless through the American Institute
in Taiwan (AIT).) The House passed the final measure, amended, on June 29, 2006
(393-23), and the bill was referred to the Senate. The Senate Appropriations
Committee marked up the measure on July 13, 2006 (S.Rept. 109-280), and the
measure was placed on the Senate calendar. There was no further action.
H.Con.Res. 76 (Miller). Expressing the sense of Congress that the United
States should strongly oppose China’s anti-secession law with respect to Taiwan.
Introduced on February 17, 2005, and referred to the House Committee on
International Relations; and to the Subcommittee on Asia and the Pacific on March
17, 2005.

CRS-16
H.Con.Res. 98 (Hyde). Expressing the “grave concern” of Congress about
China’s passage of an anti-secession law aimed at Taiwan. Introduced March 15,
2005. The measure passed on March 16, 2005, by a vote of 424-4, and was referred
to the Senate Foreign Relations Committee. There was no further action.
H.Con.Res. 219 (Andrews, R.). Expressing Congress’s grave concern over
China’s continued deployment of ballistic missiles opposite Taiwan. The bill also
expresses Congress’s sense that the President should: seek from China a renunciation
of the use of force against Taiwan; abolish all restrictions on high-level military visits
to Taiwan; authorize the sale of the Aegis system to Taiwan. The bill was introduced
on July 27, 2005, and referred to the House International Relations Committee.

CRS-17
Appendix: Chronology of Key Developments
2005-2006
11/24/06 —
President Chen survived a third vote in the Legislative Yuan (which
received only 118 votes) to recall him.
11/16/06 — The PRC and Taiwan delegates to APEC clashed after the PRC
delegate said only “sovereign countries” had the right to sign free
trade pacts.
11/16/06 —
The PRC said it would consider setting up a business association at
the national level for Taiwan businessmen operating in the mainland.
11/15/06
— Mayor Ma Ying-jeou apologized after prosecutors revealed
irregularities in his office’s handling of the special mayoral
allowance. Ma called the irregularities “administrative defects.”
11/03/06 —
Prosecutors in Taiwan indicted Wu Shu-jen, wife of President Chen
Shui-bian, and three close aides on charges of embezzlement, forgery,
and perjury. The President himself was described as a “perpetrator,”
with the implication that he would be indicted when he left office.
Sitting Presidents are immune from prosecution.
10/25/06 —
Speaking at The Heritage Foundation, Secretary of State Condoleezza
Rice responded to a question by reiterating the U.S. “one-China”
policy, saying that under the Taiwan Relations Act, the United States
is obligated “to help Taiwan defend itself.”
10/24/06 —
Taiwan’s opposition-controlled legislature again blocked a military
weapons procurement budget.
10/13/06 — Taiwan President Chen Shui-bian survived a second legislative
attempt to recall him. The recall motion received 116 of the 147
votes needed for the required two-thirds majority for passage.
10/03/06 —
According to a Reuters report, the United States temporarily blocked
the sale of 66 F-16C/D fighter jets to Taiwan after the Taiwan
legislature’s repeated failure to pass a defense budget to purchase a
2001 U.S. weapons sales package.
09/29/06 — Taiwan-PRC direct cross-strait flights began for the Mid-Autumn
Festival.
06/28/06 — The House agreed by voice vote to the Tancredo Amendment
(H.Amdt. 1124) to H.R. 5672 to prohibit funds from being used to
enforce long-standing “Guidelines on [U.S.] Relations with Taiwan.”

CRS-18
06/27/06 —
An insufficient 2/3 majority having voted in the affirmative, Taiwan’s
legislature rejected the first recall petition for President Chen Shui-
bian.
06/20/06 —
Chen Shui-bian gave a two-hour television speech defending himself
against the opposition’s charges of corruption and malfeasance.
06/18/06 — According to a China Times opinion poll, 53% of respondents
believed President Chen should step down.
06/18/06 —
The Taiwan Society, a new pro-independence organization in Taiwan,
announced its official establishment.
06/16/06 —
Taiwan and Nicaragua signed a Free Trade Agreement in Taipei.
06/14/06 —
Taiwan and China announced simultaneously that they had reached
agreement to allow up to 168 direct round-trip charter passenger
flights between China and Taiwan, shared evenly between mainland
and Taiwan airlines, during four public holidays: Lunar New Year,
Tomb Sweeping Day, the Dragon Boat Festival, and the Mid-Autumn
Festival. In Beijing, China’s General Administration of Civil
Aviation said the two sides had agreed “on the framework of
chartered flights for festivals and special cases.”
06/13/06 —
Taiwan’s Legislative Yuan voted to hold a special legislative session
through late June to consider a recall motion for President Chen over
corruption allegations involving his family and his key advisors. The
opposition plans to hold a vote on the petition on June 27th, which
must pass by a 2/3 vote and then be subjected to a public referendum.
It also voted (113-96) to have a special screening committee to begin
hearings on whether Chen should be recalled.
06/10/06 — Demonstrations were held in Taiwan for the second consecutive
weekend calling for the resignation of President Chen Shui-bian.
06/08/06 — The State Department issued a press statement expressing U.S.
pleasure at President Chen Shui-bian’s “public reaffirmation” on June
8 of his promises to the United States to make no changes in the
status quo and to exclude any sovereignty measures in a revision of
Taiwan’s constitution. The statement said the United States “attaches
profound importance” to the pledges.
06/07/06 —
Raymond Burghardt, chairman of the American Institute in Taiwan
(AIT), arrived in Taiwan for discussions concerning Taiwan’s
political situation.
03/24/06 —
The Taipei Times reported that the six “non-institutional bodies” that
the LY ruled should be dissolved (in January 2006) are: the Science
and Technology Advisory Committee; the preparatory group for the
national human rights memorial museum; the Gender Mainstreaming

CRS-19
Advisory Panel; the Constitutional Re-engineering Office; the Youth
Corps; and the Human Rights Advisory Committee. (President Chen
cited this LY decision when he announced the cessation of the NUC.)
03/23/06 — President Chen reiterated (in his online newsletter) that Taiwan
should be able to join the United Nations using the name “Taiwan.”
03/22/06 —
Ma Ying-jeou visit. Taipei Mayor Ma Ying-jeou arrived in
Washington, DC, and addressed a luncheon meeting hosted by
Heritage and AEI. The following day, he addressed a morning
meeting of CSIS and Brookings, a luncheon meeting hosted by the
U.S.-Taiwan Business Council, and a later meeting at the National
Press Club. He unveiled his “five ‘do’s’” (or “five yesses”) proposal,
including: (1) resume interrupted cross-strait talks on the basis of the
“‘92 consensus,” (2) a negotiated 30-50 year peace treaty with the
PRC, (3) facilitation and acceleration of economic exchanges,
including direct air links, etc., (4) a “modus vivendi” on Taiwan’s
participation in the international community, both bilaterally and
multilaterally, based on pragmatism, and (5) acceleration of cross-
strait cultural and educational exchanges. (Mentioned PRC degrees
being obtained by 5,000 Taiwan students are not being recognized by
current Taiwan government.) During his trip, Ma reportedly also met
with Deputy Secretary of State Bob Zoellick; Assistant Secretary of
East Asia Chris Hill; Deputy National Security Advisor Jack Crouch;
and NSC China specialist Dennis Wilder. (He reportedly also met
with Barbara Schrage; David Dean; David Laux; Nat Bellocchi; and
David Brown.)
03/22/06 —
The Taiwan government announced a new regulatory framework of
approval, on a case-by-case basis, for large investments involving
“sensitive technology” in China; also, an effort to force Taiwan
businesses to disclose their interests, and the leaving in place of a
40% cap (on a company’s net worth) on PRC investments.
03/19/06 — Taiwan’s pan-blue opposition staged a protest (“Voicing your
indignation at A- Bian”) for the second anniversary of the March 19,
2004 assassination attempt of President Chen and Vice President Lu.
After criticizing Chen’s NUC decision before the crowd (“He’s told
the U.S. side one thing, the Taiwanese people another”), KMT
Chairman Ma Ying-jeou left for a ten-day U.S. visit.
03/18/06 — Taiwan’s ruling pan-green coalition staged a protest (“Defending
democracy and opposing annexation”) protesting China’s Anti-
Secession law and military threats.
03/17/06 —
Ma Ying-jeou said the KMT had reached consensus on a “reasonable
purchase” of U.S. arms, but did not pass the package in the wake of
Chen’s NUC decision because it did not want to appear to endorse the
decision.

CRS-20
03/13/06 — KMT candidate Chiang Yi-hsiung won a legislative by-election in
Chiayi City, a stronghold of the DPP. The election results mean that
the KMT will be tied with the DPP as the largest party in the LY,
each with 88 seats. (The PFP controls 24 seats.) Counting
independence legislator Lee Ao, the KMT/PFP coalition will control
113 out of the 223 LY seats.
03/02/06 —
State Department spokesman Adam Ereli issued a written statement
saying that the United States expected the Taiwan authorities to
unambiguously and publicly clarify that the NUC had been abolished,
the status quo maintained, and that the Chen Shui-bian assurances
were still in force.
02/27/06 — President Chen Shui-bian announced officially that the NUC and
GNR had “ceased to function” and “ceased to apply.”
02/08/06 —
China denounced Chen Shui-bian as a “troublemaker and saboteur”
for his remarks on the Unification Council.
02/05/06 —
Taiwan Minister of Foreign Affairs James Huang rebutted a report
that the United States was angry at Taiwan for President Chen Shui-
bian’s New Year’s Day proposal to scrap the National Unification
Council and unification guidelines.
02/04/06 —
Japan’s foreign minister, Taro Aso, attributed Taiwan’s high
educational levels to Japan’s occupation of the island before World
War II.
02/01/06 —
The U.S. State Department sharply criticized Chen’s New Year’s Day
statement as “an effort to change the status quo.”
01/31/06 — In a New Year’s Day speech, Taiwan president Chen Shui-bian
proposed scrapping the National Unification Council and unification
guidelines and seek U.N. membership under the name “Taiwan.”
01/29/06 —
President Chen Shui-bian said it was time to scrap Taiwan’s National
Unification Council and its unification guidelines — a statement
Beijing condemned him for.
01/27/06 —
According to the China Post, Taiwan received an official U.S. letter
asking it to approve the appointment of Stephen Young as new AIT
director to replace Doug Paal.
01/26/06 —
President Chen Shui-bian called on the DPP to “uphold the core value
of ‘Taiwan identity’” in preparing for a second “Economic
Development Advisory Conference.”
01/25/06 — Taiwan AIT Director Doug Paul left Taiwan after 3½ years in his
position. Deputy Director David Keegan will serve as acting AIT
director until a replacement is chosen.

CRS-21
01/23/06 —
Taiwan’s cabinet resigned, with new appointees (scheduled to be
sworn in January 25) apparently closer to president Chen’s policies
than their predecessors. Mark Chen (outgoing Foreign Minister), will
head the Presidential Office; James Huang (Deputy Foreign Minister)
will become Foreign Minister; Su Tseng-chang will replace Prime
Minister Frank Hsieh, who resigned earlier in the month.
01/23/06 —
Taiwan’s Central News Agency reported that New Tide, a moderate
faction of the DPP, had conducted a study concluding there is a high
likelihood of miscalculation in cross-strait relations.
01/17/06 —
According to the LA Times, Taiwan Premier Frank Hsieh submitted
his resignation after the DPP’s ignominious electoral defeat.
01/15/06 —
A close intimate of President Chen Shui-bian (Yu Shyi-kun) won an
absolute majority as new DPP chairman.
01/09/06 —
The Financial Times (Asia) reported that Ma Ying-jeou, KMT
chairman, said he would use the KMT’s legislative majority to force
President Chen to establish direct cross-strait transport links — first
removing statutory impediments to such a move, and then holding a
referendum if the President did not open direct links.
01/01/06 — In his New Year’s Day address, Taiwan president Chen Shui-bian
announced that strengthening the island’s separate identity would be
his top priority for the remainder of his term, along with devising a
new constitution for Taiwan.
12/15/05 —
After first announcing she would step down, Taiwan Vice President
Annette Lu reversed course and announced she would stay on as
acting chair of the DPP.
12/15/05 — Taiwan’s Vice Minister for National Defense, Huo Shou-yeh,
announced Taiwan would be building an airfield on one of the larger
Spratley islands.
12/08/05 —
The first two (out of four) U.S. Kidd-class destroyers sold to Taiwan
arrived at Suao Naval base in northeast Taiwan. The destroyers were
delivered to the Taiwan navy on October 29th from a Charleston,
South Carolina, shipyard.
12/03/05 —
The DPP was soundly defeated in Taiwan’s local elections for city
mayors and county magistrates, retaining only 6 out of 23
constituencies, while the opposition KMT won 14.
11/25/05 — The PRC announced that six mainland airlines would run special
Lunar New Year cross-strait charter flights: Air China, China East
Airlines, China Southern Airlines, Shanghai Airlines, Hainan
Airlines, and Xiamen Airlines.

CRS-22
11/18/05 —
Taiwan and the PRC reached agreement to offer cross-strait flights
for the Lunar New Year from January 20-February 13, 2006.
10/26/05 —
The United States notified Congress that it had approved for sale to
Taiwan 10 AIM-9M Sidewinder missiles and 5 AIM-7M Sparrow
missiles, worth as much as $280 million, both systems manufactured
by Raytheon. The sale also reportedly included logistics support for
F-16 aircraft and continuation of a pilot training program.
10/20/05 —
Speaking in Washington, DC, during a two-week U.S. trip, former
Taiwan President Lee Teng-hui called on the international community
to recognize Taiwan as an independent country.
09/25/05 —
Thousands of Taiwan citizens marched through Taipei to protest the
legislature’s delay in passing the “special arms budget” to purchase
American weapons.
09/20/05 — Edward Ross, a senior Pentagon official, said it was reasonable to
question whether the United States should continue to provide for
Taiwan’s self-defense “if Taiwan is not willing to properly invest in
its own self-defense.”
09/08/05 —
According to a report in Bloomberg cited by TSR, the PRC’s China
Development Bank agreed to offer 30 billion yuan ($3.7 billion) in
loans to Taiwan companies wanting to invest in China.
09/07/05 —
Ma Ying-jeou (KMT) and James Soong (PFP), Taiwan’s two main
opposition party leaders, announced they would jointly oppose the
$NT340 special defense budget to purchase American weapons.
09/06/05 — Taiwan held a high-profile navy drill to test the capabilities of its
Dutch-built Sword Dragon-class submarine.
08/28/05 —
The Taipei Times reported that regular high-level U.S.-Taiwan
military talks — called the “Monterey Talks” for their California
location — would be postponed this year from their scheduled dates
of September 13 and 14 until later in September. According to the
report, U.S. officials said the postponement is because U.S. officials
don’t want to be distracted by President Hu Jintao’s mid-September
visit.
08/24/05 —
Taiwan withdrew from legislative consideration a special budget for
purchasing U.S. weapons. Reportedly, the special budget is being
slashed from $480 NT to around $370 million in order to garner more
support from opposition lawmakers.
08/24/05 —
China announced that tuition for Taiwan students at PRC universities
will be slashed by more than half; beginning next month, tuition for
Taiwan students will be the same as tuition for mainland students.

CRS-23
08/18/05 —
China and Russia began an eight-day joint military exercise off the
Shandong Peninsula — their largest joint military exercise in modern
history, involving nearly 10,000 troops.
08/17/05 —
Taiwan’s army and navy conducted joint military exercises designed
to counter a PRC amphibious invasion and blockade.
08/16/05 —
KMT Chairman Lien Chan announced the formal start of grass-roots
exchanges between the KMT and the CCP. The exchanges involve
Taiwan party officials from: Keelong, Hsinchu, Taichung, Changhua,
Tainan, and Kaohsiung; and CCP officials from: Shenzhen, Xiamen,
Suzhou, Qingdao, Ningbo, and Fuzhou.
— Beijing urged for cross-strait talks to establish cross-Strait charter
passenger and cargo flights based on the “Macao model.”
08/15/05 — The inaugural ceremony in Taiwan for the “Democratic Pacific
Union,” a quasi-governmental body comprised of political and civil
leaders from 26 countries, including: the United States, Canada,
Australia, New Zealand, Mexico, Honduras, Guatemala, El Salvador,
Costa Rica, Nicaragua, Panama, Peru, Chile, Russia, Japan, South
Korea, the Philippines, Malaysia, Indonesia, East Timor, Marshal
Islands, Solomon Islands, Tuvalu, Kiribati, Palau, and Taiwan.
Taiwan was the prime mover behind the group’s formation, and VP
Annette Lu was elected as the body’s first chairman. The DPU’s core
values are: democracy, peace, and prosperity.
08/12/05 — Taiwan’s LY voted 108-100 against holding a special legislative
session to consider priority bills, including the special arms-
procurement package. Four of the NPSU’s eight legislative members
voted, all for the losing DPP position.
— An AFP report said that Taiwan has begun deploying indigenous
cruise missiles around the island on mobile launchers. The report
later was denounced by a Ministry of National Defense spokesperson.
08/11/05 —
According to AP, 13 of Taiwan’s allies filed a request in the U.N. to
appoint a U.N. envoy or task force to try to mediate China-Taiwan
tensions.
06/29/05 —
Taiwan’s Cabinet approved a number of revisions to the Referendum
Law approved by the Legislative Yuan in November 2003. The
changes would lower thresholds for citizen initiatives and passage of
non-territory related referenda, making passage of referenda easier.
06/24/05 — In an interview, Mr. Kong Jaw-sheng, Chairman of Taiwan’s
Financial Supervisory Commission, said that Taiwan will allow PRC
banks to open representative offices in Taiwan for the first time in 56
years, since the end of overt civil war hostilities.

CRS-24
06/19/05 — The China Post reported that a group of Taiwan farmers will visit
China within a week to discuss more mainland access for Taiwan
fruits.
06/17/05 —
According to Agence France Presse, Taiwan’s Supreme Court
rejected the KMT/PFP lawsuit to overturn the result of the March
2004 presidential election. A second lawsuit to nullify the entire
election is still pending.
06/17/05 —
Press reports said that Taiwan president Chen Shui-bian will reveal
an unprecedented National Security Report to Taiwan in the summer
of 2005.
06/13/05 —
The Washington Post reported that a peasant revolt had occurred in
Huawi township on April 10, 2005, near Hangzhou. Farmers and
peasants who were protesting the building of an industrial park on
their land beat back a police effort to halt their efforts.
— Taiwan’s Premier, Frank Hsieh, announced that Taiwan was
announcing three initiatives to improve cross-strait contacts:
authorizing Taipei Airlines Association (TAA) to negotiate direct
charter cargo flights; exporting agricultural products to China; and
allowing PRC nationals to sightsee in Taiwan.
06/07/05 — By a vote of 248-23, Taiwan’s antiquated National Assembly
approved constitutional changes, including a measure permitting
some future changes to be decided by an island-wide referendum.
05/14/04 —
The DPP won the largest block of seats in elections for Taiwan’s 300-
member National Assembly, charged with considering proposed
constitutional amendments.
05/05/05 —
PFP Chairman James Soong departed for a week-long visit to China.
04/26/05 —
U.S. Assistant Secretary of State Christopher Hill arrived in China to
discuss ways to re-start the Six Party Talks involving North Korea’s
nuclear program. He reportedly asked Beijing to cut off oil shipments
to North Korea, which the Chinese declined.
04/26/05 —
KMT Chairman Lien Chan departed for an eight-day “peace journey”
to China. In addition to visiting Xi’an, Shanghai, and Nanjing, Lien
will give a talk at Beijing University and meet with PRC President
Hu Jintao on April 29. It is the first time the leaders of the CCP and
KMT will have met since World War II.
04/18/05 —
Taiwan’s PFP leader James Soong accepted an invitation from PRC
President Hu Jintao to visit Beijing before Taiwan’s May 14, 2005
National Assembly elections. The Taiwan government urged Soong
to meet with President Chen Shui-bian before departing for China.

CRS-25
04/16/05 —
President Chen Shui-bian warned KMT chairman Lien Chan not to
enter into any agreements with China during his landmark impending
visit there without prior consultation with and authorization by the
Taiwan government.
03/30/05 — A 34-member Nationalist Party delegation from Taiwan arrived in
Beijing. The delegation visit was criticized by President Chen as
“unimaginable” under current tense circumstances.
03/17/05 —
Taiwan’s cabinet approved a reduced version of the special defense
budget to purchase weapons from the United States. The original
budget of $18.2 billion had been criticized as too high by opposition
legislators. The budget the cabinet passed was pared to $15.5 billion,
partly reduced by Taiwan’s decision not to build part of the diesel
submarines in Taiwan.
03/16/05 — The House of Representatives passed H.Con.Res. 98, a measure
expressing Congress’ “grave concern” about China’s passage of the
anti-secession law. The measure passed by a vote of 424-4.
03/14/05 —
The National People’s Congress (NPC) enacted an anti-secession law
authorizing “non-peaceful” means to resolve the Taiwan question.
03/04/05 —
In a panel discussion with CPPCC members representing Taiwan, Hu
Jintao proposed a four-point guideline for China in pursuing cross-
strait relations: never stop adhering to the “one-China” principle;
never give up efforts to seek peaceful reunification; always place
hope on the Taiwan people; and never compromise in opposing
Taiwan independence activities.
02/24/05 — Taiwan’s President Chen and PFP opposition leader James Soong
agreed to relax restrictions on business ties with China and to
cooperate to improve cross-strait ties. It was their first meeting in
five years. Chen also intimated he was open to discussions of
eventual reunification with China if Beijing showed “goodwill.”
02/20/05 — China’s official news media, the Xinhua News Agency, issued a
statement denouncing the joint U.S.-Japan statement on February 19.
China’s statement said that it “resolutely opposes the United States
and Japan in issuing any bilateral document concerning China’s
Taiwan, which meddles in the internal affairs of China, and hurts
China’s sovereignty.”
02/19/05 — The United States and Japan issued a joint statement describing
mutual security concerns and announcing a new joint security
agreement. Among other issues, the statement listed a peaceful
resolution of Taiwan’s situation as a mutual security concern — the
first time Japan had placed itself on record in this way on the Taiwan
issue.

CRS-26
02/10/05 —
The Financial Times reported that Taiwan President Chen Shui-bian
had invited James Soong to chair the Straits Exchange Foundation,
which handles cross-strait relations and contacts.
02/02/05 —
According to Agence France Presse, Taiwan President Chen Shui-
bian extended an invitation to PRC negotiator Wang Daohan to visit
Taiwan and reopen talks.
02/02/05 —
Members of the House signed a bipartisan letter to Secretary of State
Condoleezza Rice asking her to end the State Department’s foot-
dragging over transmitting congressional notifications for an $28.2
billion arms sales to Taiwan. The letter was drafted by
Representative Rob Simmons and signed by Representatives Roskoe
G. Bartlett, Madeleine Z. Bordallo, Jeb Bradley, Lane Evans, Trent
Franks, John N. Hostettler, and Christopher H. Smith.
02/01/05 — Two PRC officials arrived in Taiwan to attend the funeral of Koo
Chen-fu, Taiwan’s chief cross-strait negotiator, who died on January
3, 2005, at age 85. The officials were Sun Yafu, deputy director of
the PRC’s official Taiwan Affairs Office, and Li Yafei, secretary
general of the semi-official Association for Relations Across the
Taiwan Strait.
01/29/05 — For the first time since 1949, Taiwan and China launched direct
cross-strait charter flights for the Chinese New Year holiday. The
United States issued a statement welcoming the flights.
01/28/05 —
In what appeared to be a softening of the PRC position, the #4 in the
PRC leadership hierarchy, Jia Qinglin, gave a speech commemorating
the 10th anniversary (on January 30) of Jiang Zemin’s Eight Points for
reunifying with Taiwan. Jia said that Beijing was willing to negotiate
on cross-strait ties with any person on the Taiwan side, “regardless of
his past rhetoric and actions.” Some saw the remarks as a reference
to Taiwan president Chen Shui-bian. Skeptics, however, pointed out
that affirmation of the “one-China” policy remained a pre-condition
cited by Jia.
01/27/05 — Taiwan formally ended diplomatic ties with Grenada after the
Caribbean island established formal ties with the PRC on January 20,
2005. The move reduces to 25 those countries with formal relations
with Taiwan.
01/20/05 —
Grenada’s Minister of Foreign Affairs, Elvin Nimrod, signed a joint
communique with PRC Foreign Minister Li Zhaoxing to resume
diplomatic ties. (A Taiwan Foreign Ministry spokesman said that
Taiwan would consider dual recognition from Grenada that would
establish relations with both the PRC and Taiwan.)
01/08/05 —
A press report quoted the caucus head of Taiwan’s People First Party
(PFP) — now in a coalition with the opposition Nationalist Party

CRS-27
(KMT) — as saying that a coalition with the ruling Democratic
Progressive Party (DPP) would be possible if the DPP abandoned its
pro-independence platform. It had been expected that early in 2005
the PFP and would merge with the KMT.
01/05/05 — Press accounts reported that Taipei Mayor Ma Ying-jeou, a KMT
moderate said to oppose Chen Shui-bian’s push for Taiwan
independence, was denied a Hong Kong visa. Hong Kong University
had invited Mr. Ma to attend a conference. The refusal was criticized
by U.S. officials as “not a constructive decision.”
01/04/05 —
Chen Yunlin, who heads China’s cabinet-level Taiwan Affairs Office,
began a U.S. visit to discuss China’s proposed anti-secession law.
While in Washington, Chen met with Deputy Secretary of State
Richard Armitage, new National Security Advisor Stephen Hadley,
and U.S. Asian affairs official Michael Green.
01/02/05 —
China’s Xinhua news agency reported that China was receptive to
discussing with Taiwan the allowing of direct flights between the two
sides over the Chinese New Year in February 2005.
01/02/05 —
Former Taiwan President Lee Teng-hui returned from a six-day trip
to Japan, a trip that brought strong protests from the PRC. Japan’s
decision to grant Lee a visa was regarded as a policy change and
evidence of its recently more assertive stance toward Beijing.
01/01/05 — Koo Chen-fu, Taiwan’s chief negotiator with China on cross-strait
talks, died of cancer at age 87.
01/01/05 — In his New Year’s Day address, Taiwan President Chen Shui-bian
criticized China’s announcement that the National People’s Congress
would consider an “anti-secession” law aimed at Taiwan. Chen
warned that such a law posed a great threat to regional stability and
peace.