The uncertain outlook in Taipei following the death of President Chiang Ching-kuo on January 13 has underlined the dilemmas confronting American policymakers as they seek to develop stable ties with the People’s Republic of China while at the same time fulfilling U.S. obligations to Taiwan. When the United States and China established diplomatic relations nine years ago, they were able to paper over their differences on the future of Taiwan. Increasingly, however, this sensitive problem has become a focal point of conflict between Washington and Beijing.

Characterizing its policy as one of noninvolvement, the United States says that it does not care whether, or how, the island is reunified with the mainland, so long as force is not used. Reagan Administration spokesmen have carefully remained within the confines of the Shanghai Communiqué of February 1972, in which the United States "acknowledges" that "all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China."

Secretary of State George Shultz has resisted continuing pressures to endorse Deng Xiaoping’s "one country, two systems" model for reunification. He made a cautious gesture to Beijing in early 1987 during a visit to China, when he said that the United States "welcomes" the current growth of trade and contacts across the Taiwan Strait, expressing support for "a continuing evolutionary process toward a peaceful resolution of the Taiwan issue." But P.R.C. leaders argue that the American role in Taiwan obstructs progress toward an accommodation. Pointing to U.S. sales of weaponry and military-related technology to Taipei, which have totaled more than $6 billion since 1979 and will approach $800 million in the 1988 fiscal year alone, Beijing contends that Washington continues to be deeply involved in what is the final stage of the Chinese civil war.

The potential for growing U.S. policy problems concerning Taiwan is increased by the political transitions now taking place in both Taipei and Beijing. Chiang Ching-kuo’s iron control suppressed demands in Taiwan for "self-determination" that have begun to intensify since his passing. Similarly, although Deng Xiaoping has subordinated the Taiwan issue to other priorities, a powerful, xenophobic nationalism lurks just beneath the surface of Chinese politics. In the factional infighting likely to follow his death, dissatisfaction with Washington’s Taiwan policy could quickly become a weapon in the hands of domestic critics of close economic, military and intelligence-sharing ties with the United States.

II

"C.C.K.," who became president three years after the death of his father, Chiang Kai-shek, directed a remarkable transformation during his ten years in the presidency and an earlier 13-year apprenticeship as defense minister, vice premier and premier. He accelerated the process of modernization that has given Taiwan a 13-percent growth rate, an annual per capita income of $4,600 and foreign exchange reserves of $76 billion, the world’s second largest. Adapting with surprising ease to the role of politician, Chiang shed the hard-line image acquired as army political commissar and secret police chief from 1950 to 1965. He developed a folksy political style; a baseball cap and turtleneck sweater became his trademark. Above all, he recognized the need to make political concessions to a rising middle class and Taiwan-born majority that resents domination by the Kuomintang (Nationalist Party) in-group of post-1945 mainland immigrants. His death came just as he was beginning to liberalize the political process in the face of stiff conservative resistance.

Three years ago, in order to head off a takeover by the party’s ultraconservatives, Chiang Ching-kuo banished their most determined leader, former army political commissar Wang Sheng, by naming him ambassador to Paraguay, a post he still holds. In December 1985 the late president formally announced that it would be incompatible with the constitution for a member of his family or a military officer to succeed him. His choice as successor, 64-year-old technocrat Lee Teng-hui, a Cornell-trained agricultural economist, has been on the Kuomintang Standing Committee since 1979 and was appointed vice president in 1984. Lee enjoys strong public support as the first native Taiwanese to hold the presidency. However, he has no political base of his own, in contrast to former vice premier and interior minister Lin Yang-kang, the leading Taiwanese machine politician in the KMT, who has been shut out of the party’s inner councils in recent years.

In naming Lee, Chiang Ching-kuo did not disturb the authoritarian institutional structure of KMT rule, in which the armed forces, the intelligence services and the powerful presidential secretariat share power with the nominal party leadership. In particular, he did not face down the army chief of staff, General Hao Pei-tsun, who was permitted to remain in office beyond the previously enforced three-year limit. General Hao occupies a central position in the emerging Taiwan power struggle.

In a conversation when he was still vice president, Lee Teng-hui spoke knowledgeably and with easy confidence about both domestic and foreign policy problems. His dispassionate and well-informed approach to developments on the mainland, especially in the economic field, differed markedly from the standard rhetoric of Taipei officials. On many issues, however, he took a more cautious stance than the one ultimately adopted by Chiang Ching-kuo. He elaborated on the obstacles to permitting the formation of an opposition party. Several months later, in December 1986, the new Democratic Progressive Party was in fact allowed to participate in elections to the Legislative Yuan and the National Assembly, and won 23 percent of the vote.

Since inheriting Chiang Ching-kuo’s term of office, which expires in 1990, Lee has attempted to strengthen his public support by adopting a new, open style. His decision to hold a full-scale press conference in late February was a marked departure from past practice. Of potentially greater significance was his suggestion that "new concepts" were needed to improve relations with Beijing, and his guarded support for athletic and cultural exchanges with the mainland. However, Lee’s power is circumscribed. While clearly more than a figurehead, he is likely to play a limited mediating role between virtually independent power centers. A key test will be whether he is named KMT president at the next party convention in July. If he survives over time, it will be as the fulcrum of a collective leadership.

The first phase of the succession has been encouraging. But the longer-term issues now emerging are whether a collective leadership can remain stable, and whether the KMT, with its entrenched old guard, can keep in step with rapidly growing pressures for democratization.

III

The terms "mainlander" and "Taiwanese" often confuse discussion of Taiwanese politics and the unification issue. Ethnically, 16.2 million of the 19.4 million people of Taiwan are Han Chinese, like most of the people of the mainland; 13.3 million of these ("Taiwanese") are the descendants of immigrants who came from Fujian province across the Strait in earlier centuries, while 2.9 million ("mainlanders") are post-1945 immigrants and their children, who trace their origins to a variety of mainland provinces. There are also 3.2 million Hakkas, a sinified, non-Han minority who migrated from Guangdong province in the nineteenth century, and 325,000 aborigines.

The cleavages between mainlanders and Taiwanese are often exaggerated. Most of the younger mainlanders were born on the island. During four decades of Kuomintang rule, many of the cultural and social barriers between new and old immigrants have been reduced through intermarriage and a common educational system. To be sure, the heavy-handed repression practiced by the KMT regime, especially in its early years, aroused strong resistance from the established island populace. The KMT had a bunker mentality, and it excluded Taiwanese from positions of importance. In this setting the fight for democratic rights was a black-and-white struggle of the Taiwanese against the mainlanders. But a significant change has occurred. The regime has increasingly sought to broaden its base by appointing some Taiwanese to high positions in the government and the armed forces, a trend epitomized by the elevation of President Lee. Similarly, while the opposition parties get most of their support from Taiwanese, some of their leaders and supporters are now drawn from the younger generation of mainlanders.

The driving force behind the recent upsurge of the opposition parties is a popular desire for majority rule and an end to one-party authoritarianism, not for the assertion of a Taiwanese national identity. It was because Chiang Ching-kuo recognized this reality that he had begun to initiate significant moves toward political liberalization. To the extent that his policies are carried forward, moderate opposition leaders led by Kang Ning-hsiang and You Ching are likely to win increasing power in the legislature. An informal coalition could well develop between the moderate opposition and rising Taiwanese elements within the KMT. The pro-independence minority in the opposition would then be relegated to the fringes of political life.

But another scenario is perhaps more probable. Conservative KMT elements identified with General Hao Pei-tsun may well rein in the more liberal party secretary-general, Lee Huan, and his Taiwanese allies, President Lee and Lin Yang-kang. Should old-guard elements succeed in blocking meaningful liberalization, the frustrated opposition forces could become progressively radicalized. Advocates of independence could then plausibly argue that the political and constitutional underpinnings of the Republic of China are inherently incompatible with majority rule, making a sovereign Republic of Taiwan necessary.

The most critical test of liberalization will be whether there is significant reform of the R.O.C. constitutional structure, with its built-in limitation on majority representation. Since the KMT continues to claim jurisdiction over the mainland, it preserves the fiction that R.O.C. legislative bodies should represent all of China. Thus, more than two-thirds of the members of the key Legislative Yuan were elected on the mainland in 1948, and nearly half of these are over 80 years old. An average of 14 members have died each year between 1980 and 1986. In response to popular pressures, supplementary elections have been held periodically to add members from Taiwan. But out of 312 there are still only 73 members from the island, and of these, only 13 represent the newly organized opposition Democratic Progressive Party.

The DPP and other opposition groups are demanding that the original members be pensioned off, opening the way for a fully representative legislature. Moderate opposition leaders have proposed a variety of compromise formulas designed to guarantee specified levels of representation to mainlanders. At the time of Chiang’s death, however, the KMT had rejected the idea of opening up all mainland seats at one stroke in the next election, scheduled for December 1989. Instead, proposals for an incremental expansion of 20 to 50 seats are under discussion.

Conservatives argue that the replacement of the present members requires a constitutional amendment that only the members themselves can enact. However, KMT liberals and opposition critics point out that the R.O.C. has functioned on Taiwan under "Temporary Provisions for the Period of Communist Rebellion." Just as these provisions have suspended constitutional requirements for elections on the mainland, they contend, so a similar measure could now define new constituencies for the Legislative Yuan, stipulating that elections for these seats shall be held on the territory under the effective control of the Republic of China until elections can be held on the mainland.

Moderate opposition leaders are prepared to retain the name "Republic of China" if the reality of majority rule is conceded. As Kang Ning-hsiang put it, "in American cities, zoning laws may require that you keep the facade of an historic building, even if you renovate the interior. We can do this to save face for the Kuomintang and to avoid precipitating a crisis in relations between China and the United States." However, advocates of de jure independence believe that compromise with the KMT will never yield more than token concessions. Only by creating a "Republic of Taiwan," in this view, can the majority overturn the existing order and establish an equitable political system. "If we don’t get the name," said Cheng Nan-yong, editor of the magazine Freedom Era, "we won’t get the system."

Chiang Ching-kuo’s liberalization moves produced a major change in the atmosphere but relatively limited concrete results. His most popular reform gives civilians accused of national security offenses the right to be tried in civilian rather than military courts. When the Democratic Progressive Party surfaced, he took the unprecedented step of permitting it to compete openly in the 1986 elections. But the government has yet to adopt formal legislation authorizing opposition parties. Controversial election laws, including one restricting campaigning to ten days, have not yet been revised.

Martial law was lifted in July 1987, a symbolic step of great importance, but a new national security law keeps the substance of martial law restrictions largely intact. Critics emphasize that ubiquitous KMT political commissars keep a watchful eye on the bureaucracy, the military, the educational system and the press. So far the government has failed to fulfill promises to liberalize regulations that keep the opposition from starting new newspapers and radio stations. While it is preparing to allow modest increases in the number of Legislative Yuan members representing Taiwan, the KMT is resisting demands for the direct election of the president, now chosen by a National Assembly (originally elected in 1947) which meets once every six years for this purpose. Direct elections for the governor of Taiwan province and the mayors of two major cities, Taipei and Kao-shiung, are also ruled out. When Lee Teng-hui said that such elections would come "someday," I asked him whether they would occur within five years. "Maybe five or ten years," he replied.

The most serious tension between the government and the opposition concerns the issue of "self-determination." In its 1986 platform the DPP declared that "Taiwan’s future should be determined by all residents of Taiwan according to the principles of freedom, self-determination, universality, justice and equality." The government warns that this provision violates the R.O.C. constitution, which vests sovereignty in all R.O.C. nationals, including the people of the mainland, and bars "territorial changes" without their approval. But DPP leaders emphasized in interviews that the party is not committed to any specific future for Taiwan. "‘Self-determination’ simply means that we would not accept ‘foreigner determination’," said You Ching. "It is not equivalent to independence. What we are saying is that the KMT and the Communist Party should not make a deal over our heads. When we win power, we will review the situation at that time and decide what is in our interests."

Stressing the "important differences" between his party and independence advocates, Kang Ning-hsiang has observed that "the relations between Taiwan and the mainland must be very good and intimate in the future. For the past 35 years we have been set in postures of mutual confrontation. This is not a natural situation, but one which was created by the Chinese Communist Party and the Kuomintang. The first task now is to get rid of this emotional burden."

The Hong Kong model, Kang said, is "very similar to the traditional model which existed in the past between China and its vassal countries. These countries had completely different political, economic and social systems, but they recognized China as ‘big brother.’ If that is what China wants now, then we can find a way to accommodate them." Asked whether this implied a recognition of Beijing’s sovereignty, he replied, "not necessarily." Gau Jeng-ju, chairman of the DPP’s Foreign Affairs and Defense Committee, dismissed the idea that there is such a thing as a Taiwanese nationalism: "This concept cannot be scientifically sustained. Culturally, all of us are Chinese, but the fact that industrialization came to Taiwan so much sooner than to the mainland has created significant differences, so that at least for the present, we should remain two countries."

When the DPP was formed, pro-independence advocates attempted unsuccessfully to get "Taiwan" into its name. As KMT conservatives point out, however, the map of Taiwan is shown on the party flag. National Security Bureau Director Soong Chien-lien said that "most" DPP members secretly favor independence, whatever their stated position. President Lee is closer to the truth when he contends that "very few" of them do, though "they use ‘self-determination’ as a shock absorber for other issues." The government has taken no legal action against DPP leaders for general references to "self-determination." However, two leaders of a militant pro-independence group were sentenced to long prison terms in January of this year for explicitly advocating a sovereign Taiwan.

The DPP has taken a more positive stand on opening up contacts with the mainland than the KMT. It was the DPP that first raised the issue, using it to attract mainlander support in the 1986 election. This provoked a bitter controversy within the ruling party that continued until the partial relaxation of travel restrictions in October 1987. Younger party leaders, pointing to the flood of unpunished covert visits, warned that the government would look increasingly ridiculous at home and abroad unless it relaxed its policy. They argued that permitting limited contacts would help to counter pro-independence sentiment and would prevent the DPP from preempting the issue.

The modified policy adopted last October permits travel by those with relatives on the mainland but continues to ban tourism, trade and other contacts. By contrast, a DPP policy statement urges the government to permit mail and telephone contacts with relatives as well as "a wide range of nongovernmental exchanges and competition of a cultural, academic, artistic, scientific, athletic and economic character."

While supporting more contacts, the DPP, like the KMT, rejects the "one country, two systems" concept in its present form. Unlike Hong Kong, which as a colony had no sovereignty to lose, Taiwan has exercised sovereignty for four decades. Thus, Taipei does not regard Deng Xiaoping’s proposal, which would reduce it to provincial status, as a compromise. Not surprisingly, mainlanders and Taiwanese alike question whether Beijing’s autonomy pledges would be honored in practice and are waiting to see what happens in Hong Kong. More important, given the contrast between their standard of living and that on the mainland, with its per capita income of only $300, they question Deng’s central argument that reunification would be economically beneficial, though they would like to have more economic contacts without a political union.

The R.O.C. continues to maintain diplomatic relations with 23 countries. At the same time, Taipei increasingly plays down the idea of retaking the mainland, and KMT Secretary-General Lee Huan has even suggested that "while we want to promote political and economic democracy on the mainland, we are not seeking to replace the Communist regime as such."

IV

Viewed from Beijing, the consolidation of "one China" is a patriotic mission of transcendent importance left over from history. Disunited and weak, China was unable to maintain its control over Taiwan in the face of European, Japanese and American inroads. Spanish and Dutch adventurers established outposts on the island during the Ming period, and the Qing dynasty, which ruled Taiwan loosely for two centuries beginning in 1683, was forced to cede it to Japan in 1895 as the price for ending the Sino-Japanese war. No sooner had Japan been defeated in World War II than American support for the Chiang Kai-shek regime once again blocked national unity. Just as past humiliations in Taiwan symbolize the impotence of earlier Chinese regimes in this perspective, so reunification would demonstrate that a strong, unified China has now arrived on the world stage.

Soon after the normalization of Sino-American relations in January 1979, Beijing shifted to its present emphasis on peaceful reunification, gradually unveiling the "one country, two systems" proposal. The revised P.R.C. constitution, adopted in 1982, contains a new clause specifically designed for Taiwan and Hong Kong. Both would become Special Administrative Regions with a "high degree" of autonomy. They would be free to maintain their existing economic, political and social systems and their own administrative and judicial machinery, "including the power of final adjudication." They would issue their own currency, operate under their own budgets and levy their own taxes. They would be exempt from any taxation by Beijing. They would have unfettered control over "the proprietary rights and lawful rights of inheritance of private property, houses, land and enterprises," including the rights of foreign investors. While the P.R.C. alone would represent China in international forums, Taiwan and Hong Kong would have "considerable diplomatic powers to handle some external affairs," especially in the economic and cultural realm. As local governments, it is emphasized, they would not have "inherent" powers. Their powers would be "granted by the central government" under the constitution.

In one critical respect Deng’s proposal accords more favorable treatment to Taiwan than to Hong Kong. Taiwan would maintain its own armed forces; Hong Kong would not. Moreover, P.R.C. forces would be stationed in Hong Kong but not in Taiwan.

Deng’s reunification strategy focused initially on the settlement of the Hong Kong dispute with Britain as a necessary first step toward negotiations with Taiwan. By making good on its autonomy pledges in Hong Kong, he said repeatedly, Beijing will reassure doubters in Taipei. Once the Hong Kong issue was settled, Deng began a massive program to promote contacts and trade with Taiwan. In mid-1985 he created a new steering committee in the Communist Party leadership with broad powers to coordinate all government efforts relating to reunification. Known as the "Taiwan Operations Small Group," the committee, under Deng’s personal control, gave the party’s United Front Department unprecedented money and manpower to expand its activities.

In earlier years the reunification offensive was directed solely to winning over the dominant, Kuomintang-led mainlanders who took refuge in Taiwan beginning in 1945. Now it is a dual-track program addressed simultaneously to the post-1945 immigrants and the Taiwanese majority.

To contact KMT-oriented elements in Taiwan, the United Front Department seeks to enlist the help of the estimated three million mainland residents with relatives on the island. The "reach out and invite back" campaign is said to involve 350,000 volunteers organized in some 2,800 local chapters. Its purpose is to stimulate letter-writing to relatives and to arrange for the completed letters to be taken to Hong Kong, where they are mailed to Taiwan. These letters not only urge visits but also enclose government circulars offering to restore abandoned properties.

The United Front Department estimates that 25,000 former Taiwan residents now live on the mainland, many of them political exiles. This group, organized in the All-China Federation of Taiwan Compatriots, is spearheading the campaign to promote contacts with the anti-KMT dangwai (literally, "outside the party") political forces in Taiwan. Lavishly financed missions frequently visit the United States, where there are 300,000 Taiwan Chinese, and Japan, where there are 80,000. Seven new "social" organizations have been formed among overseas Taiwan Chinese communities during the past two years to promote contacts with the mainland. These groups have been systematically sending their members to Taiwan for quiet missionary work that is not easily detected or controlled by the KMT authorities.

While covert P.R.C. operations in Taiwan appear to be growing, they are no longer dedicated to subverting the government, as in earlier decades, since the incumbent regime is viewed as a brake on groups seeking de jure independence. These operations now focus largely on intelligence collection and on promoting support for more contacts and trade with the mainland. Insulating Taiwan from P.R.C. penetration is all but impossible. Fishing boats from the island regularly visit some 70 coastal P.R.C. "reception stations" that serve as hubs for illicit trade and espionage. Fujian province, immediately opposite Taiwan, is the busiest center for both overt and covert contacts. Taiwanese of Fujianese origin flock to Taoist temples and ancestral shrines in Fujian.

In 1987 indirect trade with the mainland through Hong Kong, Singapore and Tokyo totaled $1.9 billion, and smuggling accounted for another $300 million. The P.R.C. imposes few restrictions on the content of this trade. In addition to imported electronics and other consumer goods, shops and sidewalk stalls in China are permitted to sell the latest novels, fashion magazines, video cassettes and popular song recordings from Taiwan, all of which are in great demand.

Most visitors from Taiwan get visas for Japan, the United States or Hong Kong and then travel secretly to the mainland on separate permits issued by China. Beijing estimates that more than 100,000 people have come in this fashion since 1979. This figure seemed to me to be wildly exaggerated until Director General Soong of Taiwan’s National Security Bureau asserted early last year that "about 10,000 a year" were going illegally. Since Taipei partially relaxed its travel ban, an estimated 14,000 people per month have been traveling to the mainland legally.

V

P.R.C. officials have no illusions concerning the prospects of early negotiations on the future of Taiwan. They are painfully aware of the negative attitudes on the island toward the mainland. In a definitive exposition of P.R.C. thinking on Taiwan, Li Shenzhi, director of the Institute of American Studies of the Academy of Social Sciences, acknowledges that the Cultural Revolution and "leftist mistakes in our policies have aggravated these attitudes." At the same time, Li, like every Chinese official I met, blames the United States. Both Taiwan and Hong Kong, he said, are "products of certain imperialist policies. Taiwan has a unique form of de facto dependence on the United States, like that of Hong Kong on the United Kingdom, although their de jure relationships are different." Vested interests in Taiwan will resist reunification, Li declared, "so long as they have the tacit support provided by your arms sales, and so long as it is your policy, in general, to freeze the status quo in Taiwan." Li expressed the suspicion that the United States wants to keep open the option of installing military bases on Taiwan if the United States loses its present facilities in the Philippines.

Underlying Beijing’s perceptions of the Taiwan issue is the basic conviction that economic and other interchange would eventually lead to peaceful unification if the United States would adopt a genuinely detached posture. The disparity in living standards between Taiwan and the mainland is viewed as a serious but transitory problem. Huan Xiang, director of the State Council’s Center for International Studies, reacted sharply to the suggestion that this disparity might make reunification impracticable. "If we are to reason that way," he said, "why not divide the United States into three or four countries on the basis of per capita income?"

The option of using military force to achieve reunification is not ruled out. In response to American pressures for a commitment to peaceful methods, China reaffirmed its "fundamental policy of striving for peaceful reunification" in the so-called second Shanghai Communiqué of August 1982, in which Washington and Beijing attempted to resolve the issue of U.S. arms sales to Taiwan. American officials, defending the communiqué, argued before hostile congressional committees that the word used for "fundamental" in the Chinese text (da zheng fang zhen) implies "unchanging, long term, a great guiding principle." But P.R.C. leaders emphasize the word "striving." If the United States continues to block reunification, they say, force might become necessary.

Since 1982, Deng Xiaoping has avoided direct threats but has repeatedly reaffirmed China’s "sovereign right" to retain the option of using force. In 1985, then General Secretary Hu Yaobang declared more expansively that "if we are economically powerful in seven, eight or ten years, we shall be in a position to modernize our national defense. If the broad masses of the Taiwan people wish to return and a small number do not wish to return, it will be necessary to use some force."

Discussions of the Taiwan issue in Beijing reveal differing points of emphasis among contending elite groups. The armed services and affiliated foreign policy think tanks tend to play it down, stressing the need for Sino-U.S. defense cooperation. Technocrats and reform-minded economic officials show concern that the issue could erupt but stress their own priorities. Hard-line sentiment appears to be strongest in the ranks of politically conscious youth, especially in the universities, and among a wide spectrum of Communist Party leaders and activists. Open criticism of Deng for not pushing reunification with sufficient vigor and for "pandering" to the United States was expressed at the 1986 session of the Chinese People’s Political Consultative Conference. There is little evidence of a "generation gap" on this issue. To be sure, many mainland Chinese of all ages are now more interested in the "four modernizations" than in politics. But conversations with widely varied groups evoked frequent outbursts of latent nationalistic emotion relating to Taiwan and certain other issues, notably relations with Japan.

As Taiwan’s democratization process has advanced, P.R.C. concern over the growth of pro-independence forces has steadily grown, producing an ambivalent response. Yang Shangkun, vice chairman of the Communist Party’s Central Military Commission, emphasized recently that Beijing has "always supported the efforts of the people of Taiwan in winning democratic rights" and gives "full consideration to all groups in Taiwan, not only to the Taiwan authorities." At the same time, Beijing Review, describing the opposition parties in Taiwan as representatives of a rising middle class, warned that the democratic movements, encouraged and supported by the United States, "grew last year enough to tip the balance of Taiwan’s politics." In time, the Review said, political instability "may eventually lead to the toppling of the present regime to be followed by a critical, chaotic situation."

While the prospects for an accommodation between Beijing and Taipei still appear extremely remote, beneath the surface powerful economic forces are steadily drawing them closer together.

Beijing is seeking to make its autonomy offer attractive by advancing explicit suggestions for economic partnership. Renmin Ribao (People’s Daily) repeatedly emphasizes that China is ready to provide oil, coal and other raw materials at "domestic" prices, cooperate with Taipei in developing East China Sea petroleum, expand duty-free imports from Taiwan, and give Taiwan businessmen preferential access to mainland investment.

Taipei authorities have given the green light for trade, so long as it is conducted indirectly. The only businessmen arrested in trade cases have been those who attempt to deal openly with Beijing, bypassing Hong Kong middlemen, or who ship goods that are not repacked in Hong Kong to disguise their origins. But Taipei is resisting broader economic relationships that would entail governmental contacts or would lead to an uncontrollable escalation of economic dependence on the mainland. Beijing is not really interested in economic interchange as such, they argue, but in using such interchange to set the stage for a political dialogue.

VI

What policies would best serve American interests in dealing with the Taiwan issue?

In my view, the United States should continue to resist an activist role, neither endorsing nor promoting the "one country, two systems" concept. At the same time, if Washington wishes to stabilize its relations with Beijing, it should show greater sensitivity to the deeply held conviction in the P.R.C. that the present American posture toward the future of Taiwan is not genuinely detached.

A modest but significant initiative would be the removal of residual legacies of America’s former "two Chinas" concept, especially with respect to U.S. policy toward Chinese representation in seabed disputes. In normalizing relations with the P.R.C., the United States recognized Beijing’s jurisdiction over the mainland and "de-recognized" the R.O.C. as a regime with such jurisdiction. At the same time, the United States carefully stopped short of recognizing Beijing as the sole legitimate spokesman for China in its extensive seabed boundary disputes with its maritime neighbors. On the contrary, with respect to the East China Sea, where Beijing, Taipei and Tokyo have conflicting seabed boundary claims, the United States has continued to treat Taipei as one of three co-equal disputants, ignoring established international law principles. A continuing policy of calculated ambiguity on the part of the United States is impeding the resolution of the Sino-Japanese seabed dispute. This, in turn, forecloses the possibility of cooperation in seabed petroleum development between Taipei and Beijing that could open up broader vistas of economic cooperation.

The sensitivity of the issue of arms sales to Taiwan does not arise only from its impact on the military balance across the Taiwan Strait or on Taipei’s attitude toward negotiations. It has become a rasping psychological irritant to the entire American relationship with Beijing. To Beijing, it symbolizes American bad faith, coupled with a patronizing posture in which the United States assumes that it holds all the cards and takes China’s friendship for granted.

This perception is explained by the history of the arms sales issue. The United States insisted on retaining the right to sell arms to Taiwan when it "de-recognized" the Republic of China and opened relations with the People’s Republic. But Congress went a step further, enacting the Taiwan Relations Act, which requires U.S. sales of weaponry to Taiwan "sufficient" for its defense. This led to festering tensions with Beijing until U.S. and Chinese leaders signed the August 1982 joint communiqué. The United States declared that it "does not seek to carry out a long-term policy of arms sales to Taiwan" and pledged that its arms sales to Taipei "will not exceed, either in qualitative or quantitative terms" the level of those supplied since 1979. In deliberately ambiguous language, the communiqué said that the United States "intends gradually to reduce its sales of arms to Taiwan, leading over a period of time to a final resolution."

Charges of bad faith erupted when China learned in 1985 that the United States had begun to license exports of sophisticated technology for the manufacture of weaponry by Taiwan much more advanced than its existing military hardware, including late-model tanks, guided-missile frigates, fighter aircraft and six different types of missiles. Beijing dismisses American arguments that the accord does not cover transfers of technology. In an early 1986 discussion, Hu Yaobang, flanked by Vice Foreign Minister Zhu Qizhen, said that "even though they are not mentioned directly, they are clearly covered in the reference to ‘qualitative’ increases. What is the difference between arms sales and the transfer of technology for the manufacture of armaments? ‘Transfer of technology’ sounds better, but it is the same thing."

Foreign Minister Wu Xueqian demanded American acknowledgment that the communiqué covers technology in a July 1986 exchange of letters with Secretary of State Shultz and in a September meeting with him at the United Nations. When Wu failed to obtain results, Deng raised the issue with Shultz as part of a tense exchange on Taiwan during the latter’s 1987 visit, prompting the secretary’s speech on mainland-Taiwan contacts. Yang Shangkun, in his subsequent visit to the United States, urged the Reagan Administration twice in each of his major speeches to "strictly abide" by the 1982 communiqué, warning that "failure to handle the Taiwan question properly is bound to cause new twists and turns in our relations."

In keeping with the ban on qualitative upgrading of arms sales in the communiqué, the United States has refused to sell Taiwan aircraft more advanced than its current F-5E fighter. However, the qualitative superiority of the indigenous fighter being built with American components and technology is undisputed. The projected aircraft is often described as a smaller version of the F-16. Similarly, Taiwan’s new generation of indigenous tanks, guided missile frigates and antiaircraft missiles are all being built with late-model U.S. technology. The fact that Washington is approving new export licenses for the tank, frigate and missile programs has now produced an open collision.

Suspicions of bad faith are magnified by the fact that the U.S. government does not reveal the nature of its arms sales or issue differentiated statistics showing the value of military-related technology transfers. Officials state that some technology transfers are classified as "weapons" and are included in arms sales totals, but the extent of these and other transfers is not disclosed. China believes that U.S. figures showing a $20-million annual reduction in arms sales—which totaled $720 million in fiscal 1987 —would be invalidated by adding technology transfers. But even on the basis of U.S. statistics, Beijing argues, it would take the United States 36 years at the present reduction rate to phase out its sales.

As its access to U.S. military technology has increased, Taiwan and its supporters in the U.S. Congress have muted their criticism of the 1982 communiqué. Taipei’s security concerns are now focused on U.S. sales of arms and military technology to Beijing, especially sales of torpedoes and other naval weaponry and a $450-million program to upgrade fighter aircraft. Such military links, it warns, coupled with the expanding American role in China’s economic modernization, will bolster Beijing’s capabilities for the forcible annexation of Taiwan. The Pentagon responds that its arms transfers to both China and Taiwan are carefully tailored to serve defensive purposes alone.

The United States properly refused to include a timetable for the termination of arms sales to Taiwan in the 1982 communiqué, and any attempt to define one now would be a violation of the Taiwan Relations Act. In pledging gradual reductions "over a period of time," Washington did not become committed to reductions every year. Thus the United States could now reduce sales somewhat more rapidly in response to the continuing decline of tensions across the Strait, while at the same time reaffirming its readiness to readjust the level of sales should renewed tensions erupt. Both the 1982 communiqué and President Reagan’s April 1982 letter to then Prime Minister Zhao Ziyang clearly linked the level of future arms sales to the level of tensions. Thus, in Beijing’s perspective, the American effort to modernize and expand Taiwan’s defense establishment through technology transfers, without regard to the improvement in Beijing-Taipei relations, violates the spirit as well as the letter of the 1982 accord.

For its part, Taipei warns that the slightest hint of more rapid reductions and limits on technology exports would create a disastrous crisis of confidence on the island, damaging investment prospects, stirring demands for independence and bringing a halt to the liberalization of contacts with the mainland. Some officials even hint of accelerated efforts to develop nuclear weapons or of a possible deal with Moscow for military bases.

These threats appear to be greatly overstated. Given its $76 billion in foreign exchange reserves and its high investment influx during recent years, Taipei could comfortably absorb a loss of economic confidence. Demands for independence, as we have seen, often embellish what is primarily a demand for democratic rights. The trend toward improved relations with the mainland has gained a momentum that would be difficult to reverse. Nevertheless, the United States should take Taiwan’s anxieties into account by accompanying more rapid reductions in sales to Taipei with parallel restraint in making new military sales to Beijing.

Washington has been effective in promoting democratic change on Taiwan and should encourage a continuation of the Chiang Ching-kuo legacy. The security of the island ultimately depends on domestic political stability accompanied by a relaxation of tensions with the mainland. China would be most tempted to intervene militarily in a chaotic political situation resulting from a polarization between mainlanders and Taiwanese.

For an export-oriented economy, there would indeed be a serious loss of confidence if the United States should adopt protectionist trade policies toward Taiwan. Washington should continue to resist such policies. At the same time, the United States should emphasize that it welcomes growing exports by Taiwan to the mainland in part as a way of relieving Taipei’s colossal trade surplus with Washington, which reached $19 billion in 1987.

Beijing could contribute to a resolution of its differences with Taipei and Washington by making its dedication to peaceful reunification and meaningful autonomy more credible. While the use of force is China’s sovereign right, frequent reaffirmations of this right have strengthened demands in Congress for upgraded arms sales to Taiwan. More important, Beijing is obstructing the development of democratic local government institutions in Hong Kong. A key provision of the 1984 reversion agreement states that "the legislature will be elected." However, when Britain permitted indirect elections last year for half of the seats in what is now an appointed local council as a prelude to direct elections this year, Deng objected, and direct elections have now been put off indefinitely. Taipei justifiably contends that Beijing’s attitude casts doubt on its readiness for meaningful autonomy under the "one country, two systems" proposal.

It is often argued that China does not care about the Taiwan issue as much as it says it does, but merely uses it to keep the United States on the defensive in order to extract concessions on other issues. All that matters to China, this argument runs, is economic modernization. This assessment dangerously underrates the strength of Chinese nationalist feeling. Should it guide future American policy, the Sino-American relationship is indeed likely to face "new twists and turns" that could quickly tear apart the fabric of economic, political and strategic linkages so carefully developed since 1979.

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  • Selig S. Harrison is a Senior Associate at the Carnegie Endowment for International Peace, and the author of The Widening Gulf: Asian Nationalism and American Policy and China, Oil and Asia: Conflict Ahead?
  • More By Selig S. Harrison