Dynamics of Taiwan-Mainland China Economic Relations: The Role of Private Firms

Abstract

This article examines Taiwan's statecraft toward the People's Republic of China (PRC) and the role of the business community in cross-strait interactions. It argues that the realist perspective on statecraft cannot fully explain the current political economy between Taiwan and mainland China. The realist school of thought on international political economy argues that states are the only meaningful actors in the world economy. In an anarchic international society, relative gains in wealth and power are the goals of those actors. The structure of bilateral power, either in political or terms, determines the winners and losers in the international arena. Foreign trade and investment policies can thus be utilized as instruments to enhance national interests. The policy implication following from this analysis is that coercive and exchangeoriented economic statecraft, such as aid sanctions, should be based on a careful calculation of foreign policy goals. From this perspective, interaction between Taiwan and mainland China would be used to serve political purposes. If the state can effectively control the tempo of and trends in interaction, trade and investment can be greatly reduced or expanded according to the policy makers' political judgment. However, research on statecraft shows that such coercive tactics as sanctions do not work well after such new actors as non-governmental organizations (NGOs) and multinational corporations (MNCs) have appeared.' A home country government cannot easily influence corporations