Wall Street Journal Interview September 1, 2011

Taiwan's Tsai Stresses Slower Track for China Ties


TAIPEI—Taiwanese presidential challenger Tsai Ing-wen said that Taiwan should take its time to develop trade and tourism links with China, in an interview that highlighted a shift that ties between Taipei and Beijing might undergo if she defeats incumbent Ma Ying-jeou, who has fast-tracked relations with the island's giant neighbor.

"We are not in a rush," Ms. Tsai, chairperson of the opposition Democratic Progressive Party, told The Wall Street Journal. If elected in January's vote, she said she would re-examine a key trade deal signed between China and Taiwan last year known as the Economic Cooperation Framework Agreement (ECFA).

"Ten years, in my view, is just too short," she said, referring to what she said was a common time frame for economic opening under free-trade agreements. Chinese banks are "much, much bigger," she said, and local banks may not be able to withstand a competitive onslaught. "We have to think very seriously about the survival of our financial institutions," she said.

She also said that Taiwan doesn't currently have the infrastructure to cope with a sudden influx of Chinese tourists. In 2010, the number of Chinese tourists soared to 1.6 million from a mere 200,000 in 2008.

Ms. Tsai is currently running neck-and-neck in opinion polls with the Kuomintang party's Mr. Ma, who has presided over a rapid improvement in trade and economic ties with Taiwan's longtime rival.

She said the DPP is throwing out "olive branches" to China to show its goodwill, but she rejected a vague agreement between Beijing and the KMT on Taiwan's status as a part of "one China," which both view to be the foundation for recent economic cooperation. Instead, she said, Beijing must accept the Taiwanese people's commitment to their own sovereignty. China regards Taiwan as a renegade province to be reunited with the mainland, by force if necessary.

A former law professor known for her academic demeanor, Ms. Tsai became Taiwan's vice premier under former DPP president Chen Shui-bian, who infuriated China with his pro-independence policies and is now in jail for corruption. Earlier, she served as the chairperson of the Mainland Affairs Council, which is responsible for Taiwan's policy toward China.

Since the 2008 presidential and legislative elections, which the DPP lost by a landslide amid widespread accusations of corruption against Mr. Chen, Ms. Tsai has headed the DPP, helping to restore its credibility and ushering in a new consensus within the party that aims for a more conciliatory tone toward China.

Ms. Tsai has insisted that ECFA—which is now structured as a preferential-treatment pact rather than a traditional free-trade agreement between two countries—be consistent with the guidelines of the World Trade Organization, where both Taiwan and China are members. However, Citigroup economist Cheng Cheng-mount China might not accept this, since under current ECFA guidelines, trade disputes are handled bilaterally whereas under the WTO they are handled multilaterally and China is likely to reject a process that involves other countries.

Ms. Tsai acknowledged there are significant "conflicting interests" between the DPP and China. "China must face the fact that Taiwan is a democracy and they have to treat Taiwan as a democracy. The way they conduct business with us, the way they have dialogues with us, they all have to keep this in mind: Taiwan is a democracy," she said.

Cross-Strait relations are likely to dominate the presidential vote, including the impact that closer economic integration has had on the island's economy, an area in which Mr. Ma is vulnerable. While rapidly growing trade with China has underpinned the island's rapid recovery from the global recession, critics say that it has also widened the island's wealth gap and contributed to growing unemployment, as high-tech companies migrate to China. Mr. Ma also has been criticized for failing to wean the island's economy off its heavy reliance on exports, particularly in the high-tech sector.

Pointing to last year's 10.8% economic growth, Ms. Tsai said that number reflected a jump in global demand for exports, but had failed to bring quality jobs to Taiwan as more than 50% of those products are in fact produced elsewhere by Taiwanese companies.

Ms. Tsai said she hopes to spur more investment in research and development, as well as in green energy, to help narrow the wealth gap. She also said that Taiwan should invest heavily in urban renewal to replace many of the island's old and unsightly buildings that were built during the economic boom in the 1960s and '70s.

Despite the close polls, Ms. Tsai faces an uphill battle in the coming months. China has made it no secret that it backs Mr. Ma, issuing a rebuke last week of Ms. Tsai's cross-Strait policy. On Thursday, the DPP said its computers continue to be targeted by a Chinese hacking campaign that it expects to become more intense before the elections.

Some pundits say that Ms. Tsai may face discrimination as the island's first female presidential candidate, but Ms. Tsai said that could work in her favor.

"People here might still be skeptical about whether a woman is capable of leading a country, but in general...people think it is okay. In certain sectors of the society here, people tend to think this is a rather fashionable idea."