China & Taiwan:
The Menace of U.S. Meddling
Jude Wanniski and Peter Signorelli
July 14, 1999


The already bad state of U.S.-China relations now has taken an ominous turn for the worse. The faction in the U.S. that characterizes China as a menacing threat steadily has been advancing a series of provocations that sabotages the Clinton Administration's general policy of engagement. The latest provocation is the alarming announcement from Taiwan's President Lee Teng-hui that the "one-China" policy, to which Taiwan, China, and most of the world have subscribed, is no longer valid. Lee has not declared that Taiwan is a sovereign state, but he now defines any cross-strait discussions as "state-to-state" relations. This is a major victory for those who seek to isolate China and put the U.S. on a collision course with Beijing. It of course threatens the growing cross-strait trade, a threat now being felt in the region's financial markets. With such a tremendous stake in China's prosperous development, most Taiwanese want no part of any activity viewed as a pretext for confrontation with the mainland. The regional business communities regard this turn of events with serious alarm. Taiwan's stock exchange already is down 8.39% this week on Pres. Lee's announcement. China's B-shares have fallen 14.37% in the same period, and the Hong Kong's Hang Seng is down 4.5% for the week.

 Beijing sees the very clear pattern of anti-China provocations being coordinated by the Beltway faction that argues it is not in our interest for China to further prosper, as this would eventually give them Asian hegemony. Among them are Senator Jesse Helms and the virulent, anti-China Cold War intellectuals at the Weekly Standard -- together with their allies in Taiwan. In the days immediately proceeding Lee's provocative announcement, Helms in The Wall Street Journal (July 8) and the editors of the Standard (July 5) both produced "Let's-Be-China's-Enemy" commentaries. Beijing still regards the bombing of its embassy in Belgrade as a consciously ordered hit, with leaks now coming from the Pentagon to journalists suggesting that it may have been. Beijing also notes with alarm the frenzy being whipped up over the unsupported allegations in the Cox Report of Chinese spying and espionage. The efforts by the China-bashers within the U.S. to block China's membership in the World Trade Organization and even from some congressmen to deny renewal of China's Most-Favored-Nation trading status add up to a clear pattern of a strategy to isolate China.

Senate Foreign Relations Chairman Helms has been arguing on behalf of the old Cold Warrior factions that the U.S. Senate approve the Taiwan Security Enhancement Act, which will authorize more U.S. arms sales to Taiwan and strengthen U.S.-Taiwan military cooperation. The proposal to bring Taiwan under a regional missile-defense system puts Taiwan on the road to being a de facto U.S. protectorate. Beijing views the recent revision of the U.S.-Japan Security Defense Guidelines as a reinforcement of the alliance's offensive nature. It regards U.S. bilateral military alliances with South Korea, and now the Philippines, as "an attempt to give shape to an arc ring of encirclement to contain a stronger China," Shanghai's Jiefang Ribao reports. The same article quotes deputy secretary of defense for East Asia, Kurt Campbell, to chilling effect on this point: "What worries us the most is a stronger China. If China's present growth rate continues for another decade, then historians 50 years later may look back and give such a comment: Strategically speaking, the biggest incident at the end of the 20th century was not the disintegration of the Soviet Union, the Middle East Peace Process, or the Gulf War, but the prosperity of China." The Chinese are not without cause to suspect that President Lee's rejection of the "One-China" policy was coordinated with the U.S. faction that seeks to portray China as a strategic threat.

Although the general development of economic convergence was progressing (Taiwanese have some US$30 billion invested on the mainland), Pres. Lee's announcement likely means suspension of the promising bilateral non-government talks that had been occurring. Lee's government, while paying lip service to a policy of non-provocation, has attempted to control the pace and volume of Taiwan's booming commercial and financial relations with the mainland. Hsu Hsin-liang, leader of a KMT faction, voiced criticism of the government's official "guard against impetuosity and maintain patience" policy. In his "Guidelines," as reported in Taipei's Lien-Ho Pa, Hsu proposed an acceleration of efforts to improve cross-strait relations and promote progress in trade and economic relations. The government is too short-sighted and efforts to restrain Taiwanese investors from making large-scale investments in China threaten Taiwan's economic well-being, he advises. Hsu articulates the view of what increasingly now is a de facto role in China's development -- the one played by Taiwan's business community. The relationship has not escaped the consequences of the Asian financial crisis, with Taiwan investment on the mainland down by 75.6% since the beginning of the year and indirect trade off by nearly 8% (as import controls were employed). Yet the direction remained positive, as the Taiwanese business community continued to circumvent official policy restrictions on trade with the mainland. This development, of course, is regarded with alarm in those quarters that seek to isolate China.

It is hard to take at face value the conventional rationalization that Pres. Lee's remarks on "state-to-state" relations were intended to steal thunder from the pro-Independence party going into Taiwan's presidential campaign. After all, the recent KMT advances in legislative elections were based on approval of a policy of non-confrontation with the mainland. A recent editorial "Ask Taiwan" in The Wall Street Journal, 6-29-99, reported that virtually no one the editorial staff talked to in Taipei wants to exploit the current Beijing-Washington rift. The Journal, though, remains schizophrenic on China. This morning it runs a highly provocative piece by James Lilley, ambassador to Beijing in the Bush years, which argues for Taiwan's status as a state separate from the PRC. GOP presidential frontrunner George W. Bush is getting his China advice from the hardliners, including Richard Perle and Paul Wolfowitz, while the only GOP presidential hopeful who publicly opposes statehood status for Taiwan and supports China's economic success -- while supporting Taiwan's membership in the World Trade Organization -- is former Bush Vice President Dan Quayle.

While most Taiwanese want no part of a confrontation with Beijing, the China-bashers likely hope to goad the PRC into a military reaction to further buttress their allegations that the country is a threat that must be encircled and contained. Thus, Taiwan has become a pawn in a post-Cold War strategy to portray China as a threat. Such a strategy, though, cuts against what many in Taiwan's leadership have affirmed: "There is nothing to be gained by attempts in the U.S. to isolate China." This area of foreign policy has slipped through Clinton's hands, and the momentum now is with the anti-China faction. It comes very close to representing a major coup within the U.S. foreign policy establishment. China-U.S. relations now is the single most important foreign policy question facing the country and will remain so during the 2000 presidential elections.