Memorandum submitted by Foreign and Commonwealth
1. Taiwan has a unique position. It has
an economy of global importance and has witnessed remarkable developments
both in its economy and more recently in its political system.
However, for reasons set out in paragraphs two and three below,
the United Kingdom, like most other countries including our closest
allies, does not recognise Taiwan as a state. We thus do not have
diplomatic relations or any formal dealings with the authorities
in Taiwan. Britain nonetheless does have real interests in relation
to Taiwan and we maintain an unofficial British Trade and Cultural
2. Taiwan was ceded to the Japanese under
the Treaty of Shimonoseki in 1895. At the end of the Pacific War,
Taiwan was occupied by Nationalist troops of the Republic of China.
Following their defeat in the civil war in China, the remnants
of the Nationalist administration fled to Taiwan. For many years,
the Nationalist administration in Taiwan maintained its claim
to be the legitimate government of the whole of China, a claim
also made by the Government of the People's Republic (PRC). Although
the "Republic of China" constitution still lays claim
to sovereignty over the mainland, the administration has in practice
long since stopped denying that there is another legitimate government
in power on the mainland (ie one (notional) country, two separate
III. UK POSITION
3. HMG recognised the Government of the
PRC in 1950. We retained a British Consulate in Tamsui outside
Taipei, accredited to the provincial authorities of Taiwan, until
1972. At that time, an agreement was signed with the PRC allowing
for an exchange of Ambassadors with China. The Consulate was withdrawn
at that time and since then there has been no official UK representation
in Taiwan. Under the terms of the 1972 agreement with China, HMG
acknowledged the position of the government of the PRC that Taiwan
was a province of the PRC and recognised the PRC Government as
the sole legal Government of China. This remains the basis of
our relations with Taiwan. We do not deal with the Taiwan authorities
on a government to government basis, and we avoid any act which
could be taken to imply recognition.
4. Taiwan has an economy of global importance.
It has a GNP of US$290 billion and a GDP per capita of US$13,203
which ranks it among the developed industrialised nations. The
Ministry of Finance estimates true GNP per capita as over
US$21,000. This figure includes income from Taiwanese investments
abroad and assumptions about the size of the black economy (thought
to be worth at least a quarter of official GNP). It is the world's
fourteenth largest trading economy and has the world's third largest
foreign exchange reserves at US$110 billion.
5. Of the major industrialised economies
in Asia, Taiwan's is arguably the strongest and the healthiest.
In the past four years, it has bounced back vigorously from bouts
of Chinese sabre rattling, the Asian financial crisis, and an
earthquake which killed 2,500 and destroyed 100,000 homes. In
1998 at the height of the Asian crisis, Taiwan eased back to 4.9
per cent growth compared to negative growth in Hong Kong, Korea
and Singapore. Last year Taiwan posted 5.5 per cent growth and
at least 6.5 per cent is predicted for 2000. At the macro-level
it owes its robustness to a consistent trade and current account
surplus, a surplus in net domestic savings, local investment mostly
locally funded, negligible external debt, and massive forex reserves.
Taiwan has pursued a policy of keeping capital account exchange
controls in place until the economy is judged strong enough to
withstand their complete removal. It also runs a floating but
managed exchange rate. On a micro-level, the financial system
is relatively sound and well regulated, and bad loans, corruption
and "crony capitalism" are less widespread than elsewhere
in Asia. In industry most large companies are neither over-expanded
6. In preparation for WTO entry, the Taiwanese
economy has been extensively liberalised and opened to foreign
participation. Fulfilment of further commitments following WTO
accession will eventually make Taiwan one of the most open economies
in Asia if not the world. Britain is already benefiting from improved
market access for both goods (eg whisky) and services (retailing
and financial services).
7. Politically Taiwan has undergone a remarkably
smooth transition from an authoritarian one-party system to a
fully functioning democracy in the last 15 years. The ruling Nationalist
Party first tolerated and then had gradually to yield power to
the opposition Democratic Progressive Party. The election, in
March 2000, of Chen Shui-bian, the candidate of the Democratic
Progressive Party, as President marked a further important step
in this process. For the first time in its history, representatives
of a party other than the Nationalists (Kuomintang) hold power
at the national level in Taiwan. Since the election both the political
landscape and the structure of the government have changed dramatically.
Though a small number of Nationalist members have been recruited
to Chen's government, including the former Defence Minister Tang
Fei as premier, the Nationalist Party is nevertheless in serious
trouble and undergoing a critical look at itself. It now barely
retains a majority in the legislature. It may yet lose this if
it continues to divide and more MPs defect to the new People's
First Party, formed by James Soong, the former Nationalist governor
of Taiwan Province, who ran as an independent in the Presidential
election. The DPP controls only a third of the seats in the legislature
and is itself composed of several factions. The result is a fragmented
parliament with no party in firm control and the DPP struggling
to form a majority alliance. Meanwhile the National Assembly,
once aiming to evolve into an Upper House, has voted to pass its
Constitution-amending powers to the legislature, the very body
whose excesses it had aimed to curb. Taiwan now has an unusual
semi-Presidential system, with a powerful uni-cameral parliament.
It slightly resembles the French system but has yet to be put
to the test.
8. Uncharted waters thus lie ahead in the
short-term. But in the transition to democracy since 1986, Taiwan
has peacefully absorbed numerous dramatic changes. With the transfer
of power to the DPP, the last big shake-up is now taking place,
but there is no reason to believe that it will not be peaceful.
Chen Shui-bian was elected to begin the longer-term but less spectacular
work of strengthening democracy and the rule of law inside Taiwan.
Already in place are a functioning democratic electoral system,
freedom of speech and movement, and a free press. There are no
political prisoners or exiles. Serious human rights concerns are
limited to the use of the death penalty and occasional reports
of police and military brutality.
VI. THE RELATIONSHIP
9. The Government of the People's Republic
of China continues to maintain that Taiwan is an inalienable part
of China, that it is the sovereign power over Taiwan, and that
its ultimate aim is reunification. In fact, official-level dialogues
have been carried out in the past between China and Taiwan to
discuss the possibility of establishing a modus vivendi, at least
on the technical issues if not on the fundamental questions of
Taiwan's status and the possibility of agreeing terms on eventual
reunification. But these contacts were broken off following President
Lee Teng-hui's statement in July 1999, that relations across the
straits should be conducted on a "special state to state"
basis. The Chinese leadership have more recently re-asserted their
policy position that the PRC will not rule out recourse to military
means to secure reunification, especially in the context of the
Taiwanese Presidential election in March 2000. Their statement
that "indefinite refusal to negotiate on these issues"
would be a pretext for such action was widely construed as a threat
to the Taiwanese not to elect a candidate who might incline towards
independence for Taiwan. China publicly described the subsequent
election of Chen Shui-bian as "destablising", but has
indicated that it would be prepared to resume cross-straits talks
on the basis that Taiwan accepts the policy of "one China".
Chen, for his part, has since the election attempted to steer
a careful course to avoid offending the PRC, while not wholly
abandoning the idea of independence for Taiwan.
10. Chen's measured approach reflects a
general consensus in Taiwan not to disturb the status quo by unnecessarily
provoking the Chinese while not compromising Taiwan's interests
in the face of Chinese pressure. While neither side wishes to
force the issue, their positions are some way apart and the question
of the approach to "one China" remains a sensitive and
difficult issue for both sides. It will take some inspired thinking
to find an acceptable way back into the negotiating process.
VII. UK AIMS
11. HMG's principal objectives in relation
to Taiwan are economic. We seek to develop UK exports and commercial
involvement with Taiwan, including inward investment. We also
seek to develop a wide range of unofficial links, particularly
in the educational and cultural fields. We support the further
economic development of Taiwan and look forward to its entry to
the WTO. We also welcome Taiwan's political development and the
democratic elections that have taken place there. In developing
our relations with Taiwan we act within the restraints imposed
by our formal position on the status of Taiwan and bear in mind
Chinese sensitivities in order to ensure that unnecessary damage
to that relationship is avoided.
12. We also make it clear that we consider
the Taiwan issue is one to be settled by the Chinese people on
both sides of the Taiwan strait. We are strongly opposed to any
use of military force and urge both sides to engage in constructive
dialogue on the issue.
13. For the reasons outlined above, the
UK has no official representation in Taiwan. Our commercial and
other interests are unofficially represented through the British
Trade and Cultural Office (BTCO). It was established in 1993 when
it was decided to strengthen our effort in Taiwan. It is headed
by a senior Diplomatic Service officer on secondment. The principal
role of the BTCO is to promote our trade and investment interests
and the majority of staff are devoted to this task. It also has
a Visa Handling Unit, set up in 1989. Because of its unofficial
nature it cannot carry out any formal consular functions. However
it does seek to carry out some consular type protection work by
assisting distressed British citizens, for example during the
earthquake in September last year and in undertaking prison visits.
14. The BTCO currently has nine UK based
staff and a complement of 41 locally engaged staff in Taipei.
There is a small branch office in the southern port of Kaohsiung
which is currently staffed by one locally engaged officer.
15. The British Council has been operating
as the Cultural and Education Section of the BTCO since 1993 when
it took over, and expanded, the functions of the private Anglo
Taiwan Education Centre. One of its principal functions (below)
is to encourage Taiwanese students to study in the UK. It has
offices in Taipei and Kaohsiung and a total of 45 staff in Taipei
(UK based and locally engaged) and four in Kaohsiung (locally
16. Taiwanese representation in London is
similarly unofficial. It consists of the Taipei Representative
Office in the UK which carries out similar functions to the BTCO.
It has a branch office in Edinburgh which opened in 1998. There
is also an office called the Taiwan Trade Centre, which is an
arm of the private Taiwanese trade promotion body called the China
External Trade Development Council (CETRA).
17. Our main emphasis is on trade and investment
promotion. UK exports to Taiwan dipped in 1998 and 1999 but are
now showing signs of recovery. The total export figure in 1999
was £867.6 million. Since 1992, there have been regular private
visits to Taiwan by UK Ministers to pursue trade and inward investment
promotion objectives. The most recent was by Mr Caborn, the Minister
for Trade, in February. We hope to continue and develop these
exchanges which can provide real practical support to British
business. We welcome private visits by Taiwanese Ministers to
this country. Recent senior visitors have included the Minister
of Health in 1998 and the Minister of Economic Affairs last year.
18. The annual UK/Taiwan trade policy talks
form the focal point of regular official level bilateral dialogue
on market access and trade liberalisation. We are also actively
seeking practical ways to help UK businesses through improving
the business environment; the BTCO recently signed with the relevant
body in Taiwan an Intellectual Property Arrangement and is hoping
to negotiate other informal arrangements, such as one on the avoidance
of double taxation. The BTCO has also been active on market issues
such as the removal of discriminatory taxes on Scotch whisky,
better access for financial services, lobbying for the lifting
of the ban on British beef and pork and the protection of British
intellectual property. It makes regular informal representations
in support of the protection of Falkland Islands fish stocks from
X. INWARD INVESTMENT
19. Taiwan is a major inward Asian investor,
with 80 per cent of their European investment in the UK. The companies
are almost exclusively IT related. Taiwan is the third largest
IT producer behind USA and Japan. Although, like Hong Kong, inward
investment to the UK has slowed, there too are signs that Taiwanese
companies are now more actively looking to invest overseas with
an accent on Research and Development into new IT technologies.
There is also a growing interest in biotechnology.
20. The Invest in Britain Bureau is housed
within the BTCO with a team of five full time (one UK based) staff
devoted to inward investment.(These have been included in the
total staff of BTCO above). This is the largest IBB team in Asia
outside Japan. Ten regional development agencies also maintain
offices in Taipei, although these are spearate from the BTCO.
They are: Advantage West Midlands, London First Centre, One North
East, North West England Development Bureau, East Midlands Development
Bureau, Locate in Kent, Locate in Scotland, Welsh Development
Agency, Industrial Development Board for Northern Ireland, and
English Partnerships. The Yorkshire Forward office closed in February
21. The number of Taiwanese students in
Britain has grown impressively in the last decade. The UK now
has approximately 24 per cent of the Taiwanese overseas study
market, compared to 1 per cent in 1989. During 1999, some 6,550
students visas were issued in Taipei and the total number of Taiwanese
students in the UK during the year is estimated at between 10,000
and 11,000. The BTCO's educational and Cultural Section holds
eight education exhibitions a year, produces a range of publications
and offers daily counselling. In addition to education promotion,
it operates in the field of arts, science and technology and English
22. The British Tourist Authority closed
down its Taipei operation in February 1999 and the British Council
now operates a limited tourist information service on its behalf.
Due to the Asian financial crisis, tourist numbers fell 6 per
cent to 28,000 last year, but the total number of Taiwanese visitors
grew by 5 per cent to 43,000.
23. Parliamentary exchanges are active.
Since 1993, Taiwan has hosted oveer 100 visits by British MPs.
The Foreign Affairs Committee and the Employment Committee both
visited in 1993, and the Trade and Industry Committee has visited
twice, although there have been no Select Committee visits in
recent years. Taiwan's Legislative Yuan has an association promoting
links with parliaments in Europe and numerous MPs have visited
the UK. The BTCO's lobbying and networking activities are directed
at key MPs of all parties as well as at the authorities.
24. We seek to encourage non-official links
in a wide range of areas, cultural, scientific and so on where
these can be of mutual benefit.
XII. TAIWAN AND
25. Because of our formal position on the
status of Taiwan we do not support Taiwan's membership of international
bodies whose membership is limited to states. We do support and
encourage Taiwan's membership of appropriate international economic
fora, including the WTO. We look forward to Taiwan joining the
WTO, under the right terms, in its capacity as the Customs Territory
of Taiwan, Kinmen, Matsu and Penghu.