Economic ties across the Taiwan Strait: Buying time for compromise

This work explores the way in which Taiwan's extensive economic interactions with the mainland affect cross-Strait relations. These economic interactions occur not only within a context of mainland-Taiwan political tension, but also within a broader environment of economic globalization wherein the international community is dependent on economic output from both sides of the Taiwan Strait. The paper begins by examining Beijing's and Taipei's views and policies toward cross-Strait economic exchanges. While Beijing sees economic exchanges as beneficial for both reunification with Taiwan and economic growth, Taipei worries that the pace of economic exchange reduces the island's security and political flexibility. The second section lays out the details of increasing trade and investment across the Taiwan Strait, while the third part looks at Taiwanese investments in the electronic sector The final section assesses the impact of economic exchange on cross-Strait relations. This work argues that a web of investment and trade is increasingly tying Taiwan and the mainland to each other and the international division of labor. These links make disruptive political action on the part of the mainland or Taiwan increasingly costly for both primary players, as well os the international economy, and thus serve to reinforce the political status quo.