Taiwan-U.S. Relations: Recent Developments and Their Policy Implications

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

U.S.-Taiwan relations have undergone important changes, sparked in part by the increasing
complexity of Taiwan’s democratic political environment and the continued insistence of Beijing
that the separately ruled Taiwan is a part of the People’s Republic of China (PRC). Taiwan
President Ma Ying-jeou, elected on March 22, 2008, in a surprisingly broad electoral victory, has
moved quickly to repair Taiwan’s relations with the PRC. Since President Ma assumed office on
May 20, 2008, Taiwan-PRC talks have resumed for the first time since 1998. The first set of talks
resulted in establishment of regular direct weekend charter flights. Taiwan also has made other
concessions, such as lifting long-standing caps on Taiwan investment in the PRC and giving a
lower profile to Taiwan’s bids for participation in U.N. specialized agencies. Opponents of the
government’s plans have said that President Ma’s moves to improve cross-strait relations have
been too rapid, too unilateral, and have compromised Taiwan’s sovereignty and placed its
economic security in jeopardy.
President Ma also has sought to address any annoyances in Taiwan-U.S. relations arising from the
former Chen Administration. Throughout his tenure from 2000-2008, President Chen Shui-bian, a
member of the Democratic Progressive Party (DPP), pursued the position that Taiwan already “is
an independent, sovereign country.” This position was highly objectionable to Beijing and
problematic for many aspects of U.S. policy, which is based on vague “one-China” policy
formulations. Term-limited, Chen was required to step down in May 2008. Since then he has been
fighting a growing financial scandal that erupted during his presidency involving allegations of
money-laundering and corruption by his administration and members of his family.
In addition to its U.N. bid, the Taiwan government also is seeking to raise its international profile
in other ways involving the United States. Taiwan is seeking to be removed from the U.S. Special
301 “Watch List” (its inclusion connotes problems with intellectual property rights, or IPR) by
making significant IPR improvements. It also is seeking to qualify for the U.S. Visa Waiver
Program (VWP), which eliminates some visa requirements for qualified countries. The Taiwan
government also continues to place a high priority on obtaining a U.S.-Taiwan Free Trade
Agreement (FTA); U.S.-Taiwan trade discussions to date have been held under a 1994 Trade and
Investment Framework (TIFA).
The 110^th Congress was concerned with bolstering U.S. support for Taiwan and helping to
improve Taiwan’s international position. Relevant legislation on Taiwan included: H.R. 2764
(P.L. 110-161); H.R. 1390; H.R. 3912/S. 1565; H.Con.Res. 73; H.Con.Res. 136; H.Con.Res. 137;
H.Con.Res. 170; H.Con.Res. 250; S.Con.Res. 48; and S.Con.Res. 60. This report will be updated
as events warrant.

Most Recent Developments.............................................................................................................1
Background and Analysis................................................................................................................1
Brief Historical Background to Taiwan’s Political Landscape..................................................2
Political Pluralization..........................................................................................................2
Key Current Issues in Taiwan..........................................................................................................3
Corruption Investigations: Former Chen Administration..........................................................4
Special Expense Accounts..................................................................................................6
Resumption of Cross-Strait Talks..............................................................................................7
Bid for U.N. Membership.........................................................................................................8
Economic and Trade Relations................................................................................................10
Taiwan-U.S. Trade and Investment...................................................................................10
Taiwan-China Trade and Investment.................................................................................11
Other Key Bilateral Issues......................................................................................................13
U.S. Arms Sales to Taiwan and Taiwan’s Defense Budget...............................................13
Visa Waiver Program (VWP)............................................................................................14
Change in Taiwan’s Political Direction in 2008............................................................................15
March 2008 President Election.........................................................................................15
January 2008 Legislative Elections...................................................................................15
U.S. Policy Trends and Implications.............................................................................................16
Trends in the George W. Bush Administration........................................................................16
Tilt Toward Taiwan...........................................................................................................16
Taiwan the “Unhelpful”....................................................................................................16
Implications ............................................................................................................................. 17
For Cross-Strait Relations.................................................................................................18
For U.S. Arms Sales..........................................................................................................18
For PRC Policy and Credibility........................................................................................19
For Taiwan Democracy.....................................................................................................19
Legislation in the 110^th Congress..................................................................................................20
Chronology ..................................................................................................................... ............... 22
For Additional Reading.................................................................................................................25
Author Contact Information..........................................................................................................26

January 7, 2009—According to a report in The Taipei Times, U.S. military officials are concerned
that military-to-military exchanges between Taiwan and China could jeopardize U.S. arms sales
to Taiwan. Also, Taiwan’s cross-strait negotiator, P.K. Chiang, began a visit to four PRC cities to
discuss issues facing Taiwan investors in the mainland.
December 12, 2008—Former Taiwan President Chen Shui-bian was indicted on charges of
corruption. He was arrested on those charges on November 12, 2008.
October 3, 2008—The Defense Security Cooperation Agency notified Congress of the possible
Foreign Military Sale of six different types of defense articles and equipment, totaling
approximately $6.4 billion.
September 22, 2008—In the wake of the contaminated milk scandal in China, Taiwan’s Health
Ministry warned consumers against buying non-dairy creamers made in the mainland—the source
of an estimated 29% of Taiwan’s non-dairy creamer imports. According to Taiwan’s Straits
Exchange Foundation (SEF), Taiwan has imported no liquid milk from China.
September 8, 2008—Taiwan announced that it would cancel the live-fire exercise portion of its
annual five-day military exercises in deference to warming ties between Taiwan and the PRC.

Once a U.S. World War II ally, the Republic of China (ROC) government, which moved to the
island of Taiwan after 1949, remains a key U.S. foreign policy issue. With sovereignty over the
island also claimed by the People’s Republic of China (PRC), official U.S. relations with the
ROC government on Taiwan became a necessary casualty of the 1979 American decision to
establish diplomatic relations with the communist PRC government as the sole legitimate
government of all China. Since then, absent formal diplomatic relations, the United States still
has maintained substantial economic and security relationships with Taiwan, including the sale of ¹
defensive military weapons and services. But continuing political transformations in both the
PRC and Taiwan since 1979 mean that U.S. policymakers are facing a different set of complex
policy choices with each new Taiwan government.
This report focuses on current developments in Taiwan, analyzing how those developments are
affecting choices the United States makes about its policy toward Taiwan specifically and toward
the PRC more broadly. Other CRS reports provide more details about the myriad historical
complexities of Taiwan’s current situation in U.S. policy, such as: historical background about
how the ROC on Taiwan went from a U.S. ally to a government with no diplomatic U.S.
relations, including the fundamentals governing U.S. policy toward Taiwan today (CRS Report
RS22388, Taiwan's Political Status: Historical Background and Ongoing Implications); the
increase in U.S.-Taiwan tensions under the former administration of President Chen Shui-bian

¹^U^.^{S. w}^e^a^pons^s^a^le^s^{to T}^a^iw^aⁿ^a^r^e^g^o^v^e^rⁿ^e^d^by^Se^c^{tion 2 a}^nd^Se^c^tion³⁽^b)^of^the^T^a^iw^aⁿ^R^e^la^tions^A^c^{t, P}^.^L^.^96-^8:²²
^U^.^S.C^{., C}^h^a^p^te^r^48,^Se^c^tio^ns³³⁰¹^-³³¹^6.

(CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political Relations); the 2008
elections in Taiwan CRS Report RS22853, Taiwan's 2008 Presidential Election, all by Kerry
Dumbaugh, and the subtle and complicated permutations of the “one-China” policy over three
decades and its role in U.S. policy (CRS Report RL30341, China/Taiwan: Evolution of the “One
China” Policy—Key Statements from Washington, Beijing, and Taipei, by Shirley A. Kan).
With the victory of Mao Tse-tung and his Communist Party military forces on mainland China in
1949, the remnants of the government of the Republic of China (ROC),America’s former World
War II ally led by Chiang Kai-shek, fled to the island of Taiwan off the south China coast. For the
next thirty years, the United States continued officially to recognize the ROC government while
both regimes—the ROC on Taiwan and the People’s Republic of China (PRC) on the mainland—
claimed legitimacy as the sole legal government of the Chinese people.
Official U.S. relations with Taiwan became a casualty of the American decision in 1979 to
recognize the communist government of the People’s Republic of China (PRC) as China’s sole
legitimate government. Since then, U.S. unofficial relations with Taiwan have been built on the
framework of the Taiwan Relations Act (P.L. 96-8) and shaped by three U.S.-China
communiques. Under these agreements, the United States maintains its official relations with the
PRC while selling Taiwan military weapons and having extensive economic, political, and
security interests there. But continuing transformations in both the PRC and Taiwan political
systems mean U.S. officials have continued to face new and difficult policy choices.
Until the mid-1980s, Taiwan had a one-party system in which Chiang Kai-shek’s authoritarian
Nationalist Party (KMT) ruled under martial law. The KMT permitted no political opposition and
held no democratic elections. In 1986, the party began to liberalize, allowing the formation of
opposition parties, including the Democratic Progressive Party (DPP), a party whose platform
advocated Taiwan independence from China. The KMT government also ended martial law (in
1987), and for the first time opened government positions to native “Taiwanese”—the 85% of the
island’s population who predated the influx of the two million “mainlanders” fleeing civil war in
China. In the ensuing years, members of the ROC legislature on Taiwan, elected on mainland
China over 40 years earlier, were asked to retire, and a new, streamlined legislature was elected in

1992.

In 1996, Taiwan held its first direct presidential election, which was won by KMT leader Lee
Teng-hui, himself a native Taiwanese. During his presidency, Lee increasingly distanced himself
from his party’s long-standing position that there was only “one China” and that Taiwan was part
of it, and instead began emphasizing Taiwan’s separate culture and identity apart from China’s.
This posed complications for one of the fundamental tenets on which U.S. relations with the PRC
were based—the statement that “The United States acknowledges that all Chinese on either side ²
of the Taiwan Strait maintain that there is but one China and that Taiwan is a part of China.”

²^T^h^is^pa^r^tic^ula^r^qu^ote^is^f^r^om^the¹⁹⁷²^Shaⁿ^g^h^aⁱ^C^o^m^m^unique^is^s^u^e^d^a^t^the^c^o^nc^lusⁱ^on^of^P^r^e^s^ideⁿ^t^Rⁱ^c^h^a^r^{d N}ⁱ^x^on’^s
^la^ndm^a^r^k^{trip to Ch}^ina^.^A^som^e^wha^t^v^a^g^u^e^r^f^o^r^m^ula^tion—“^T^he^[^U^nite^d^Sta^t^e^s^]^a^c^k^now^le^dg^e^s^the^Chine^s^e^p^o^sitio^{n t}^h^a^t
^the^r^e^{is b}^u^{t o}ⁿ^e^Ch^ina^aⁿ^{d T}^a^iw^aⁿ^{is pa}^rt^of^China^.^”^—^w^a^s^pa^r^t^of^the¹⁹⁷⁹^c^o^m^m^unique^nor^m^a^liz^ing^U^.^{S. r}^e^la^tio^ns
⁽^c^onti^nue^d.^..)

The uninterrupted KMT dynasty on Taiwan finally was broken on March 18, 2000, when DPP
candidate Chen Shui-bian won the presidency with only 39% of the popular vote in a three-way
race. The victory was a stunning defeat for the KMT and its unbroken 50-year tenure in power on
Taiwan. By the narrowest of margins, President Chen was elected to a second (and final) term in ³
March 2004, winning by only 29,518 votes out of a reported 13.25 million votes cast. The
KMT’s fall from political dominance was compounded in two subsequent legislative elections in
December 2001 and December 2004. By 2004, the struggling party saw its majority of 115 seats
in the 225-member Legislative Yuan (LY) cut to just 79.
With neither the DPP nor the KMT having a working majority, each formed coalitions with
smaller parties to gain strength. As President, Chen Shui-bian presided over a “Pan-Green”
coalition composed of his DPP party and the Taiwan Solidarity Union; it was opposed by the
“pan-Blue” coalition of the KMT and the People First Party (PFP), which together retained the
barest control of Taiwan’s 225-member legislature. Since the two opposing coalitions had very
different political ideologies and roughly equal political strength, this split government created
significant gridlock in Taiwan’s political arena and thus difficult political realities for U.S.
policymakers throughout Chen’s tenure.

Taiwan’s political situation changed substantially in 2008 when political momentum swung back
behind the KMT while the DPP, struggling with growing political scandal and low voter
confidence, lost power in both presidential and legislative elections. While many had expected a
victory on March 22, 2008, for KMT presidential candidate Ma Ying-jeou and his running mate,
Vincent Siew, the size of the party’s winning margin (2.2 million votes) was a surprise to most ⁴
outside observers and even to some in the party itself. Emphasizing a platform of economic
improvement and better relations with the PRC and the United States, Mr. Ma did respectably
even in southern and rural districts heavily dominated by the DPP in the past. His ticket’s wide
margin of victory echoed a similarly dramatic KMT victory in the January 2008 legislative
elections, where the party gained a majority of 81 seats in the new 113-seat body compared to the ⁵
DPP’s 27 seats. When Ma assumed office on May 20, 2008, the KMT had regained solid control
of the government.
The electoral fortunes of the DPP’s presidential ticket—candidate Frank Hsieh and his running
mate, Su Tseng-chang—were burdened by what was widely regarded as the poor performance of
the DPP incumbent President Chen Shui-bian, particularly with respect to the economy; by
corruption scandals in the DPP; and by Chen’s increasing emphasis on a controversial pro-

^(...c^on^tin^ue^d)
^w^{ith the}^P^RC.
³^Iⁿ^t^h^is^c^a^m^pa^ig^{n, P}^r^e^s^ideⁿ^{t C}^h^eⁿ^a^nd^his^Vic^e^-^pr^e^s^ideⁿ^t^,^A^nne^tte^L^u^{, w}^e^r^e^both^s^h^o^t^aⁿ^{d s}^lig^htly^w^oun^de^d^jus^t^be^f^o^r^e
^the^e^l^e^c^tion.^K^M^T^op^po^ne^nts^,^w^h^{o be}^lie^v^e^{d t}^h^e^y^w^e^r^e^{on the}^v^e^r^g^e^of^vⁱ^c^t^or^y^,^ca^lle^{d this}^t^h^e^“^s^ho^otiⁿ^g^incⁱ^deⁿ^t^,”^w^ith
^so^m^e^su^g^g^estⁱⁿ^{g i}^t^{was st}^ag^ed^t^o^gi^{ve t}^h^{e DP}^P^sl^at^{e an ed}^{ge i}ⁿ^t^h^e²⁰⁰⁴^el^ectⁱ^oⁿ^.
⁴^B^a^s^e^{d on}^the^a^u^t^hor^’^s^c^onv^e^r^s^a^tionsⁱⁿ^T^a^iw^aⁿ^{on Ma}^r^c^h^23-^24,²⁰⁰⁸^{, w}^{ith b}^o^t^h^K^M^T^pa^r^t^y^of^fⁱ^cⁱ^als^a^{nd w}^{ith f}^o^r^e^igⁿ
^obs^e^r^v^e^r^s^.
⁵^DP^P^can^dⁱ^d^a^t^e^{s recei}^ved³⁷^%^o^f^t^h^{e vo}^t^e^{s i}ⁿ^t^h^e²⁰⁰⁸^l^e^gi^sl^atⁱ^v^{e el}^ectⁱ^oⁿ^s^,^w^hⁱ^c^h^w^e^{re h}^e^l^d^un^d^e^r^new^ru^l^e^{s t}^h^at
^f^a^vo^r^e^d^t^h^{e KM}^T.^S^{ee C}^R^S^R^e^por^t^R^S²²⁷⁹¹^,^Ta^iw^aⁿ^'^s^Le^gis^l^ativ^e^Ele^c^tions^{, J}^aⁿ^uar^y²⁰⁰⁸^:^I^m^p^lic^a^tions^for^U^.^S.
^Polic^y^{, by}^K^e^rr^y^D^u^m^b^a^u^g^h^.

independence agenda. Some observers felt that the DPP had lost the opportunity to make critical
adjustments in its policies after public dissatisfaction with its performance became clear in 2005.
Instead of becoming more moderate and moving to where the voters were, according to this view,
the DPP had tried to move the voters to it, a strategy that did not serve it well in the 2008 ⁶
elections.
Taiwan’s new President, Ma Ying-jeou, of the KMT, has pursued a more conciliatory approach
toward the PRC and has vowed to improve relations with the United States. Since his landslide
election, however, Ma’s popularity has fallen, plagued among other things by tumbling stock
markets and rising energy prices as well as by concerns over his cross-strait policies and by
residual domestic political tensions in Taiwan.
Under Taiwan’s new KMT government, the United States will be faced with challenges familiar
from past years. These include: decisions on new arms sales to Taiwan; the level of U.S. relations
with Taiwan and the Ma government; and whether to pursue closer economic ties. Under the Ma
Administration, Taiwan-U.S. relations also face new challenges—notably the implications for
U.S. interests of closer and more cordial ties between Taiwan and the PRC, and what role, if any,
Washington should play in cross-strait relations.
On December 12, 2008, former President Chen Shui-bian was indicted on charges of corruption
while he served as Taiwan’s president; he had been arrested on those charges on November 12,
2008. The Taiwan government has been conducting broadening investigations into allegations of
corruption made since 2006 against then-President Chen, his family members, and officials in his
administration. New allegations of money-laundering arose in August 2008 against Chen and his ⁷
family, plunging the DPP further into crisis, according to current DPP chairwoman Tsai Ing-wen.
The August 2008 allegations, which involve foreign government investigations and not just those
of Taiwan’s KMT-dominated government, also are the first in which Chen publicly has admitted
even partial culpability, saying that the funds were from campaign contributions, legally acquired,
that he failed to report.
In a story first reported by a Taiwan magazine, President Chen’s wife, former first lady Wu Shu-
jen, was said to be under investigation for having secretly transferred an estimated $21 million of
unknown origin to overseas bank accounts in Switzerland and the Cayman Islands under the
name of her daughter-in-law, Huang Jui-ching, and other family members. Taiwan officials were
said to have been alerted to the suspected money-laundering by The Egmont Group, an
international network that monitors suspected money-laundering and terrorism financing. Taiwan

⁶^She^lle^y^Rigg^e^r^{, Brow}^{n Assoc}ⁱ^a^t^e^P^r^of^e^{ssor of}^Ea^{st Asia}^{n Po}^litic^s,^Da^vⁱ^{dson Col}^l^e^g^e^,^{in a}^disc^ussi^on^rou^ndta^b^le^oⁿ
^T^aⁱ^w^aⁿ^{, Ma}^r^c^{h 23,}²⁰⁰⁸^.
⁷^DP^P^Ch^ai^rw^o^m^an^T^s^ai^In^g-wen^,^q^u^o^t^e^dⁱⁿ^“D^P^P^c^hⁱ^e^f^‘sh^o^c^ked^’^by^f^o^r^m^{er P}^r^esi^d^en^t^Ch^eⁿ^{’s graf}^t^s^can^d^a^l^,^”^The
^Chⁱⁿ^a^P^o^stⁱⁿ^Eⁿ^glⁱ^s^h,^A^u^gu^st^17,²⁰⁰⁸^.

is a member of the Egmont Group.⁸ Later reports alleged that Wu had wired the money first to ⁹
Singapore.
Taiwan’s Ministry of Foreign Affairs (MOFA) confirmed the allegations on August 14, 2008,
saying that the Swiss Confederation’s Department of Justice, suspecting money-laundering, had
sought assistance from Taiwan to verify that the substantial sum deposited in a Swiss bank
account held in Huang’s name was obtained legally. The same day, former President Chen held a
press conference in which he admitted he failed to fully declare campaign funds collected in 2000
and 2004, and that he was unaware until recently that his wife had transferred millions of dollars ¹⁰
to overseas bank accounts. On August 15, 2008, Chen apologized to the DPP for causing
“humiliation” and “irreparable damage” to the party for his failure to declare the campaign funds. ¹¹
He announced his and his wife’s immediate resignations from DPP party membership.
Among the details Taiwan prosecutors have provided are: that former President Chen had four
undisclosed bank accounts for political donations in his 2000 and 2004 campaigns; that he had
failed fully to declare campaign funds he had raised for mayoral and presidential campaigns
between 1993 and 2004; and that his wife had transferred surplus campaign contributions of an
estimated $21 million to bank accounts in Switzerland and the Cayman Islands using the names
of her son, daughter-in-law, and other family members. On August 19, 2008, Taiwan’s Special
Investigation Unit (SIU) announced it was inviting the Taipei-based Central Bank of China
(CBC) and the cabinet-level Financial Supervisory Commission (FSC) to assist in investigating
the source of the money. SIU investigators said they were looking into possible irregularities or
kickbacks in President Chen’s 2004 banking and financial reforms as a potential source of the ¹²
funds.
The August 2008 scandals are the latest in a series of legal problems for Chen, which surfaced
first in 2006 when the Taipei district prosecutor’s office began investigating allegations that ¹³
president Chen’s son-in-law had profited in an insider trading scheme. Related allegations were
that President Chen’s wife had participated in questionable insider transactions involving the
Pacific Sogo Department store. At the time, Chen accused his political opponents of mounting a ¹⁴
political “power struggle” against him. Nevertheless, the scandals helped worsen Chen’s low ¹⁵
approval rating late in his tenure—put at 16% in one survey on May 19, 2006. In an effort to

⁸^T^h^e^s^t^or^y^r^e^por^te^{d on}^A^u^g^u^s^t¹³^,²⁰⁰⁸ⁱⁿ^Next^Weekl^y,^a^T^aⁱ^w^aⁿ^ta^bloi^{d, s}^a^id^tha^t^t^h^e^Eg^m^{ont G}^r^{oup of}^Fina^nc^ia^l
^Inte^llig^eⁿ^c^e^{Units (FIUs)}^ha^{d a}^l^e^r^te^{d T}^a^iwaⁿ^a^u^thor^itie^{s to}^the^sus^p^ic^{ions a}^b^out^the^f^o^rm^e^r^{First L}^a^dy^’^s^ov^e^r^se^a^s
^a^c^c^ounts^.^T^a^iw^aⁿ^is^a^m^e^m^b^e^r^thr^oug^{h i}^t^s^Mo^ne^y^La^unde^rⁱ^ng^P^r^e^v^eⁿ^tio^{n C}^e^nte^r^{, a}ⁿ^Eg^m^{ont G}^r^oup^FI^U^.^T^h^e^P^R^C^is
ⁿ^o^t^a^me^mb^e^r^.
⁹^“^T^aⁱ^w^a^{n inv}^e^s^tig^a^t^e^s^a^lle^ge^{d m}^o^ne^y^la^unde^rⁱ^ng^,”^AP^{, A}^u^g^u^s^t²⁵^,²⁰⁰^8.
¹⁰^“^C^h^eⁿ^a^pol^og^iz^e^s^f^o^r^hidi^ng^f^unds^,”^The^C^hⁱⁿ^{a P}^o^s^tⁱⁿ^Eⁿ^g^lis^{h, A}^u^g^u^s^t¹⁵^,²⁰^08.
¹¹^{“ F}^o^rm^{er p}^r^esi^d^en^t^quⁱ^t^s^D^P^Pⁱⁿ^dⁱ^sgrace,^”^Cen^t^ra^{l News Ag}^en^cyⁱⁿ^Eng^lis^{h, A}^u^g^u^s^t¹⁵^,²⁰^08.
¹²^T^h^e^“^s^e^c^ond-^pha^s^e^fⁱ^na^nc^ia^{l r}^e^f^o^r^m^”^o^f^{2004 m}^a^de^s^ubs^ta^nt^ia^{l c}^h^aⁿ^g^e^s^{in ba}^nkⁱⁿ^g^a^{nd i}ⁿ^v^e^s^t^m^e^{nt r}^e^g^u^la^tionsⁱⁿ
^T^aⁱ^w^aⁿ^{, inc}^l^udi^ng^the^priv^a^tiz^a^tio^{n of}^s^t^a^t^e^-run^ba^nk^s^.^A^c^c^o^rding^t^o^a^K^M^T^ne^w^s^a^c^c^{ount c}^iting^Fiⁿ^a^nc^e^Minis^t^e^r
^{(MOF) L}^e^e^Shu-de^,^the^Mⁱ^nistry^w^{ill inv}^e^stig^a^t^e^de^ta^{ils of}^the^re^f^o^rm^{s, inc}^l^u^d^ing^t^h^e^T^a^ishin-Chaⁿ^g^Hw^a^a^{nd the}
^China^T^r^ust-Me^g^a^ba^nk^{s c}^a^s^e^s^{, to de}^te^rm^ine^if^the^r^e^w^e^re^irre^g^u^la^ritie^{s, ne}^g^lig^eⁿ^c^e^,^{or m}^a^l^f^e^a^s^aⁿ^c^e^.
¹³^P^r^esi^d^en^t^C^h^en^{’s son}^-ⁱⁿ^-l^aw^,^Ch^ao^Chⁱ^eⁿ^-^mⁱⁿ^g^,^w^a^{s i}^m^p^lⁱ^cat^edⁱⁿ^{a sch}^e^{me i}ⁿ^vo^l^vⁱⁿ^{g t}^h^{e T}^aⁱ^w^an^Devel^o^p^m^en^t
^Corpo^r^a^tio^n.
¹⁴^“Ch^eⁿ^:^cam^p^aⁱ^gⁿⁱ^s^{a ‘p}^o^lⁱ^tⁱ^cal^st^ru^ggl^e,^’”^The^Chin^{a P}^o^s^t^{, Se}^pte^m^be^r^{6, 20}⁰⁶^.
¹⁵^T^h^{is re}^{sult w}^a^{s obta}ⁱ^ne^{d i}ⁿ^a^s^u^r^v^e^y^b^y^{Shih Hsin U}ⁿ^iv^e^r^sity^.^A^c^c^o^rdiⁿ^g^{to tw}^{o se}^pa^ra^te^p^o^{lls c}^o^nd^uc^te^{d by}^the
^Chine^s^e^la^ng^ua^g^e^da^ily^the^C^hⁱ^{na T}ⁱ^mes^a^nd^by^Ta^ipeⁱ^’^s^Unite^{d Da}^ily^Ne^ws^{in la}^te^Ju^ne²⁰⁰⁶^{, C}^h^eⁿ^’^s^a^pprov^a^l^ra^ting
^hov^e^r^e^dⁱⁿ^a¹⁹^%^-^22%^r^a^ng^e^.

save his presidency, Chen on June 1, 2006, delegated authority for “day-to-day control” of the
government to Premier Su Tseng-chang and accepted the resignations of a number of his key
advisors. In July 2006, KMT politicians additionally accused Chen of misusing funds and
creating false invoices from a special “state affairs fund” available to the president. As a serving
president in 2006 Chen could not be indicted; but he survived three recall votes by Taiwan’s ¹⁶
Legislative Yuan as a result of the growing scandals—in June, October, and November 2006.
Shortly after Chen stepped down as president on May 20, 2008 (thereby losing his presidential
immunity), Taiwan prosecutors announced they were starting an official investigation on his
potential role in the 2006 corruption and malfeasance charges. In pursuit of these allegations,
President Ma on August 6, 2008 announced that he was declassifying documents, classified by
Chen while he was president, that allegedly implicated Chen in the case of the special expenses
fund. DPP members said that President Ma’s unilateral action set a bad policy precedent; they
hold that he should have convened a special non-partisan panel to review the materials prior to
declassification. Taiwan prosecutors have questioned the former president on several occasions in
investigating these allegations. Former President Chen has maintained that the funds wired to
overseas accounts are undeclared campaign funds legally acquired, not government funds
embezzled from the “special affairs” account while he was president or bribes associated with the ¹⁷
2004 financial reforms he initiated. He has called the current investigations a “political
vendetta” by the KMT against him and his family. One Taiwan press editorial has criticized
recurring corruption allegations in recent years—which have involved a number of senior Taiwan
politicians—suggesting they are fueled more by political partisanship than by interest in real ¹⁸
reform.
Investigations and indictments for corruption have been a recurring feature of political life in
Taiwan, particularly over the issue of how senior officials use and account for expenditures from
so-called “special expense accounts.” Such accounts are to be used for official expenses only, but
give the controlling officials broad discretion on how the funds are spent; they operate generally
with poor government oversight and are subject to vague rules that many Taiwan officials have
said are confusing. Among those investigated and cleared of such charges in the past are: current
President Ma Ying-jeou, former foreign minister James Huang, former economics minister Steve
Chen, and current DPP chairwoman Tsai-Ing-wen (investigated when she was head of the
Mainland Affairs Council). Other investigations for “special expense account” infractions
include: former Vice President Annette Lu, former justice minister Shi Mao-lin, former education
minister Tu Cheng-sheng, former interior minister Lee Yi-yang, and former civil service minister
Chu Wu-hsien, among others.

¹⁶^{Y. F. L}^o^w^,^“^L^e^g^isla^ture^se^{t to v}^o^t^e^{on se}^c^o^{nd m}^o^tio^{n t}^o^re^c^a^{ll pre}^s^ideⁿ^{t Oc}^to^be^{r 1}³^,”^Cen^t^r^a^{l News}^Ag^en^{cy En}^g^lish
^News^{, Se}^pte^m^be^r^{29, 2}⁰⁰⁶^.
¹⁷^A^f^te^r^que^s^tioni^ng^by^pr^os^e^c^u^tor^s^{on A}^u^g^u^s^t¹²^,²⁰⁰⁸^{, f}^o^r^m^e^r^P^r^e^s^ideⁿ^{t C}^h^eⁿ^w^a^s^quote^d^a^s^s^a^yⁱ^ng^“I^ha^v^e^ne^v^e^r^put
^aⁿ^y^ille^ga^{l inc}^o^m^e^{in m}^y^o^w^{n or i}ⁿ^m^y^f^a^mⁱ^l^y^’s^poc^k^e^ts^{. I be}^lie^v^e^the^ju^dicⁱ^a^r^y^w^{ill prov}^e^m^e^innoc^eⁿ^t.”^“^F^orm^e^r
^P^r^e^s^ideⁿ^{t C}^h^eⁿ^pr^of^e^s^s^e^s^hisⁱⁿⁿ^o^c^eⁿ^c^e^af^te^r^que^s^tioni^ng^,”^Ta^iwaⁿ^Ne^ws^Online^{, A}^u^g^u^s^t¹³^,²⁰^08.
¹⁸^“Do^e^{s co}^rru^p^tⁱ^oⁿ^st^op^h^e^re?”^Tai^p^eⁱ^Tim^e^s^{, A}^u^g^u^s^t²²^{, 2}⁰⁰⁸^,^p.^8.

Many observers believe that the election of President Ma has presented an opportunity to lay a
new framework in Taiwan-PRC relations—one that moves toward cross-strait improvements and
new understandings, and away from the more confrontational policies of the past. In the two
months between his election and his inauguration on May 20, 2008, Ma spoke of his intentions to
begin normalizing cross-strait ties in a “cross-strait common market,” to establish direct air links
with the PRC, and to ease other restrictions on cross-strait contacts. He sought to ease tensions
with China by pledging adherence to a “three no’s” approach: no unification, no independence,
and no use of force—a pledge he repeated in his inaugural address. He called for a “diplomatic
truce” with China and pledged to stop using “dollar diplomacy” to win foreign country ¹⁹
recognition. These were notable departures from the policies of former President Chen, who
antagonized Beijing by emphasizing Taiwan’s separate identity and independent political status.
After his inauguration, Ma moved quickly to implement improvements in cross-strait relations, ²⁰
expanding on foundations laid by the previous Chen administration. In a symbolic move,
Taiwan in mid-May 2008 worked jointly with the PRC in providing disaster relief after the
Sichuan earthquake. By late May, Taiwan had accepted a PRC invitation to resume official talks ²¹
for the first time since October 1998. The chairman of the KMT, Wu Poh-hsiung, met with PRC
President Hu Jintao on May 28, 2008, the highest-level encounter between the two sides since ²²
1949. Official talks reopened on June 11-12, 2008, in Beijing, resulting in groundbreaking new
agreements to allow regular weekend direct charter flights, to open permanent offices in each
other’s territories, and to boost PRC tourism to Taiwan, among others. Taiwan’s cross-strait
negotiator, P.K. Chiang, began a trip to China on January 7, 2009, visiting a number of PRC cities
to discuss issues facing investors from Taiwan on the mainland. Taiwan also has undertaken a
number of unilateral initiatives, including lifting caps on Taiwan investment in the PRC.
Other Taiwan initiatives appear still to be in the discussion stage. President Ma has suggested that
Taiwan be more flexible on the names it uses in its international engagement efforts—suggesting,
for instance, that Taiwan’s negotiation of Free Trade Agreements (FTAs) would be less divisive if
Taiwan used the same name it used when applying to the WTO—“separate customs territory of
Taiwan, Penghu, Kinmen, and Matsu.” And while Taiwan’s SEF chairman, Chiang Pin-kung, was
reported as having said he wants to study and promote the creation of a cross-strait
comprehensive economic cooperation agreement (CECA) with the PRC, the chairwoman of
Taiwan’s Mainland Affairs Council (MAC), Lai Shin-yuan, is reported to have said that MAC

¹⁹^“^D^olla^r^di^plom^a^c^y^”⁽^o^r^“^c^h^e^c^k^book^dip^l^om^a^c^y^”⁾^r^e^f^e^r^s^{to the}^s^itua^tion^{in w}^h^ic^h^bo^{th T}^a^iw^aⁿ^a^{nd th}^e^P^R^C^ha^v^e
^c^o^m^p^e^t^e^d^f^o^r^of^fⁱ^cⁱ^a^l^diplom^a^tic^r^e^la^tions^by^pr^om^is^ing^{to a}ⁿ^{d i}ⁿ^v^e^s^ting^hug^e^s^u^m^s^{in c}^o^uⁿ^tr^ie^s^t^h^a^t^m^a^y^be^w^a^ve^rⁱ^ng
ⁱⁿ^t^h^ei^{r d}ⁱ^p^l^o^m^atⁱ^c^al^l^e^gi^an^ces.
²⁰
^A^m^ong^othe^r^init^ia^tiv^e^s^dur^ing^t^h^e^C^h^eⁿ^A^d^mⁱ^nis^t^r^a^{tion, i}ⁿ^J^aⁿ^u^a^r^y^{2005, T}^a^iw^aⁿ^a^{nd the}^P^R^C^la^un^c^h^e^d^the^fⁱ^r^s^{t n}^on-
^st^o^p^h^o^lⁱ^d^ay^dⁱ^rect^ch^art^e^{r f}^lⁱ^g^h^t^{s f}^l^o^wⁿⁱⁿ⁵⁵^y^{ears acro}^{ss t}^h^{e st}^rai^t^.^T^h^ese^w^e^{re e}^x^p^aⁿ^d^e^dⁱⁿ²⁰⁰⁶^wⁱ^t^h^{an agree}^m^en^t
^{to a}^llow^u^p^to¹⁶⁸^dir^e^c^t^aⁿ^nua^{l r}^oun^d-^trⁱ^p^c^h^a^r^te^r^pa^s^s^e^ng^e^r^f^lig^ht^s^be^tw^e^eⁿ^C^h^ina^a^{nd T}^a^iw^aⁿ^.
²¹^T^h^e^T^aⁱ^w^aⁿ^a^nd^P^R^C^g^o^v^e^rnm^eⁿ^t^still^do^no^{t ne}^g^o^tia^te^dire^c^tly^{. In T}^aⁱ^w^aⁿ^{, c}^r^oss-stra^{it ta}^lk^{s a}^r^e^ha^ndle^d^by^the
^S^t^rai^t^s^E^x^ch^an^{ge F}^o^un^d^a^tⁱ^oⁿ^(S^E^F^),^{a p}^rⁱ^v^at^{e o}^r^ganⁱ^zatⁱ^oⁿ^au^t^h^ori^zed^b^y^t^h^{e go}^vern^men^t^t^o^h^aⁿ^d^l^e^t^h^{ese exch}^an^ges.
^T^h^e^c^o^r^r^e^s^pond^ing^b^ody^{in t}^h^e^PR^C^is^the^A^s^s^o^cⁱ^a^{tion f}^o^r^R^e^la^tio^ns^A^c^r^o^s^s^the^T^aⁱ^w^aⁿ^Str^a^{it (}^A^R^A^T^S⁾^.^T^h^e^J^une¹³
^ta^lk^s^w^e^r^e^c^onduc^te^d^by^the^s^e^tw^{o b}^odie^s^.
²²^On^A^p^ri^l²⁹^,²⁰⁰⁵^,^w^h^en^t^h^{e KMT}^w^a^{s o}^u^t^o^f^p^o^w^er,^KM^T^Ch^ai^rman^Lⁱ^en^Ch^an^m^e^t^wⁱ^t^h^P^RC^P^r^esi^d^en^t^Hu^Jiⁿ^t^ao^,
^t^h^{e f}ⁱ^rst^tⁱ^m^{e t}^h^{e l}^ead^{ers o}^f^t^h^{e CCP}^an^d^K^M^T^h^a^d^m^e^t^siⁿ^{ce W}^o^rl^d^W^a^{r II.}

would not authorize the SEF to negotiate with China for a closer economic partnership agreement ²³
(CEPA) with China.
In spite of this progress, controversies have continued to arise, such as an initial tussle, later
smoothed over, about the name that the PRC would use to refer to Taiwan during the 2008 ²⁴
Olympic Games. Taiwan’s Ministry of National Defense also has said that acquiring
submarines—a move directed at the PRC—remains a top priority for Taiwan. Supporters of
President Ma’s new policies were critical that the June official talks did not include discussion of
direct charter cargo flights or marine cargo. Taiwan officials say these subjects will be on the
agenda of the second round of official talks after the 2008 Olympics.
DPP members also have criticized the new policy approach, saying that by not “properly
analyzing the consequences” of easing cross-strait economic restrictions, the KMT government
has jeopardized Taiwan’s interests. The opposition party also criticized Ma’s diplomatic overtures ²⁵
toward China as being “over-dependent on China’s goodwill.” While President Ma himself
reportedly has said that cross-strait talks should be accelerated, opponents of his new policies ²⁶
have criticized them as proceeding too rapidly. Opponents also have leveled other charges, such
as that the PRC negotiators at the June 2008 talks were more experienced than their Taiwan
counterparts.
The new Ma Administration also has been more moderate and flexible than its predecessor
concerning Taiwan’s annual United Nations (U.N.) bid. On August 14, 2008, Taiwan submitted a
proposal to the U.N. Secretariat via 17 countries with which it maintains diplomatic relationships,
asking the U.N. to allow Taiwan to have “meaningful participation” in U.N. special ²⁷
organizations. In spite of the new milder tone to Taiwan’s bid, the PRC raised objections on ²⁸
August 18, 2008, saying that Taiwan is not qualified to participate in U.N. activities. Because of
these objections, on September 19, 2008, a U.N. subcommittee decided not to include Taiwan’s ^rd
request for “meaningful participation” in U.N. activities on the agenda for the 63 General
Assembly.
Taiwan has been unsuccessful in 15 previous attempts to gain either membership or non-member
status in the U.N., particularly in the World Health Organization (WHO), a U.N. affiliate.
Taiwan’s efforts under the DPP Administration of President Chen included an application both for

²³^“^N^{o CE}^P^A^{to be}^sⁱ^gⁿ^e^d^w^{ith Chi}ⁿ^a^:^MA^C,”^The^Chiⁿ^a^Pos^t^,^O^c^to^be^r¹⁷^{, 2}⁰⁰⁸^.
²⁴^Rep^o^r^t^e^d^l^y^o^f^fⁱ^ci^al^P^{RC so}^u^r^ces^h^a^d^b^{een u}^sⁱⁿ^{g “Z}^h^oⁿ^ggu^o^T^aⁱ^p^ei^”—o^r^“T^ai^p^eⁱ^,^Chⁱⁿ^a,^{” l}^eadⁱⁿ^{g up t}^o^t^h^{e Ol}^ym^pⁱ^c
^G^a^m^e^s^.^A¹⁹⁸⁹^a^g^r^e^em^eⁿ^{t s}^tipula^t^e^d^tha^t^T^a^iw^aⁿ^be^c^a^lle^{d “}^Z^ho^ng^hua^T^aⁱ^p^ei^”—o^r^“Chⁱⁿ^e^{se T}^aⁱ^p^ei^,^”^{a t}^e^r^m
^s^u^g^g^e^s^ting^a^m^o^r^e^am^big^uous^C^hⁱⁿ^e^s^e^na^tion^h^o^o^d^.^A^f^te^r^inte^r^v^eⁿ^tion^by^the^P^R^C^Sta^t^e^C^o^unc^il’^s^T^a^iw^aⁿ^A^f^f^a^ir^s
^O^f^fⁱ^ce^{on J}^u^ly^23,²⁰⁰⁸^,^of^fⁱ^cⁱ^a^l^P^R^C^m^e^dia^be^g^a^{n us}ⁱⁿ^g^the^la^tte^r^f^o^r^m^ula^tion.
²⁵^“^M^a^’^s^c^r^os^s^-^s^t^r^a^{it e}^c^onom^ic^a^nd^tr^a^d^e^po^lic^ie^s^a^r^e^{not r}^e^a^d^y^,^”^D^{PP N}^e^w^s^link^,^J^u^ly^22,²⁰^08,
^http:^//w^w^w^.dpp.^or^g^.^tw^/.
²⁶^W^u^,^S^o^fⁱ^a,^“Cro^ss-st^rai^t^t^a^l^k^{s sh}^ou^l^d^b^e^accel^erat^ed^:^p^r^esi^d^en^t^,^”^Ceⁿ^t^ra^{l News A}^g^en^cy^Eng^lis^h^,^J^u^ne^15,²⁰⁰⁸^.
²⁷^Ac^c^o^r^dⁱⁿ^g^to^T^h^e^C^hⁱ^na^Pos^t^of^A^u^g^u^{st 16,}²⁰^08,^the^re^sol^u^ti^{on w}^a^{s title}^{d “}^T^he^Ne^e^d^{to Ex}^a^m^ine^the^Fun^d^a^m^eⁿ^ta^l
^Rig^h^ts^of^the²³^Mi^llioⁿ^P^e^ople^o^f^the^Re^public^of^China^(T^aⁱ^w^a^{n) to}^P^a^rticⁱ^p^a^t^e^Me^aⁿ^ing^f^ully^{in the}^A^c^tiv^itie^s^o^f^the
^U.^N.^S^p^eci^alⁱ^zed^A^g^en^ci^es.^”
²⁸^T^h^e^obje^c^tio^{n c}^a^m^e^f^r^o^m^the^P^R^C^’^s^U^.^N^.^A^m^ba^s^s^a^dor^W^a^ng^G^u^angy^a^,^{in a}ⁿ^A^u^g^u^s^t¹⁸^,²⁰^08le^tte^r^{to U}^.^N^.
^Se^c^r^e^t^a^r^y^-^G^e^ne^r^a^{l B}^a^{n K}ⁱ^-^m^oon.^C^ite^{d by}^J^e^nny^H^s^{u, “}^M^O^F^A^uns^ur^pr^is^e^d^by^P^R^C^r^e^a^c^tio^{n t}^o^U.N.^pa^rtic^ipa^tio^n,”
^Taipeⁱ^Tim^e^s^{, A}^u^g^u^s^t²⁸^{, 2}⁰⁰⁸^,^p.^1.

full U.N. membership as well as for use of either the name “Republic of China” or “Taiwan.”
These applications had been of particular concern to both China and the United States.
Taiwan’s bid to participate in the United Nations is controversial. While there is support in the ²⁹
U.S. Congress for Taiwan’s U.N. membership, U.S. government officials, on record as ³⁰
supporting Taiwan’s membership in organizations “where statehood is not an issue,” have been
unusually blunt and outspoken in opposition to some of Taiwan’s past U.N. application efforts
under President Chen. A strong succession of U.S. statements in 2007 includes:
• June 19, 2007: “We do not support Taiwan’s membership in international
organizations that require statehood [for membership] ... . This would include a
referendum on whether to apply to the United Nations under ‘Taiwan’.” (State
Department spokesman Sean McCormack reacting to President Chen’s U.N.
referendum announcement.)
• August 27, 2007: “ ... We strongly support Taiwan’s democracy.... But when it
comes to this issue of a referendum as to whether or not Taiwan joins the United
Nations in the name of Taiwan, we do have great concerns. We oppose ... that
kind of a referendum because we see that as a step towards the declaration—
towards a declaration of independence of Taiwan, towards an alteration of the
status quo.” (Deputy Secretary of State John Negroponte, in an interview with
Hong Kong’s Phoenix TV.)
• August 30, 2007: “We are very supportive of Taiwan on many many fronts....
However, membership in the United Nations requires statehood. Taiwan, or the
Republic of China, is not at this point a state in the international community. The
position of the United States government is that the ROC ... is an issue
undecided, and it has been left undecided ... for many, many years.” (Dennis
Wilder, National Security Council Senior Director for Asian Affairs, at a White
House press briefing on the President’s September APEC trip.)
• September 11, 2007: “... we do not support Taiwan’s membership in
international organizations that require statehood and therefore would not support
such a [U.N.] referendum ... [the referendum’s supporters] do not take seriously
Taiwan’s commitments to the United States and the international community
[and] are willing to ignore the security interests of Taiwan’s most steadfast friend
... we do not like having to express publicly our disagreement with the Chen
Administration ... [and] I can assure you that we would not have done so had we
not exhausted every private opportunity through consistent, unmistakable, and
authoritative messages over an extended period of time.” (Deputy Assistant
Secretary of State Thomas J. Christensen, in a speech at the U.S.-Taiwan Defense
Industry Conference.)
• December 11, 2007: “ ... the referendum ... isn’t going to accomplish anything in
changing Taiwan’s status. All it does is cause trouble.” (AIT Chairman Raymond
F. Burghardt, Press Roundtable, Taipei.)

²⁹^Re^soluti^{ons i}ⁿ^tr^od^uc^e^dⁱⁿ^the¹¹⁰^th^C^ong^r^e^s^s^{in s}^u^pp^or^t^of^T^aⁱ^w^aⁿ^’^s^U^.^N^.^bi^{d i}ⁿ^c^l^ude^H^.^C^oⁿ^.^R^e^s^.⁷³^aⁿ^d^H^.^C^o^n.R^e^s^.
²⁵⁰^.
³⁰^A^Sta^t^e^D^e^pa^r^t^m^e^{nt s}^pok^e^s^m^a^{n, in r}^e^s^p^oⁿ^s^e^to^a^pr^e^s^s^q^u^e^s^tion^a^t^the^Sta^t^e^D^e^pa^r^t^m^e^{nt pr}^e^s^s^br^ie^fⁱ^ng^of^Ma^r^c^{h 20}^,
²⁰⁰^2.

The PRC vigorously opposes Taiwan’s bid for U.N. participation because it suggests that Taiwan
is a sovereign state separate from the mainland. Beijing argues that since Taiwan is not a state but
a part of China, it cannot separately be admitted to U.N. entities for which sovereign status is a
pre-requisite for membership. As noted above, U.S. officials similarly have opposed Taiwan’s
past bids for full U.N. membership. In a common U.S. practice, an official from the U.S.
American Institute in Taiwan (AIT—the de-facto U.S. representative in Taiwan) refrained from
commenting directly on the new 2008 Taiwan U.N. initiative, but instead reiterated generic U.S.
policy that the U.S. supports Taiwan’s “meaningful participation” in international organizations in ³¹
which statehood is not a requirement.
Taiwan has maintained that its “observer status” in U.N. bodies such as WHO would be an
apolitical solution since other non-sovereign entities, like the Holy See and the Palestine
Liberation Organization, have been given such status. Taipei also points out that it is a full
member in other international organizations to which the PRC also belongs, such as the Asian
Development Bank (ADB), the World Trade Organization (WTO), and the Asia Pacific Economic ³²^th
Cooperation forum (APEC). In 2004, the 108 Congress enacted legislation (P.L. 108-235)
requiring the Secretary of State to seek Taiwan’s observer status in WHO each year at its annual
meeting, the World Health Assembly (WHA).
Taiwan’s economy grew rapidly (around 10% a year) in the 1970s and 1980s. Growth declined to ^st
around 5-6% a year in the 1990s as the economy matured. During the first years of the 21
century, however, the Taiwan economy experienced a serious slowdown. GDP growth for 2001
contracted by 2.2%—Taiwan’s first economic contraction in 26 years—when exports dropped
and the unemployment rate hovered at around 5%. Experts blamed these economic difficulties on
the global economic downturn, reduced U.S. demand for Taiwan’s information technology
exports, and the sizeable transfer of the island’s manufacturing base to the PRC. The economy ³³
began to recover in 2002, with economic growth in 2007 reaching 5.7%.
Taiwan is the United States’ ninth-largest overall trading partner, with two-way trade in 2007
valued at $64.9 billion, and the sixth-largest destination for U.S. agricultural exports, about $2.5
billion annually. In addition to agricultural goods, Taiwan’s U.S. imports include industrial raw
materials and machinery and equipment; its exports to the United States are largely electronics
and consumer goods. Once Taiwan’s largest trading partner, the United States has been surpassed
by China and Japan and is now Taiwan’s third-largest trading partner, supplying 11% of Taiwan’s
imports and absorbing 14% of its exports. The U.S. trade deficit with Taiwan increased by 19% ³⁴
from 2005-2006, reaching $15.2 billion in 2006.

³¹^C^o^m^m^eⁿ^ts^a^ttr^ibute^d^t^o^A^I^T^s^pok^e^s^m^a^{n T}^hom^as^H^odg^e^s^{in T}^a^iw^{an, A}^u^g^u^s^t¹⁵^,²⁰^{08; L}^u^,^N^e^{il, “}^U^.^S^{. s}^u^pp^or^ts
^T^aⁱ^w^aⁿ^’s^m^e^aⁿ^ing^f^{ul inte}^rna^tio^na^{l pa}^rtic^ipa^tⁱ^oⁿ^:^A^I^T^,^”^Cen^t^ra^{l News Ag}^en^cyⁱⁿ^Eng^lis^h^,^A^u^g^u^s^t¹⁵^,²⁰^08.
³²^H^ong^K^o^ng^a^l^s^o^eⁿ^j^o^y^s^s^e^pa^r^a^te^m^e^m^b^e^r^s^h^{ip in}^the^s^e^org^a^niz^a^tioⁿ^s^f^r^o^m^{its sov}^e^re^ig^{n, the}^P^RC.
³³^U.^S^.^S^t^at^{e Dep}^a^rt^m^eⁿ^t^,^Bu^reau^of^E^a^st^A^sⁱ^aⁿ^an^d^P^aci^fⁱ^c^Aff^aⁱ^r^s,^B^a^ckg^ro^un^{d N}^o^t^e^:^T^aⁱ^w^aⁿ^,^M^a^r^c^h²⁰⁰⁸^.
³⁴^A^c^c^o^r^d^ing^t^o^the^A^m^e^r^icaⁿ^Iⁿ^s^tit^uteⁱⁿ^T^aⁱ^w^aⁿ⁽^A^I^T⁾^{in 20}^08,^htt^p^://w^w^w^.a^it.or^g^.^tw^/^e^n/e^c^onom^ic^s^/^.

Over the years, Taiwan has made progress in addressing U.S. concerns about the protection of
intellectual property rights (IPR). The Taiwan government has passed more robust copyright
legislation, enacted new laws targeting illegal Internet file sharing, and improved prosecution of
IPR offenses through the establishment (July 1, 2008) of a specialized Intellectual Property ³⁵
Court. In recognition of past improvements, the U.S. Trade Representative (USTR) removed
Taiwan from the “Priority Watch List” in 2004. But Taiwan has remained on the U.S. Special 301
“Watch List” pursuant to provisions the Trade Act of 1974; the “Watch List” designates a less ³⁶
serious risk of IPR violations compared with the “Priority Watch List.” The USTR in 2008 is
conducting a “Special 301 Out-Of-Cycle Review” for Taiwan to determine whether its continued
IPR enforcement improvement merits removal from the “Special 301” Watch List. The U.S.
business community appears divided on whether Taiwan has made sufficient IPR improvements.
For instance, in separate letters to USTR dated September 8, 2008, the U.S.-Taiwan Business
Council said it “strongly supports” Taiwan’s removal from the Watch List, while the U.S.-based
International Intellectual Property Alliance recommended that “Taiwan remain on the Watch List”
pending further IPR improvements.
Taiwan for years has been seeking the economic and political benefits of a U.S.-Taiwan Free
Trade Agreement (FTA), so far without success. Reportedly President Ma mentioned the subject ³⁷
again during his August 2008 transit visit through the United States. To date, U.S.-Taiwan trade
discussions have been held under a 1994 Trade and Investment Framework Agreement (TIFA), a
non-binding consultative mechanism the United States employs for resolving trade and ³⁸
investment difficulties with countries still opening their economies. In some instances, a TIFA
may lead to economic liberalization that is significant enough to result in a U.S. FTA with the
TIFA country. Taiwan has argued that its status as a major trading partner of the United States
justifies an FTA on economic grounds. U.S. officials cite a number of obstacles to an FTA with
Taiwan over the near term—not only trade matters, such as Taiwan’s record on intellectual
property rights (IPR), but also complicated political issues involving both Taiwan’s and U.S.
relations with the PRC. The PRC strongly opposed a U.S.-Taiwan FTA. Taiwan’s bid has its ^th
supporters in the 110 Congress, several of whom have introduced measures regarding an FTA ³⁹
for Taiwan.
Since 1949, Taiwan has maintained restrictions on trade and economic investment relations with
China. These have included requirements that goods and articles be transhipped via third parties

³⁵^“²⁰⁰^{8 S}^p^e^cⁱ^a^l³^{01 Re}^port^,^”^Offⁱ^c^e^of^the^Unite^{d S}^t^a^t^e^s^T^r^a^d^e^Re^pre^s^eⁿ^ta^tiv^e^,^te^x^t^a^t^http://w^ww^.ustr.g^o^v^/^a^sse^ts/
^D^o^c^u^m^e^nt_L^ibr^a^r^y^/^R^e^por^ts^_^P^u^b^lⁱ^c^a^tions^/²⁰⁰^8/²⁰⁰⁸^_Spe^cⁱ^a^l^_³⁰¹^_^R^e^por^t/^a^s^s^e^t_uploa^d_f^ile⁵⁵^3_¹⁴⁸^69.^pdf^.
³⁶^Spe^cⁱ^a^l³⁰¹^Pr^ov^is^io^ns^of^the^T^r^a^d^e^A^c^{t of}^1974.
³⁷^Lⁱ^{n Yi-f}^eⁿ^g^a^{nd W}^u^{, L}^ilia^{n, “}^P^re^side^{nt Ma}^a^rriv^e^{s in}^Sa^{n Fra}ⁿ^cⁱ^sc^o,”^Cen^t^ra^{l News Ag}^en^cyⁱⁿ^Eⁿ^g^lis^{h, A}^u^g^u^s^t¹⁸^,
²⁰⁰^8.
³⁸^N^e^g^o^tia^tions^f^o^r^t^h^e^T^I^FA^w^e^r^e^cond^uc^te^{d t}^h^r^o^ug^{h t}^h^e^r^e^s^p^e^c^tiv^e^U^.^{S. a}ⁿ^{d T}^a^iw^aⁿ^un^of^fⁱ^cⁱ^a^l^r^e^pr^e^s^eⁿ^ta^tiv^e^bod^ie^s^a^t
^the^tim^e^:^the^Am^e^rⁱ^c^aⁿ^Instituteⁱⁿ^T^a^iwaⁿ^(A^I^T^{), a}^{nd th}^e^C^oor^din^a^{tion C}^o^uⁿ^c^{il f}^o^{r Nort}^{h A}^m^e^r^ic^aⁿ^Aff^a^{irs (CCN}^AA^).
³⁹^S^.^Con^.^Res.⁶⁰⁽^S^en^.^Bau^c^u^s^),ⁱⁿ^t^r^o^d^u^ced^on^Decem^b^e^{r 1}⁸^,²⁰⁰⁷^;^aⁿ^d^H.^C^o^n.^Res.¹³⁷^(Rep.^Berkl^e^y),ⁱⁿ^t^r^o^d^u^ced^oⁿ
^Ma^y^{1, 200}^7,^bot^{h e}^x^pr^e^s^s^c^ong^r^e^s^sⁱ^ona^{l s}^u^pp^or^{t f}^o^r^t^h^e^o^p^eⁿ^ing^of^FT^A^ne^g^o^tia^tions^w^{ith T}^aⁱ^w^aⁿ^.

and not directly; restrictions on the kinds of goods and articles that can be traded; and caps on
investment levels, among others. Even with the official restrictions that Taiwan has maintained in
the past on investment and trade with mainland China, Taiwan businesses have invested
increasingly across the strait, although the exact figures remain unclear. Taiwan-China trade has
also increased dramatically, so that China (along with Hong Kong) now has surpassed the United
States as Taiwan’s most important trading partner. According to Taiwan’s Central News Agency,
Taiwan’s total bilateral trade with the PRC for the year through November 2007 was U.S.$92.68 ⁴⁰
billion—a 15.3% increase year-on-year over 2006. Taiwan’s exports to the PRC were up 12.6%
over 2006. (By comparison, Taiwan’s exports to the United States dropped by 0.9% over the ⁴¹
previous year.)
Despite these restrictions on investment and official contacts, Taiwan-PRC economic ties have
grown significantly, with Taiwan businesses increasingly invested across the strait (although the
exact figures remained unclear). Taiwan-China trade also has increased dramatically, with China
(along with Hong Kong) now ranking as Taiwan’s most important trading partner. According to
Taiwan’s Bureau of Foreign Trade, Taiwan’s total bilateral trade with the PRC reached $64.44 ⁴²
billion from January-September 2006, accounting for 20.4% of Taiwan’s total foreign trade.
This growing economic interconnectedness with the PRC has created increasing pressures on a
succession of Taiwan governments to accommodate the Taiwan business community by easing its
restrictions on direct travel and investment. Since 1987, Taiwan incrementally eased long-
standing restrictions on contacts with the PRC. Initiatives under President Chen and the DPP,
included the start in January 2005 of the first non-stop (limited to the Lunar New Year holiday
that year) direct charter flights flown in 55 years between the two adversaries. On June 14, 2006,
Taiwan and China simultaneously announced that they had reached agreement to establish up to
168 direct annual round-trip charter passenger flights between China and Taiwan, shared evenly
between mainland and Taiwan airlines, during four public holidays and for other special ⁴³
occasions.
President Ma’s willingness to significantly expand such cross-strait exchanges has concerned
many DPP members and pro-independence advocates in Taiwan, who see the Ma initiatives as
having overly ambitious expectations and as moving far too rapidly. These DPP observers say
that cross-strait overtures need to be calibrated carefully to avoid compromising Taiwan’s
economic security and political autonomy. They further point out that many of Ma’s initiatives to
date appear to be unilateral, without significant reciprocal overtures and concessions from
Beijing.

⁴⁰^Hu^an^g,^L^uⁱ^s^,^“Cro^ss-st^rai^t^t^r^ad^e^u^p¹⁵^.³^p^e^rcen^tⁱⁿ²⁰⁰⁷^,^”^Cen^t^r^a^l^{News Ag}^en^cy^Eⁿ^glⁱ^s^h,^Jan^u^a^r^y²⁹^,²⁰⁰⁸^.
⁴¹^W^u^{, L}^ilia^{n, “}^T^aⁱ^w^a^{n re}^gⁱ^ste^r^{s re}^c^o^{rd tra}^d^e^surp^{lus i}ⁿ²⁰^07,”^Cen^t^ra^{l News Ag}^eⁿ^cy^Eⁿ^glⁱ^s^h^,^Janu^ar^y⁸^,²⁰⁰⁸^.
⁴²^A^c^co^rdⁱⁿ^{g t}^o^t^h^e^F^o^rei^gⁿ^B^o^ard^o^f^T^r^ad^e,^ci^t^e^d^b^y^Agen^ce-F^r^an^ce^P^r^{esse i}ⁿ^T^a^iwaⁿ^News^oⁿ^line^,^M^a^r^c^{h 3,}²⁰^05,
^http:^//w^w^w^.e^taⁱ^w^a^nnew^s^.c^o^m^{. Se}^e^a^l^s^o^C^R^S^R^e^p^o^r^t^R^L³¹⁷⁴^9,^F^o^r^eⁱ^gⁿ^Di^rect^In^vest^m^en^tⁱⁿ^Chiⁿ^a^,^b^y^Dic^k^K.^Nan^t^o
^a^{nd R}^a^d^h^a^Si^nha^.
⁴³^T^h^{e f}^o^u^r^h^o^lⁱ^d^ay^{s are:}^L^uⁿ^a^{r New}^Ye^ar,^T^o^m^b^S^w^e^e^pⁱⁿ^g^Da^y^,^t^h^{e Drago}ⁿ^Bo^at^F^e^stⁱ^v^al^,^and^t^h^{e M}ⁱ^d^-^A^u^t^u^mⁿ
^Fe^stiv^a^l^.

Under the Taiwan Relations Act (P.L. 96-8), the United States is obligated to provide Taiwan with
defense articles and services for its self-defense—a commitment to which the PRC objects.In
spite of the apparent warming ties with Taiwan after the March 2008 presidential election, many
thought the Bush Administration was stalling in 2008 on sending send forward notifications to ⁴⁴
Congress concerning a number of long-pending U.S. arms sales to Taiwan. In June 2008, some
Members of the U.S. Senate wrote to President Bush expressing concern about the reports and ⁴⁵
urging the White House to act swiftly on Taiwan’s arms sales requests. Some speculated that the
delay in arms sales notifications was related to Beijing’s hosting of the 2008 Summer Olympic
Games from August 8-24, 2008. One Pentagon official hinted in a public forum that the United ⁴⁶
States may have imposed a freeze on weapons sales to Taiwan. A State Department spokesman
at the time maintained that the pending arms sales still were being discussed in “an internal ⁴⁷
interagency process.”
However, on August 25, 2008, the Pentagon announced that it was awarding the McDonnell-
Douglas Corp. (owned by Boeing) a contract to provide Taiwan with 60 Harpoon missiles and ⁴⁸
associated hardware, worth $89.8 million, that Taiwan requested in 2007. The announcement
raised expectations that U.S. arms sales to Taiwan would resume on a more regular basis. This
proved to be the case on October 3, 2008, when the Defense Security Cooperation Agency
(DSCA) notified Congress of the possible Foreign Military Sale of six different types of defense
articles and equipment, consistent with the policies of P.L. 96-8, which could total a maximum of
approximately $6.4 billion. These included:
• upgrades of four E-2T Aircraft to the HAWKEYE 2000 configuration (est.
maximum of $250 million)
• 30 AH-64D Block III APACHE Longbow Attack helicopters (est. maximum of
$2.532 billion)
• 330 PATRIOT Advanced Capability (PAC-3) missiles (est. maximum of $3.1
billion)
• 32 UGM-84L Sub-Launched HARPOON Block II missiles and 2 UTM-84L
HARPOON Block II Exercise missiles (est. maximum of $200 million)
• follow-on spare parts in support of F-5E/F, C-130H, F-16A/B, and Indigenous
Defense Fighter IDF aircraft (est. maximum of $334 million)

⁴⁴^F^o^r^d^e^t^aⁱ^l^s^on^T^aⁱ^w^an^{’s ar}^{ms p}^u^r^ch^ases,^{see CRS}^Rep^o^r^t^RL³⁰⁹⁵⁷^,^Taiw^an:^M^a^jor^U^.^S.^Ar^m^s^Sa^le^s^Sinc^e¹⁹⁹⁰^{, by}
^Shirle^y^A^.^Ka^n.
⁴⁵^“^I^nhof^e^ur^g^e^s^s^u^p^por^t^of^T^aⁱ^w^aⁿ^,”^J^une³⁰^,²⁰⁰⁸^pr^e^s^s^r^e^le^a^s^e^.^For^a^f^u^{ll te}^x^t^{, s}^e^e^http:/^/in^hof^e^.^s^e^na^te^.g^ov^/public^/
^inde^x^.^c^f^m^?^Fus^e^A^c^tion=^P^r^e^s^s^R^oo^m^.^P^r^e^s^s^R^e^l^e^a^s^e^s^&^C^onteⁿ^tR^e^c^o^r^d^_id=^D^A^B^422E^7-⁸^02A^-^23A^D^-⁴¹^01-
^32F^FB⁹^10F^FE4^.
⁴⁶^A^d^mⁱ^r^a^{l T}ⁱ^m^o^th^y^K^e^a^ting^hinte^d^a^t^a^f^r^e^e^z^e^dur^ing^a^br^ie^fⁱ^ng^a^t^the^H^e^r^ita^g^e^Founda^ti^on^oⁿ^J^u^ly^16,²⁰^08.
⁴⁷^Sta^t^e^D^e^pa^r^t^m^e^{nt s}^pok^e^s^m^a^{n Se}^{an Mc}^C^o^r^m^a^c^k^{, in r}^e^s^pons^e^t^o^a^q^u^e^s^tion^a^t^the^D^a^ily^B^r^ie^fⁱ^ng^{on J}^u^ly^{17, 2}⁰⁰⁸^.
⁴⁸^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^D^e^f^e^ns^e^,^O^f^fⁱ^c^e^of^the^A^s^sⁱ^s^t^aⁿ^{t Se}^c^r^e^t^a^r^y^of^D^e^f^e^ns^e⁽^P^u^b^lic^A^f^f^a^ir^s⁾^{, N}^o^{. 71}⁷^-^08,^A^u^g^u^s^t^25,
²⁰⁰^{8. htt}^p^://w^ww^.de^f^eⁿ^se^link^.^m^il/c^ontra^c^t^s/^c^ontra^c^t^.a^spx^?^c^ontra^c^tid=³⁸⁴⁸

• 182 JAVELIN guided missile rounds and 20 JAVELIN command launch units ⁴⁹
(est. maximum of $47 million)
The October 3, 2008 notifications followed a lengthy period when first Taiwan and then U.S.
officials were seen to stall over the arms sales process. After years of stagnation (with delays
alternately attributed to both the DPP and the KMT), on June 15, 2007, Taiwan’s legislature
passed a long-delayed national defense budget that for the first time included funds for
purchasing some of the U.S. weapons systems that President George W. Bush offered for sale in
2001. The budget included funds to purchase P-3C anti-submarine reconnaissance; to upgrade the
Patriot missile batteries that Taiwan already had; and to provide over $450 million to fund the
purchase of F-16 C/D fighters (a request still pending before the United States government as of
this report). The budget passage subsequently was followed, on September 12, 2007, by a
Pentagon announcement of $2.2 billion in possible military sales to Taiwan, including 12 surplus
Orion P3-C maritime patrol craft and 144 SM-2 Block 3A Standard anti-aircraft missiles, built by
Raytheon; and by Federal Register publication of a U.S. announcement of a proposed arms sale
to Taiwan for upgrade and refurbishment of PATRIOT Advanced Capability-3 (PAC-3) Guided ⁵⁰
Missiles.
Taiwan also has sought to qualify for coverage under the U.S. Visa Waiver Program, which
eliminates some visa requirements for qualified countries, allowing their citizens to make
temporary U.S. visits without first obtaining a valid visa. VWP countries must meet certain
criteria—such as offering reciprocal privileges to U.S. citizens, having machine-readable
passports, and having a low non-immigrant refusal rate—only some of which Taiwan has been ⁵¹
able to meet. Recently, Congress enacted amendments to the VWP which may provide for a
waiver of the non-immigrant refusal rate. With a waiver, Taiwan may meet the requirements of
the program.
Although Taiwan citizens would benefit from the facilitated travel that the U.S. Visa Waiver
Program affords, another key Taiwan government motive is thought to be the international stature
that Taiwan would gain from being among the VWP’s group of participants. In addition,
participation in the program is often seen as evidence of close ties with the United States. In
addition to its current failure to meet all of the program’s qualifications (absent a non-immigrant
refusal rate waiver), Taiwan’s chances of participation in the VWP also are subject to the
anticipated kinds of political difficulties involving the PRC that are aspects of other U.S.-Taiwan
relations. The PRC does not qualify for the VWP.

⁴⁹^T^h^e^notif^ic^a^tions^c^aⁿ^be^f^oun^d^oⁿ^the^D^S^C^A^w^e^bs^ite^unde^r^“³⁶⁽^b)^A^r^m^s^Sa^les^N^o^tif^ic^a^tions^.”^htt^p^://^w^w^w^.ds^c^a^.^m^il/
^P^r^e^s^s^R^e^l^e^a^s^e^s^/^36-^b/³⁶^b_i^nde^x^.^ht^m
⁵⁰^{DOD n}^o^{tice o}^f^{a p}^r^o^p^o^s^ed^L^e^{tter o}^f^Off^e^r^f^o^{r an}^{arms sa}^{le to}^th^{e T}^a^ip^{ei Eco}ⁿ^o^m^ic^an^d^Cu^lt^u^r^{al Represen}^tative
^O^f^fⁱ^ce⁽^T^aⁱ^w^aⁿ⁾^f^o^r^upg^r^a^de^aⁿ^d^r^e^f^u^r^b^is^hm^eⁿ^{t of}^P^A^T^R^I^O^T^A^dvanc^e^d^C^a^pa^bil^ity^-³⁽^P^A^C^-³⁾^G^u^ide^d^Mis^s^ile^s^.
^[^T^ra^nsm^itta^{l No. 08-}¹⁰^{, p}^u^rsuaⁿ^t^{to se}^c^tion³⁶^(b)(¹⁾^of^the^A^r^m^s^E^x^{port Co}^ntr^o^{l A}^c^t.]^Fe^de^{ral Re}^gⁱ^ste^r^{, N}^o^v^e^m^b^e^r^20,
²⁰⁰^{7, p. 65}³⁰^6.
⁵¹^For^a^dditi^ona^l^inf^o^r^m^a^{tion o}ⁿ^t^h^e^Vis^a^W^a^iv^e^r^P^r^og^r^a^m^,^s^e^e^C^R^S^R^e^por^{t R}^L³²²²^1,^Vⁱ^s^a^W^a^iv^e^r^Pr^ogr^am^,^by^A^lis^on
^Sis^k^in.

In the March 2008 presidential election, the DPP offered a referendum measure on whether
Taiwan should apply for U.N. membership under the name “Taiwan.” This was a high priority for
President Chen. But both Chen’s referendum and a KMT alternative each failed to reach the
threshold of 50% of the electorate turnout that was a requirement for passage. Beijing had
considered Chen’s referendum in particular to be tantamount to a public poll on independence—a
prospect the PRC has threatened to prevent by force if necessary. The referenda also had been
problematic for the United States, which had called Chen’s proposal “provocative.”
Analysts attributed the DPP losses in part to its failure to make the kind of political adjustments to
public sentiment that the KMT had made in recent years. Instead of focusing on public
perceptions of Taiwan’s economic ills (a perception emphasized by the KMT) and appealing to
the self-interests of the divided Taiwan electorate, analysts said, the DPP instead decided to stay
close to the pro-independence interests of its core supporters, raising tensions with both the PRC
and the United States in the process of doing so. In the wake of effectively having been crushed in
two electoral outings in 2008, the DPP now is facing a period of reassessment and re-building as
it considers how to broaden its electoral appeal and maintain its vitality in the face of KMT ⁵²
dominance. The DPP’s choice on May 19, 2008, of a new, moderate Party Chairwoman, Tsai
Ing-wen, suggests that it is trying to make these adjustments to broaden its base. The party’s task
has been further complicated by new financial scandals that emerged in August 2008 involving
former President Chen and his family, discussed elsewhere in this report.
The KMT’s March 2008 presidential victory was preceded on January 12, 2008, by a sweeping
victory in which it swamped the DPP in elections for the Legislative Yuan, the national
legislature. The DPP won only 27 seats in the new 113-member body, while the opposition KMT
Party gained a hefty majority with 81 seats. President Chen Shui-bian stepped down as head of
the DPP party after the January elections, saying he took full responsibility for his party’s loss.
Five additional seats went to independent and smaller party candidates who are expected to side
often with KMT positions. Having won the presidency as well in March, the KMT assumed solid
control of the Taiwan government in May 2008.
The 2008 legislative elections were the first held under new electoral rules adopted in 2005 under
an amendment to Taiwan’s constitution. The new rules halved the size of the legislature to 113
members from its former size of 225 and increased the term of office from three years to four.
The rules also instituted a new single-member district system employing two ballots for voters,
similar to systems used in Germany and Japan: one to be cast for a candidate and one to be cast
for a political party. As demonstrated by the January 2008 electoral results, the new system
appears to favor larger, well-organized parties and to put smaller parties and fringe elements at a
disadvantage.

⁵²^Fr^aⁿ^k^H^s^ie^{h him}^s^e^l^f^c^ite^{d the}^ne^e^d^f^o^r^a^thor^oug^h^pa^r^t^y^r^e^a^s^s^e^s^s^m^e^{nt, s}^a^yⁱ^ng^“w^e^m^u^s^t^le^{t the}^s^oun^{d of}^r^e^f^o^r^m^rⁱ^ng
^o^u^t^.^”^(Re^u^t^e^rs,^“T^ai^w^aⁿ^’^{s DP}^P^c^h^ai^rman^q^uⁱ^t^s^af^t^e^{r el}^ectⁱ^oⁿ^d^e^f^eat^,^”^M^a^rch²⁶^,²⁰⁰⁸^.⁾^S^{ee al}^so^{a st}^at^e^m^en^t^t^o^t^hⁱ^s
^e^f^f^e^c^t^by^She^lley^Rⁱ^gg^e^r^{, “T}^aⁱ^w^a^{n r}^u^lⁱ^ng^pa^r^t^y^{to r}^e^to^{ol a}^f^te^r^a^noth^e^r^de^f^e^a^t^,”^Re^ute^r^s^{, Ma}^r^c^{h 24,}²⁰^08.

The PFP and TSU, the former coalition partners of the two major parties, the DPP and KMT, were
effectively wiped out under the new electoral rules, ending the previous brief era of coalition
politics in Taiwan. The resulting Legislative Yuan, although still markedly polarized between the
two major parties, emerged far less evenly split than its predecessor; its strong KMT majority
likely will be able to muscle through many of its own legislative priorities. While a KMT
legislative victory had been expected under the new electoral rules, the wide margin surprised
most analysts and dealt a serious blow to lingering DPP aspirations to win the March 22, 2008
presidential election.

When it first assumed office, the Administration of George W. Bush articulated policies in Asia
that were more supportive of Taiwan and less solicitous of engagement with China than those of ^th
previous U.S. Administrations. That approach had changed by the 110 Congress as U.S.-PRC
relations became smoother and U.S.-Taiwan relations became more troubled.
Many observers concluded in 2001 that the newly elected George W. Bush had abandoned the
long-standing U.S. policy of “strategic ambiguity” in favor of “strategic clarity” that placed a
clearer emphasis on Taiwan’s interests and showed less concern for PRC views. In addition to
approving a major arms sales package for Taiwan in 2001, subsequent statements and actions by
Bush Administration officials continued to appear more supportive of Taiwan than those of
previous U.S. Administrations. This support was in keeping with growing concern in Congress in
the late 1990s that the U.S. policy framework toward Taiwan may be outdated and that Taiwan’s
self-defense capabilities had eroded while those of its chief antagonist, the PRC, had grown.
These conclusions were supported by a series of congressionally mandated annual reports, first
issued by the Pentagon in February 1999, assessing that the military balance in the Taiwan Strait
was increasingly tilting in the PRC’s favor.
During its tenure, however, the Bush Administration began reshaping its own policy articulations
concerning both Taiwan and the PRC. Administration officials came to see that smooth U.S.-PRC
relations may be an important tool in cooperating against terrorism and maintaining stability on
the Korean peninsula. As articulated by Vice President Cheney during his visit to Shanghai in
April 2004, the White House judged that “the areas of agreement [between the United States and ⁵³
the PRC] are far greater than those areas where we disagree ... ”
In addition, Taiwan’s unpredictable political environment, along with then-President Chen Shui-
bian’s growing pro-independence statements and actions, began to pose special challenges for

⁵³^F^r^o^m^t^h^{e Q & A}^sessi^oⁿ^wⁱ^t^h^Vⁱ^{ce P}^r^esi^d^ent^Ch^en^ey^f^o^l^l^o^wⁱⁿ^g^hⁱ^{s sp}^eech^at^F^u^d^aⁿ^Uni^v^ersi^t^yⁱⁿ^S^h^an^gh^ai^,
^broa^dc^a^s^{t by}^Be^ijing^CCT^Vⁱⁿ^En^g^{lish, f}^oun^{d i}ⁿ^FBI^S^{, A}^p^r^il^15,²⁰^04.

U.S. policy. U.S. officials claimed to have strong ties with Taiwan’s DPP government and a
considerable network of working economic and military ties with Taiwan under the Chen
administration. But such problems of trust had developed between President Chen and U.S. ⁵⁴
officials that the bilateral atmosphere eroded significantly. The Bush Administration came to
balance criticisms of China’s military buildup opposite Taiwan with periodic warnings to the ⁵⁵
Taiwan government that U.S. support was not unconditional. The Chen Administration’s
continued willingness to employ the provocative gesture heightened the concerns and sharpened
the criticism of many U.S. officials about its credibility and its commitments to the U.S.
government. The uncharacteristically pointed language directed at Taiwan in the State
Department’s statements listed above—in the written statement of March 2, 2006; in its press
briefing of June 19, 2007; and in subsequent blunt statements by Deputy Secretary of State John
Negroponte (August 27, 2007), NSC Senior Director for Asian Affairs Dennis Wilder (August 30,

2007), and Deputy Assistant Secretary for East Asia Thomas Christensen (September 11, 2007)—

reflected these U.S. concerns.
The Bush Administration sought to maintain a careful neutrality during Taiwan’s 2008 electoral
cycle. Nevertheless, Administration officials are thought to be optimistic that U.S.-Taiwan
relations and Taiwan-PRC relations will be more cordial under Taiwan’s new President, Ma Ying-
jeou, who has promised to repair relations with both Washington and Beijing. In his first overseas
trip to Latin America in August 2008, the United States permitted President Ma an overnight
transit stop in Los Angeles and was given a dinner attended by the top U.S. official for Taiwan, ⁵⁶
Ray Burghardt. This compares favorably with the U.S. treatment of President Chen on the way
to his visit to Guatemala in January 2008: a re-fueling stop in Anchorage, Alaska and a
conversation with Burghardt.
Many consider the continued success in 2008 of the democratic process in Taiwan to be a
validation of U.S. goals for the spread of democratic values. It also further emphasizes the unique
and delicate challenge for U.S. policy that Taiwan continues to pose: Taiwan is our ninth largest
trading partner with a vibrant and free democratic government on an island claimed by the PRC,
with which the United States has no diplomatic relations but does have defense commitments,
and whose independence from China U.S. officials say they do not support. With Taiwan under
the KMT government, then, the United States will be faced with challenges familiar from past
years, including decisions on: new arms sales; how to accommodate requests for visits to the
United States by President Ma and other senior Taiwan officials; the level of U.S. relations with
the Ma government; and whether to pursue closer economic ties, such as through a Free Trade
Agreement. In addition, Taiwan-U.S. relations under the KMT government face new
challenges—notably the implications that President Ma’s initiatives toward the PRC have for U.S.
interests; and what role, if any, Washington should play in Taiwan-PRC relations.

⁵⁴^Se^e^C^R^S^R^e^por^{t R}^L³³⁶⁸⁴^,^Un^de^rlyⁱ^ng^Straiⁿ^{s in}^Ta^iwaⁿ^-U.S.^Po^l^itic^{al Re}^l^a^tio^ns^,^by^K^e^rr^y^D^u^m^b^a^u^g^h^.
⁵⁵^“^T^he^re^a^r^e^li^m^ita^{tions w}^{ith re}^spe^c^t^{to w}^h^a^t^the^Un^ite^{d S}^t^a^t^e^s^w^{ill supp}^{ort a}^s^T^a^iw^aⁿ^c^onside^r^{s possi}^ble^c^h^aⁿ^g^e^{s to i}^t^s
^c^onstitu^tio^n.”^T^e^stim^on^y^of^A^ssis^t^aⁿ^{t Se}^c^r^e^t^a^r^y^o^f^Sta^t^e^Ja^m^e^s^A^.^Ke^ll^y^be^f^o^re^the^House^Inte^rna^tⁱ^o^na^{l Re}^la^tions
^Com^m^itte^e^,^A^p^{ril 21,}²⁰⁰⁴^.
⁵⁶^Burg^ha^rdt^{is Cha}ⁱ^rm^aⁿ^of^the^Am^e^r^ic^aⁿ^Instituteⁱⁿ^T^a^iw^aⁿ⁽^A^I^T⁾^.

President Ma’s emphasis on improving relations with the PRC present a potentially new policy
environment for the United States. U.S. policy had been stressed after President Chen abandoned
his early, unsuccessful olive branches to Beijing in favor of a more pro-independence approach,
with U.S. officials subjected to increasing pressure from both sides to become directly involved in
some aspects of cross-strait ties. PRC officials began quietly urging the United States to pressure
Chen Shui-bian into shelving plans for an island-wide referendum, and they pressed U.S. officials
to avoid sending the “wrong signals” to Taiwan. Members of the Taiwan government urged U.S.
officials to give more overt support for Taiwan’s democracy and to put more pressure on Beijing
to lessen its hostility. U.S. officials were put in the position of continually seeking to re-balance
the cross-strait relationship to achieve some sort of stasis.
The cross-strait policy of President Ma’s government presents the United States with a different
set of challenges. Ma’s election presents an opportunity to lay a new framework in Taiwan-PRC
relations—one that moves toward cross-strait improvements and understanding. U.S. officials in
the past have urged both sides to move toward greater conciliation and less confrontation. In
2008, a U.S. State Department spokesman spoke favorably (if somewhat tepidly, in keeping with
most U.S. policy pronouncements on Taiwan issues) of the resumption of cross-strait talks under
the Ma Administration, responding to a reporter’s question with “ ... we believe it’s important for ⁵⁷
the two to work towards a peaceful resolution of the ... Cross-Strait issues.” But while U.S.
policy favors improvements in Taiwan-PRC relations, it has been silent on what should be the
speed, depth, and degree of cross-strait conciliation. Some observers worry that the KMT
government may be overly responsive to economic imperatives and to pressures from influential
Taiwan business interests that have substantial economic investments in China. They worry that
the Ma government could reach a swift accommodation with Beijing that may complicate U.S.
regional interests.
The implication for U.S. interests is only one factor President Ma will have to consider in
pursuing his PRC policy. Ma will be faced with multiple balancing acts. He will have to improve
cross-strait relations—and Taiwan’s economic opportunities on the mainland—while not
appearing overly eager to core DPP supporters who worry that he will sell out Taiwan’s political
interests in pursuit of closer mainland economic ties. He also will have to strike a balance
between those in the electorate who favor unification with China; those who argue for a strong
defense for Taiwan and the continuation of U.S. weapons purchases; and those who urge
significant improvements in Taiwan’s relations with Beijing.
Relatedly, the question of U.S. arms sales to Taiwan takes on new shades of delicacy in an
environment of improving Taiwan-PRC ties. While U.S. law mandating arms sales to Taiwan
states that these sales shall be “based solely upon ... the needs of Taiwan,” such decisions can be ⁵⁸
and have been a useful U.S. policy lever in U.S.-Taiwan-PRC relations. Either the approval of a
major weapons package to Taiwan or an apparent “freeze” in weapons sales can have symbolic
significance for either side of the strait. U.S. policymakers will be faced with decisions on what

⁵⁷^A^c^ting^D^e^puty^Spok^e^s^m^a^{n G}^onz^a^l^{o R}^.^G^a^lle^g^o^s^,^Sta^t^e^D^e^pa^r^t^m^eⁿ^t^D^a^ily^P^r^e^s^s^B^r^ie^fⁱ^ng^{, J}^une^12,²⁰⁰⁸^.
⁵⁸^A^r^m^s^s^a^le^{s to T}^aⁱ^w^aⁿ^a^r^e^m^a^nda^t^e^{d in}^P.L^.⁹⁶^-8,^the^T^a^iw^aⁿ^Re^la^ti^{ons A}^c^{t (T}^R^A^{). Se}^c^{tion 3}³⁰²^(b)^of^{U.S.C. 2}²^{, C}^h^.
^48,^Se^c^t^{. 3}³⁰¹^-³³¹^{6, e}ⁿ^a^c^t^e^d^A^p^r^{il 1}⁰^,¹⁹^79.

kind of signal a specific U.S. arms sale will send under current circumstances. The PRC objects
to U.S. arms sales to Taiwan and has reacted punitively in some cases, so that future U.S. arms
sales to Taiwan may have significant implications for cross-strait ties. A recent news story from a
Taiwan newspaper alleged that U.S. military officials are concerned that potential Taiwan-PRC
military exchanges could provide Beijing with an opportunity to learn details about sensitive U.S.
military technology sold to Taiwan and, therefore, could jeopardize future U.S. arms sales to ⁵⁹
Taiwan.
Despite the challenges that Ma faces, many believe that the election results will be an important
test of the PRC’s stated intentions of approaching cross-strait problems by “putting aside ⁶⁰
differences and seeking a win-win result.” Having railed against President Chen for eight years
while wooing the KMT, the PRC now will be pressed to follow through with creative initiatives
with the Ma regime if it is to capitalize on this opportunity. Rebuffing a new and, at least initially,
a more conciliatory Taiwan government could damage the PRC’s credibility that it wishes to
pursue a peaceful and constructive solution for cross-strait ties. Any perceived PRC reluctance
also could serve to revitalize U.S. and congressional opposition to the PRC’s Taiwan policy—
opposition which has remained muted in recent years in part because of mutual U.S.-PRC
problems with former President Chen.
Observers suggest there are a number of options now for Beijing to make a meaningful gesture
toward Taiwan that would not impinge on PRC sovereignty claims. Beijing’s willingness to
restart cross-strait talks on a mutually acceptable basis was one such step. Others could include a
new willingness to entertain Taiwan’s aspirations to be a “meaningful participant” in the World
Health Organization (WHO); a halt to petulant posturing against Taiwan in APEC and other
multilateral organizations; or a suspension of Taiwan-focused military exercises and other
military maneuvers in the strait, among other acts. Unfortunately, past experience demonstrates
that the PRC often is unwilling to adopt creative and flexible policy initiatives in times of
tension—as is currently the case in the wake of the crackdown in Tibet and smoldering ethnic
tensions in Xinjiang—or when there is intense pressure to be seen to be successful—as there is
now in the year China is hosting the 2008 Summer Olympics (August) and the Paralympic Games
(September). For instance, while appearing more conciliatory in a reported letter to U.N.
Secretary-General Ban Ki-moon concerning Taiwan’s more modest U.N. bid on August 15, 2008, ⁶¹
the PRC’s U.N. representative still objected to Taiwan’s participation.
Many Americans welcomed the March 2008 election results as a sign that Taiwan’s democracy
has continued to ripen and mature. They say Taiwan’s democratic development has been validated

⁵⁹
^L^o^w^t^he^{r, W}^illia^m^,^“^P^eⁿ^ta^g^{on w}^a^r^y^o^f^P^RC-T^a^iwaⁿ^tie^s,”^Tai^p^eⁱ^Ti^m^e^s^{, J}^a^nua^r^y^{7, 200}^9,^p.^1.
⁶⁰^Re^porte^dly^la^ng^ua^g^e^{in a}^le^tte^{r w}^r^itte^{n t}^o^t^h^e^{U.N. Se}^c^r^e^t^a^r^y^G^e^ne^r^a^{l by}^the^P^{RC’s U.N.}^Am^ba^ssa^{dor W}^a^ng^G^u^a^ngy^a
^c^onc^e^r^ning^T^a^iw^aⁿ^’^s^c^u^r^r^e^{nt bid f}^o^r^“^m^e^aⁿ^ingf^{ul pa}^r^tic^ipa^tⁱ^on”ⁱⁿ^t^h^e^U^.^N^.^“^C^hi^na^gⁱ^v^e^s^U^.^N^.^{bid c}^o^{ld s}^h^oul^de^r^,^”
^CNA^{, Se}^pte^m^be^r^10,²⁰⁰⁸^.
⁶¹^Se^ntim^eⁿ^{t f}^r^om^a^le^tte^r^r^e^por^te^dl^y^se^{nt to U}^.^N^.^Se^c^r^e^t^a^r^y^-^G^e^ne^r^a^l^B^a^{n K}ⁱ^-^m^{oon by}^P^R^C^U^.^N^.^r^e^pr^e^s^eⁿ^ta^tiv^e^W^a^ng
^G^u^a^ngy^a^{on A}^u^g^u^s^t¹⁸^{, 2}⁰⁰⁸^{. C}^h^eⁿ^{, Ra}^c^h^e^l^{, “}^M^O^F^A^s^e^e^s^g^oodw^{ill f}^r^om^China^de^s^p^ite^o^p^p^o^s^iti^{on t}^o^U^.^N^.^bid^,^”
^Cen^t^ra^{l News Ag}^eⁿ^cy^{, A}^u^g^u^s^t^28,²⁰^08.

by having passed the “Huntington test” for established democracies—having two successful, ⁶²
consecutive changes of government through a free and peaceful electoral process. Those
harboring concern about how the DPP’s supporters would take such a defeat were reassured
greatly by the gracious concession speech of Frank Hsieh and the widespread DPP acceptance of
the results of the democratic process. To some watching the March 22 election, the Taiwan
electorate also appeared to have attained a new level of maturity and sophistication, apparently
motivated more in its election decisions by pragmatic calculations of governmental performance ⁶³
than by more emotional issues involving U.N. membership or sovereignty issues.
Some, however, suggest that functional political pluralism in Taiwan may be in trouble over the
short term. An effective democracy requires a viable opposition, and the overwhelming KMT
electoral victories in 2008 left Taiwan’s polity lopsided, the opposition effectively crushed. The
DPP has been demoralized and decimated further by the political scandals involving former
President Chen, who brought the party from a fledgling opposition party to the pinnacle of power.
The scandals, wrote DPP Chairwoman Tsai Ing-wen, have brought the DPP “a kind of sadness so ⁶⁴
painful it cannot be soothed, and a kind of disappointment so grave it cannot be overcome.”
Despite the warming U.S.-Taiwan relationship under the KMT, then, many feel that U.S. interests
in having Taiwan remain a full-fledged democracy may be compromised should the opposition
remain too feeble effectively to monitor and hold accountable the majority party.

P.L. 110-161 (H.R. 2764)
Consolidated Appropriations Act, 2008. The act provides $15 million for democracy and rule of
law programs in China, Hong Kong, and Taiwan, provided that money for Taiwan be matched
from sources other than the U.S. government; Section 671 (b) of the act allows the President to
waive restrictions on Economic Support Funds for certain countries, including NATO countries,
“major non-NATO allies,” and Taiwan, listing Taiwan separately. The bill was signed into law on
December 26, 2007.
H.R. 1390 (Tancredo)
A bill requiring Senate confirmation for the position of Director of the American Institute in
Taiwan (AIT). Introduced on March 7, 2007, and referred to the House Committee on Foreign
Affairs.
H.R. 3912/S. 1565 (Lantos/Biden)
Naval Vessel Transfer Act of 2007. Among other actions, the bill transfers to TECRO (the Taiwan
office in the United States) the OSPREY class minehunter coastal ships ORIOLE (MHC-55) and

⁶²^Sa^m^u^e^l^P^.^H^untiⁿ^g^t^oⁿ^de^fⁱ^ne^{d t}^h^is^pr^oc^e^s^sⁱⁿ^his^bo^ok^T^h^{e T}^hⁱ^r^d^Wa^{ve: Demo}^cra^tⁱ^z^a^tio^{n in}^the^Lat^e^Tweⁿ^tie^th
^C^e^ntur^y^{, N}^o^r^m^aⁿ^a^{nd L}^oⁿ^d^oⁿ^,¹⁹^{91. T}^a^iw^aⁿ^qua^lif^ie^s^by^vⁱ^r^t^ue^of^t^h^e^D^P^P^ha^vⁱ^ng^w^r^e^s^t^e^{d pow}^e^r^f^r^om^the^K^M^Tⁱⁿ
²⁰⁰^{0 a}ⁿ^{d t}^h^e^K^M^T^ha^vⁱ^ng^r^e^g^a^ine^d^pow^e^rⁱⁿ²⁰^08.
⁶³^Ma^ny^U^.^{S. a}^nd^othe^r^f^o^r^e^ig^{n e}^l^e^c^tion^o^b^s^e^r^v^e^r^s^w^e^r^e^{in T}^aⁱ^w^aⁿ^be^f^o^r^e^a^{nd a}^f^te^r^the^Ma^r^c^h²²^e^l^e^c^tio^{n, i}ⁿ^c^l^u^d^ing^t^h^is
^a^u^thor^{. T}^h^is^r^e^p^o^r^t^dr^a^w^s^he^a^v^il^y^{on t}^h^e^s^e^pe^r^s^ona^l^o^b^s^e^r^v^a^tions^aⁿ^{d ins}ⁱ^g^h^t^s^.
⁶⁴^D^{PP C}^h^aⁱ^r^w^om^aⁿ^T^s^aⁱ^Iⁿ^g^-^w^e^{n, “}^A^{n ope}^{n le}^tte^r^t^o^D^P^P^s^u^p^por^te^r^s^,”^Taipeⁱ^Tim^e^s^,^A^u^gu^st²⁷^,²⁰⁰⁸^,^p.^8.

FALCON (MHC-59). H.R. 3912 was introduced on October 22, 2007, and referred to the
Committee on Foreign Affairs, which held markup on October 23, 2007. S. 1565 was introduced
on June 7, 2007, and referred to the Senate Foreign Relations Committee, which held markup and
ordered the bill reported on June 27, 2007. (S.Rept. 110-139). The bill was placed on the Senate
calendar on July 31, 2007.
H.R. 5916 (Berman)
Security Assistance and Arms Export Control Reform Act of 2008. The bill contains findings that
security in the Taiwan strait will benefit from a more intensive U.S. dialogue with the EU on the
beneficial effects of its continued arms embargo against the PRC. Introduced on April 29, 2008
and referred to House Foreign Affairs Committee, which ordered the bill to be reported amended
on April 30, 2008 (H.Rept. 110-626). The House passed the bill on the suspension calendar by
voice vote on May 15, 2008, and the bill was referred to the Senate Foreign Relations Committee
on May 19.
H.R. 6646 (Ros-Lehtinen)
Requiring the Secretary of State, in consultation with the Secretary of Defense, to provide
detailed briefings to Congress on discussions between the United States and Taiwan about any
transfer of military equipment or arms sales or on potential arms sales. Introduced on July 29,
2008, and referred to the House Foreign Affairs Committee. On September 23, 2008, the bill
came to the full House on the suspension calendar. The House suspended the rules and passed the
bill by voice vote.
H.R. 7059 (Tancredo)
Requiring the sale of certain defense articles and services to Taiwan, including F-16 C/D fighters
and diesel submarines. Introduced on September 24, 2008, and referred to the House Foreign
Affairs Committee.
H.Res. 676 (Ros-Lehtinen)
Resolution that the United States continue to sell defense articles and services to Taiwan “based
solely” on Taiwan’s legitimate defense needs. Introduced September 25, 2007, and referred to the
House Committee on Foreign Affairs. Passed by voice vote on the suspension calendar on
October 2, 2007.
H.Con.Res. 73 (Tancredo)
Expressing the sense of Congress that the United States should resume diplomatic relations with
Taiwan. Introduced February 16, 2007, and referred to the House Foreign Affairs Committee.
H.Con.Res. 136 (Chabot)
Expressing the sense of Congress that the United States should lift restrictions on visits by high-
level Taiwan officials, including the Taiwan president. Introduced on May 1, 2007, and referred to
the House Foreign Affairs Committee. The Committee marked the measure up on June 26, 2007,
and passed it by unanimous consent under suspension of the rules. The House passed the measure
by voice vote on July 30, 2007, and the measure was referred to the Senate Foreign Relations
Committee on August 3, 2007.

H.Con.Res. 137 (Berkley)
Expressing the sense of Congress that the United States should initiate negotiations to enter into a
free trade agreement with Taiwan. Introduced on May 1, 2007, and referred to the House Ways
and Means Committee (May 1) and its Trade Subcommittee (May 15).
H.Con.Res. 170 (Tancredo)
Expressing the sense of Congress that the International Olympic Committee should allow Taiwan
to participate in the 2008 Beijing Summer Olympics under the name and flag of its own choosing.
Introduced June 15, 2007, referred to the House Foreign Affairs Committee.
H.Con.Res. 250 (Garrett)
Supporting Taiwan’s membership in international organizations such as the United Nations.
Introduced on November 8, 2007, and referred to the House Foreign Affairs Committee.
H.Con.Res. 278 (Ros-Lehtinen)
A measure supporting Taiwan’s fourth direct presidential election on March 22, 2008. Introduced
on December 19, 2007, and referred to the House Foreign Affairs Committee, which held mark-
up on February 27, 2008. Passed the House on the suspension calendar on March 5, 2008 by a
vote of 409-1. Received in the Senate on March 6 and referred to the Senate Foreign Relations
Committee.
S.Con.Res. 48 (Johnson)
Expressing the sense of Congress that restrictions be lifted on U.S. visits by democratically
elected high-level Taiwan officials. The measure was introduced on October 2, 2007, and referred
to the Senate Foreign Relations Committee.
S.Con.Res. 60 (Baucus)
A sense of Congress resolution calling for negotiations on a Free Trade Agreement with Taiwan.
Introduced December 18, 2007, and referred to the Senate Finance Committee.

01/07/09—According to a report in The Taipei Times, U.S. military officials are concerned that
military-to-military exchanges between Taiwan and China could jeopardize U.S. arms sales to
Taiwan.
01/07/09—Taiwan’s cross-strait negotiator, P.K. Chiang, began a visit to four PRC cities to
discuss issues facing Taiwan investors in the mainland.

12/12/08—Former Taiwan President Chen Shui-bian was indicted on charges of corruption.

11/12/08—Former Taiwan President Chen Shui-bian was arrested on charges of corruption while
in office.

10/03/08—The Defense Security Cooperation Agency notified Congress of the possible Foreign
Military Sale of six different types of defense articles and equipment, totaling approximately $6.4
billion.

09/08/08—Taiwan announced that it would cancel the live-fire exercise portion of its annual five-

day military exercises, in deference to warming ties between Taiwan and the PRC.

09/08/08—Taiwan’s Foreign Ministry announced it would seek closer participation in the 16-

member Pacific Islands Forum (PIF). Taiwan has taken part every year in the PIF since joining in
1993, but because of PRC objections has been restricted to dialoguing only with its 6 diplomatic
South Pacific partners.

08/27/08—The Pentagon announced the sale of 58 Harpoon missiles as well as related support,

logistics, and training equipment to Taiwan worth about $101 million.
08/20/08—According to a KMT news account citing Taiwan’s Finance Ministry will investigate
details involving the privatization of state-run banks including the Taishin-Chang Hwa and the
China Trust-Mega banks cases, to determine if there were procedural irregularities.
08/19/08—John C. T. Feng, Taiwan’s former ambassador to the Dominican Republic, was named
the new representative to Japan.

08/19/08—Taiwan former President Chen Shui-bian’s long-time legal advisor, Wellington Koo,

quit.
08/19/08—Taiwan’s Special Investigation Unit (SIU) announced it was inviting the Taipei-based
Central Bank of China (CBC) and the cabinet-level Financial Supervisory Commission (FSC) to
assist in investigating the source of $21 million in a Swiss bank account in the name of former
President Chen Shui-bian’s daughter-in-law, Huang Jui-ching. SIU investigators said they were
looking into possible irregularities in the second-phase financial reform initiated by President
Chen in 2004 as a potential source of the funds.
08/18/08—Prosecutors in Taiwan named five suspects in an alleged high-level money laundering
scheme involving former President Chen Shui-bian. They included: Chen Shui-bian; his wife Wu
Shu-jen; Chen’s son Chen Chih-chung and his wife Huang Jui-ching; and Wu’s brother Wu
Ching-mao.
08/17/08—Tsai Ing-wen, head of Taiwan’s DPP party, said the current political crisis had come
about because the DPP put too much faith and trust in Chen Shui-bian.
08/14/08—Former Taiwan President Chen Shui-bian held a press conference to resign from DPP
membership. He admitted failing fully to declare campaign funds and for wiring millions of
dollars overseas, and apologized for causing “humiliation” and “irreparable damage” to the party.
08/14/08—Taiwan’s Ministry of Foreign Affairs (MOFA) confirmed that the Swiss
Confederation’s Department of Justice sought assistance from Taiwan about suspected money
laundering by Chen’s daughter-in-law, Huang Jui-ching.
08/14/08—Taiwan submitted a proposal to the UN Secretariat via St. Vincent and the Solomon
Islands (2 of Taiwan’s diplomatic relationships), asking the UN to consider permitting Taiwan to
have “meaningful participation” in the organization’s specialized agencies.

08/13/08—A spokesman for Taiwan’s presidential office said that this year’s UN bid would focus
on “participation” in specialized UN agencies.
08/13/08—Taiwan President MaYing-jeou arrived in Panama for a refueling stop; he was greeted
by Panama’s President, Martin Torrijos.
08/12/08—AIT Chairman Ray Burghardt gave a dinner for President Ma in Los Angeles. Ma also
met with Members of Congress.

08/12/08—Taiwan President Ma YJ left for state visits to Paraguay and the Dominican Republic, ^th

returning on the 19. He flew a commercial flights to the United States—a first for a Taiwan
president—and transited through LA (coming) and through San Francisco (returning home).

08/09/08—Former President Chen Shui-bian’s son, Chen Shih-chung, his wife Huang Jui-ching,

and their baby left Taiwan for the United States. The younger Chen reportedly went to begin a
doctorate in law
07/27/08—Taiwan’s Sports Affairs Council (SAC—a cabinet-level council) announced that
several Taiwan Ministers would attend the 2008 Olympic Games at IOC invitation using National
Olympic Committee ID cards. In the past, China’s protests had led to the issuance of the less
prestigious “Guest Card” for Taiwan officials.
07/22/08—Taiwan’s SEF chairman, Chiang Pin-kung, was reported as having said he wants to
study and promote the creation of a cross-strait comprehensive economic cooperation agreement
(CECA).
07/17/08—Taiwan’s cabinet announced it would revise regulations limiting investment by Taiwan
companies in China, and that new measures would be put into place August 1. Preliminary reports
said that the current investment cap would be abolished for some companies and raised to 60% of
net worth for other companies.
06/12/08—The first cross-strait meetings in a decade began between China and Taiwan in Beijing
at the Diaoyutai State Guest House, conducted by SEF and ARATS. The two sides reportedly
agreed to set up permanent offices in each other’s territory and to begin regular weekend direct
charter flights.
05/26/08—KMT Chairman Wu Poh-hsiung visited China and met with PRC Party Secretary Hu
Jintao at the latter’s invitation in the highest-level contact between the two sides of the Taiwan
Strait.

05/20/08—Ma Ying-jeou was inaugurated President of Taiwan.

05/19/08—Tsai Ing-wen, considered a moderate in the DPP Party and a former Vice-Premier, was
elected chairwoman of the Party.

05/19/08—The WHO rejected Taiwan’s bid for observer status.

03/22/08—KMT candidate Ma Ying-jeou was elected president of Taiwan, defeating the rival
DPP ticket of Frank Hsieh.

01/12/08—Taiwan’s legislative elections were held under its newly reorganized system: 428
candidates fighting for membership in the new 113-seat body. The KMT crushed the DPP,
winning 81 seats to the DPP’s 27.
01/07/08—According to the International Herald Tribune, Beijing plans to open a new
commercial aviation route through the Taiwan Strait. Taiwan officials said they considered the
move a threat to air safety.
12/28/07—Taiwan’s High Court acquitted Ma Ying-jeou of corruption charges, upholding the
acquittal of a lower court.
11/20/07—The Federal Register published a U.S. announcement of a proposed arms sale to
Taiwan for upgrade and refurbishment of PATRIOT Advanced Capability-3 (PAC-3) Guided
Missiles.
11/06/07—Secretary of Defense Robert Gates, visiting in Beijing, reportedly told PRC President
Hu Jintao that the United States is “categorically” opposed to any moves by Taiwan towards
independence.

09/19/07—For the 15^th consecutive year, a U.N. General Assembly Committee rejected the ^nd

recommendation that Taiwan’s formal application for U.N. membership be considered by the 62
General Assembly.
09/12/07—The Pentagon announced $2.2 billion in possible military sales to Taiwan, including
12 surplus Orion P3-C maritime patrol craft and 144 SM-2 Block 3A Standard anti-aircraft
missiles, built by Raytheon.
09/10/07—Taiwan Defense Minister Ko Cheng-heng said that Taiwan had an “urgent and
legitimate need” to buy F-16s. Minister Ko made the statement while attending the Sixth U.S.-
Taiwan Defense Industry Conference in the United States.
08/06/07—According to the United Daily News, Taiwan wants to buy at least 6 Aegis-equipped
U.S. destroyers for more than $4.6 billion.

07/23/07—The United Nations Legal Affairs Office rejected Taiwan’s application for U.N.

membership on the grounds that it violated the agency’s “one China” policy.

07/20/07—Taiwan announced it had applied for U.N. membership under the name “Taiwan.”

07/17/07—The Taipei Times reported that KMT sources said the United States had postponed
approval of the sale of 66 F16 C/D fighters to Taiwan because of President Chen’s U.N.
referendum.

CRS Report RS22853, Taiwan's 2008 Presidential Election, by Kerry Dumbaugh.
CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political Relations, by Kerry
Dumbaugh.

CRS Report RS22388, Taiwan's Political Status: Historical Background and Ongoing
Implications, by Kerry Dumbaugh.
CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990, by Shirley A. Kan.
^Kerry^D^u^m^b^augh
^Sp^ecialistⁱⁿ^A^s^iaⁿ^Af^f^a^ir^s
^k^dum^baugh^@^c^rs^.l^oc.^g^ov^{, 7-}⁷⁶⁸³