Weaving a Cross-Strait Fabric Unveiling the Role of US Think Tanks

In late summer in New York, before the terrorist attack on the World Trade Center, there was a sense of hurrying to make the most of the tail end of vacation. Beneath the shimmering sun, tourists wove in and out of the streets like fibers in a loom, while underground the subway trains pulsed through the city. Most scholars were heading back to their offices to start on their work for the rest of the year. However, Donald Zagoria of the National Committee on American Foreign Policy (NCAFP), who has been responsible for organizing a number of track two conferences, found himself with some unexpected time off, because the closed-door roundtable scheduled for August, which he spent the whole summer organizing, had to be canceled at the last minute.

"It's difficult to promote track two meetings when everyone is paying such close attention," complains Zagoria. Because of widespread exposure in the Taiwan media, which ran stories before checking with him, misunderstandings have arisen on the PRC side, forcing the cancellation of this most recent meeting. Naturally there would be no point to a trilateral meeting in which one of the sides did not attend.

The NCAFP has been organizing closed-door roundtables twice a year, and has held a total of nine so far. They have been singled out for particular attention because of the importance of the persons who attend. For example, for the scheduled August conference, participants were to include former American assistant secretary of state Winston Lord, former chairman of the ROC Mainland Affairs Council Su Chi, and Xu Shiquan, head of the Institute of Taiwan Studies at the Chinese Academy of Social Sciences.

As Zagoria explains, because of the sensitivity of cross-strait relations, mutual trust is essential for these closed-door roundtables. But the media has found the attraction irresistable. The exposure of these non-governmental track two conferences has touched a raw nerve, and set off warning bells in mainland China about the threat of an "internationalization of cross-strait relations" (which the PRC claims is a "purely domestic issue").

Be that as it may, it is precisely when the situation is precarious and there is a need to build mutual trust and communication that track two is most important.

Getting on track

How did track two get started? Lin Chong-pin, currently vice chairman of the Mainland Affairs Council and formerly assistant director of Asian studies at the American Enterprise Institute, a think tank in Washington DC, recalls that there was unofficial cross-strait interaction as early as the late 1980s. At that time, the Atlantic Council, an American foreign policy think tank, invited armed forces personnel from Asian countries to study in the US. Military personnel from the US, mainland China, and Taiwan were able to discuss cross-strait military issues at these activities, with considerable success at increasing mutual understanding.

In recent years, official cross-strait relations have been at a standstill, and formal channels of communication have been closed. The idea of the second track has again come to the fore. Moreover, it has gone from being behind the scenes to center stage, and the status of participants is higher than before. These developments are due in large part to the actions of former US secretary of defense William Perry.

Go back to June of 1998. At that time, President Clinton visited mainland China and announced the "new three no's" policy. The US was at that time actively working to build "a constructive strategic partnership" with mainland China. Perry, who had already left office and was at that time working in the Asia-Pacific Research Center at Stanford University on the "preventive national defense research program," met in Hawaii with Wang Daohan, chairman of the PRC's Association for Relations Across the Taiwan Strait, and he persuaded Wang to arrange a visit to Beijing by Koo Chen-fu, chairman of Taiwan's parallel organization, the Straits Exchange Foundation.

Perry's efforts were very successful, but the scheme ran aground after then-ROC president Lee Teng-hui angered Beijing by announcing his "special state to state" formula for cross-strait relations. A planned visit to Taiwan by Wang Daohan was canceled, and the official contact channel was once again shut down.

Henry S. Rowen, former assistant secretary of defense, who is currently at the Asia-Pacific Research Center, says that track two operations conducted by think tank scholars who were formerly in government can have considerable influence. But, in the end, these individuals no longer have official status or power, so they can only handle small topics. When the larger environment is not conducive to progress, as was the case after President Lee's comments, it is impossible to make any breakthroughs via the second track. At such times, track two is confined to the simple function of transmitting information.

Official scholars

In fact, even as they have encouraged the resumption of track one communication, American think tanks have for a long time been transmitting messages around the Washington-Beijing-Taipei triangle, thereby having an important impact on cross-strait relations, policy, and public opinion. For example, after the 1996 missile crisis, William Perry, who had already left office, relayed the view of the American government to high-level officials and to the then-opposition Democratic Progressive Party that the US would not look kindly on Taiwan independence if this led to a crisis in the Taiwan Strait.

It is important to keep in mind that the comments and messages transmitted by think tank scholars are not necessarily "objective." Many are closely tied to the ruling authorities. For example, before Bill Clinton visited China in 1998, scholars such as Harvard professor Joseph Nye and former assistant secretary of defense Charles Freeman paved his way by writing articles for major scholarly publications in which they expressed the idea that Taiwan independence would be a major threat to American interests.

Ted Galen Carpenter of the Cato Institute at that time published an article in which he strongly criticized the views of these scholars. He argued that Clinton's desire to develop a constructive strategic partnership with mainland China was in fact making Taiwan nervous, while calls by some scholars to halt arms sales to Taiwan would only force Taiwan down the path of developing their own weapons.

Of course, there are serious limits to the impact think tanks can have with track two activity. But it may be said that they can serve better than other possible candidates for this function, such as the media, non-governmental organizations, or business enterprises. Orville Schell, dean of the Graduate Institute of Journalism at the University of California at Berkeley, argues that media cannot really serve as a second track because in the PRC it is an extension of the government. There's no press freedom as there is in United States and Taiwan. The lack of symmetry between the three sides naturally inhibits the free exchange of information and ideas. As for nongovernmental organizations, since mainland China has none, naturally these are out of consideration.

Thomas Metzger of the Hoover Institute at Stanford University, puts a damper on hopes that businessmen could be a second track. He acknowledges that there have been frequent private sector contacts across the strait in recent years, and naturally the more channels of communication there are the better. But, though one can often see Taiwan business leaders traveling to Beijing and trying to play a communication role, their objectivity is compromised by their commercial interests. In sum, although think tanks face serious limits, they are still most suited to play the role of unofficial communication channel.

Message delivery service

American think tank scholars are very happy to travel back and forth. In the last year in particular visits along the legs of the US-PRC-ROC triangle have reached a new peak, with virtually every American think tank connected to Asian affairs sending numerous staff people to both sides of the Taiwan Strait, not to mention the countless bilateral and trilateral closed-door conferences organized in the States. As Edwin Feulner, president of the Heritage Foundation, describes it, the second track is running all the time. If you sat in the lobby of the Heritage Foundation and just observed, you would see visits from delegations from both sides of the Taiwan Strait constantly coming and going.

Alexander T.J. Lennon, dean of the Young Leaders Program at the Center for Strategic and International Studies and also editor-in-chief of The Washington Quarterly, says that one important reason why there has been such a flurry of track two activities recently is because new administrations have come to power in both the US and Taiwan, and all three sides are anxious to understand where these new political developments may lead. In addition, Taiwan and mainland China are about to enter the WTO, and many scholars believe that this is a good opportunity to open track two channels.

"Even mainland China-which is the weak link in the three-way 'track two' relationship, and where think tanks are still mainly sounding boards for central government policy, whose scholars at most might dare to express some slight opinions of their own at closed door conferences-considers track two communication with American think tanks to be extremely important," says Elizabeth Economy, deputy director of Asia Studies at the Council on Foreign Relations. American think tanks have long been revolving doors for figures to move in and out of government, have a great deal of information about cross-strait relations, and provide suggestions to the American government, so that if you understand the positions of American think tanks, then to a considerable degree you can understand the spectrum of views in American politics.

Ted Galen Carpenter, vice president for defense and foreign policy studies at the Cato Institute, says that mainland China particularly hopes to learn through the think tanks more about the positions of the US government and congressmen. For example, a high-ranking PRC military official with whom he recently met asked him especially about the opinions of the different political parties in the US toward Asian military issues.

"However," warns Elizabeth Economy, "mainland China does not always maintain an open attitude toward think tanks functioning as track two." She says that when the political situation in mainland China is unstable, they want to minimize the amount of information the outside world receives, and at those times tend to have a closed attitude.

Marginal views

Although mainland China is the most uncertain player in track two communication, long-term communication at the very least exposes and perhaps even encourages more open-mindedness within Chinese think tanks themselves. Thomas Metzger of the Hoover Institution says that in the past PRC scholars all toed the same line, but in recent years he has begun to hear some different voices. For example, he says recently a mainland Chinese scholar admitted to him that Beijing also needed to rethink its position, and that in fact Taiwan independence would not be a substantial loss to mainland China. "I was very surprised to hear that," says Metzger. Although such views are still marginal in mainland China, they indicate that there may be growing pluralization within Chinese academia.

However, though track two has its positive sides, it also can be the source of misunderstandings. For example, this August, the American scholar Bonnie Glaser created quite a controversy with an article released through the Center for Strategic and International Studies website. The article said that some members of the Kuomintang were lobbying mainland China not to open any dialogue with current president Chen Shui-bian of the Democratic Progressive Party, in order to avoid strengthening his leadership position before the next presidential election. Although the KMT has repeatedly denied that this is official party policy, Glaser says that she was simply quoting official mainland sources. Unfortunately, it is possible for mainland China to release information to American scholars, for purposes of its own, which could create unnecessary variables in Taiwan's political situation.

Sometimes you win, sometimes you lose, and the reason could be the same both times. The question now, given the pluralistic nature of American think tanks, is what role they are best capable of playing. For example, James Mulvenon, deputy director of the Center for Asia Pacific Policy at the RAND Corporation says that right now the cross-strait situation is changing in a strange way. In particular, there is high-level development of democracy in Taiwan, and extremely rapid change in the political situation. American think tank scholars do not necessarily have a firm grasp of all of these changes, which could affect their role as a middle man.

But Catharin Dalpino, deputy director of the Center for Northeast Asian Policy Studies at the Brookings Institution and a former assistant secretary of state for democracy, thinks that track two should be even more active despite the limitations and difficulties. She says that track two conferences need to be convened on a regular and long-term basis. It is precisely because results have not been great so far, she says, that more must be done to organize track two activities.

Re-opening track one

Though the attitude of American think tanks is positive, the impact of track two remains cloudy. Will it become any clearer in the new issues that are now calling for attention? Taiwan and mainland China are soon to enter the WTO, the "no haste, the patient" policy is being relaxed, and the three links are looming. But official dialogue remains closed between the two sides. Can American think tanks help bridge the gap and set the stage for official, direct cross-strait talks on "track one"?

Brookings senior fellow Nicholas Lardy feels that there's no need. He argues that, so far as these economic topics are concerned, the influence of the market itself will far outweigh what is said through any channel of communication. After all, the pressure to open the three links comes from Taiwan businesses, or from American companies who are no longer willing to maintain their headquarters in Taiwan because of the lack of direct travel and shipping between the two sides.

He adds, moreover, that all the pressure being generated is on the Taiwan side. Mainland China is not under any pressure to enter into direct negotiations with Taiwan because of WTO entry or the three links, and even less so considering that the details of the three links can be ironed out in non-governmental forums. For example, negotiations on air transport could be handled by the civil airlines.

Edwin Feulner, president of the Heritage Foundation, says that think tanks will primarily focus on issues that involve negotiations between the US and PRC, and therefore will not be in a position to promote official cross-strait dialogue. However, he adds that this does not mean that WTO entry will not have some positives for track two. After entry into the WTO, he notes, in some areas such as opening up the Internet, mainland China will have to conform to international standards. This could encourage mainland China to adopt a more open attitude toward track two communications.

Though they may not be able to restore track one, American think tank scholars, located at the nexus of track two, are at least in a position to offer insight into the differences between the two sides. Ted Galen Carpenter notes that the most controversial subject in track two conferences is always "one China," which remains the main obstacle to restoring track one.

Longtime US diplomat James Lilley (see the interview in this issue) points out that the "one China" demand is a card being played by mainland China, but in fact the cross-strait game is going on without that requirement being fulfilled. As Lin Chong-pin states, mainland China sticks to the "one China" principle mainly because it does not want to enter into negotiations at the present time. He says that mainland China has always played a two-faced game, leading the Americans to feel that the atmosphere is harmonious, while taking a hard line against Taiwan, in order to get the maximum benefit out of Sino-American relations.

A China that looks like Taiwan

Lin says that President Chen has made many friendly gestures toward the mainland. If the mainland wants to talk, they will certainly find Taiwan ready to do so. However, the recent terrorist attacks in the US have added a new variable to the possibility of reopening track one.

Ted Galen Carpenter says that prior to the attacks the Bush administration was shifting its military and diplomatic focus from Europe to Asia, and because of the Hainan Island aircraft collision incident, had already had numerous contacts with mainland China. But the terrorist attack should draw American attention back to the Persian Gulf. The US will seek mainland Chinese cooperation, which can only be good news for Beijing.

Thus Beijing is now in a position to demand more from the US. The PRC could be even more insistent on its own ideology, thereby pushing cross-strait political relations deeper into the mire, despite the fact that it could lose out on common interests it shares with Taiwan in terms of economics and culture.

Where does this all lead? Edwin Feulner is optimistic. He says that Taiwan's strengths lie in its democratic politics and open economy. In the future, even if the current two Chinas become one China, this will probably be a China that resembles today's Taiwan.

Donald Zagoria anticipates that even if the focus of official American attention is shifted, American think tanks will still continue to play a track two role between the two sides of the strait. Much remains to be done in terms of political communication, but James Lilley argues that this is not the only path to be followed. Economic and cultural interaction between Taiwan and the PRC is already causing evolutionary change on the ground, and the two sides should focus on more practical economic issues of joint interest. Edwin Feulner also suggests that the rise of a new generation of leaders will bring a new atmosphere to the political situation on both sides of the Taiwan Strait. The key will be whether or not these two societies are willing to peacefully coexist.

The "track two" role played by American think tanks opens another channel of communication between the two sides of the Taiwan Strait. But whether or not this will open larger doors depends on the political wisdom of leaders on both sides. Taiwan longs for communication, regardless of the form it takes.

Donald S. Zagoria

Current position: Project director of the Roundtables on US-China Policy and Cross-Strait Relations for the National Committee on American Foreign Policy (NCAFP); professor of political science, Hunter College.

Major activities: Has directed nine NCAFP Roundtables on US-China Policy and Cross-Strait Relations.

Major publications: "Soviet Policy in East Asia: A New Beginning?" (1989), The Vietnam Triangle (1971), The Sino-Soviet Conflict, 1956-1961 (1962), etc.

On cross-strait issues: "As many strategic thinkers have said, the challenge is how to live with a complex problem that does not yet allow a final solution. The need for self-restraint on all sides is clear. If the US disavows the long-standing 'one China' principle, military confrontation is likely. If China uses force, American resistance is certain. If Taiwan abandons restraint, it will unleash a conflict that will harm all sides, but especially itself.

"All the parties have an interest in avoiding confrontation and easing the confrontational atmosphere. The first step is for Taiwan and the PRC to resume official dialogue. This may be possible after Taiwan's December elections and after both enter the WTO.

"Encouragingly, Chen Shui-bian's government has made conciliatory gestures, including the recent statement that the 'one China' problem should be handled in accordance with the ROC constitution. The PRC has also shown new flexibility, and is quietly changing its attitude towards Chen. Both sides may be able to agree on 'one China with different interpretations' as a basis for resuming dialogue.

"Taiwan needs to understand that good US-China relations are in its interests because a key constraint on China's Taiwan policy is China's stake in its relationship with the US."

Ted Galen Carpenter

Current position: Vice president for defense and foreign policy studies, the Cato Institute.

Expertise: Has published numerous articles in recent years on post-Cold War regional crises, with particular emphasis on Bosnia, Somalia and the Taiwan Strait.

Recent publications: "Going Too Far: Bush's Pledge to Defend Taiwan" (2001), "Let Taiwan Defend Itself" (1998), "Roiling Asia: US Cosiness with China Upsets the Neighbors" (1998), etc.

"Let Taiwan Defend Itself" proposes that the US should arm Taiwan, but should not assist in its defense. To deter China from attacking Taiwan, the US should do its best to satisfy all Taiwan's demands for arms purchases.

On cross-strait issues: "I am in favor of the United States adopting a firm policy of maintaining a balance of power across the Taiwan Strait, which would include allowing Taiwan officials to visit the US, and making it clear to the PRC that that is a matter of American domestic policy, and is not for them to decide.

"I also firmly support arms sales to Taiwan. Taiwan does not pose a threat to the PRC, and arms sales are only to assist Taiwan's defense. The PRC should not use military force against Taiwan either. We would not wish to see any events in the Taiwan Strait that would jeopardize stability in East Asia. Arms sales are not an invitation to the PRC to use force against Taiwan.

"But I also believe that the US should not provoke the PRC, so I am not in favor of TMD. Also, following the midair collision incident, the US needs to consider whether this method of intelligence gathering is worth the cost of persistent challenges from the PRC."

Henry S. Rowen

Current positions: Co-director, Asian/Pacific Research Center, Stanford University; senior fellow, the Hoover Institution.

Formerly assistant secretary of defense for international security affairs in the US Department of Defense.

Expertise: International security, economic development, Asian economics and politics, US institutions and economic performance.

Current projects: Economic growth prospects for the developing world; political and economic change in East Asia.

Recent publications: Growth of Freedoms in China (2001), "Catch Up: Why Poor Countries Are Becoming Richer, Democratic, Increasingly Peaceable, and Sometimes More Dangerous" (1999).

On cross-strait issues: "There is no substantive barrier to cross-strait communication. The closure of official channels does not preclude people-to-people contacts between the two sides. The PRC asserts that lack of consensus over the 'one China' issue is preventing the reopening of official dialogue, but I believe the biggest problem is that the governments on both sides want to emerge as the winner, and this affects their willingness to negotiate, and the possible outcomes.

"Few US presidents have had experience in diplomacy before coming to office. Clinton too came to the presidency without diplomatic experience. But the important thing is that the president has many advisers, and I believe President Bush's China policy has been on track from the beginning."

Orville Schell

Current position: Dean of the Graduate School of Journalism, University of California, Berkeley.

Expertise: Chinese society, human rights in Tibet, Hong Kong, cross-strait relations.

Recent publications: Nearly ten books based on research into Chinese society, including Virtual Tibet: Searching for Shangri-La from the Himalayas to Hollywood (2000), Mandate of Heaven: A New Generation of Entrepreneurs, Dissidents, Technocrats and Bohemians Grasp for Power in China (1994), and Discos and Democracy: China in the Throes of Reform (1988).

Recent articles include "Chinese Puzzle" (2001), in which he encourages the PRC government to establish peaceful relations with the Dalai Lama.

On cross-strait issues: "Because of the special situation in Tibet, the prospects for establishing track two relations with the PRC on that subject through US think tanks are rather poor, since most American scholars would not wish to jeopardize their relationships with Chinese officialdom in this way.

"The US government should deal with the PRC with a friendly attitude, but there are undeniably still many points of dispute between China and the US. The PRC should understand that other countries also have their interests to consider.

"The PRC is very adept at using 'soft' methods. They like to tell their counterparts that if they do not make concessions, it will harm their bilateral relations. This can easily cause inexperienced players to make repeated concessions in order to save the friendly relationship. But making such concessions may cause one to lose sight of one's own principles. This is something both the US and Taiwan need to guard against."

Thomas A. Metzger

Current position: Senior fellow at the Hoover Institution, Stanford University; visiting professor at East China Normal University, Shanghai, and Wuhan University.

Expertise: Intellectual and institutional history of China.

Current projects: US China policy; contemporary China's moral-political discourse and its historical roots.

Relevant publications: The Organizational Capabilities of the Ch'ing State on the Field of Commerce; "Continuities Between Modern and Premodern China," etc.

On cross-strait issues:

"Based on information gained through my contacts with Chinese officials and academics, the PRC already understands that 'one country, two systems' is not feasible, which is why it proposed the more flexible 'one China, separate interpretations.' If Taiwan cannot even accept the concept of 'one China,' then there is no possibility of consensus across the Taiwan Strait. If Taiwan simply relies on protection from the US navy, it will become a vassal of the US, and in the long term this is of no benefit to the US, China, or Taiwan.

"In politics you can't only demand rationality. In cross-strait relations, Taiwan is like a psychiatrist and the PRC is the one in therapy. Taiwan should be more patient with the PRC."

Alexander T.J. Lennon

Current position: Dean of the Young Leaders Program, and editor in chief of The Washington Quarterly, at the Center for Strategic and International Studies.

Expertise: Global issues including US-Japan-China relations, China's foreign and defense policies, and nuclear non-proliferation.

The Washington Quarterly has emerged in recent years as an important US academic publication in the field of international relations. It aims to present the views of a mixture of established and emerging experts from inside and outside the US on global public policy issues.

On cross-strait issues:

"Terrorism is the new primary enemy. The US government will strengthen its links with the global coalition to fight against terrorism, and in the short term will devote greater funds and resources to developing and testing missile defense systems. However, deployment may take longer than previously anticipated. Opposition to such systems within the US will decline.

"In East Asia, I believe the most important axis of future development will be economic. Of course, whether Japan can emerge from its economic doldrums, and whether the PRC can avoid a financial crisis, will be crucial factors. If businesses and governments in the region can find common interests and continue to invest, then I am optimistic for the future of the region."

Edwin J. Feulner

Current position: President of the Heritage Foundation.

An important opinion leader in the US Republican Party.

Formerly chairman of the board of the Intercollegiate Studies Institute. A leading member of many other think tanks.

On cross-strait issues:

"President Bush is aware that Sino-US relations got out of balance under Clinton, so he is now trying to rectify that. But the PRC is also in the process of testing President Bush's limits. If President Bush attends the APEC meeting to be hosted by China in October, I expect he will come to a better understanding with the PRC's senior leadership.

"President Chen Shui-bian is very unlike President Lee Teng-hui both in his political background and his way of thinking. I think that in future the PRC will gradually become friendlier towards him. Beijing should respect Taiwan's popularly elected president, and not attempt to bypass Taiwan to threaten and blackmail Washington."

Elizabeth C. Economy

Current position: Deputy director, Asia studies, and senior fellow for China, at the Council on Foreign Relations.

Expertise: China's domestic and foreign policies, global environment issues.

Recent publications: "Reforming China" (1999), China Joins the World: Progress and Prospects (co-editor, 1999), etc.

On cross-strait issues:

"From the US perspective Taiwan is clearly headed in the right direction politically. It has successfully completed not only a free presidential election but also a peaceful transition in power, which is the hallmark of a strong democracy. Among the United States, Taiwan, and the PRC, the PRC is clearly the weakest link in this regard. US-Taiwan relations are quite strong, and have been for decades. The US really needs to establish stronger ties with the PRC.

"Human rights issues are an important aspect of US foreign policy, and I expect that this will not change for the foreseeable future. But if the US wants to exert any positive influence on China in this regard, it will have to do more to help China establish a middle class and strengthen the foundations of the rule of law.

"There is no practical alternative to engagement. Unfortunately, there has long been an excessive, and I think misplaced, fear of China in some policy circles in the US. However, I believe that a strong China is a much better bet for fruitful Sino-American cooperation over the long term than a weak and unstable China."

James Mulvenon

Current position: Deputy director of RAND's Center for Asia-Pacific Policy.

Expertise: Chinese military affairs.

Current projects: Chinese strategic weapons doctrines (information warfare and nuclear warfare); theater ballistic missile defenses (TBMD) in Asia.

Recent publications: Soldiers of Fortune (2001), "Professionalization of the Senior Chinese Officer Corps: Trends and Implications" (1999), etc.

On cross-strait issues:

"US policy toward China should be seen from the perspective of comprehensive strategic management. I believe that preventing war in the Taiwan Strait is crucial to vital US interests. One result of globalization is that events anywhere in the world may have far-reaching effects. For instance, when the 1999 earthquake interrupted semiconductor production in Taiwan, it also affected American industry. But that does not mean that the US should incorporate Taiwan into its own defense system. It should sell military hardware to Taiwan and help Taiwan's military modernize its force so that Taiwan can have its own independent defense capability, in order to maintain peace and stability across the Taiwan Strait."

Catharin Dalpino

Current position: Deputy director, Center for East Asian Policy Studies, the Brookings Institution.

Formerly deputy assistant secretary for democracy at the Bureau of Democracy, Human Rights, and Labor, US Department of State.

Expertise: Asia, US-Asian relations, human rights.

Current projects: Political consequences of the Asian financial crisis; impact of Taiwan's democratization on the PRC regime.

Recent publications: Deferring Democracy: Promoting Openness in Authoritarian Regimes (2000), Anchoring the Third Wave Democracies: Problems and Prospects for US Policy (1998), "Economic Growth in Asia: Its Impact on Governance and Political Life" (1997), etc.

On cross-strait issues:

"Because there have been so many big changes in Taiwan over the last year that affect cross-strait relations, Beijing needs to take a step back to watch how things develop in Taiwan, so in the short term it is unlikely that there will be any breakthrough. As for the United States, following the EP3 surveillance plane collision, both sides are still searching for new directions for development. But in the initial phase their actions are inevitably restricted by their respective ideologies.

"The US will not take up a specific position on the issue of 'one China,' but will maintain a greater degree of flexibility. But the US has no intention to push Taiwan into accepting the models proposed by Beijing.

"In the long term, I believe the aspect most worth watching is the impact of Taiwan's democratization on the PRC internally. Senior members of the PRC regime are also likely to be watching whether the Kuomintang will disappear from Taiwan's political map after losing power, and this may affect the future pace of democratization in the PRC."

Nicolas R. Lardy

Current position: Senior fellow, Foreign Policy Studies, the Brookings Institution.

Expertise: Asia, Chinese economy, economics of transition, Hong Kong.

Current projects: Integrating China into the global economy

Recent publications: "Foreign Financial Firms in Asia" (2001), China's Unfinished Economic Revolution (1998), China in the World Economy (1994), etc.

On cross-strait issues:

"After China joins the WTO, the volume of its external trade is bound to greatly increase, and it will become a major global trading nation. But the message coming from Taiwan's government is that it believes there is only a finite amount of funds, and that if firms invest in the mainland they cannot invest in Taiwan. They seem to be unaware that there is always a diversity of sources of funds. What Taiwan's government should be thinking about is how Taiwan can compete with a China that is both a low-wage economy and the world's biggest manufacturing center. Taiwan needs to improve education levels, develop its service sector and become a design, marketing and financial center.

"I am optimistic about Taiwan's future, if only it can grasp this excellent window of opportunity and integrate with mainland markets."