American Enterprise Institute

March 22, 2006

[Edited transcript from audio tapes]

11:45 a.m.	Registration and Luncheon
Noon	Welcome:	Christopher DeMuth, AEI
	Introduction:	James R. Lilley, AEI
	Keynote Speaker:	Ma Ying-jeou, mayor of Taipei
2:00 p.m.	Adjournment

Proceedings:

Christopher DeMuth:  My name is Chris DeMuth.  I’m president of the American Enterprise Institute and I’m delighted to welcome such a distinguished assemblage here today for this luncheon and speech in honor of Dr. Ma Ying-Jeou, the mayor of Taipei, Taiwan, which is being sponsored jointly by the Heritage Foundation and AEI.  My good friend and counterpart at Heritage, Dr. Edwin Feulner, has published a book this month.  I’m very envious of him, and he had long-standing plans to be away on a book tour on this book, Getting America Right.  So he has had to be out of town but his colleague, Phillip Truluck, and many others from the Heritage team are with us here today.  Both Heritage and AEI have a longstanding interest in political and economic developments in Asia and a strong commitment to the growth of freedom and democracy and prosperity. 

We have had for many years a special interest in developments in the Republic of China, and many of us have been longtime friends of Mayor Ma Ying-Jeou.  Mayor Ma is the mayor of one of the world’s most dynamic and successful cities.  And like many big-city mayors, he spends a good deal of his time on the road promoting investment and development and he has been to America for many years.  He has been to America on many occasions in connection with these tours.  But recently, he has also become a chairman of the Kuomintang, the KMT party.  And as a result, he speaks not only on Taipei affairs but on the extremely complex and important matters of developments in ROC politics and the very sensitive relations across the Taiwan Strait with the People’s Republic of China. 

So as a result, now his every word is hung upon, his every sentence is carefully parched for a meaning and nuance.  When he was last at AEI as a mayor several years ago, he was greeted mainly by Washington’s high-tech entrepreneurs who were seeking to do business in Taipei.  Today, I hope we have few high-tech entrepreneurs in the audience, but we have a much larger audience as well interested to hear his insights on current developments in Taiwan and in US-ROC relations. 

To introduce our guest, I’m going to call on my colleague, James Lilley, who is a senior fellow at AEI.  He has been the US representative to the ROC, ambassador to Korea and to mainland China.  He is one of America’s great China hands, and he is the author of a book by that title, which is a biography of his days over many long years in Asia and in China, which is a fine book and it is doing very well.  Jim, the podium is yours.  Thank you.

James R. Lilley:  Thank you, Chris.  I want to acknowledge our Heritage friends here.  Phil Truluck, my old pal, Harvey Feldman, John Tkacik, Peter Brookes; they are all here today with us.  Mayor Ma Ying-Jeou, I met him first in 1982 when he was an aid and interpreter for Admiral Ma Ji-juang.  And he then, later on became the interpreter for Jiang Jingguo, one of the great visionaries, I believe, of the latter part of the 20th century, Jiang Jingguo was.  Later, Fred Chen became the… when I was there, Fred Chen was the interpreter and then you took over from him, did you not? 

Okay.  Next, I came to Taiwan and he was the minister of justice, cleaning up the situation in Taiwan, perhaps too successfully.  He was then, the next time I came, he was minister without portfolio.  And the next time I came, he was the mayor.  I’m pointing this out because there is continuity in our relationship.  He is a runner.  I was a swimmer.  But now I understand that this Renaissance man has become a swimmer, too.  We share much but we come from different and clashing American educational backgrounds.  But if you cannot lick them, join them.  So, I swallowed hard and went to Harvard to teach them in 1991. 

His accomplishments are legendary.  I think they are comparable to our very best mayors, Mayor Giuliani, Mayor Bloomberg.  And he was just been in New York.  And now at 47, he is a rising star with a 70 percent approval rating.  It makes us green with envy.  Taipei is going to become a world-class metropolis under him.  Mayor Ma can do it.  And I’m reminded of the old Chinese phrase and if you do not know the phrase ask the Chinese sitting next to you.  It is [speaks in Chinese].  Thank you.

Ying-Jeou Ma:  Thank you, Dr. DeMuth and Jim.  As you know, Mr. Lilley has contributed very much to relations between Taiwan and the United States during his tenure of office as a director of AIT in Taiwan, and I want to take this opportunity to thank you again, Jim.  You have done so well in spite of your Yale background. 

Well, let me just share with you some of my thoughts about what we are doing in Taiwan, particularly the policy of my party towards cross-strait relations and our relations with the United States.  Well, I’ll try to be brief so that I could leave enough time for you to ask questions.  I think I should start with the changeover of power in the year 2000 when the DPP became the ruling party of Taiwan.  Frankly, at that time, a lot of people had high expectations of President Chen because it was the first time in Taiwan that an opposition party was able to replace a party that has been empowered for, as far as Taiwan is concerned, for over half a century.  And obviously, the split of the KMT at that time contributed to the victory of President Chen.  He got 39 percent of the vote, but he was able to have an approval rating in the opinion polls of almost 80 percent just one month into his presidency. 

What happened?  What happened in that couple of months was really worth noting.  He visited all the old guards of the KMT and he retained then-Defense Minister Tang Fei as his premier.  As you know, Tang Fei is a military man, a KMT member, and all that.  And then, the president announced his Five No’s when he was inaugurated on May 20, 2000. 

The Five No’s, just for the benefit of some of the audience means, first of all, the president says as long as the Chinese communists would not demonstrate the intention to invade Taiwan, he pledged, first of all, not to declare Taiwan’s independence.  Secondly, not to change the country’s name and its national flag.  Number three, not to put into the constitution by revision the idea of a two-state theory.  Number four, he will not conduct a referendum of unification or independence for the purpose of changing the status quo.  And number five, there is no question of abolishing the National Unification Council and unification guidelines. 

That five-point pledge actually won him a lot of praises in and out of Taiwan.  And even the people on the Chinese mainland did not have any criticism.  They primarily said, “We will listen to what he said and watch what he does.”  So that was a very good start and this is the reason why his rating in the opinion polls shot up to almost 80 percent. 

Of course, things changed in the last six years.  At one point, even now, I still wonder whether he was about to accept the ’92 Consensus reached between the representatives of Taiwan and the mainland in Hong Kong, but a month after he was inaugurated, he met with the delegation from Asia Foundation of the United States.  And he said during the meeting, because one of the delegates then was Harry Harding, he said that it is okay for him to accept the ’92 Consensus.  That matter was still in the presidential press release of the presidential office.  But barely 24 hours later, the chairwoman of the Mainland Affairs Council came out and called a press conference and denied that the president said anything different from what he said before mainly:  they still believe the ’92 Consensus did not exist. 

At the same time, the PRC deployed hundreds of missiles targeted against Taiwan.  In the year 2000, it was about 200 or so, and has gradually increased by 50 to 100 a year.  And then, in 2002, the president began to talk about one country on each side of the Taiwan Strait.  And beginning in 2003, when the presidential election was approaching, he mentioned about how he wants to have a referendum law.  In that law, they reserve the right for the president to conduct a defensive referendum if the country is in serious danger of its sovereignty being eroded. 

And then, when the presidential election took place on March 20, 2004, a referendum was held at the same time.  The two topics on the referendum ticket were first, whether we should purchase an anti-missile system for Taiwanese defense, and the second one, whether we should have a dialogue with the other side of the Taiwan Strait.  Those items were vetoed because the people who turned out for the referendum did not reach the quorum - that is, half of all the registered voters. 

And then, in 2005, the Chinese mainland - at that time, I think the missiles targeted against Taiwan reached at least 500 or 600.  Mainland China adopted the Anti-Secession Law.  I remember they had the idea back in December 2004 after the presidential election.  They said they are putting that bill into the legislative process of the People’s Congress.  At that time, I cannot, I think I’m probably the first one among Taiwanese politicians. 

I criticized that idea as unnecessary and unwise because I believe mainland China did not need a piece of law as their legal base for launching an attack against Taiwan.  Mainland China has never been noted for its rule of law.  On the other hand, it is unwise because you would unnecessarily antagonize the independence-minded people in Taiwan and create tension across Taiwan Strait.  But they would not have anyway. 

So in March 2005, that was passed.  The day when it was passed, it was 11:00 a.m.  And at 1:30 p.m., I called upon 12 city mayors and county magistrates and together, 13 of us made public an open letter to the international community registering our protest, demonstrating our displeasure for three reasons. 

First of all, we believe the Anti-Secession Law, the idea behind it has seriously mistaken the mainstream public opinion in Taiwan.  Those who support de jure independence in Taiwan constitute only a small minority.  The majority of the people support maintaining the status quo.  Even the president himself said many times that it is impossible to implement Taiwanese independence in Taiwan.  And at that time the premier of Taiwan, Frank Hsieh, who is now studying at Harvard, said Taiwan’s constitution is a One China constitution.  Well, in any case, the first reason, I think they seriously have mistaken the mainstream public opinion. 

Secondly, we believe that for all the cross-strait matters, it should be done not by unilateralism but bilateralism. 

And number three, all cross-strait matters should be conducted not by non-peaceful means but peaceful means.  In spite of our criticism of this piece of law, we proposed that the two sides should, as soon as possible, resume the interrupted talks in order to solve the differences.  The DPP reacted to the passage of the Anti-Secession Law by holding a large rally with the participation of 275,000 people, the second largest rally in Taiwan in history.  So, that is 2005.  And so, the relationship as we saw it, began with a high expectation and was eroded into stagnation and eventually ended with a confrontation. 

Obviously, you will have all noticed that on the 29th of January this year, President Chen decided that he would seriously consider abolishing the National Unification Guideline and Unification Council.  So politically, the relationship across the Taiwan Strait has been rather bumpy.  On the other hand, the economic relationship has continued to boom regardless of the political upheavals and stagnation, as well as confrontation. 

Last year, the bilateral trade across the Taiwan Strait reached US$71 billion, with Taiwan having a trade surplus of US$49.7 billion.  Actually, Taiwan’s total trade surplus last year was only about US$7 billion.  That means had Taiwan not traded with the Chinese mainland, Taiwan would have a trade deficit of US$42 billion.  That could be unthinkable for a country that so much depends on foreign trade. 

Secondly, the accumulated amount of investment of Taiwanese business on the Chinese mainland is estimated at US$100 billion, with more than 100,000 companies investing there.  But the figure could be higher.  Last month, I was visiting Europe.  I met with some officials of the European Union.  Their estimate is US$170 billion. 

On the other hand, there are around one million residents from Taiwan currently working, living, or studying on the Chinese mainland.  This is also a record high.  So if we look at the cross-strait relations from a historical perspective, this is probably the first time ever in history that the two sides have had such a close economic relationship. 

But in spite of the boom, there are clouds ahead.  As you know, ASEAN countries, 10 of them, are concluding an FTA, Free Trade Agreement, with mainland China to be effective in 2010, and it could be followed by an FTA with Japan and South Korea.  So 10 + 1 and then 10 + 2, and then 10 + 3.  What is going to be the impact of this on Taiwan if Taiwan cannot have 10 + 4?  Well, according to the economists back home in Taiwan, if that becomes a reality, Taiwan’s economic development will go down one percentage point as a result. 

And in addition to that, if Taiwanese product to the Chinese mainland, if in fact – mainland China now, last year bought 38 percent of Taiwan’s exports, so if Taiwanese products are going to meet with tariffs higher than their competitor’s products, and the logical thinking of Taiwanese companies will be to move their factories to mainland China in order to avoid the high tariffs, that could trigger off another wave of immigration from Taiwan to the mainland.  That kind of hollowing-out effect for Taiwan would be very difficult to handle. 

We were not afraid of Taiwanese labor intensive companies moving to the mainland because the vacuum they left over it was soon filled by high-tech companies.  Now, when high-tech companies had to move their manufacturing arm to the mainland, the vacuum could be filled by R&D, by design, by incubation, by marketing companies related to high-tech.  These are all happening and are not hurting Taiwan’s economy, but instead if these companies are forced to move out of Taiwan because we are left out of regional economic integration, Taiwan’s economy could be in trouble. 

Well, what really are the problems or the origin of the problem?  I think, obviously, there is a serious lack of mutual trust across the Taiwan Strait.  Each side considers the other side enemies or at least potential enemies.  And they could not find a common ground for negotiation unlike what happened in 1992 when the KMT was empowered. 

We were able to negotiate with mainland China for about 24 rounds of negotiations culminating in the Koo-Wang in 1993 in Singapore, but this has not happened because the two sides do not have any contacts through the two instrumentalities created precisely for this purpose.  That is, the Straits Exchange Foundation representing Taiwan and the Association for Relations across Taiwan Strait, ARATS.  The two instrumentalities nicknamed White Glove Institutions have not met ever since – I think more than six years as of now. 

So the second problem I see is that the lack of consensus.  Not only lack of consensus within Taiwan but also across the Taiwan Strait.  And there is also a lack of shared vision for the future.  When the mainland says, “We would be happy to talk with Taiwan as long as you recognize the One China principle.”  And the Taiwan side led by the DPP government says, “Sorry, One China could not be the precondition for our talks.  We could put One China as one item on the agenda, but not a precondition.”

So far, no progress is made in this regard.  On the other hand, the KMT government, in 1992, in a way has already taken care of this problem.  At that time, we had a Hong Kong conference.  Before that, the National Unification Council held a conference on August 1, 1992 specifically to pass a resolution on the definition of One China. 

And the definition clearly indicates that for that term it means the Republic of China for us, and it means the People’s Republic of China for the other side of the Taiwan Strait.  We understand that, but we also understand that the two sides of Taiwan Strait are now being governed by different governing authorities.  We should work together to facilitate interchanges across the Taiwan Strait and hopefully, one day, we could reach consensus on building a unified but free democratic and prosperous China. 

So when our delegation went to Hong Kong, they based the negotiation on the concept of our definition of One China but nothing was really reached in Hong Kong per se.  But after the delegation went home, they exchanged correspondences, and from the correspondence they exchanged came the consensus.  The consensus was that both sides accept the One China Principle, but the Taiwan side says, “We do have different interpretations,” and that was not challenged by the other side.  So that was what we understand as ’92 Consensus meant, and this, in my view, in the view of the KMT, could serve as the basis for discussion for negotiation in the future. 

So let me just give you a very brief idea of how the KMT would handle this situation.  First of all, if the KMT is able to come back to power in 2008, we will resume the interrupted negotiations based on the ’92 Consensus, namely one China, different interpretations.  This has been accepted by mainland China. 

Secondly, we will try to reach some kind of a peace accord that will formally terminate the state of hostilities across the Taiwan Strait.  The peace accord could have a period of 30 years, 40 years, 50 years, primarily to let the two sides try to get along with each other in peace. 

And number three, we would like to have a normalized economic relationship across the Taiwan Strait by first instituting the direct air links across Taiwan Strait by letting men and tourists to come to Taiwan, by letting the Taiwanese financial services industry to go to the Chinese mainland, and by doing a number of other things that will facilitate the economic relationship under the framework of World Trade Organization.  A lot of people have forgotten that both sides of Taiwan Strait have been admitted to the WTO.  That was in 2001 for the PRC and 2002 for Taiwan. 

But Taiwan entered the WTO in a very strange and awkward name and very long.  It is “Taiwan Penghu, Kinmen, and Matsu Separate Customs Territory.”  And the reason why it was so long is because, as you know, the WTO organization, its predecessor, the GATT (General Agreement on Tariffs and Trade) worked on customs territory instead of a national territory.  And that name has a short form and was informally adopted by the GATT authorities back in 1992 when Taiwan was admitted as an observer and the short name is Chinese Taipei.  That term was not particularly liked by our foreign ministry, but it seems to me that they could not really change it to some other more preferable terms like Taiwan.  So, that is it for economic affairs. 

And then, the fourth one is international participation of Taiwan.  That is the most difficult part of cross-strait relations because any discussion, any planning involves the very naughty issue of sovereignty.  But I think if we are able to have a peace agreement, a peace accord of a period of 30 to 50 years, during that period we should develop some kind of modus vivendi for Taiwan’s international participation.  That is vitally important for Taiwan because at least one of the most important reasons for some people in Taiwan to support de jure independence was due to the lack of meaningful international participation.  In other words, without a respectful position in the international arena, many people would not forget about their liaison with China and go along.  So this is a very important and very, very vital issue that has to be dealt with. 

And number five, I think we should attach a lot of importance to culture and educational exchange.  Usually, this is a soft area that could easily be ignored, but you should never forget that there are now 5,000 students from Taiwan studying on campuses on mainland China but their degrees are not recognized by the Taiwanese government.  President Chen announced last year that during his tenure of office, he would not recognize these degrees for Taiwanese students.  But I think this has to be changed because the rationale for President Chen’s decision was that he believed if those degrees are recognized more students will be going to the mainland and making Taiwanese universities lose more students. 

Why is that?  Now in Taiwan, because of the rapid growth of our higher education, now we have 169 universities.  And for each high school graduate, they could have more than one place in university.  When I was a high school student, our chances of getting into a university is about only 27 percent.  Now, it is over 100 percent.  So it would be very difficult for a high school to graduate in Taiwan not to get into a university.  These days, you can see that the admission rate is sometimes 87 percent, 86 percent.  This was due to the fact that many students who are already in college come back to take the test again so that to make the admission rate lower than 100.  So we do have excess capacity to allow people from the mainland to come to Taiwan. 

And also, in the Chinese mainland, only 18 percent of their graduates of high school can be admitted to a university.  There is an obvious need for more universities.  So maybe studying in Taiwan could be an interesting option for mainland Chinese high school students.  But many of you in the audience might ask, do they have the money to come to Taiwan?  The ordinary tuition in Taiwan is just about NT$250,000 per year.  And on the Chinese mainland it is about RMB10,000 per year, which is about NT$50,000 or NT$40,000. 

So the tuition is obviously higher in Taiwan.  But according to a recent statistic, mainland China spent RMB15 billion for overseas education.  Obviously, there are quite a few people on mainland China who could afford the relatively inexpensive education in Taiwan because in the United States, usually, you need about NT$1 million for one year in American universities.  But in any case, if we can take care of the national security considerations, this might be a good way to make the young people across the Taiwan Strait to get together at a rather early stage of life and I think this will also contribute to a peaceful relationship across Taiwan Strait. 

Well, what do all these mean to the United States?  What role should the United States play in the process?  I think, first of all, this is all, what I said, intended to maintain the status quo.  Taiwan should not pursue permanent separation from China, but also Taiwan should not pursue immediate unification with the mainland. 

Unification and independence are unlikely to occur in the near future, so the best policy for Taiwan to pursue is to maintain the status quo.  That would be compatible with the U.S. security role in East Asia.  If we can maintain the status quo and improve relations with the mainland according to the principles and ideas that I have just described, I think we could stabilize the situation in East Asia and the U.S. role, the security role, would be made easier and more stable.  But, on the other hand, we still need the United States to provide us with defensive weapons to make us have an adequate defense capability.  On the other hand, the U.S. will have much less opportunity to be dragged into a major war involuntarily with mainland China.  And so the security relationship between Taiwan and the United States will be enhanced but made more stable.  And I think this will be in the interest of all sides. 

So, in a nutshell, I will say that the best approach for Taiwan is to maintain good relations with the U.S., with Japan, and with the mainland at the same time.  Taiwan should be a peacemaker, not a troublemaker.  We want to become a responsible stakeholder in East Asia.  We do not want to rock the boat in regional waters.  And this is very important to leaders of Taiwan, whether it is now or in the future.  So if the KMT comes back to power in 2008, we hope we could really make the policy I just described into a reality.  Thank you very much.

Christopher DeMuth:  Mayor Ma, thank you for that very fine and impressive address.  Ladies and gentlemen, the mayor has said that he would be happy to take questions from the audience and we are going to have a question period.  I will call on people and I will try to keep a lineup of people waiting to ask questions so we do not waste too much time with the microphone going around.  I would like to ask individuals whom I call upon to wait until the roving microphone arrives, to introduce yourself and to ask your question and to remember that this is a question period, not a speech period.  We have already had the speech. 

I’m going to try to set a good example by asking the first question myself.  Mayor Ma, you have spoken with great clarity and command on issues of cross-strait relations.  I would like to ask you a question about Taiwan’s relations with the United States.  In the recent period, the Bush administration, while pursuing closer relations with the government of the People’s Republic of China on counter-terrorism and other measures, has clearly indicated its concern about the growth of Chinese military power and possible ambitions in the region and has given renewed emphasis to the importance of the American alliance with the free democracies of Asia and the President went out of his way to say very positive things about Taiwan recently. 

At the same time, at last the reports that I have read, and I do not always know if what I read in the newspapers is precisely correct, you have said that you envision a Taiwan policy that is more balanced between mainland China and the United States, and that is similar to some statements that we have heard from President Roh of South Korea.  Some people in Washington are wondering if at a time when we are beginning to make overtures for closer relations with the free nations of Asia, if maybe some of these nations may, for one reason or another, want to keep more of a distance from the United States.  I’m not sure exactly what you said or what your intentions were but obviously thinking about relations across the straits and then relations across the Pacific, you must have thoughts about the latter relationship as well.

Ying-Jeou Ma:  Well, I think you should remember that the last sentence that I have just said is that we want to maintain good relations with the U.S., Japan, and the Chinese mainland.  The security relations between Taiwan and the United States will be enhanced as a result of the policies of the KMT instead of being downgraded.  I do not think I have ever said anything that to make a balance because we suddenly needed assistance from the United States in a number of ways, not just arms supplied but also high technology. 

Now there is a prominent decrease of Taiwanese students coming to the United States to study high technology and that worries me.  One of the leading high tech professors in MIT once told me that we should really change our military conscription system to make it a voluntary army so that students from the ICT area could come to the United States right after they finish their college.  At the moment, we have to serve two years in the military and he said, “Those who have served two years have forgotten half of what they learned from college.”  I said, “Well, they still remember the other half.”  Then he said, “The other half has become outmoded.” 

Okay, so this is something that we still need the United States in many ways and most importantly, when I laid out the blueprint for our mainland policy, obviously, we do not just need the cooperation from the PRC, we also need help from the United States to make that possible because if we can make that possible, that will really reduce the U.S. security responsibility as far as Taiwan’s trade is concerned.  Taiwan’s trade now stands as one of the two flash points in Asia, the other one being the Korean peninsula.  But if we can achieve peace and prosperity, these are the two things that I have in mind, I think not only our relations – Taiwan and United States – will be enhanced as a result and our energies could be put into economic development instead of only purchasing arms.

Christopher DeMuth:  Thank you very much.  I’m now going to become a moderator once again and look around the room and see who I might know. 

Chris Nelson:  Thank you very much.  Are we on?  Mr. Mayor, I’m Chris Nelson of The Nelson Report.  Let me ask you a question about the free trade agreement situation, but I want to couch it in the broader terms that you have so eloquently discussed today.  The received wisdom back here, at least, is that that negotiation is really a three-way one, that much as we might desire to have it between the United States and Taiwan, the Chinese have use on it back in the mainland and the wisdom here is that at least for now, they do not see it as being in their interest and they would oppose it. 

Ying-Jeou Ma:  Opposed to what?

Chris Nelson:  That the mainland would oppose such an FTA.  This has a chicken-and-egg effect.  You never quite have serious negotiations.

Ying-Jeou Ma:  Between Taiwan and mainland?

Chris Nelson:  No, between U.S. and Taiwan.

Ying-Jeou Ma:  Oh, okay.

Chris Nelson:  Yes.  My question is, do you intend to seek or would you accept an invitation from the mainland to have a similar tour that some of your colleagues had last year and would you see that as an opportunity to try to persuade the authorities in Beijing that a U.S.-Taiwan FTA would be in their advantage also?

Ying-Jeou Ma:  First of all, thank you for your question.  First of all, I do not have plans to travel to the mainland in the foreseeable future.  But on the question you raised, we are going to have a cross-strait forum on this issue.  I forgot to tell you that in my second point of a blueprint for cross-strait relations when the KMT comes back to power is that the normalization of economic relations between Taiwan and mainland China hopefully will lead to eventually an establishment of a common market.  That was actually already in the five-point condition reached between our former chairman Lien Chan and party general secretary Hu Jintao, April 29th last year. 

It was beyond my imagination because at the time people were talking about either an FTA, (Free Trade Agreement) or CEPA (Closer Economic Partnership Arrangement).  Nobody talked about common market except our former premier, Xiao Wanchang, but obviously the idea was picked up by former chairman Lien Chan and quite to my surprise, the communist China side decided to accept it. 

So I think this is something that we could discuss during the forum whether Taiwan could also have an FTA with the United States, which Taiwan has been trying to get but so far with very little progress.  So suddenly, it is a good idea.

Charlie Snyder:  Charlie Snyder of the Taipei Times.  Can you hear this?  In your comments about planning to resume the Hong Kong talks if you are elected in 2008, does this reflect…?

Ying-Jeou Ma:  I’m elected in 2008 if the KMT comes back to power.

Charlie Snyder:  If the KMT… pardon me, if the KMT comes back to power in 2008.  Does this reflect your feeling that direct talks between Beijing and the Chen Shui-bian government are impossible over the next two years despite the fact that the United States has repeatedly oppressed Beijing to hold such talks?  And if so, do you have any direct evidence about this?  Did you get this directly from the Chinese or what?

Ying-Jeou Ma:  Okay, very good question.  I do not have any direct crew or information or whatever tip from the mainland Chinese but there has been, I think the information in the public domain, is that unless the DPP government accepts the ’92 Consensus, otherwise, Beijing will not talk to Taipei. 

But on the part of the KMT, we also called upon Beijing to talk to the DPP government.  We are the largest opposition party.  We do not have the power to really implement whatever we talk.  That is why every time when our people went to the Chinese mainland and negotiate something from them for Taiwan, we always brought this back and asked the government, “Hey, you guys continue to do the rest.  We do not have the power to execute, to implement whatever we have accomplished.” 

Actually, this has become a very important formula for cooperation between our party and the DPP, the Democratic Progressive Party.  One prominent example is the charter flights during Chinese New Year.  The last one took place in January and February this year.  That was the best charter flight ever and it was done with the blessing of Premier Frank Hsieh.  I met him yesterday at Harvard when I delivered a speech. 

I actually called upon him and praised his accomplishment in this regard.  The trip, actually the flight from Shanghai to Taipei for instance, normally would need six to seven hours and the previous charter flights sometimes takes five hours and this time, it took only three hours.  Although it was still double the time of a direct flight because the flight has to touch the airspace of Hong Kong before they can come to Taiwan just to show this is an indirect flight.  Okay, but still, it is much better than any previous charter flights and everybody was happy. 

So this was accomplished by what we call a Macau model.  What does the Macau model mean?  The Macau model means the industry people, the airlines met, worked out a program together with the participation of civil aviation officials attending the conference as advisers.  That formula worked, you see what I mean?  So it does not have to be started with the discussion on sovereignty or One China.  It does not have to.  The charter flights become a reality and a welcome reality by the people across the Taiwan Strait without having to solve the One China problem. 

Let me give you an example.  When we were in power back in 1990, the first agreement between mainland China and Taiwan was reached on September 20, 1990, when the representatives of the Red Cross Society met in Kinmen, talking about the repatriation of criminals or criminal suspects or illegal immigrants from Taiwan or from mainland China.

 The two sides worked out an agreement, the two Red Cross societies, but in the last moment, they encountered an intractable difficulty.  What was that?  The dating of the agreement.  The mainland side, both sides used September 20th, but the mainland side used the western dating method, the year 1990.  The Taiwan side is the 79th year of the Republic of China.  Nobody wanted to make any concession so they decided after an hour or so to leave that blank and when they go home, they just filled it in themselves. 

That is all.  That is the best way to really implement the principle of “agree to disagree.”  I do think as long as the two sides have a will to accomplish something, they could.  They have a variety of ways to conquer the difficulties that have been encountered.  Thank you.

Kin-ming Liu:  Thank you.  Kin-ming Liu, columnist from Hong Kong.  Mr. Ma, in your speech you mentioned correctly that mainland China has been adding missiles, pointing at Taiwan almost everyday and you also mentioned the KMT strives for maintaining the status quo.  I wonder how the KMT can maintain the status quo by vetoing the arms package from the United States.  And also I’m from Hong Kong so I’m curious to know your views on the one-country, two-system model being played out in Hong Kong, whether you can accept that as a basis for the future of Taiwan.  Thank you.

Ying-Jeou Ma:  Well, first of all, I think the Taiwanese people from the very beginning are opposed to one country, two systems and the one-country, two-system formula has very few followers in Taiwan.  Even if it became very successful in Hong Kong, we think that it would not apply to Taiwan because Hong Kong is a British colony and Taiwan has already become a democracy.  We elect our own president, our own national parliament and we run our own businesses from the very beginning. 

Secondly, about the missiles, yes, the missiles obviously present a threat to Taiwan but I think all the intelligences of the US and other countries, including our own, understand that they are deployed.  But whether they have the intention to invade Taiwan is probably not necessarily the same thing. 

So I think, the question you asked, why the subject on the referendum on whether to purchase anti-missile systems was vetoed.  It is not vetoed by the KMT or by Pan-Blue.  It is vetoed by the Taiwanese people.  It was done on March 20th, 2004.  I think this is the reason why when the anti-missile system was vetoed, it could not be brought up again in three years.  This is a compulsory requirement according to Article 34 of the referendum law. 

So the Executive Yuan, the national parliament, could not have brought that up again.  But the issue, since now it has been more than two years, ever since March 20th, 2004, and by March 20th next year, the period will expire so at the moment, even the Defense Ministry will not worry that very much because it is less than a year before the deadline will be met. 

John Tkacik:  Mayor Ma, thank you.  I have got two questions.  Actually, one to follow up on…

Christopher DeMuth:  Can you introduce yourself, please?

John Tkacik:  I’m sorry.  I’m John Tkacik of the Heritage Foundation.  I have two questions, one to follow up on Kin-ming’s question and one sort of broader question.  You began your remarks by reminding us that the 2004 referendum on missile defense and the cross-strait dialogue was defeated and now you are telling us that the KMT cannot support missile defense because the referendum was defeated.  How then… what is the legislative reasoning behind pursuing a cross-strait dialogue?  Because that was defeated, too. 

My broader question is to follow up on Chris’s first question—you mentioned that you foresee under a Kuomintang-led government an enhanced security relationship with the United States and with Japan and with China.  I think in the broad scheme of things, this looks sort of like the Kuomintang trying to maintain an equidistant relationship from the United States and from Japan and China or equally close to the United States and Japan and China. 

So I’m just wondering if you could explain to us a little more what the KMT’s policy or philosophy is on Taiwan’s self-defense.  Does it really need a self-defense or is there a certain level of spending that Taiwan needs to maintain to preserve its autonomy? 

Ying-Jeou Ma:  Okay, first of all about the referendum, you are right that two items were both vetoed by the referendum, but for the anti-missile system, it requires the legislative process on the budget and on the law.  So the Executive Yuan is bound by the law not to bring it up again for three years after that.  But for the cross-strait negotiations for the KMT, we are a political party.  We are not in power so we are not restricted by the result of the referendum.  But for the government, I think it is up to the government to decide. 

Interesting enough, the government says the anti-missile system vetoed by the referendum was not the PAC-III we are talking about because PAC-III has already been decided.  But that issue was not even known to the people when the referendum took place on March 20th, 2004, because the budget proposal did not reach the Executive Yuan until June 2nd, 2004, almost three months after the referendum.  Okay. 

Secondly, your question about the equidistant, I never said anything about equidistant because the distance can never be equal.  Every country has a different consideration and I think we do need self-defense. That is why I said I support reasonable defense, reasonable purchase of arms from the United States or elsewhere but we are opposed to unreasonable ones.  Then you are asking what do we mean by unreasonable.  When the budget proposal was first made to the Executive Yuan on June 2nd, 2004, the price tag was $18 billion.  Everybody was surprised by the cost so out of about 17 opinion polls conducted in that period of about six months, except for the five opinion polls conducted by the government, the other 12 all indicate that people are opposed to it. 

At the time you see Taiwan’s economy was not in very good shape, so that is why people wondered whether we should spend so much money on arms.  They are also afraid that items like the submarine, we did not even know what country is going to manufacture that and what specifications it has, whatever.  So that is why people had a lot of doubts and the Defense Ministry was quick to respond to that. 

So in a year’s time, they have cut the cost from $18 billion to about $10.2 billion, and they also changed some of the format of the budget proposal from special budget to annual budget.  That had effectively reduced the resistance, within the Legislative Yuan, and that is the reason why I said in January of this year that our party might come up with our policy statement on arms purchase.  But it was unexpected that President Chen decided to scrap the National Unification Council, which make the consensus building quite difficult within the Executive Yuan exactly because of the timing. 

The KMT caucus and the Legislative Yuan believe that if they pass it now, people would get a wrong message.  They thought that we support the president to scrap the National Unification Council.  That is why they say, “Why do we not wait for a while?”  But obviously the policy on the part of the KMT is quite clear:  We support reasonable purchase of arms from the United States.  We need adequate defense capability.  We want to demonstrate our determination to defend ourselves.  Thank you.

Christopher DeMuth:  Many people have been waiting patiently so you know what we are doing, we are going to go across, up here…

Dan Blumenthal:  Chairman Ma, thank you very much.  My name is Dan Blumenthal from the American Enterprise Institute and I want to press a little bit on Chris DeMuth’s very good question about what we mean by having a good relationship with China, Japan, and the United States.  It is not an abstract question in the sense that the United States is very concerned, so much so that it is now explicitly talking about hedging in its national security strategy, is moving more forces into the region, and is working with Japan very closely.  Japan is spending up to billions of dollars on its own missile defense, so it is certainly is taking missile deployments very seriously. 

I wonder about the following:  Is Taiwan under the Kuomintang prepared to help the United States in its hedging strategy with China, particularly when it comes to another emerging flashpoint which is the Sino-Japanese skirmishes in the sea.  I’m wondering if Taiwan is prepared to help the United States and Japan, I would say, in its hedging strategy with respect to Chinese military power and if so, how?

Ying-Jeou Ma:  First of all, I’m not a military strategist.  I do not know very much about the details of military cooperation between the United States and Taiwan, but as a matter of general policy, we will cooperate with the United States in our defense planning.  Not just in the sense of strengthening our own defense capability but also in our effort to keep East Asia, keep our region safe and stable. 

Marcin Zaborowski:  Hello. It is Marcin Zaborowski, European Union, Institute for Security Studies.  I was just wondering how did you perceive your intention to lift this arms embargo on exports to China.  I mean as you know, part of the policy was commercially driven but part of that was also political, meaning the policy of engagement China.

Ying-Jeou Ma:  It is a very good question.  Actually I encountered that question when I visited the European Union last month and I also talked about this issue when I visited RUIS, the Royal United Institute Service in Great Britain.  As you know, the European Union imposed the arms embargo right after the Tiananmen Square incident and they talked about lifting the embargo at the end of 2004.  But because of the passage of the Anti-Secession Law, that did not become a reality. 

When I talked to European Union officials, and I specifically mentioned that they should take into account the peace process across the Taiwanese Strait as a reference for their decision to either lift or continue the arms embargo.  The arms embargo was imposed because of the human rights violations on the Chinese mainland.  Of course, if that situation continues, there is no reason for Brussels to do that.  But on the other hand, it also has a lot to do with cross-strait peace because the Anti-Secession Law was pinpointed as a reason for the continuance of the embargo.  So I just called upon them to take that into consideration.  Thank you. 

Questioner:  Thank you.  I study economics at the University of Maryland and actually I’m from mainland China, but I have a lot of friends from Taiwan and some of them even married people from mainland China so I got different experiences from them.  One concern about the relationship between Taiwan and mainland China is that as time passes by, I expect that some young generations would have less and less relationship with people in the mainland, like the relatives become remote and they know less about it and also the education in Taiwan has been changed over time. 

So what is the effort on maintaining the relationship, especially for the young generations?  And also what do you think is the influence of the two-year service in military on these young people?

Ying-Jeou Ma:  Well, as I said, the KMT had the policy of voluntary army two years ago when Lien Chan and Soong Chu-yu ran for president.  So had they succeeded, we would have been in the process of changing our military conscription system.  So in 2008, we will continue to advocate the voluntary armed forces.  The most important part is that we have to raise the salary of not just our officers, the non-commissioned officers, and that is very important part of the armed forces.  Their current salary is about NT$20,000 to NT$30,000 per month. 

If we could raise that or double that, we could attract able people to become career soldiers and then leave others to pursue their career.  And only by doing that we could train people to stay in the armed forces for at least five years.  When we acquire so many state-of-the-art arms from the United States or elsewhere, we need high-quality people to manage them.  Otherwise, we could have a lot of problems.  I’m sure you have heard of some of the problems when we had a military drill.  So that is very important for the KMT and we will continue to do that. 

The other thing you worry about, if I understand correctly, what you were saying was that you worry that the relationship between young people of Taiwan and the mainland are actually really departing each other far and far away, is that what you are saying?  Oh, I would not worry too much about that, to be frank.  Why?  Because as I said, there are one million Taiwanese now living in the Chinese mainland.  It has never happened in history. 

On the other hand, there are more and more people from mainland China coming into Taiwan and even the DPP government is considering to let more mainland tourists come to Taiwan.  I think more exchanges, not just among young people, among all people, will certainly contribute to more understanding and reduce the element of tension.  That is why I propose that we should think about letting mainland high school graduates to come to Taiwan to study.  If 10 years from now, think about it, 10 years from now, picture a situation where the head of the mainland China’s Taiwan Affairs, Department of the State Council, the director is somebody who is a graduate of National Taiwan University. 

On the other hand, the chairman of the Mainland Affairs Council, is a graduate of Beijing Daxue, Beijing University, I think would not be a bad idea at all.  Is that right?  Do you think so?  By having student exchange at early stage of those students’ life, I think it is a very important way to seed friendship, to seed goodwill instead of hatred.

Christopher DeMuth:  We have nine minutes left and more than nine questions here.  There is going to be a premium on brevity of questions therefore. 

Questioner 2:  I’m Taiwanese, was born and grew up in Taiwan, came here for graduate school in education.  Now I work as elementary school teacher in a public school in the Washington D.C. metro area.  After several years of experience of being a teacher, I have a better understanding of American education.  As we all know that since President Bush implemented the No Child Left Behind Act to focus on education in America, the quality of education is improving, and I’m looking forward to seeing that in the near future, when the Kuomintang comes back to power, that the Kuomintang will also focus on education as a way to build a foundation for future education and prosperity in Taiwan.  What is the Kuomintang’s perspective in education for Taiwan’s future?  Thank you.

Ying-Jeou Ma:  Okay, although this question has nothing to do with cross-strait relations, but I would still like to answer that.  Suddenly we will have a different education policy.  As you can see from the campaign promise of the Kuomintang, even myself has different ideas about how education should be done in Taiwan.  Certainly, it would be different from the current ones and we should let our students have more knowledge, not just about Taiwan and about the rest of the world.  Thank you.

Questioner 3:  …opening up right now in Taiwan and also in this country.  So are you afraid of being destroyed or cut into pieces politically by Chen Shui-bian or are you prepared for the worst scenario to happen during the 2008 elections?  So because there was a hope of peace, stability, and the prosperity if the Pan-Blue comes to power in the year 2008, that is why some people are worried about you.  Thank you.

Ying-Jeou Ma:  Thank you very much for your concern about my personal safety.  I do not think the president will cut me into pieces.  No, we do not have that kind of hatred between us.  And so you know, although I disagree with him most of the time, I still respect him as the president of the Republic of China.  Every time I mention his name, I will say President Chen. And when the State Department posted a press statement on the State Department website asking him to publicly correct the record on his decision on the National Unification Council, they did not mention the name of the president.  They did not use the title of the president. 

I was the first person in Taiwan to say that this was impolite, and I think after that, the State Department has corrected itself.  I think it is very important that in a civilized and democratic society, I could disagree with whatever you said but I still respect you as a person, let alone a president.  Thank you.

Gregory Ho:  Gregory Ho from Radio Free Asia, also from Hong Kong.  Since you mentioned Hong Kong just now, you said one country, two systems is mainly opposed as a model for the future Taiwan-China relations, but you also mentioned one country, two systems being very successful in Hong Kong.  So is it contradictory to you purely saying that this and that model, one country, two systems would not fit Taiwan and China and do you remember that you have refused to enter Hong Kong after you openly opposed the Anti-Secession Law two years ago?  So is the one country, two systems really successful in Hong Kong?  This is question one. 

And the second question, you said you are looking for a democratic united China.  So are you going to set up your KMT party inside China?  Is it feasible and do you require that?  It is also reported by RFA some Pan-Blue members, they try to set up a KMT party inside China but they are all arrested so are you going to give them a hand to help them release and help them organize a KMT party inside China?  Thank you.

Ying-Jeou Ma:  Okay.  Let me first respond to your first question and probably correct what you have just mentioned.  I never said that the one country, two-system formula is very successful in Hong Kong.  What I said was from the very beginning, the Taiwanese people are opposed to the one country, two-system formula.  It was first proposed by Beijing in the early 1980s and it was actually designed for Taiwan, not for Hong Kong, but Hong Kong came out to use it. 

And what I said a while ago was that even if it is very successful in Hong Kong, still Taiwan does not want it because as I said, we elect our own president, we elect our own members of Parliament, we run our own business. We do not want one country, two systems.  If the system is so great, why not one country, one system?

Gregory Ho:  What about organizing the KMT party inside China?

Ying-Jeou Ma:  Oh.  Well, whether KMT should set up shops in mainland China?  Well, it is a good idea but it is not very feasible until and unless the mainland decided to allow the establishment of political parties.  Otherwise, it will be very difficult, even dangerous, to set up an organization.  Okay.

Christopher DeMuth:  I’m afraid that some of the people I said I was going to recognize – I do not think we are going to make it.  I think we are going to have time for two more questions to people I called on.  This gentleman here and then this one.

Jay Lu:  Chairman Ma, you have stated that Taiwan should focus on… oh, sorry.  My name is Jay Lu.  I’m with the International Assessment and Strategy Center.  You have stated that Taiwan should focus on maintaining the status quo and the statement sounds a little bit disingenuous to me because for three reasons:  one, the other gentleman already mentioned, the KMT is blocking the arms procurement bill as you know.  The procedure committee has voted it down almost 50 times now and whatever their excuse, it is weakening Taiwan’s security.

And second, Taiwan’s economy is being hollowed out as you pointed out because of the mass exodus of capital, technology and manpower to China, and yet the KMT, the Pan-Blue advocates more economic integration or the implementation of the three links.  That seems to me would undercut the status quo. 

Third, if you want to maintain the status quo, what you need most is unity and cooperation between the opposition parties and the ruling DPP government.  That is not happening and I think the Pan-Blue is in a sense, almost undermining the DPP government and sort of making it a very ineffective government. 

So my question, kind of a direct question for you is this:  As chairman of the KMT, do you believe that you owe your allegiance to Taiwan or to China or perhaps both countries?

Ying-Jeou Ma:  Thank you for your question.  First of all, I think you said maintaining the status quo does not really mean very much.  I think it does mean a lot to Taiwan because that means that we will not pursue Taiwan independence, neither do we pursue unification in the foreseeable future.  And maintaining the status quo of the Republic of China is a very important step to maintain peace and prosperity across the Taiwan Strait. 

Secondly, you are talking about the KMT blocking the arms purchase bill.  Let me just remind you that the arms sale package was approved by President George Bush in April 2001.  Now it is March 2006, so exactly five years has passed, but out of these five years, three years and three months was delayed by the DPP government because they did not send the bill to the Executive Yuan until June 2, 2004, and that was barely nine days before the recess. 

So there was no possibility for discussion, and when the Executive Yuan came back from the recess in September, it was only two months before the Executive Yuan elections.  Most of the members were preoccupied with their campaign.  So it was impossible to have any serious discussion in the year 2004.  So last year should be considered as the first year for blocking the process and actually, the 55 times of blocking effectively cut the price tag from $18 billion to $10.2 billion, saving the people of Taiwan a lot of money.  I think the opposition party does not have any weapons.  The only weapon they have is the legislative process to help people save more money. 

Another thing about, you said that the Pan-Blue is undermining the DPP government – we are an opposition party.  The opposition party does not always support the ruling party.  That is the basic rule of democracy.  Thank you.

Christopher DeMuth:  We have time for your one last question.

Ying-Jeou Ma:  Oh, by the way, I pledge my allegiance to the Republic of China, which was established, as you know, by Dr. Sun Yat-sen in 1912.  Thank you.

Christopher DeMuth:  Time for one last question.

Simon:  My name is Simon.  We met in your office a couple of months ago in Taipei.  I just wanted to ask you about the previous period when the KMT occupied the presidency in Taiwan.  That was not a particularly happy relationship between Taiwan and the mainland. 

Ying-Jeou Ma:  What was the period you are talking about?

Simon:  Well, the period before the DPP occupied the presidency.

Ying-Jeou Ma:  Before the year 2000.

Simon:  Yes.  And I just wondered whether as far as you are concerned, was this a matter of the personality of the KMT president or was it a matter of conviction?

Ying-Jeou Ma:  Well, it could be both.  It could be both.  Actually, ever since we decided to let the president of Taiwan to have family reunions with their relatives in the Chinese mainland on November 2nd, 1987, I think relations were ups and downs, but the 1993 conference in Singapore was really the peak where based on the ’92 Consensus, that both sides reached full agreement.  If we were able, if we had been able to continue that, I would have thought that we are going to have pretty good relations, although the relationship would foster or strengthen the status quo. 

Let me just tell you that even mainland China today are not prepared to have unification of any sort.  They would rather prevent independence than accelerate unification.  That is why if we maintain the status quo under the concept of the Republic of China, I think it is not unacceptable to the mainland China side.  Thank you.

Christopher DeMuth:  Ladies and gentlemen, we are now adjourned, but first, may I ask that you join me in showing our appreciation to Mayor Ma himself for his superb presentation.

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