Sunday, August 09, 2009

Book Review: Trading with the enemy: the paradox of economic integration

It would be difficult to overstate the importance and timeliness of Scott Kastner’s Political Conflict and Economic Interdependence Across the Taiwan Strait and Beyond, which seeks to explain why, despite hostile political relations between Taipei and Beijing, economic ties have not only persisted, but accelerated.

Kastner, an assistant professor in the department of government and politics at the University of Maryland, goes far beyond the general, albeit contested, view that increased trade between two states reduces the likelihood of armed conflict. Rather, he argues that the more important question is when conflict affects trade. His main hypothesis is that national leaderships that are more accountable to “internationalist economic interests” are less likely to act in ways that threaten economic stability.

To make his case, Kastner looks at three protracted hostile political relationships, or dyads — Taiwan-China, India-Pakistan and South-North Korea — with emphasis on the Taiwan Strait. What follows is a fascinating exploration of the cross-strait paradox, whereby despite serious political conflict, trade between the two sides from the 1980s on has accelerated.

While prior to the mid-1980s economic interaction between Taiwan and China was extremely limited, democratization in Taiwan, added to a revaluation of the New Taiwan dollar that made domestic manufacturing less competitive, brought gradual changes in Taipei’s policies on investment in China. Democratization meant that the authorities became more accountable to the people and could no longer ignore business associations, or the “internationalist economic interests,” which gained clout as the size of the businesses investing in China grew. As liberalization intensified, the cost to the national leadership of ignoring those interests, or of preventing their expansion, increased.

Full review is available in the Taipei Times here.


Anonymous said...

looks interesting. i also think it is worthwhile to look at how the CCP has managed to stay in power contrary to the theory that a free market brings the need for a more liberal regime. China's Trapped Transition (Pei) and Wealth Into Power (Dickson) are interesting in that regard.

MikeinTaipei said...

Minxin Pei's book is actually next on my reading list. Another good book on the subject - which I reviewed for the Times last year - is David Shambaugh's China's Communist Party.

Dixteel said...

Hmm...I am wondering if this phenomenon happens in the past human history...of trade between enemies, that can serve as a case study for Taiwan?

Maybe there are similar situation as Taiwan and China, and the eventual outcome etc would be a good lesson for Taiwan...