“Cold Peace” and the Nash-equilibrium in Cross-Strait Relations (Part 2)

“Cold Peace” and the Nash-equilibrium in Cross-Strait Relations (Part 2)

“Cold Peace” and the Nash-equilibrium in Cross-Strait Relations (Part 2)

Despite Beijing’s vow of “three nos” (i.e., no international space, no further economic concession, no official channel of communication) to Tsai Ing-wen’s government, it has implemented a united front strategy: namely, to divide and rule Taiwanese society. For example, eight KMT county magistrates who accept the “1992 Consensus” were warmly received by Beijing, who rolled out the red carpet  and made a swift promise to send Chinese tourists to their jurisdictions and Chinese delegations to purchase their agricultural products. The State Council’s Taiwan Affairs Office (TAO) has laid out its subsidy plan to invite young Taiwanese to start up their own businesses in mainland China. The Vice Mayor of Shanghai visited Taipei city, announcing Shanghai’s support for Taipei’s hosting the 2017 Summer Universiade.

Official channels of communications between TAO and the Mainland Affairs Council (MAC), and between the Straits Exchange Foundation (SEF) and the Association for Relations Across the Taiwan Straits (ARATS) have been severed. Taiwan was also forced to participate in the World Health Assembly (WHA, the governing body of the World Health Organization, or WHO) under the written notice of the “One-China” principle” in the Secretary General’s invitation letter; Taiwan was likewise denied participation in the International Civil Aviation Organization (ICAO), and the title for Taiwan in the World Economic Forum (WEF) was changed from “Chinese Taipei” to “Taiwan, China.” The alleged Taiwanese criminals, accused of telecom fraud in Kenya, Cambodia, Malaysia, and most recently Vietnam, were deported (or abducted) to Beijing, rather than to Taiwan. All of the above incidents are designed by Beijing to show its muscle and to “punish” the newly elected DPP government for its reluctance to accept the terms of the so-called “1992 Consensus.”

The above punitive actions against Tsai’s government may be a face-saving measure for the TAO’s failure to win the hearts and minds of the Taiwanese people in the past eight years. These actions also show the temporary nature of the “peace bonus,” and the ceiling of benefits for accepting the “1992 Consensus.” Viewed most negatively in the minds of Taiwanese people is China’s decision to abduct Taiwanese nationals to Beijing for the sake of expressing its judicial power over Taiwan under the “One-China” policy.”

The question is this: were all of these punitive measures, taken by Beijing anticipated by Tsai’s government? I would argue that, except for the case of repatriation of the alleged Taiwanese criminals, they have all been anticipated by Tsai’s government. That is why Tsai’s government has reiterated its intention and resolution to maintain the status quo across the Taiwan Strait. While not verbally accepting the term “1992 Consensus,” Tsai’s government has honored and implemented all of the KMT’s cross-Strait policies and agreements, which were based on the “1992 Consensus” as agreed to by the Kuomintang Party (KMT) and the Chinese Communist Party (CCP).

For example, President Tsai has reined in the independence-leaning rhetoric and actions of DPP officials and Legislative Yuan (LY) members. In her own announcements, President Tsai always refers to China as “mainland China” (except in the most recent letter addressed to DPP members on September 28). She also instructs her government to use the term of “mainland China” in all official letters and documents. She has appointed non-DPP members as Minister of Foreign Affairs, Chairwoman of Mainland Affairs Council, President of Strait Exchange Foundation, and Leader’s Representative to the APEC Summit.

Foreign Minister David Lee (李大維) announced that the DPP government would not officially promote Taiwan’s membership in the UN. Tsai’s government temporarily suspended the invitation of the Dalai Lama to visit Taiwan. It also decided to terminate the R&D program for the mid-range missile Yun-Feng (雲風). Finally, while not publicly endorsing the PRC’s legal position in South China Sea, the Tsai government’s reactions to the verdict of International Tribunal are almost identical to those of the PRC.

All the above reactions of Tsai’s government are meant to send olive branches to Beijing in the hope that the PRC would reciprocate with good will. Unfortunately, Beijing’s policy toward Taiwan has proven to be inflexible. From Beijing’s perspective, the “1992 Consensus” is the political base that has allowed the benign evolution of cross-Strait relations to the current status quo. It is also the political base that facilitated the conclusion of 23 cross-Strait agreements since 2008.

According to Beijing, if Tsai means to maintain the status quo and inherit all the benefits of cross-Strait cooperation, she must accept the “1992 consensus.” In the PRC’s view, Tsai’s unwillingness to accept the term “1992 Consensus” (which affirms that both Taiwan and the PRC are “China,” but each side may interpret that differently) disrupts the status quo across the Taiwan Strait. What Beijing has done since May 2016 is simply to show what new cross-Strait relations would look like.

Moreover, there is also a long-standing strategic mistrust between the Chinese authorities and the DPP administration. On one hand, because Tsai is regarded by Beijing as the originator of state-to-state theory between China and Taiwan, her words and deeds need to be tested under a series of pressures. Therefore, even if Tsai verbally accepted the “1992 Consensus,” Beijing would still question her sincerity and demand further actions to prove her allegiance to the “One-China” principle.

On the other hand, Tsai was elected President with a specific pledge to maintain the “status quo” without explicitly accepting the term “1992 Consensus.” The KMT’s candidate Eric Chu did pledge to base cross-Strait relations on the “1992 Consensus” and to promote cross-Strait cooperation, but he was defeated. That is why President Tsai in her interview with the Wall Street Journal urged Beijing to take a second look at her democratic mandate. President Tsai said that she would not bow to the PRC’s pressure, and indeed no democratically elected leader in Taiwan would go against the will of Taiwanese people.

Contrary to popular misconception, the Chinese leadership has not failed to understand how democracy works in Taiwan. The Chinese leadership has a detailed and rational calculation of pros and cons for each option it prepares to launch. What Beijing has implemented is simply its dominant strategy; any deviation from this dominant strategy would entail a net loss for China. In game theory jargon, the current status of cross-Strait relations is a suboptimal Nash equilibrium, given that both China and Taiwan have adopted their dominant strategies.

But this equilibrium is unstable, because Tsai’s government in Taiwan cannot endure bullying from China without retaliating if domestic pressure demands it. If Tsai’s government deviates from her dominant strategy by mistake, tensions across the Taiwan Strait would escalate. It behooves the United States to intervene or the only alternative left may be to let tensions escalate into open conflict.

The main point: Given the unstable Nash equilibrium embedded in the “Cold Peace” across the Taiwan Strait, it is in the US interest to see Tsai’s moderate policy toward China continue.