From silk to semiconductors

Lessons from the Kingdom of Ryukyu for free trade in East Asia

Andrew Leonard
November 3, 2006 5:48AM (UTC)

The Ryukyu Kingdom, ranging across an archipelago of coral reefs between Japan and Taiwan, was once a critical trade entrepot in East Asia. While Taiwan, an island of greater size and with access to far more resources, muddled along, Ryukyu civilization grew to impressive heights, all the while balancing carefully between the empires of China and Japan over a period of centuries. Today the Ryukyus are best known in the U.S. as the site of the WWII battle for Okinawa, but hundreds of years ago, when trade in Chinese silk and Japanese silver was the local currency, instead of semiconductors and iPods, Ryukyu was a major player.

So goes the story told in "The Ryukyus and Taiwan in the East Asian Seas: A Longue Durie Perspective," an article in the new issue of Japan Focus by Taiwanese historian Man-houng Lin. (Thanks to Michael Turton for the alert)


Any historical work that references, even in the most glancing way, Koxinga, the pirate general of Taiwan and last defender of the Ming Dynasty, should be mandatory reading (Lin devotes to one sentence to Koxinga's father!). But the conclusion of Lin's piece is especially fruitful in light of current geopolitical maneuvering.

...The Republic of China today, like the historical Ryukyu kingdom, is a small nation between great powers in East Asia. The Ryukyu kingdom imported Confucianism, the Chinese classical language, and Chinese folk religion from China, and it imported Buddhism from Japan. In the Ryukyu kingdom, Chinese officials held positions of influence and power, while Japanese monks were deemed national mentors. As China-Japan rivalry intensified in the seventeenth and eighteenth centuries, the Chinese calendar was used when Chinese envoys came, and the Japanese calendar was applied when Japanese envoys visited. Ryukyuans conducted tributary missions to both the Chinese and Japanese capitals.

Adroit diplomatic and cultural strategy as bases for sustaining the economy, and achieving a sense of dignity, are lessons of the Ryukyu kingdom legacy for Taiwan.

One of the big differences between the balance of power in the 13th century and now, of course, is that the United States is part of the equation, even if from across the Pacific ocean. With military bases in Okinawa and a close alliance with Taiwan, the U.S. is very much in the mix. With that in mind, let us now turn to an op-ed piece appearing on by Doug Bandow, arguing that the time has come for the U.S. to negotiate a free trade agreement with Taiwan. (Thanks to Daniel Drezner for the link.)

(If you're wondering why the name Doug Bandow is familiar, you may recall he resigned in disgrace from the Cato Institute last December after BusinessWeek revealed he had been receiving payments from Jack Abramoff for writing op-ed pieces favorable to Abramoff's clients. But How the World Works is feeling generous today, so we'll examine his thesis without even speculating who exactly paid him to push it. We're even going to restrain ourselves from dwelling too long on the fact that any FTA agreement between the U.S. and Taiwan would doubtless forbid Taiwan from such activities as manufacturing generic copies of Tamiflu to protect its population from an outbreak of bird flu. It's not as if every single mention of bilateral free trade agreements must by definition focus on the role Big Pharma plays in their negotiation.)

Let's look at one paragraph from Bandow's op-ed:

The island, with widespread economic penetration throughout Asia, would provide a base for U.S. enterprises to expand their reach. More important, Taiwan's proximity to China and increasing economic integration with the mainland would indirectly boost American ties with the PRC. Since Beijing views Taiwan as part of one China, U.S. firms operating in Taiwan and investing in Taiwanese concerns might find improved access to the larger China market.

This is an odd set of assertions, not least because Taiwan has been a base for U.S. enterprises to expand their reach in Asia for decades. The so-called Golden Triangle of Taiwan, the U.S. and China, in which the U.S. contributes the R&D, China contributes the labor, and Taiwan contributes the management has long been established. But even more strange is Bandow's failure to mention here that China is vociferously against anyone signing free trade agreements with Taiwan, especially the United States. This is not to say that the U.S. is under any obligation to respect China's wishes, given the longstanding special relationship between Taiwan and the U.S., but it does cast some doubt on the theory that U.S. companies will get improved access to the Chinese market as a result. You could equally well expect that directly contravening China's expressed objections would lead to precisely the opposite eventuality.

Bandow cites a study of the pros and cons of a Taiwan-USA FTA published by the generally pro-trade Institute for International Economics as suggesting "that such an arrangement would further integrate Taiwan into East Asia." But if you read the 45-page study, you find that the authors argue that the economic benefits of a FTA would be marginal to both countries, and could ultimately hurt Taiwan, by encouraging the allocation of resources away from Taiwan's current comparative advantage -- high tech manufacturing. And as for integrating with East Asia, that depends largely on Chinese permission, not the U.S.


From the IIE study:

Relations between the United States, China, Taiwan, and the rest of Asia are in a dynamic phase, largely due to China's rapid economic development.... But in any case, Taiwan would not be helped politically by any FTA that diverts the island from realizing advantages in Asian trade, or that distracts it from addressing weak links in its position between the United States and China, especially while U.S. businesses increasingly deal directly with the mainland.... even as the United States strongly asserts its right to pursue an FAA with Taiwan, all parties involved should understand this is a second-best option. The welfare gains for Taiwan, China, and the region from normalized Taiwan-China economic relations and from including Taiwan in regional trade integration would be far greater today and sustainable into the future than an FTA between the United States and Taiwan.

Man-houng Lin suggests that Taiwan needs to pay close attention to the adroit diplomacy of the Ryukyan kings if it wants to thrive and survive in these latter days of existing and emerging superpowers. But the final lesson from the history of Ryukyu is that long-term independence for a small island kingdom nestled between China and Japan was not to be. The geopolitical implications of a free trade agreement between the United States and Taiwan may illustrate that lesson even further. For the U.S. to draw even more tightly together with Taiwan will rile China. But for Taiwan to move more closely to China will risk inevitable reunification, if not by force, then by trade.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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