Tipping point in cross-strait talks approaches

The argument boils down to embracing government stimulus to alleviate unemployment and propel the economy, versus the argument that the market should be left alone because it is able to eventually heal economic downswings on its own.

As it turns out, there was no obvious solution for the sovereign debt crisis. Pumping in easy money was important to make sure the economy didn’t collapse, but Schauble is determined to implement the advice of Kenneth Rogoff, the American economist whose idea of the “90 per cent” threshold – indicating a tipping point at which a country’s growth becomes slowed down by debt – has been key behind Germany’s insistence on austerity in exchange for aid.

Of course, there are human costs to austerity in the form of jobs lost, health coverage denied, social services cut and education downgraded for the young. What’s more, lives were probably lost as a result of austerity – that’s a claim that’s been made for the most extreme cases of reduced availability and affordability of medical coverage and suicide from despair.

The “tipping-point” is admitted by Rogoff to not be an absolute value but rather a definite threshold that is difficult to pin down across different situations, Der Spiegel says.

The lack of a final verdict on economic policy is a verdict in itself on whether Keynes or Hayek is correct – or as Der Spiegel described Schauble’s attempt, applying stimulus per Keynes in the short run, and focusing on cutting debt to restore fiscal health in economies in the longer run. The trick is in manoeuvring to an optimal range just before hitting the crisis point.

All public policy is a constant string of moves by the government to manoeuvre, without touching a point that brings about the unravelling of desirable units of value – be it priming the pumps of state stimulus or, in Taiwan’s case, inundating itself in the economic graces of China’s massive economy.

For Taiwan President Ma Ying-jeou, caught in the middle of partisan crossfire over the Cross-Strait Trade in Services Pact, a bigger issue looms. China’s requests to advance the cross-strait relationship to “political negotiations” are mounting. The standard line of the Taiwan government has been to say that “the time is not yet ripe” for such negotiations. But there is no doubt that China is pushing Taiwan to talk.

It is impractical to not be in negotiations and to not engage China in economic exchange because of its status as the world’s second-largest economy. Taiwan is right to capitalise on the trade benefits with Beijing, but with the coming of the trade services pact the immediate next step is political negotiations.

We call on Ma to honour his own “red line” for political negotiations. “The mainland hopes to discuss a cross-strait peace agreement. But our people are concerned that such talks would end up as a discussion about unification. So two years ago, when we first brought up this issue, we thought it would be best to first put it to a referendum to confirm that we had strong public support. If so, it would be easier to move on with discussions,” Ma said.

“For the leaders of the two sides to meet, the nation must require it, the people must support it, and the meeting should proceed in a dignified manner, with equal status for both sides.”

To ensure that he had “strong public support”, Ma should be clearer with his definition by establishing a percentage threshold at which a referendum will pass, which should be well above the usual 50 per cent. His conviction over whether Taiwan will proceed is necessary to protect the nation against the dangerous “tipping point” in cross-strait negotiations.

It is time for Ma and the DPP to come together and work under the presumption that the point of reckoning is approaching fast, even as Taiwan tries to earn economic benefits for its people. This does not mean terminating negotiations, but it requires thinking about a unified stance in-house, a strategic goal that puts the Taiwanese people’s interest on top, and setting some conditions.