Sweet deals and sour tastes: The political economy of economic interactions across the Taiwan Strait

This dissertation seeks to explain the dual process of economic integration and political divergence in current relations across the Taiwan Strait. On the one hand, Beijing's policy designed to stem the separatist drift in Taiwan through engagement of trade and investment has driven the two sides further apart politically. On the other hand, Taipei, despite its reputation as a strong state, has largely been unsuccessful in its efforts to restrict the pace and direction of trade and investment with the mainland. The dissertation analyzes economic statecraft and strategic interactions across the Taiwan Strait and conflicts of state goals and the pursuit of private interests at home.; To prevent economic dependence, Taipei has established restrictions on investment to mainland China and supported investments headed for other locations like Southeast Asia. Nevertheless, by 1996 Taiwanese investment in mainland China totaled more than US{dollar}33.8 billion, more than one third of Taiwan's total overseas investment and more than 40,000 Taiwanese invested firms now operate on the mainland. The failure of government restrictions points to the limit of state power to control capital mobility.; To capture the dynamics of cross-strait relations, we first analyze the politics of strategic interactions between the two sides and then turn to policies designed to influence flows of trade and investment. Finally, and most importantly, we look at state-society interactions as economic relations deepen. Unlike previous works on East Asian political economy, which talk mostly about states and state policies, this dissertation focuses on the organizational characteristics of the private sector and the institutional foundations of state-society linkages and interactions. Special attention is paid to the role of small and medium-sized firms.; The analytical focus on industrial organization takes discussion beyond the ongoing debate between the state-centric theoretical frameworks and neo-classical economics in the study of East Asian political economy. In addition, analysis of the organizational characteristics of the private sector and its responses to state policies adds an explicitly institutional dimension to theories of economic statecraft and the post-statist critique that has concentrated mostly on the structural power of big business.