Taiwan’s Cross-Strait Service Trade Agreement: Accept or Forgo?

In January 2024, the people of Taiwan will go to the polls to elect a new president. There have been several heated debates as candidates discuss their respective goals and policies, one of which is the Cross-Strait Service Trade Agreement (CSSTA; 海峽兩岸服務貿易協議), an economic agreement between Taiwan and China focused on selected service-industry markets. This is not the first time the CSSTA has stirred a debate. The last time it gained significant attention was during the Sunflower Movement in 2014, when hundreds of students stormed and occupied Taiwan’s national legislature, the Legislative Yuan. What were they protesting against? How have Taiwanese perspectives on cross-Strait issues changed since then? Have concerns about the CSSTA changed?

Historic Concerns over the CSSTA

There were three main reasons for the pushback over the CSSTA in 2014. First and most important was the CSSTA itself and its implications for broader cross-Strait relations. Publicly, the goal of the agreement was to formalize existing business practices and lift trade restrictions between Taiwan and China, thereby benefiting Taiwan economically. However, economists have argued that in practice the agreement would have only benefited the wealthy and severely hurt the working class. Moreover, Taiwan’s Ministry of Economic Affairs estimated that the CSSTA would have only brought a 0.025–0.034 percent increase in Taiwan’s annual gross domestic product (GDP).

Additionally, the CSSTA was written under the framework of the Cross-Strait Economic Cooperation Framework Agreement (ECFA), which was signed in 2010 by then-President Ma Ying-Jeou from the Kuomintang (KMT) party. When the ECFA was signed, it was already criticized as part of Beijing’s efforts to gain influence over Taiwan through increased economic integration. To sum up, a key concern was that the CSSTA would only bring minor benefits to Taiwan while heightening Chinese influence over Taiwan and bringing Taiwan one step closer to unification, which was against the will of the majority of the Taiwanese population.

The second point of debate centered on the “black box” process through which the agreement was passed into law. The CSSTA vote in the Legislative Yuan was moderated by a KMT legislator, Chang Ching-Chung, who declared a complete review of the bill in thirty seconds and forced the CSSTA into law. The process was criticized as opaque and undemocratic, and it sparked protests by non-governmental and civil society organizations. For many, the black box process highlighted how the ruling KMT could force through decisions affecting cross-Strait relations and the future of the Taiwanese people. On March 18, 2014, frustrated with the fact that simply voicing their concerns could not change the situation, a group of student-led protesters stormed the Legislative Yuan in the hope of gaining more public attention.

Finally, there was also a minority group who opposed Free Trade Agreements (FTA) altogether because of the potential negative effects on Taiwan’s service industry, regardless of which country the agreement would be signed with.

On April 10, 2014, after protestors occupied the Legislative Yuan for 24 days, the government compromised and promised to revoke the CSSTA and review it again clause by clause. One of the compromises that led to the end of the occupation of the Legislative Yuan was for legislators to first pass a bill examining all cross-Strait agreements before reviewing the CSSTA.

Renewed Debates over the CSSTA

Nine years after the initial controversies over the CSSTA, the legislation has re-entered debates amid the 2024 Taiwan presidential election. In early 2023, Taiwan People’s Party (TPP) presidential candidate Ko Wen-Je, a politician who gained attention after giving a speech as part of the Sunflower Movement, has pushed to reopen CSSTA talks. While many criticized his change in attitude, Ko claimed that he was only against the black box process in 2014 and not the CSSTA itself.

As a result, other presidential candidates have announced their stances on this topic as well. The KMT presidential candidate Hou Yu-Ih has criticized Ko for changing his stance on the agreement and stated that Ko is doing so to gain favor with China. Hou has further emphasized that the KMT has been in support of the CSSTA since 2014 and wants to reopen cross-Strait dialogues regarding economic exchange. The Democratic Progressive Party (DPP) candidate and current vice president Lai Ching-Te has stated he firmly opposes the 1992 Consensus and the re-opening of the CSSTA debate.  This shows that DPP candidate Lai is the only one to oppose the CSSTA, making him the exception.

Key Considerations in Passing the CSSTA

When reevaluating the CSSTA, there are both political and economic dynamics to consider. To start, the future of cross-Strait relations remains the core of the debate over re-opening CSSTA conversations. China stands firm that it will only discuss the CSSTA again on the basis of the 1992 Consensus, which would force Taiwan to acknowledge the politically charged “one China” principle. However, according to a poll released by the Asia-Pacific Elite Interchange Association in July, 52 percent of the Taiwanese public opposed discussing the CSSTA on the basis of the 1992 Consensus. In fact, only 22.9 percent supported the discussion of the CSSTA based on that term. This indicates there is a wide gap between Beijing’s position and the majority views of the Taiwan people.

In the same poll, 64.8 of the respondents supported signing an FTA with the United States and only 13.5 of respondents opposed. When further asked to compare an FTA with the United States to the CSSTA with China, almost 40 percent of respondents believed that an FTA with the United States would be more beneficial to Taiwan, and only 22 percent believed that the CSSTA with China would better serve Taiwan. This shows that the broader Taiwanese population is not against having FTAs, but rather is most focused on the partner country in question.

It is also evident that the primary concern for many Taiwanese in 2014 was the review process of the CSSTA. Today, many have expressed support for the CSSTA if it is discussed under a strict supervision and review process. This was underscored in 2014, when passing a supervision agreement before the discussion of the CSSTA was one of the protestors’ demands. However, the crucial articles of such an agreement have already been included in the revised 2019 Cross-Strait Act, which provides the legal framework governing Taiwan’s approach to cross-Strait relations. At the end of the day, according to legal expert Lin Zhi-Jie, these demands have been met, and the CSSTA can already be discussed under the established laws of Taiwan.

On the economic front, both Taiwan and China are trying to gain membership to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an expansive free trade agreement between 10 countries in the Asia-Pacific and Canada. Taiwan formally submitted its application to join the CPTPP in 2021. As of January 2023, member economies of CPTPP are major trade partners to Taiwan and account for 24 percent of Taiwan’s total international trade. Taiwan’s strong push to join regional economic organizations further shows that Taiwan is seeking to integrate its economy with other countries and decrease its dependence on China.

Domestically, Taiwan remains heavily reliant on its service sector, as it made up 60.7 percent of Taiwan’s GDP in 2022. With such a large portion of the Taiwanese economy at stake, China’s economy must be evaluated before Taiwan opens its market to them. The issue is that the Chinese economy faces significant headwinds, which could pose challenges for Taiwan. China’s urban youth unemployment rate (ages 16 to 24) hit a new high in June 2023, reaching 21.3 percent before authorities stopped publishing the data. In comparison, Taiwan’s unemployment rate was 3.48 percent in September 2023, while China’s was 5 percent. Signing the CSSTA would mean opening markets and employment opportunities to China that could lead to an influx of Chinese workers in Taiwan. Left unchecked, this could affect Taiwan’s job market in the service sector on a very large scale.

Finally, greater linkages with China leave Taiwan exposed to Chinese economic coercion. Beijing has a history of using economic leverage to influence Taiwan, especially amid Taiwan’s election campaigns. In December 2023, China’s Taiwan Affairs Office (TAO) announced that China would suspend tariff concessions on some products under ECFA. The announcement defended the suspension by pointing out that ECFA was signed on the basis of the 1992 Consensus, and that the DPP authorities adhere to the stance of “Taiwan independence.” Establishing the CSSTA would not only open up new avenues for Beijing to wield economic influence against Taiwan but also give the Chinese government another opportunity to stoke partisan divides within Taiwan.

While the debate of the CSSTA and the Sunflower Movement faded after 2014, the resurfacing of the topic emphasizes that the Taiwanese people are closely monitoring the presidential candidates’ plans for cross-Strait relations. The people of Taiwan must take this issue into consideration before casting their vote for president to avoid a potential Sunflower Movement 2.0.

Yu-Jie Liao was a research intern with the China Power Project at the Center for Strategic and International Studies in Washington, D.C.

Yu-Jie Liao

Former Research Intern, China Power Project