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President Ma interviewed by Thomson Reuters

During an interview on October 1 with Thomson Reuters, President Ma Ying-jeou discussed issues such as cross-strait ties, US arms sales to Taiwan, and Taiwan's trade relations with Southeast Asian countries.

A transcript of the interview follows:

Q1: Despite the progress on the economy, considerable challenges still remain. Growth is slowing, the central bank just recently cut interest rates for the first time in six years, and some critics say that Taiwan relies too much on China for its economic growth. What does Taiwan need to do in order to get the economy going again?
Recent economic difficulties are not wholly attributable to our economic relationship with mainland China. This is a global phenomenon. Many countries' exports have fallen and economic growth has slowed; mainland China is but one example. Taiwan is a small, liberalized economy. Some 70% of our economic growth is derived from exports, meaning that we are affected more than other nations less dependent on exports.

Trade with mainland China actually grew fastest in the eight years before I took office, when exports to mainland China and Hong Kong grew from 24% of total trade to 40%. Since I took office, we've reduced that to 39%. So export volume has grown, as has trade volume, yet the percentage [of exports to mainland China and Hong Kong] has fallen. This is the result of our efforts to diversify our export markets.

Q2: How far do you expect the reliance to drop to? You talked about 39%. Do you see that falling further? What would be the right percentage, would you say?
The economy is dynamic, so I can't give you a specific figure. We have been able to cut the percentage [of exports to mainland China and Hong Kong] while maintaining overall trade volume growth because trade with Association of Southeast Asian Nations (ASEAN) members grew from 14% to 19% of our overall trade volume. Trade with other areas, including emerging Islamic markets, also increased. Of course, mainland China will still account for a large percentage of our exports; it has been our largest trading partner since 2003. Geographically, we are so close, and also share a cultural and ethnic heritage. These factors make it natural for mainland China to become our largest trading partner. To put it another way, we will not put all of our eggs in one basket; but on the other hand we cannot ignore the largest basket, which is mainland China.

There are 23 countries and areas neighboring mainland China, and mainland China is the largest trading partner of 17 of those countries. So this is a regional phenomenon, and it's not just in the Republic of China.

Q3: So I'm very interested in your personal view on the relationship with China. Does this mean from what I'm hearing that you're very happy with where the relationship stands right now, or do you not see room for improvement and what would that be?
Over the past seven years cross-strait relations are much improved compared to the period prior to my term of office, when the relationship was marked by a great deal of confrontation, antagonism, and tension. This does not mean there have been no problems between the two sides during my term. But whenever we have encountered problems, we've been able to, first, resolve them peacefully, and second, build mutual trust to deal with them. This has allowed us to foster cross-strait prosperity and friendship over the past seven years in a stable and peaceful manner.

In fact, all human relationships are like that. All relationships are different, and none are without problems. We have to deal with problems when they arise, and when we overcome those problems, the relationship can develop further. Over the past seven years we've signed 23 agreements with mainland China. That is unprecedented. There hasn't been anything like it over the past 66 years. Why were we able to do this, and why couldn't it be done before? This goes back to what I said earlier, which is, once the two sides reached a basic consensus, it became easier to deal with various issues. Inevitably, there will be minor issues, but we have not seen any major problems. Once we've reached a consensus, we can build mutual trust. I think that's extremely important.

Q4: We just talked about how there have been huge improvements, things are better, but you seem to be saying things are not perfect and that there are some problems. Can you at least share what one of those problems are, so I have a better understanding and can go away thinking "Ah, this is what you're working on."?
For example, the mainland feels that cross-strait ties have developed to the point where political issues can be discussed. But for us, that depends on what kind of political issue they're talking about. If they want to talk about the unification issue, we believe the time isn't ripe. Nevertheless, in 2009 we signed the Cross-Strait Joint Crime-Fighting and Judicial Mutual Assistance Agreement. Does that count as a political issue? If so, the two sides already concluded that kind of agreement five years ago. And we're currently negotiating the establishment of reciprocal representative offices. Is that considered a political issue? It does seem a bit political. We don't rule out those kinds of issues. But when it comes to discussing more sensitive issues like unification, we believe the time is not ripe, because t here are other more urgent issues that need to be discussed first. We have been through this process so many times in the past. After we have this kind of mutual understanding, the mainland won't press us to discuss political issues. In fact, some of the issues we're currently discussing touch on political issues. If those issues can't be resolved, how do we move forward? We have set priorities—address urgent matters before non-urgent ones, easy issues before difficult ones, and economic matters before political ones.

Q5: A couple of questions deriving from your comments because they're very insightful. You said reunification it's not good time. Is there any specific reason, other than the general consensus that this is not a good time?
We need to understand that Taiwan and mainland China have been under separate rule for 66 years. Our political, economic, and social systems are different. Over the past 30 years mainland China has changed tremendously, so the differences between the two sides are no longer so pronounced. But there's still a gap between us on certain core issues. So I think there's no need to discuss issues that, for now, can't be resolved. What we can do, however, is narrow the distance between the two sides through greater exchanges that bring us closer together. If, at some point, both sides are willing to engage in further discussions on the issues, then there is more likelihood of resolving them. Discussing them now would be pointless and unproductive.

Mainland China's economy and society are much freer than they used to be. Its stock markets are flourishing, which in the past was rare, and 30 years ago, unheard of. But our political systems are still quite different. So at this point, of course I don't think it's appropriate to talk about reunification issues. Taiwan isn't ready. I think that before we move in that direction, there are other matters we need to discuss first, and resolve one step at a time. At this point, it's not urgent. So we don't need to discuss political issues right now.

Q6: As Taiwan's Commander-in-Chief, you have regularly asked the United States to support Taiwan's indigenous submarine program. How likely do you think that you will see a breakthrough in this program from the US before the end of the year?
Our current submarine policy is that some parts will be domestically produced, and some will come via military procurement, acquiring key technologies overseas. In other words, it's an integrated program. The US agreed to sell us diesel-electric submarines back in 2001, but they haven't built that kind of ship for a long time. They only produce nuclear-powered submarines. But for us, the Taiwan Strait doesn't require nuclear-powered subs. So that means there's a kind of gap. Taiwan's decision to build submarines domestically, a decision that was actually made some time ago, was made because we already have certain domestic ship-building capabilities. So we aren't solely reliant on foreign manufacturers. But we may have to look overseas for some of the key technologies, as well as weapons systems.

We have in the past built our own advanced fighter jets. While some of the key technologies were purchased from the US, we built the other components.

Q7: You said you still need technology help in order for Taiwan's submarine program. How do you see it happening? Would you be going to another company or other governments to seek help, or are you facing some problems in getting help?
Since once we adopted that policy, the US has been willing to support it. So we really don't have any significant problems with the US government right now.

Q8: But they haven't said yes to your request for technology?
Our discussions haven't reached that stage yet.

Q9: Can you tell us what phase we're in?
It wouldn't be appropriate to discuss the details. But the general direction is domestic and overseas cooperation. We will manufacture some components ourselves, while also using foreign technology for others. We're quite confident about this.

Q10: So it's a two-pronged strategy—one you'd build your own and the other is you'd buy some? In total, do you have any right now, or what's the purchase plan?
We currently have four diesel-electric submarines, but they're comparatively old, some almost 70 years old, and some about 30. Of course, the main reason we want to build our own submarines is for national defense, so our government is actively pushing this program. We've already cultivated some personnel, and hope to pick up the pace in the future.

Q11: Are non-US government or non-US companies unwilling to help Taiwan in its indigenous submarine program?
We haven't heard anything about the US government, or companies, being unwilling to help us. This is still ongoing. The US no longer produces diesel-electric submarines. It only manufactures nuclear-powered submarines, which aren't suitable for us because the Taiwan Strait is so shallow. If other countries have the technology, then we wouldn't rule out cooperating with them. I can only say that we don't rule out that possibility, but I can't tell you who has contacted us.

Q12: Are you looking for a greater trade relationship with ASEAN nations to rectify the situation with Taiwan's exports?
Since I took office, relations with Southeast Asian countries have been very important for us. I periodically preside over meetings on related projects, which we have been promoting continuously. We've established new representative offices in some Southeast Asian countries, concluded at least 35 agreements, and are proactively developing them. Nonetheless, our ties with mainland China are also important. Due to historical, cultural, and ethnic factors, we can't disengage from mainland China just because we see some things differently. Take North America as an example. Sixty to 70% of the external trade from Canada and Mexico goes to the US. That's a much higher percentage than our external trade with mainland China. Since we're so close geographically, trade relations develop naturally. Some people may say that these situations are different, because the US won't attack Canada or Mexico. But as I just said, with the right policy, mainland China won't attack Taiwan. As long as we understand that, we can get mainland China to understand that any unilateral change to the status quo through the use of force is detrimental to everyone involved. That is our best line of defense.

About 90,000 Taiwanese companies are currently doing business in mainland China. They come and go. Some move to Vietnam, and some to Indonesia or other Southeast Asian countries. That's normal. When their products become less competitive, they naturally move elsewhere. Taiwan is a free economy. People don't invest overseas because the government tells them to, but on their own initiative. They will make the best decisions. What the government needs to do is create a fair and secure environment for them to do business no matter where they go.

Q13: Do you expect progress on any ECAs before you step down? With Australia, for example?
We are continuing to negotiate with a number of countries, and will continue to press ahead.

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