Brian Hioeby Brian Hioe
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Photo Credit: Chen Yu-chen/Facebook
EFFORTS BY THE KMT to establish “free trade zones” in offshore islands of Taiwan continue. Such proposals have primarily been advanced by KMT legislator Chen Yu-chen.
Such changes would take place through amending Article 18-1 of the Offshore Islands Development Act.
Article 18-1 of the Offshore Islands Development Act states:
To promote the development of offshore islands, prior to the comprehensive opening of transport links between the main island of Taiwan and the Mainland area, transport links between the Kinmen, Matsu and Penghu areas and the Mainland area may be opened on a pilot basis. Residents of the Taiwan area may, with due approval, use the pertinent entry/exit certificates, after checks, to enter the Mainland area from the pilot areas, or to enter the pilot areas from the Mainland area, and shall not be subject to the limitations prescribed in Act Governing Relations between the People of the Taiwan Area and the Mainland Area or other laws and regulations. Regulation on the implementation thereof shall be prescribed by the Executive Yuan.
Nevertheless, concerns have been raised about the proposal on several fronts. For one, the DPP has criticized the establishment of such free trade zones as potentially allowing Chinese goods to be passed off as Taiwanese ones, in order to circumvent restrictions from US tariffs. This would allow for product laundering or evading certain bans imposed by the US.
Indeed, the KMT advanced such a proposal at a time in which trade relations with the US are in flux. Taiwan has been engaged in trade negotiations with the US for months over securing lower tariff rates, with reports in the last week indicating that Taiwan may be down to a 15% tariff rate.
At the same time, US President Donald Trump has criticized Taiwan for “stealing” the US semiconductor industry in the past, and could resume such criticisms again in the future. Likewise, Taiwan increasingly faces allegations of manipulating currency in order to benefit the semiconductor industry–as a The Economist story in November last year alleged. That Taiwan faces long-standing charges of being a currency manipulator could place Taiwan under further US ire.
Yet concerns are also that KMT politicians such as Chen are seeking ways to expand Chinese influence over outlying islands of Taiwan. For example, previous proposals that were voted down by local residents would have allowed for the establishment of casinos in outlying islands. Such proposals were made during a time in which Taiwan saw high numbers of Chinese tourists and would likely have aimed to attract such tourists, perhaps with the aim of making Taiwan similar to Macau, in which gambling is legal.
To this extent, last year, a bill by KMT Matsu legislator Chen Hsueh-sheng would allow Chinese companies to place tenders on public infrastructure projects on outlying islands of Taiwan. The bill would also lift limits on enrollment for Chinese students in universities in the outlying islands of Taiwan, without any quota.
The bill would have allowed Chinese companies to bring workers and equipment to the outlying islands of Taiwan. Taiwanese companies would also be permitted to bring Chinese workers and equipment to outlying islands, a major risk regarding the invasion threat that Taiwan faces from China. The DPP accused the bill of endangering restricted areas in Kinmen, but also serving as a means of bypassing restrictions on Chinese workers in Taiwan. The bill was further criticized as being a “Trojan Horse” for Chinese investment.
Indeed, in the 2024 election cycle, TPP chair Ko Wen-je had proposed building a bridge between Kinmen and Xiamen. Ko claimed that electricity, water, and resource shortages would be solved through the construction of such a bridge, but the idea was similarly criticized as a Trojan Horse by the DPP.
The pan-Blue camp has traditionally been dominant in the outlying islands of Taiwan. It is to be seen whether the pan-Blue camp seeks to use its political control over such outlying islands as a vector to expand Chinese influence. Certainly, the Chinese government itself seems to place a high priority on outlying islands of Taiwan as a means of influencing the rest of Taiwan.