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Is Clinton Drifting Into A Crisis Over Taiwan?


International Outlook

IS CLINTON DRIFTING INTO A CRISIS OVER TAIWAN?

In Fujian Province, across from Taiwan, tens of thousands of Chinese troops are massing for large-scale military exercises. These maneuvers are meant to frighten the Taiwanese electorate into voting against independent-minded President Lee Teng-hui in the island's first democratic presidential elections, on Mar. 23. But the strategy is backfiring. Beijing's tactics are helping to make Lee the runaway leader.

China's misreading of the mood in Taiwan is just one of a series of miscalculations on both sides that could lead to a dangerous confrontation in the coming months. Many analysts now believe that if the saber-rattling fails to curb what Beijing perceives as Taiwan's drive toward independence, China may be tempted to take more aggressive action after the election. Lobbing missiles and disruption of shipping are both possibilities.

BEHIND THE SCENES. Until very recently, the Clinton Administration has seemed oddly disengaged from the growing tensions in the Pacific--especially considering the enormous problem that a Taiwan-China fight would pose for the U.S. Now the Administration says it is working behind the scenes to avoid a conflict. Officials say they are reviewing Taiwan's defensive capabilities, which they describe as "formidable." The Americans are also telling Beijing that its belligerence is alienating other countries in the region.

But China's near-hysterical reaction to the rise of Lee, Taiwan's first native-born President, is going to make it hard to calm the situation. Despite Lee's denials, Chinese leaders deeply fear that he is pro-independence. That is heresy in Beijing, where it is an article of faith that the island, with its $250 billion economy, is just a renegade province. China has viciously attacked Lee and his family. "They'll have to deal with Lee Teng-hui," says a China expert in Hong Kong, "but how do you do that after attacking him so personally?"

The Taiwanese have also made some missteps. They have badly underestimated Beijing's sensitivity on the Taiwan question. While something of a diplomatic breakthrough, Lee's visit to the U.S. last year clearly wasn't worth the furor it provoked in China. Beijing shifted to a more aggressive tack that has damaged confidence in Taiwan's economy and slammed its financial markets. "No fund managers want to buy Taiwan stocks," says Huan Guocang of BZW Asia Ltd. in Hong Kong.

One wonders if Lee's government is overestimating the value of the many friends its well-oiled lobbying campaign has won in the U.S. Congress. Could it be that Taiwan is interpreting the praise it hears in Washington for its budding democracy and economic success as a guarantee of U.S. military support?

If so, this is very risky for the Clinton Administration, which may be sleepwalking into a serious foreign crisis. Unlike the Bush Administration, which had plenty of goodwill in Beijing, Clinton's people have virtually no guanxi, or good connections, in the Chinese capital. The arrival of former Senator Jim Sasser in Beijing as ambassador after nearly eight months with no top U.S. envoy there may give the U.S. better access. Sasser may also be able to convey how much Chinese human rights abuses and failure to halt ripoffs of software and CDs are hurting China's cause in Washington.

The U.S. is mainly betting that its low-key approach, which somewhat eased tensions with Beijing late last year, will work again. Still, unless Taiwan and China focus more on the price they will pay, their decades-old rivalry may get out of hand.EDITED BY STANLEY REED BY JOYCE BARNATHAN IN HONG KONG, WITH STAN CROCK IN WASHINGTON AND MARGARET DAWSON IN TAIPEIReturn to top

GERMAN PHONE WARS

-- British Telecommunications PLC has teamed up with RWE, the giant German energy utility, and industrial group Viag to break Deutsche Telekom's stranglehold on the German phone market. RWE brings more than 4,000 kilometers of fiber-optic cable, reaching 50% of the German population, to the partnership. Together, the three companies plan to spend up to $2.7 billion over a 10-year period to wrest away business and residential customers from Germany's biggest monopoly, which will be privatized this summer in a $10 billion stock offering. The deal is a coup for British Telecom--which now has a strong position in Europe's biggest phone market. But it means that the group AT&T is trying to put together with Mannesmann and Deutsche Bank--RWE's ex-partners--will face tougher competition.EDITED BY STANLEY REEDReturn to top


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