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Taiwan-U.S. Relations: What’s Next?

Refugees fleeing from their destroyed homeland. An entire people subjugated, their language and culture lost forever.

The term “stateless nation” usually brings to mind a picture like this—one of oppression, hopelessness and disadvantage. But one “stateless nation” defies this stereotype. The island nation of Taiwan has remained an anomaly for decades as an economically prosperous and socially advanced entity that exists without the formal recognition enjoyed by the overwhelming majority of nation-states.

This lack of basic political recognition has had important implications for Taiwan’s economic and political dealings with other countries. From exclusion from trade deals to economic sanctions levied by other countries, Taiwan has had to fight an uphill battle to attain the prosperity it enjoys today.

But the story is more complicated. Taiwan is not completely isolated; it has notable unofficial international supporters—a list that includes the United States. Throughout the 20th century, the U.S. has maintained a variety of official positions regarding Taiwan. Although the technicalities of U.S.-ROC relations have changed throughout the years, the importance of Taiwan to the U.S. and the U.S. to Taiwan has remained steady.

Since the Nationalist ROC fled to Taiwan at the close of the Chinese Civil War, the U.S. looked to the exiled government as a strong Western ally in the region. The relationship developed into a military alliance, leading to significant arms sales to the ROC—most notably after the U.S. Congress passed the Taiwan Relations Act in 1979. Commerce between the two entities extends well beyond military equipment, with both countries trading electronics and other products.

Before we get into the current state of U.S.-ROC ties, it is important to run through the two countries’ complicated relationship. While the U.S. had traditionally recognized the ROC as the sovereign ruling government of China and Taiwan, it reversed its position in the 1970s. The Nixon administration, looking to weaken the influence of the Soviet Union and accelerate a resolution to the Vietnam conflict, established diplomatic relations with the communist mainland. This came at the price of relations with the ROC, seen at the time as a necessary measure given that the PRC made a non-recognition of the ROC a precondition for creating ties. This came to be known as the “One China” policy, and has since come to define how many nations interact with China and Taiwan.

But Washington did not abandon its capitalist Asian ally, even as it held out the olive branch to the communist PRC. Under the provisions of the 1979 Taiwan Relations Act, the U.S. committed itself to aiding Taiwan in the event of PRC invasion or aggression. In practice this has meant two things; extensive weapons sales to the ROC and assurances from top US brass that the Americans will intervene in the event of a conflict.

While at times confusing for both parties, this policy has been largely successful in practice. The United States has been able to maintain formal diplomatic relations with the PRC, while at the same time maintaining the unofficial relations with the ROC that have prevented conflict from breaking out in the Taiwan Strait and have fostered bilateral trade. The ROC still controls Taiwan and, though it does not have traditional membership in many international organizations such as the UN and the WTO, it has been able to control the island’s domestic and international policy. Furthermore, U.S.-Taiwan trade has ballooned in recent decades, with U.S. Almanac data indicating that the total value of U.S. trade in goods with Taiwan has grown from $4.7 billion in 1985 to $25.9 billion in 2015.

Although this relationship defined by the American “One China” policy has been sustainable for decades, there are reasons to question its continued viability in the years to come. The US-Taiwan relationship is based, for the large part, on the stability of the status quo. That status quo means that the PRC does not make moves to reunify Taiwan with the mainland, either through military force or economic sanctions, and the ROC does not officially declare its independence or do anything else to upset its delicate political position.

The U.S. has found itself caught between both sides, trying to prevent the PRC or the ROC from changing any of these preconditions for peace. Harry J. Nathan, a professor of political science at Columbia, explains that since the 1970s “the U.S. government’s major desire toward the Taiwan government with respect to its mainland policy is that it not provoke a crisis with Beijing.” Their rationale is simple; if the status of Taiwan changes on account of the either entity’s policies, American businesses and political interests will suffer. But this delicate balance can be upset by a variety of factors, from economic conditions to public opinion and other countries’ policies.

Two significant changes underway in Taiwan could damage this stability. The first is the shifting demographic composition of the island. Co-President of the Yale Taiwanese American Society Vernon Lin ‘18 describes the general sentiments of different social groups in Taiwan towards independence. Lin explained, “there are two groups in the older generation. One group fled the Nationalists and came to Taiwan. They are the ones who would buy into the One China principle more than the ones who were just there and just migrated who are Han Chinese ethnically, but moved from China way before the civil war. They are way more into independence.” Lin continued to say that “with the younger generation there is greater feeling of affinity towards independence.”

As increasing numbers of island-born Taiwanese enter the political sphere, the nation as a whole is shifting towards a more pro-independence mindset. Lin’s explanation is confirmed empirically; an annual survey conducted by National Chengchi University’s Election Study Center asks whether Taiwanese residents identify as Chinese, Taiwanese or both. In 2014, 60.4 percent of respondents reported themselves as Taiwanese, up from just 17.6 percent when the poll was first conducted in 1992. Just 3.5 percent identified as Chinese, compared with 10.5 percent in 1992.

The rise in Taiwanese nationalism has had noticeable effects on politics. In January of 2016, the Democratic Progressive Party captured the presidency and achieved its first-ever majority in the legislature of the ROC. While its rhetoric has softened in recent years, the DPP is still much more pro-independence than the other major political party, the Kuomintang. Although no overtly pro-independence action has been taken thus far, the new government’s policies, most notably the New Southbound Policy, are pushing Taiwan’s economy away from the mainland. The New Southbound Policy is, essentially, a southward economic pivot meant to incentivize integration and the formation of stronger ties with ASEAN and South Asian countries. Taiwanese president Tsai Ing-wen stated in her inauguration speech that the goal of the policy is to “bid farewell to our past over-reliance on a single market.” While it is true that similar policies had been implemented by previous governments, the New Southbound Policy is different in that it has a far broader scope, including for the first time South Asian countries, and has a greater emphasis on growing the ROC’s soft power through a new emphasis on bilateral relations.

The second shift that threatens the status quo is the growing economic isolation Taiwan faces from being locked out of free trade agreements. Because the vast majority of major nations do not recognize the ROC’s sovereignty, Taiwan is often unable to become a part of major FTAs that in the 21st century have grown increasingly important for other nations. This region-based trade integration, particularly fast in Asia, has left Taiwan unable to capitalize globalization. Instead Taiwan has been forced to increase its reliance on China for commerce.

Despite its political aspirations to shift to other nations for trade and investment, Taiwan is largely unable to move away from reliance on China. While in 2000 Taiwan’s total value of trade with China was $18.5 billion, in 2013 it had ballooned to $165 billion. 27 percent of Taiwan’s exports end up in China, while only 2 percent of China’s exports are sent to Taiwan.

This is exactly what the PRC government desires because it allows for a slow but steady economic annexation of Taiwan back into the mainland. As mainland China becomes a larger part of the Taiwanese economy, the ROC loses power and autonomy on both the domestic and international stages. The long-term hope of the PRC is that, once economic dominance over Taiwan is complete, the island nation will peacefully and voluntarily rejoin the mainland.

These forces far from guarantee change. In terms of public sentiment, even as many young people identify as Taiwanese, only a small minority actually want independence. Another survey from National Chengchi University’s Election Study Center found that just 5.8 percent of Taiwanese residents want immediate independence, with only 18.0 percent seeking long-term independence. Additionally, on the economic front, the slow-down of China’s growth may allow Taiwan to look elsewhere for an economic partner. Further, if Taiwan finds itself able to join a trade pact, the economic forces driving Taiwan’s drift towards China may be mitigated.

In examining U.S.-Taiwan business relations, then, it would seem that little is likely to change in the coming years, even as Taiwan experiences cultural and political shifts. While future trade deals similar to the Trans-Pacific Partnership could in theory effect a major change in Taiwan’s business climate, the American public’s distaste for free trade makes the prospect unlikely. The ties between Washington and Taipei are here to stay.