Norms and Values
USA vs. Taiwan: Trading at the Price of Stability

Neither Washington nor Beijing are ready for sharp escalation at the moment. The Americans are looking forward to the presidential election in 2024, and China continues to experience economic problems. Nevertheless, the desire of the United States to prove its readiness to support Taiwan continues to increase the level of hard tension in this part of the planet, where, as it seemed earlier, a relatively stable status quo had developed, writes Roman Romanov.

US President Joe Biden signed an executive order to launch the first phase of the “US-Taiwan Trade Initiative for the 21st century”, a trade agreement between the US and Taiwan. This will change the status quo that has developed over the past 70 years around the self-governing island. The United States is willing to take risks for many reasons, but it will lead to nothing but a new round of escalation of the conflict with China.

Claim as insurance

On August 7, US President Joseph Biden signed an executive order implementing the first phase of the US-Taiwan trade agreement. The document was proposed by the House of Representatives on a bipartisan basis in early June 2023. Among other things, it confirms the consent of Congress to establish close economic ties with Taiwan, and it also regulates the rules for implementing further stages of the negotiation process, including the rules for the division of powers between the legislative and executive branches. In short, representatives, relying on the constitution, are demanding that Biden coordinate further agreements with them on issues of US-Taiwan trade. The President’s response was not long in coming. In his official statement, published on the White House website, Biden emphasised that in the event of a violation of his constitutional rights, he would treat the aforementioned requirements of Congress as optional. In fact, he announced his readiness to determine the trajectory of the development of economic relations with Taiwan unilaterally.

Over the years, some in the foreign policy establishment, as well as some think tanks, have proposed taking US-Taiwan trade to the next level. The idea has been discussed since the late 1970s, but an active transition can be traced only from the mid-2010s.

Movement in this direction could not but provoke a negative reaction from the PRC. The country’s Foreign Ministry declared the inadmissibility of such actions on the part of Washington and called on the US administration to abandon such initiatives.

The dissatisfaction of Beijing is understandable, because the conclusion of any kind of agreements between a de facto independent state (Taiwan) and a full-fledged subject of international law (the United States) can formally mean recognition of the independence of the former. In this case, this will be an official encroachment of the territorial integrity of China, which means a weighty reason to prepare or start a real military conflict between Beijing and Taipei, possibly with the participation of Washington.

The White House and the Capitol must understand this. The US-Taiwan agreement itself, signed in June 2023, clearly states that the parties are not the US governments and Taiwan (as is common practice), but the American Institute in Taiwan and the Administration of the Taipei Economic and Cultural Representative in the US (they function as de facto embassies). However, it is not yet clear whether similar language will be used in the final agreement.

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The process of creating a kind of “anti-China” on the basis of Taiwan issue, which has been carried out by Washington since the early 2000s and finally entrenched under the current democratic administration of Tsai Ing-wen, is alarming. The United States is actually implementing the “Ukrainian scenario”, promising security guarantees and military support, as well as drawing allies — Japan and some NATO countries — into a potential conflict zone, writes Andrey Gubin.

Escalation as a seasonal dish

Somersaults in US-Chinese relations have continued to shake the global information field since February 2023, since the incident with the downed balloons. The Biden administration says it wants to reach out to Beijing to contain the competition within certain rules. The probability that this is a pure bluff is not very high, since just for the sake of a trick, no one would arrange full-fledged tours of top American officials to China, and even a very symbolic visit of the elderly statesman Kissinger there. However, at the same time, the United States continues to increase economic (expansion of export controls) and strategic (arms supplies to Taiwan) pressure on China.

In the science of international relations, the apparent inconsistency in decision-making can be explained in many ways. One of them is the Madman theory. In short, the leader of country “A” is trying to convince the leader of country “B” of his unpredictability, so that the latter would be less prone to provocations and decisions that are fundamentally not in the interests of country “A”. For example, during negotiations to end the Vietnam War, Richard Nixon told his Secretary of State Henry Kissinger to tell the North that he (Nixon) was “out of control” and ready to use nuclear weapons without hesitation. Irrationality is frightening, and this is what is being staked on. Thus, it is possible that Biden is trying to persuade China to make concessions — on the issue of weapons or trade — or may completely discourage it from wanting (at least temporarily) to reunite with Taiwan.

Let’s not forget about the choice factor. Foreign policy, previously of little importance to the American voter, is now one of the topics that in one way or another affects the chances of a presidential candidate. This is especially true of US policy towards China. Recent polls show that 27% of registered voters rank US-China relations as one of the top five most significant US foreign policy challenges. Biden has been repeatedly criticised by Republicans for being “soft” on China. Partly for this reason, he cannot afford to build a constructive dialogue with Beijing.

The election campaign has not yet accelerated, but it is already difficult for Biden, because the difference between him and Trump in potential elections is in the zone of statistical error. According to the Real Clear Politics total polling, the current president is only 0.7% ahead of his predecessor. Until November 2024, everything can still change, but if we address the Chinese issue specifically, then the handicap here is with the ex-president, and not with Biden. The latter will have to prove that he can take a hard line against Beijing. Thus, we should not expect the strengthening of trade ties, but also new arms supplies, as well as trips of US officials to Taiwan.

A pinch of economics

It would be incorrect to say that the initiative is purely political in nature. A possible easing of trade regulations is quite beneficial for some US importers affected by the trade war. For example, Taiwan supplies the United States with 20.9% of its marine power plants and their parts, 19.6% of its iron and steel, 15.7% of its computer accessories, 13.6% of its semiconductors, and 9% of its telecommunications equipment.

In addition, the agreement may contribute to a more effective diversification of Taiwanese exports, which are heavily dependent on the Chinese market. This became especially true in April 2023, when Sino-Taiwan trade relations escalated negatively again. However, this is not the primary reason for preparing an agreement with the Americans.

Chinese reaction

Beijing is unlikely to respond with anything other than protest statements or formal restrictions, such as expanding export controls on a certain category of goods, for example. “The United States should stop making any official exchanges with Taiwan, stop negotiating agreements with Taiwan ... stop sending false signals to Taiwanese separatist forces,” Chinese Foreign Ministry spokeswoman Mao Ning said. The relatively balanced reaction is explained not only by the risk of a military clash with the United States, but also by the nature of the signed agreement. The fact is that at the moment the parties have discussed and fixed the regulatory and other conditions under which trading will be conducted. Complex issues such as digital trade will be discussed in the future. The practice of US trade negotiations shows that the next stage of US-Taiwan discussions may take some time, although there is good reason to believe that the new document will be agreed upon by the end of 2023. In addition, as mentioned above, the language of the agreement does not formally contradict the status of Taiwan from the US perspective as an unrecognised political player, since it is not the states that are its parties.

Nevertheless, the very fact of the emergence of a new format of trade relations (by the way, the largest since the late 1970s) cannot but worry the Chinese in the medium and long term. The United States does not recognize Taiwan’s independence (although some American politicians are in favour of it), but it cannot be ruled out that a similar scheme — embassy + embassy (the parties to the agreement are not states, but de facto embassies) — can be used to formalise closer military-strategic relations between Taipei and Washington. Although such a development seems unlikely, even the prospect could raise the stakes even higher, and, accordingly, motivate China to pursue a tougher response.

However, it is worth clarifying that neither Washington nor Beijing are ready for sharp escalation at the moment. The Americans are looking forward to the presidential election in 2024, and China continues to experience economic problems. Nevertheless, the desire of the United States to prove its readiness to support Taiwan, including economically, continues to increase the level of hard tension in this part of the planet, where, as it seemed earlier, a relatively stable status quo had developed.

Modern Diplomacy
Pelosi's Visit to Taiwan and Beijing's New Course on the Taiwan Issue
Vasily Kashin
The visit of Speaker of the US House of Representatives Nancy Pelosi to Taiwan in early August can be considered a landmark event in the development of the Taiwan problem. This even had an impact on formal assessments: a few days after the visit, China published a White Paper titled “The Taiwan Question and China’s Reunification in the New Era”. This is only the third white paper on the Taiwan issue ever issued by the PRC.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.