Taiwan's Economic and Diplomatic Challenges and Opportunities
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Taiwan's Economic and Diplomatic Challenges and Opportunities

Mariah Thornton, Robert Ash, Dafydd Fell, Mariah Thornton, Robert Ash, Dafydd Fell

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eBook - ePub

Taiwan's Economic and Diplomatic Challenges and Opportunities

Mariah Thornton, Robert Ash, Dafydd Fell, Mariah Thornton, Robert Ash, Dafydd Fell

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About This Book

This book offers a diverse set of perspectives on the current state of Taiwan's economy and international relations, equally considering the challenges and opportunities that could forge Taiwan's future.

Featuring a range of interdisciplinary approaches, this edited volume has been written by some of the leading scholars on Taiwan's economy and international relations, as well as emerging scholars and writers with practical diplomatic, political, and civil society experience. Contributors cover themes from political economy and international relations to gender studies and civil society-led LGBT diplomacy. Readers will benefit from chapters outlining both the historical overview of Taiwan's development and more recent developments, with several chapters offering focused case studies into Taiwan's economy and international space. A balanced set of conclusions are reached, affording scope for both optimism and pessimism about Taiwan's prospects.

Taiwan's Economic and Diplomatic Challenges and Opportunities will appeal to students and scholars of international relations, economics, and Taiwan studies.

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Publisher
Routledge
Year
2021
ISBN
9781000377347
Edition
1

1 Taiwan’s economic and diplomatic challenges and opportunities

Mariah Thornton, Robert Ash, and Dafydd Fell
Since the end of Japanese colonial rule in 1945, Taiwan has fluctuated between periods of optimism and pessimism over its position on the international stage (Fell 2018). Taiwan’s ambitions in this respect have been tempered by a challenging global environment shaped by two competing superpowers: the United States and China. Hickey (2006) aptly described Taiwan’s situation as ‘a shrimp between whales.’
However, Taiwan has managed to navigate these turbulent circumstances over the past decades, emerging as an ‘island of resilience.’ In the spring of 1950, it looked only a matter of time before Taiwan would become incorporated as the latest province of the Communist People’s Republic of China (PRC), but it was saved by the outbreak of the Korean War. Twenty years on, after the Republic of China (ROC) lost its seat in the United Nations and the United States switched diplomatic recognition to Beijing, there were serious doubts about the sustainability of Taiwan’s de facto independence. Yet time and again Taiwan has found opportunities and solutions to survive and prosper against the odds. Facing the loss of formal diplomatic recognition, Taiwan successfully adopted more flexible strategies to expand its international space and enjoy unofficial but de facto diplomatic relations with most countries. In the 1980s Taiwan became known globally for having achieved an ‘economic miracle’; in the 1990s its transition from authoritarianism to democratisation was hailed as a political miracle. Like the Korean peninsula, the Taiwan Strait is often seen as a potential source of international armed conflict. However, unlike the Koreas, Taiwan and China have been able to develop extensive economic ties and substantial cross-Strait trade despite their political differences. The purpose of this book is to shed light on the changing challenges facing Taiwan today and the ways in which it has sought to adapt to its changing environment.
As a state excluded from the international society by its authoritarian neighbour, Taiwan faces a unique set of circumstances in its efforts to maintain its position within the international economy and community. Nevertheless, Taiwan has made great strides to increase its international engagement both economically and diplomatically, and its efforts have yielded some impressive results. Its economy is highly ranked by several international organisations and think tanks around the world, and it remains an important trade hub in the Asian region. On the diplomatic front, Taiwan has 15 formal allies while maintaining substantial unofficial relations with most other nations across the world. It remains a full member of 33 international governmental organisations (IGOs) and an observer in 15 others (MOFA, 2020). Taiwan also contributes significantly to the international community in terms of striving towards UN Sustainable Development Goals (SDGs), such as alleviating poverty and hunger as well as achieving universal healthcare. The proportion of low-income households in Taiwan has been reduced to 1.6%, while its National Health Insurance programme covers 99.8% of the population as of 2019. Taiwan also provides development assistance and engages in several cooperation programmes with countries in the Pacific, Asia, Africa, and the Caribbean (Wu, 2019).
However, in recent years the PRC has intensified economic, military, and diplomatic pressures on the island as it pursues its ultimate goal of unifying Taiwan with China. In January 2019, Chinese leader Xi Jinping renewed the threat of force against the island in the event of unification under the ‘one country, two systems’ (Kuo, 2019). Since the landslide re-election of Democratic Progressive Party (DPP) presidential candidate Tsai Ing-wen in January 2020, China has continued flexing its military muscles by sending more warships to pass through the Taiwan Strait and fighter jets to invade Taiwanese airspace (The Telegraph, 2020a).
The global outbreak of the novel coronavirus 2019 (COVID-19) has also seen mounting evidence of disinformation campaigns from China, including hundreds of thousands of social media accounts aimed at influencing public perception of the pandemic as well as other events, including demonstrations over the death of George Floyd and the Hong Kong protests (The Telegraph, 2020b). According to evidence collected by the Taiwanese Investigation Bureau, Taiwan has been one of China’s primary targets for fake news (MJIB, 2020). Furthermore, Beijing’s passing of the Hong Kong National Security Law following months of protests in the Special Administrative Region throughout 2019 has widely been seen as the breakdown of ‘one country, two systems’ in Hong Kong and a sign of troubled times ahead for Taiwan.
Despite intense pressures from China as well as the severe impact of COVID-19 on the global economic system, Taiwan’s economy has remained relatively strong and stable, albeit with some slowing of GDP growth in recent years. Prior to the outbreak of COVID-19, Taiwan’s economy grew 3.3% during the fourth quarter of 2019, due in part to the effects of the US-China trade war which saw substantial benefits for Taiwan, Mexico, and the European Union (Nicita, 2019). Dubbed one of the four ‘Asian Tigers’ for high levels of economic growth from the 1960s to the 1990s, Taiwan has maintained an export-oriented and technology-focused strategy for economic development. Taiwan currently stands as the seventh largest economy in Asia according to the International Monetary Fund and is the 12th most competitive out of 141 economies in the world according to the World Economic Forum’s 2019 Global Competitiveness Report (2019). Taiwan also ranks the 11th most competitive economy in the 2020 World Competitiveness Yearbook, compiled by the International Institute for Management Development, and enjoys a high degree of economic freedom (2020).
COVID-19 inevitably took a serious toll on Taiwan’s economy. Nevertheless, its handling of the pandemic has won many plaudits. Not least, compared with many other countries, the economic impact of coronavirus in terms of its short-term hit on growth has been quite mild. According to data published by OECD and national statistical reporting agencies, the decline in Taiwan’s GDP growth in the second quarter of 2020 was the lowest (−0.6%) of 38 countries included in the study (CNA, 2020).
However, despite these impressive economic credentials, Taiwan’s contentious relations with China, the economically dominant power in the Asia, also present significant limitations to its economic integration in the region. As a result, Taiwan remains excluded from trade-facilitation integration in Asia as a member economy, despite becoming more integrated in terms of business (Bush, 2019). In addition, an increasingly authoritarian Beijing has stepped up its campaign to marginalise Taiwan by stealing its remaining diplomatic allies, blocking its participation in international summits, and pressuring companies overseas to downgrade Taiwan’s status from a country to a province of China.
China’s success in excluding Taiwan from the World Health Organization (WHO) and its annual World Health Assembly (WHA) has continued despite the urgent need for global cooperation to combat coronavirus and in the face of strong international support for Taiwan’s inclusion. As of mid-September 2020, Taiwan has confirmed 495 cases of COVID-19 and seven deaths – relatively low numbers compared with those of other countries, and sufficiently low for Taiwan to be widely considered a success story (Taiwan Centers for Disease Control, 2020). Taiwan has also received praise from the international media for its effective and early response to the outbreak, as well as for its donations of personal protective equipment and medical supplies to countries hard hit by the virus. This has drawn increased international attention to the reasons for Taiwan’s exclusion from the WHO and to China’s behaviour in response to the pandemic (BBC, 2020).
Taiwan also remains shut out from several multi-lateral trade organisations, including negotiations over the Regional Comprehensive Economic Partnership (RCEP) trading bloc, comprising the Association of Southeast Asian Nations (ASEAN) member states, Australia, India, Japan, New Zealand, and South Korea. As the RCEP would account for 24% of global GDP and 46% of global population, Taiwan’s exclusion threatens to cause significant economic losses (Wong, 2018). Taiwan has also been excluded from any involvement in China’s grand vision for global economic integration: the Belt and Road Initiative (BRI). More broadly speaking, since the financial crash of 2008, Taiwan has remained on the fringes of these organisations, while ASEAN has ramped up economic integration. For example, in December of 2008, the ASEAN member states launched a charter to implement ‘an EU-style community’ by creating a single free-trade area for the region. Since Taiwan is not a member state, it cannot directly benefit from agreements made at a multi-lateral level. Taiwan’s fate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also remains uncertain following the US’s withdrawal from negotiations. In short, as other Asian countries become more economically interconnected, Taiwan has remained an outsider, squeezed out from this process by China.
On the diplomatic front, Taiwan has faced mounting pressure from China since the election of President Tsai Ing-wen in 2016. Since Tsai’s ascension to power, Taiwan has been debarred from several key IGOs in which it had previously enjoyed observer status, including the WHA and the International Civil Aviation Organisations (ICAO). Beijing has also resumed its diplomatic war with Taiwan, offering substantial economic aid and trade deals to woo remaining diplomatic allies to switch recognition. As it stands, Taiwan currently maintains formal ties with 15 countries, but this number is likely to dwindle further as China increases pressure on Taiwan towards unification. Beijing has also launched a campaign to force private overseas enterprises and organisations to designate Taiwan as a province of China, further downgrading Taiwan’s status and position in the international community. Following Tsai’s re-election in January 2020, it is likely these trends in cross-strait relations will continue.
As Taiwan navigates these major shifts in global geopolitics, this volume seeks to analyse the challenges and opportunities faced by the country from economic and diplomatic standpoints.

Origins and purpose

The origin of the book was a workshop on ‘The Challenges and Opportunities of Asian Economic Integration Facing Taiwan under the Impact of Globalisation,’ which took place at the School of Oriental and African Studies (SOAS), University of London in May 2018. After the conclusion of the workshop, participants were invited to expand their initial papers into chapters exploring different aspects on Taiwan’s economic integration and diplomacy. In compiling this volume, our aim is to give an updated overview of Taiwan’s economic and diplomatic situation during recent years. In so doing, we set out to explore not only the obstacles the island faces in building engagement with the international community, but also potential opportunities. We hope that this volume can provide valuable perspectives and insights into paths towards the country’s greater economic integration and stronger diplomatic relations.

Structure

The first half of the book focuses on Taiwan’s economic policies at the domestic and international levels in order to provide a comprehensive understanding of the country’s path to economic integration during the past decade or so. This section closely examines Taiwan’s domestic economic transformation and its integration in the regional and global economy.
First, Lin Chu-chia analyses a wide range of economic data to show how and why Taiwan made a transition from an economy with a high economic growth rate and low unemployment to one with a low growth rate and moderate levels of unemployment. Lin cites a combination of both economic and political factors to explain this transformation, and views the year 2000 as the turning point between the two eras. Although his verdict on Taiwan’s economic performance is quite pessimistic, he does offer several suggestions on how to tackle these challenges, such as adjusting energy policies and improving regional economic integration. This leads logically to Liu Da-nien’s chapter, which focuses on how Taiwan can increase its Asia-Pacific regional economic integration. Liu also offers an analysis of Taiwan’s economic development over the long term and reaches similar critical and pessimistic conclusions to those outlined in the previous chapter. In addition to external challenges such as changes in US policies on regional integration, Liu attributes blame to Taiwan’s limited success in signing free trade agreements. He suggests a range of measures that Taiwan should pursue to enhance its economic integration, such as industrial upgrading and diversification. He is also at pains to emphasise that integration will only be possible in the context of stable cross-Strait relations.
While the analysis provided by Lin Chu-chia and Liu is set in the context of long-term patterns of economic change and challenges, Syaru Shirley Lin’s chapter focuses more exclusively on current developments – in particular, the challenges which Taiwan now faces as a country caught in the high-income trap. She analyses the limited success of both the Ma and Tsai administrations in addressing the economic challenges underlying this phenomenon. She argues that Taiwan is in a double bind, which it can only escape by adopting policies that prioritise economic growth. But she also stresses the need for Taiwan to maintain its democracy and identity in the face of China’s more assertive polic...

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