May 18, 2016

Seeing Strait

The Future of the U.S.-Taiwan Strategic Relationship

By Harry Krejsa

In January, Taiwanese voters took to the polls in one of Asia’s most advanced democracies. In the island’s third democratic transfer of power, a unified government controlled by the opposition Democratic Progressive Party (DPP) was elected for the first time. Driven by mounting anxiety over the economy, voters seem to have associated the sagging economic outlook with outgoing President Ma Ying-jeou and his Kuomintang Party’s (KMT) policies of cross-strait rapprochement. The victorious DPP, while promising to largely maintain the status quo, takes office with a mandate increasingly skeptical of China. 

As new American and Taiwanese governments assess their priorities for the coming years, U.S. policymakers must be aware of the trends at play in Taiwan and their implications for the two countries’ strategic and economic relationship. The United States should continue to support Taiwan’s defense from conflict or coercion, but that will require a more nuanced approach than occasional boilerplate arms sales. U.S. policy should seek to shift Taiwanese strategic concerns from hardware prestige to human capital prestige, buttress Taiwan’s defensive capabilities with smart investments rather than just expensive ones, and — crucially — back Taiwan’s efforts to integrate more deeply into the international marketplace. By doing so, Taiwan may be able to improve its deterrence against Chinese threats, get its economy growing again, and achieve greater international visibility than it now enjoys — all without sliding from China-skepticism to China-hostility. 

President-Elect Tsai Ing-wen, seen here during a campaign rally, led the Democratic Progressive Party’s return to power in Taiwan’s 2016 election. Dr. Tsai and her party are taking power just as economic and political headwinds spell trouble for cross-strait relations.

Recommendations for Protecting U.S. and Taiwanese Interests

Taiwan’s future will likely not rise and fall with its submarine fleet, but with its economy. The Republic of China’s strength — especially while under the U.S. defensive umbrella — has long been at least as much a factor of its economic and political vitality as it has a factor of its hard power. As mainland China continues to develop and modernize, it will grow increasingly impractical to build a Taiwanese military capable of prolonged, direct confrontation with its neighbor across the strait. Taiwan should continue to focus on asymmetric deterrence while turning its attention to its other measures of national power. 

U.S. policymakers should prize cross-strait stability but also support an affirmative vision of Taiwan’s future. In short, the United States should steer Taiwan away from hostility with its neighbor and toward integration with the region. This will include continued arms sales and improved military capabilities, but with an emphasis on the cheap and asymmetric options Taiwan needs and away from prestige projects that hold little value beyond cross-strait provocation. Most important, however, the United States should help Taiwan find the economic hedges it is now seeking. Though TPP is still far from implementation, if it takes effect as scheduled the United States should wholeheartedly support Taiwan’s accession. 

Encourage A Practical Focus for Taiwan’s Military

In Hardware, Pursue Potency, Not Prestige

In the event of conflict with China, Taiwan faces threats that will be relatively conventional to counter in nature, if admittedly not in quantity. China’s overwhelming conventional ballistic-missile complement threatens not only any target in Taiwan, but many U.S. partners and assets in the region.1 Additionally, large numbers of Chinese aircraft are based within unrefueled bombing range of Taiwan, substantially easing the PLA’s logistical burden for launching numerous and frequent offensive sorties against the island.2 Though the PLA Navy is still building out its truly blue-water navy, Chinese warships and amphibious landing craft need only travel 90 miles to reach the destination of most of their war plans and simulations. These capabilities are certainly daunting, but to impose unacceptable costs on Chinese aggression, Taiwanese military power need not be exquisite — only survivable. 

In U.S. Trade, Taiwan Punches Far Above Its Weight

RankCountryTotal TradePopulation
7United Kingdom$7.6 billion64.1 million
8France$5.5 billion66.6 million
9Taiwan$5.4 billion23.4 million
10India$5.2 billion1.3 billion
11Italy$4.4 billion61.9 million

Table Source: U.S. Census Bureau (January 2016); and CIA World Factbook (July 2015 estimate)

Fundamentally, the United States should use arms sale negotiations to encourage Taiwan toward a cheaper, more contextually appropriate defense strategy. Though a larger or more advanced complement of fighter jets would enable visions of defensive dogfights, Taiwan would get more bang for its buck from concrete. The United States should foster this kind of pragmatic cost-benefit analysis with defense investments like the following:

  • Fund and equip the hardening of critical infrastructure. Taiwan has some of the most robust and hardened airbases in the Asia-Pacific; the United States should build on this institutional knowledge and encourage the hardening of both military and civilian infrastructure that must remain functional during a cross-strait conflict.3 
  • Sell platforms (and tactical visions) that make use of Taiwan’s already formidable geography. The island’s highly mountainous landscape is ideal for embedded, dug-in forces operating anti-ship missiles, long-range guns, and surface-to-air defenses that could withstand tremendous aerial assault and still threaten Chinese naval assets.4
  • Encourage investment in advanced sea mines in particular. Combined with quickly advancing sea mine capabilities and firsthand knowledge of the beaches most likely to be targeted for amphibious assault, Taiwan has a feasible framework for making a Chinese invasion cost-prohibitive.5
  • Encourage Taiwan to look beyond submarines and invest in a more cost-effective maritime defense. The Australian navy’s example should be a cautionary tale; though submarines are certainly asymmetrically effective in the abstract, it is unclear they would be worth both the opportunity cost of diverted research efforts and capital investment better spent elsewhere. Beyond cost is also the danger of destabilization. China would likely greet a renewed or expanded Taiwanese submarine fleet with accusations of troublemaking and could respond forcefully. Australia’s decision to build submarines (or acquire them from abroad) did not carry the same risks of geopolitical blowback, and Taiwan has more practical and cost-effective options for maritime defense. If Taiwan’s preeminent military concern is staving off invasion long enough for help to arrive, sea mines and conventional munitions are likely a wiser investment.

The economic and strategic stability that has defined Taiwan’s Pacific existence these last several years appears to be approaching a period of revision.

Concrete, mines, missiles, and mountain-borne gunnery are cheap, asymmetrically effective, and already a part of the cross-strait military paradigm. Building out these capabilities further would not only be a more cost-effective and potent use of U.S. security cooperation, but be unlikely to provoke a deterioration of the strategic status quo. Rather than provide exquisite air power or facilitate an indigenous submarine program, the United States should encourage (and potentially sell) capabilities and platforms more suited to the Republic of China’s highly specific needs. 

Focus on Warfighters More Than Weapons

Instead, the United States should assist Taiwan in shifting military prestige away from weapons and toward warfighters. Many young Taiwanese do not see a career in the armed forces as a prestigious or desired path. This has helped drive the difficulty Taiwan’s military is experiencing as it transitions to an AVF, with recruitment numbers falling far below original goals. The United States has a trove of experience managing the transition from conscription to a professionalized AVF and should lend its expertise to Taiwan so that it can maintain a credible deterrent to Chinese coercion. 

  • The United States should consider developing institutional capacity-building partnerships with the Taiwanese military and Ministry of National Defense focused on the transition to an AVF. The Ministry of Defense Advisors program and the Defense Institutional Reform Initiative serve as models for embedding subject matter experts inside foreign defense organizations to collaborate on organizational improvements. Though historically focused on building ministerial capacity through fundamental process improvement in relatively weak states, these programs (or a similar one) could prove an ideal platform through which to provide AVF transition support. 
  • Use Track 1.5 and Track 2 dialogues to further share lessons learned from those who facilitated the United States’ own all-volunteer transition. The considerable turmoil facing the U.S. defense establishment during the 1960s and 1970s offers valuable lessons for Taiwan’s own troubled civilian-military relationship. Vietnam-era public discontent, concerns over equity in conscription, and the Army’s own issues among draftees eventually gave significant institutional momentum to an all-volunteer transition. Retired civil servants and service members who oversaw the transition would have many insights to offer their Taiwanese counterparts in service now.6
  • Focus future potential U.S. engagement, exchange, and training efforts on the novel capabilities an AVF would require — especially social science research. A professionalized volunteer force requires significant human capital investments that are likely underdeveloped or totally absent in a conscription-based service. The U.S. transition to an all-volunteer force required new recruitment and retention efforts to go far beyond simple questions of salary and pensions to include significant investments in researching marketing and advertising strategies, aptitude testing, education incentives, and professional development and career planning, all in an effort to transform military service from a compulsory experience to an elite and desirable vocation. The United States could tailor institutional support, exchange, or training efforts to emphasize these new lines of effort that are likely foreign to a traditionally conscription-based force, including the quantitative analysis required to constantly test, evaluate, and adjust course as needed. 
  • Place these warfighter-focused initiatives on the same diplomatic level as conventional arms sales. U.S. policymakers should use similar protocols for the previously mentioned initiatives that they already employ for traditional arms sales to Taiwan, including formal congressional notification. This will signal to Taipei — and Beijing — that Washington views these efforts at warfighter and institutional capacity building as just as important as periodic arms sales. 

Members of Congress have expressed interest in funding renewed defense training and exchange with Taiwan.7 Targeted people-to-people engagement and training with the United States could not only improve the professionalism and prestige of the island’s military, but also its defensive power as measured by the human capital of its forces. A smarter, better-trained, and more committed force would be a more potent counter to Chinese threats and a source of pride for Taiwanese citizens, all without fundamentally disrupting the cross-strait strategic paradigm that exists now.

Average Taiwanese Wage and Quarterly GDP Growth, 1987–2015

As GDP growth has gradually declined, average wages have stagnated.

National Statistics, Taiwan

Provide an Economic Counterweight to China to Avoid an Economic Rejection of China

The narrative of the Taiwanese economy — one of a high-tech manufacturing powerhouse punching far above its weight in the global marketplace — has long been a key part of Taiwanese identity. As mounting economic anxiety has displaced that aspect of what it means to be Taiwanese, China-skepticism has crept back into the island’s political discourse. The recent election campaign — rightly or wrongly — linked KMT policies of closer ties to China with Taiwan’s sense of economic malaise and fear that it was becoming consumed by its neighbor’s overwhelming size. Without a return to growth and a sense of affirmative identity, Taiwan could become focused on an identity built largely in contrast to China — a development that could bring with it a worrying rise in tensions. 

Luckily, if TPP is ratified and goes into effect as planned — though still not a certainty — it could provide Taiwan both the pathways for growth and a form of recognition and international visibility on the world stage. TPP could have profound benefits for the island; exports of goods and services made up 74 percent of Taiwan’s GDP in 2012, and five of Taiwan’s top ten export destinations are first-round TPP parties.8

U.S. policymakers should support Taiwanese accession to TPP — first quietly and among its partners and countries most likely to be skeptical, and then publicly. 

  • Begin building the case for Taiwanese accession in regular talks. Taiwan joining TPP would represent a significant strategic and economic event, and U.S. partners and allies should not be caught off guard. Behind closed doors, U.S. diplomats and trade negotiators should make the United States’ potential interest in Taiwan’s accession clear, soliciting feedback and listening to concerns. Should TPP be lucky enough to be ratified and proceed to second-round negotiations, broaching the issue of Taiwanese accession should be no surprise. 
  • Reassure skeptical partners, especially those most likely to directly compete with Taiwan. Countries like Japan or the more analogously sized South Korea, have economies oriented toward the advanced manufacturing that Taiwan aims to boost by joining TPP. The United States must make clear how deeply Taiwan is already embedded into many high-tech Asian supply chains — already composed largely of existing TPP signatories. Further, Taiwan’s accession could both grow the overall high-tech manufacturing market while facilitating lucrative supply chain and capital efficiencies that would allow TPP members to better compete with China as it continues to move up the skills value chain. Given such reassurance, TPP members will be more likely to support a competitor’s accession and tolerate the geopolitical kerfuffle that comes with greater Taiwanese participation in international organizations. 
  • Encourage further economic liberalization ahead of a formal TPP candidacy. The domestic reforms necessary to be eligible for accession could be politically painful for Taiwan. Its agriculture and pharmaceutical industries, though small, are potent interest groups and the beneficiaries of many protectionist policies. Food and drug regulations, for example, can depart markedly from scientific evidence, following interest groups and sensationalized public sentiment, and the United States has been at the receiving end of many of these protectionist policies.9 Bilateral trade negotiations with a friendly country eventually seeking to boost Taiwan’s accession prospects, such as the United States, could serve as a “safe space” for Taiwan to feel out just how difficult the necessary reforms will be. 

Sunflower Movement demonstrators protest a contentious cross-strait trade agreement in March 2014. The movement came to define the economic anxiety and suspicion associated with President Ma’s policy of cross-strait rapprochement.

(Lam Yik Fei/Getty)

That said, Taiwan has a history of fraught trade negotiations with the United States that would have to be overcome for U.S. negotiators to fully endorse Taiwanese accession to TPP. U.S. policymakers should do everything they can to encourage such accession — whether it is helping other TPP signatories or candidates get to yes or finding the most politically palatable way to package liberalization reforms for the Taiwanese public. Success will be critical to ensuring that already-growing cross-strait skepticism does not eventually transform into cross-strait hostility.

The full report is available online.

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Endnotes

  1. John Page, “The East Asian Miracle: Four Lessons for Development Policy,” in NBER Macroeconomics Annual 1994, eds. Stanley Fischer and Julio Rotember (Cambridge, MA: The MIT Press, 1994), 219—282, www.nber.org/chapters/c11004.pdf.
  2. Ibid., 247. 
  3. Ibid., 234.
  4. Ibid., 262.
  5. “Taiwan,” CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html.
  6. Matleena Kniivilä, “Industrial Development and Economic Growth: Implications for Poverty Reduction and Income Inequality,” Industrial Development for the 21st Century: Sustainable Development Perspectives (2007), www.un.org/esa/sustdev/publications/industrial_development/3_1.pdf, 295—333.
  7. “Taiwan,” CIA World Factbook. 
  8. “Taiwan semiconductor output overtakes United States,” The China Post, October 29, 2007, www.chinapost.com.tw/business/2007/10/29/128610/Taiwan-semiconductor.htm.
  9. “Top Trading Partners - December 2015,” U.S. Census Bureau, December 12, 2015, https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html.
  • Harry Krejsa

    Bacevich Fellow, Asia-Pacific Security Program

    Harry Krejsa is the Bacevich Fellow at the Center for a New American Security (CNAS), working in the Asia-Pacific Security Program. His research areas include Chinese economic...

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