Given the interconnection of US-Taiwan relations with those of China, any progress in US-Taiwan ties is viewed by China as a direct challenge. Nevertheless, economic and trade connections between the United States and Taiwan have experienced significant expansion. The most recent illustration of this is the trade agreement signed by both countries last month, marking the first official trade pact between Taipei and Washington since President Biden’s inauguration and signifying a reinforcement of their economic and trade partnership.
I- The Development of US-Taiwan Relations
Relations between the United States and Taiwan have existed since 1978, when the United States announced it had severed diplomatic ties with Taiwan and formally recognized the People’s Republic of China as the only legitimate government. Nonetheless, the United States continued to have close unofficial ties with Taiwan, and in 1979, Congress passed the Taiwan Relations Act (TRA), which was regarded as the foundation for those ties.
As per the TRA, the United States promised to assist Taiwan in developing the necessary defense capabilities by offering the necessary defense goods and services. It did not, however, include a defense pact like those the US had with countries like Japan and South Korea. Instead, the US policy toward Taiwan was marked by “strategic ambiguity” regarding whether it would defend Taiwan in the event of an attack by China.
In 1994, the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States signed the Framework Agreement for Trade and Investment as a strategic framework for dialogue, which has resulted in Taiwan becoming an important partner for the United States in a wide range of fields, including trade, investment, health, semiconductors, and others. Taiwan hopes to improve relations with the United States through the Indo-Pacific Economic Framework for Prosperity (IPEF), which Biden announced at the 2021 East Asia Summit and which includes 12 countries with the goal of enhancing economic ties between the participants and containing China’s expanding influence.
II- Factors Influencing the United States’ Interest in Taiwan
The United States reevaluated its stance on Taiwan following the conclusion of the Cold War and China’s emergence as a global power in recent years. Several factors underline why the United States maintains a vested interest in Taiwan, including:
- Strategic Level: Although the United States is thousands of miles away from Taiwan, Washington has significant strategic interests in the Taiwan Strait in addition to its worries about the emergence of a regional hegemon, so Taiwan’s future will have an impact on the security and power of the United States. Taiwan is situated at a pivotal point in an island chain where the United States has established its presence, extending from Japan to the South China Sea through the Philippines. While the region fears a military conflict between the United States and China over Taiwan, if the United States withdraws from Taiwan, either explicitly or by abandoning its long-term policy towards Taiwan, China’s influence in the region would increase at the expense of the United States. As a result, the global order will take on a new shape, and the relative importance of regional and possibly global powers will shift.
- Economic Level: The United States’ interest in Taiwan is influenced significantly by Taipei’s economic success. Taiwan’s economy is based on a mix of technology, manufacturing, and services, and the island has been successful in luring foreign investment. Although there has been a recent slowdown in GDP growth, Taiwan’s economy has remained comparatively strong and stable despite significant pressure from China and the devastating effects of Covid-19.
The success of Taiwan’s economy can be attributed to its businesses, which produce nearly 70 percent of the semiconductors used in the world and 90 percent of the most advanced semiconductors. In the near future, if the world loses Taiwan’s production capacity, no other country will be able to fill the void, resulting in shortages of virtually every product containing technology, from smartphones to automobiles.
III- US-Taiwan Economic and Trade Relations
Unlike trade relations with other countries, US trade with Taiwan has been remarkably stable over the past decade. Taiwan is one of the top ten trading partners of the United States because of its significant influence on many different industries’ supply chains. With a value of US$46 billion, the United States was Taiwan’s third-largest export market in 2022 and its second-largest trading partner in terms of merchandise goods. The United States was also Taiwan’s second-largest export destination, with a value of US$75 billion. Taiwan is a major supplier of iron and steel, computer accessories, semiconductors, and marine engines to the United States, accounting for 21 percent, 20 percent, 16 percent, and 14 percent, respectively, of all imports.
On the other hand, Taiwan is an important market for US exports of commercial ships (28 percent), wood, glass, and plastic (11 percent), and military clothing (10 percent). Along with its exports of weapons to Taiwan, US crude oil is also in higher demand there as it makes up about 2 percent of all US exports. In terms of foreign direct investment, the US contributed 13 percent of all foreign direct investment to Taiwan, and Taiwanese investments in the US were worth more than $1 billion. To improve and broaden areas of economic cooperation and trade between the two countries, the US-Taiwan Economic Prosperity Partnership Dialogue was established in 2022. Recent relations between the two countries culminated in the signing of the first trade agreement between Taiwan and the United States, which will strengthen economic and trade ties between the two countries.
In conclusion, the US has frequently played Taiwan as a trump card to further its objectives and stifle China’s aspirations for expansion. On the other hand, Taiwan is seen by China as a rebellious province that must be incorporated into its territory. China therefore sees any strengthening of ties between the US and Taiwan as a negative development. As such, it is vehemently opposed to any improvement in relations between the United States and Taiwan, as it sees such progress as a direct challenge to China’s rights on the island.
