China Changing the Status Quo in the Taiwan Strait: US Report

The U.S.-China Economic and Security Review Commission (USCC) just released its newest annual report on China. In the report, a section is dedicated to analysis of Taiwan policy as the commission continues to be wary of the Chinese Communist Party (CCP)’s intention in the region. This year, USCC’s review of Taiwan policy is primarily marked by an increased focus on CCP’s interference in Taiwan’s election, as well as Taiwan’s security.

Summary of Key Findings

This year’s USCC report refers to several new topics. The USCC states its awareness of Chinese election interference efforts through traditional and social media and other pressure campaigns. The commission noted that the DPP is becoming a target of CCP influence operations, and efforts are being made to undermine trust and circumvent the authority. Beijing has escalated “diplomatic, economic, cultural, and political warfare” on Taiwan and influenced the 2018 election.

On conventional security issues, the commission expressed concerns over the crossing of People’s Liberation Army (PLA) jets over the middle line of the Taiwan strait. The crossing is seen as a major provocation and an escalation of military tension on Beijing’s side. Increasing defense spending gap is also noted, as per previous reports, as a threat to any military balance that remains between the two sides. Arms sales made by the Trump administration, such as the sale of F-16V aircraft and M1A1 Abraham tanks, however, are noted by the commission as “significant steps” in efforts to support Taiwan.

The debate around “one country, two system” by presidential candidates and political parties is noted by the commission. Situations in Hong Kong is cited to have influenced this debate.

US Priorities

The report included several sections highlighting key US priorities in Taiwan. Since 2019 marks the 40th anniversary of the Taiwan Relations Act (TRA), the report included it along with the Three Communiques and President Reagan’s Six Assurances as the cornerstones of the “U.S. Government Taiwan Policy Framework.

The commission takes notes of Chinese influence efforts on Taiwanese media in helping Kaohsiung Mayor Han Kuo-yu, now presidential candidate, get elected in 2018. Articles by Financial Times and Reuters are cited as key sources indicative of China’s influence efforts, as well as an article in Foreign Policy explaining Chinese influence.

Progress is noted in Taiwan’s military development, including the development of indigenous submarine and upgrade of F-16s. The imposition of harsher penalties on espionage is also noted as a means to curb China’s infiltration into various sectors of civil society, such as visits by retired generals and the leaking of classified information to China. Significant progress has been made between the US and Taiwan on military cooperation, such as the meeting between national security advisors David Lee and John Bolton, fighter sales, frequent transits by US ships in the Taiwan strait, port calls by US navy-owned research vessels, and the visit of a joint delegation between the Federal Bureau of Investigation and the US Indo-Pacific Command.

The domestic debate around the “1992 Consensus” is seen as one without a consensus between the two major parties, the DPP and the KMT. The report notes a growing solidarity with Hong Kong among the Taiwanese society. Nonetheless, Beijing continues to take steps to pressure Taiwan’s diplomatic allies and participation in international space.

Taiwan’s dependence on China for more than a fifth of its total trade is noted by the commission. The Taiwanese economy remains strong during the Tsai administration. Dependence of US firms such as Apple by the Taiwan-China supply chain is at over 90%, and this interconnectedness between the three can be a vulnerability to Taiwan. Taiwan, situated in the middle of the high tech supply chain, faces uncertainty as the US tariffs on China also hurts Taiwanese firms.

“The island may become collateral damage if the next round of proposed U.S. tariffs—set to take effect on December 15—disrupts consumer-electronics supply chains in which Taiwan companies play an important role,” the report noted. The Tsai administration is seen to have encouraged investors to divest from China in response to on-going policy changes like these.

The Tsai’s administrations policies, such as the  forward-looking infrastructure, new southbound policy, and domestic investment incentives are seen as reasons behind strong growth. The 5+2 Innovative Industry Program, which focuses on boosting high value-added sectors of Taiwan’s economy, is viewed as successful as machinery export, a key target of the program, grew more than Taiwan’s GDP growth in 2018.

Despite so, China continues to be able to economically pressure Taiwan. On the other hand, US-Taiwan trade talks continues to stall since 2016 despite a mandate from the Trade and Investment Framework Agreement (TIFA).

The commission, in sum, sees Beijing to be the primary party threatening cross-strait status quo and peace, in direct contradiction with Beijing’s claim that the DPP administration threatens peace. The report, in conjunction with other US government documents such as the Indo-Pacific Strategy Report, suggests that the US increasingly sees China to be a challenger of US interests and commitment to Taiwan. Taiwan’s strategic placement in the First Island Chain and  the high-tech supply chain makes it highly crucial to US interests.

“Taiwan is a beacon of democracy, human rights, and the rule of law in a region where those values and institutions are under increasing attack,” the report noted, echoing language used by President Tsai Ing-wen. The report concludes by asserting that if Taiwan is to be forcibly placed under a “one country, two system” situation under Beijing, it would not only hurt US interests, but also “deal a crippling blow to the progress of democratic values and institutions in the region.”

A recommendation is made to “raise the threshold of congressional notification on sales of defense articles and services to Taiwan to the highest tier set for U.S. allies and partners.” This would put Taiwan as a partner as important as countries such as members of the North Atlantic Treaty Organization (NATO), NATO member states, NATO, Japan, Australia, South Korea, Israel, and New Zealand, and make it easier for Taiwan to purchase arms from the US.

The commission recommends to allow both the American and Taiwanese armed forces to wear their uniforms when making a visit to the other. The commission also calls for the Director of National Intelligence to prepare a report on the impact of a Taiwan contingency situation on the high-tech supply chain, and directs the Department of Defense to assess the impact of China’s year 2035 military modernization goals. The PLA hopes to modernize its military by year 2035.

Shifting Attitudes

Overall, attitudes in the 2019 paper has shifted to become more assertive and aware of Chinese aggression beyond just conventional security. Though previous commission reports released during the Ma administration had a hint of optimism as cross-strait peace is maintained, there is little doubt that there now exists a bipartisan view of China as a threat to Taiwan and the US. Focus is shifting to the security of Taiwan and the maintenance of democratic values.

Compared to the Taiwan section of previous USCC reports, the 2019 version has significantly less focus on trade. Whereas USCC reports during the Ma administration from 2012 to 2015 focused on how increasing economic integration in trade will affect the US-Taiwan relations, reports after 2016 emphasized more heavily China’s tension and animosity towards the DPP administration.

As TIFA talks continue to stall over the issue of the use of ractopamine, no new progress has been made since 2016. Ractopamine is a substance banned in Taiwan but used by American farmers to boost the leanness of meat. The issue is a sensitive domestic issue for the DPP, who owes much of its traditional voter base to farmers. Reluctance to lift the ban on the use of the substance has led to TIFA talks stagnating.

What this means for Taiwan

Taiwan has certainly made progress in building ever stronger bonds with the US since the start of the year. 2019 marked not only the 40th anniversary of the TRA, but also two significant arms sales to Taiwan.

The US seems to appreciate much more the fact China sees one enemy and one friend in Taiwan’s two-party system. The cooperation between certain parties and entities in Taiwan with ties to the Chinese government is directly pointed out as an interference effort. This report takes note of Beijing’s support of KMT presidential candidate via methods it consider acts of interference.

This likely reflects on the KMT’s shift towards pro-Beijing attitudes and a lack of effort in connecting with Washington, a stark contrast to the success the DPP has had in conducting liaison work in Washington via its DC mission. In comparison, the KMT has very little presence in Washington D.C., and its view is rarely represented in discussions relating to Taiwan and China.

Upgrades to the level of military and security cooperation between Taiwan and the US seems likely based on the recommendations of this report. This will make arms sales to Taiwan easier and more regular, and pave the way to more public exchanges between the Taiwanese and US military. Symbolic restraints to US-Taiwan relations based on deference to China may be increasingly reviewed and lifted so that Taiwan is treated more like an independent and sovereign state.

All in all, this year’s USCC report shows more commitment to the maintenance of Taiwan’s democratic values and independence in the context of Chinese encroachment. Several references to the works of journalists in Taiwan is an encouragement for those conducting independent investigations on Chinese interference efforts.

The framing of the report is overall a positive indicator of strengthening US-Taiwan relations.

The USCC is a bipartisan congressional commission that advises Congress and the administration on China policy. The commission publishes a report on China and relevant parties like Hong Kong and Taiwan annually.