India-Taiwan Cooperation Can Benefit Both Countries

This submission features a perspective written by Ritvik Bordia, a high school senior. Thanks to edits by Dr. Jerry Blaney Jr. at the Ethical Culture Fieldston School in New York for working with students interested in Taiwan.

In 1721, the British Board of Trade told the King of Britain, “Having no manufactories of their own, their … situation will make them always dependent on Great Britain.” This was in reference to the American colonies, who, at the time, were exporting raw materials to Britain and importing the latter’s manufactured goods. 

The British Board of Trade weren’t the only ones to realize how this situation disproportionately favored British interests. Alexander Hamilton, a “founding father” of the American economic system, also saw the consequences of this relationship for a newly-independent United States of America. He advocated for intentional governmental support to foster key industries crucial for economic growth, thus allowing for sustained growth in those high-value products that previously came from Britain. The policies advocated by statesmen like Hamilton not only ensured the sovereignty of the United States, but also allowed America to rapidly become one of the world’s largest economic powers. 

Another of Britain’s former colonies faces challenges to the integrity of its independence: India. Yet, unlike the United States, the threat does not come from its former colonizer thousands of miles away. Rather, it comes from its powerful neighbor, China. India has been trying to reduce its dependency on Chinese goods for some time. As the global economy shifts into the Fourth Industrial Revolution (4IR), breaking this dependence is particularly important for India’s booming technology industry — much like what Hamilton advocated for the US manufacturing sector centuries earlier at the dawn of the first industrial revolution. India has one of the largest technological sectors in the world, second only to China. This has created intense competition with China. Naturally, the latter has employed cutthroat methods to gain primacy in the technology industry to ensure its global dominance of this increasingly crucial market. 

Any answer to this situation must offer India a better alternative to offset any potential losses from a shift away from China. There is one specific country that arguably could play a crucial role: Taiwan. Beyond the fact that both countries share the same democratic principles, India and Taiwan also recognize the strategic importance of each other in the backdrop of Asian geopolitical developments. But most importantly, there is a very natural and strong symbiotic relationship between the technological prowess of India and Taiwan, one where they can learn from and complement each other. Clearly, given China’s sensitivity surrounding Taiwanese affairs, this partnership is not without risks. Nonetheless, this article will argue that the short-term and long-term benefits significantly outweigh any potential risks.

Technology services plus hardware 

The 4IR is the ongoing technological revolution automating traditional manufacturing and industrial practices using smart technology. Currently, 2.5 quintillion bytes of data are created daily — about 4 trillion books’ worth that, if stacked, would reach the moon and back. Every minute 500 hours of video are uploaded to YouTube, and estimates show over 6 billion smartphones in the global population. Experts predict that technological advancements of the 4IR will make around 70% of common jobs — such as factory work, fast food production, or other low-paying manual labor jobs — obsolete by the end of the 21st century. And we are just at the tip of the iceberg. As one technological sector advances, the entire industry evolves, spurring further development — and in ways that we cannot always foresee. At this point, with entrepreneurs launching rockets into orbit, not even the sky is the limit. 

What this means is that now there is a massive opportunity for any enterprising individual, company, or country to grasp. India has leapt at this opportunity, trying to leverage its existing technological expertise to build a massive industry equipped for the challenges and needs of the 4IR. Initiatives such as Digital India, which aims to provide high-speed internet to all parts of India, have been a driving factor behind the technological boom in India. In fact, India’s technology industry, pre-pandemic, was forecasted to grow 8-10% annually, making it one of the fastest growth sectors in India. However, Indian technological prowess lies predominantly in services, focusing on the Information Technology (IT) industry, which deals with the storage, retrieval, usage, and processing of information. Yet, while they are one of the world leaders in IT services and software, India has traditionally lagged in other areas of the technology, this includes — most importantly — semiconductors.

This is where Taiwan comes in. In particular, the Taiwan Semiconductor Manufacturing Company (TSMC) — the current leader of the global semiconductor manufacturing industry — makes Taiwan an ideal partner for India. 

As Ajay Sawhney, Secretary to the Government from the Ministry of Electronics and Information Technology, said at the Fourth Taiwan-India Industrial Collaboration Summit last October, “The current atmosphere in India is very conducive to electronic investments and partnerships. The government through various new schemes and policies seeks collaboration in its vision to position India as a global hub for electronic manufacturing not only for domestic but also for the international market.” TSMC fits perfectly into the puzzle piece of India’s technological industry, as the biggest gap for Indian tech capabilities lies in semiconductor manufacturing. 

Semiconductors are extremely important because they are the building blocks of almost all technological advancements, making machines faster, cheaper, and more efficient than the tubes and dials of older generations of computers. Advances in semiconductors allow advances in technology: today’s most advanced semiconductors, sized at three nanometers, are the reason hand-held smartphones exist. Thus, a TSMC manufacturing facility in India could result in a massive technological boom, boosting initiatives like Digital India and developing India’s communications infrastructure. 

Another potential benefit comes from the barren Indian deserts. Due to high demand and production shortages, TSMC has had to expand factory production by buying land, but much of this land in Taiwan is expensive and difficult to build on. In contrast, India has a surplus of land which is being inefficiently used. For example, the Rajasthan desert, which is not suitable for cultivation, may very well be a great place to set up a TSMC manufacturing factory, as long as the TSMC builds sufficient infrastructure – including supplying the necessary water for the factories to operate – and suitable accommodations for employees. This would not only help the Indian economy by providing jobs for many impoverished Indians, but it would also help TSMC — and the companies that may follow — by allowing increased growth with smaller long-term costs. 

Act East Policy plus New Southbound Policy

Such a trade relationship can be easily accomplished due to the overlap between India’s Act East Policy (AEP) and Taiwan’s New Southbound Policy (NSP). The NSP sets out to develop ties with the Indo-Pacific and South Asian regions to counteract Taiwan’s economic dependency on China, and India is one of the largest potential partners. In fact, in 2018 after the launch of the NSP, India-Taiwan bilateral trade grew an astonishing 27% to $6.3 billion. This growth was furthered by India’s own AEP, which aims to counteract the strategic influence of China specifically by cultivating economic and strategic relations with Southeast Asian countries such as Taiwan. In other words, the AEP and NSP have a shared goal and a shared threat, making India and Taiwan the near-perfect trading partners. 

In fact, India-Taiwanese relations have drastically improved, in large part because of an increasing strategic and economic overlap. During COVID-19’s surge in India, Taiwan joined the array of countries rushing to provide India with supplies to combat the virus. Foreign Minister Joseph Wu tweeted, “These oxygen concentrators & cylinders are love from Taiwan. More help for our friends in India is on the way. #IndiaStayStrong!”, demonstrating an encouraging future for bilateral trade between India and Taiwan. Interestingly, while India willingly accepted supplies from Taiwan, it did not do so from China. This is not to be confused with consumer demand; while India did have incredible trade with China during the COVID-19 outbreak, most of the trade occurred on a commercial basis. Politically, the Indian government, despite the pandemic hardships, refused supplies from China while accepting them from Taiwan, demonstrating a clear shift in policy to cultivate Taiwan as a better alternative to trade versus China. 

Another overt example of India’s shift away from China and towards Taiwan lies in the Milk Tea Alliance. The Milk Tea Alliance started as a meme that pitted Chinese nationalists against young democrats in Thailand, Hong Kong, and Taiwan. All three have had their issues with China, and the youth within these areas started protesting and boycotting Chinese goods and services in retaliation to China’s flexing of its increasing power and influence. In October 2020, the partnership between India and Taiwan was tagged as a part of the Milk Tea Alliance by Taiwan’s envoy to the U.S. Hsiao Bikhim. This was in response to Tajinder Pal Singh Bagga, the BJP’s spokesperson, who demonstrated support on Taiwan’s 109th Republic of China National Day by putting up signs congratulating Taiwan near the Chinese embassy in New Delhi. He then tweeted, “As an Indian I still stand with One China, 1 Taiwan, 1 Tibet, 1 HongKong, 1 Xinjiang” to further demonstrate his support and beliefs. 

What about China

Because of this and more, China views bilateral developments between India and Taiwan with great suspicion. On October 15th, without celebration of any specific event, President Tsai posted an image of Indian food and chai on Twitter. This post received over 40,000 likes and many warm responses from Indian accounts. In response, Ji Rong, a spokesperson for the Chinese Embassy in New Delhi, said, “We urge relevant Indian media to adhere to the correct position with regard to the significant core interests of China’s sovereignty and territorial integrity”. He also added that Indian media “should not provide ‘Taiwan independence’ forces a platform, so as to avoid sending the wrong message”. 

Concerns arising over Beijing’s reactions, made more urgent by passive-aggressive responses like Mr. Ji’s, have dampened the scale and pace of collaboration between India and Taiwan. For the latter, the risk comes in the form of military threats from the Chinese regime, which is hostile towards any developments which reaffirm Taiwan’s international standing as a sovereign state. 

For India, the risk lies in border disputes along the Sino-Indian border. Mêlée fighting has broken out along these borders more than once, some skirmishes causing over 60 casualties. While there is peace along the borders at the moment, tensions continue to stay elevated. Because of this, economic ties between India and China have come to a stubborn standstill, in fact decreasing slightly over 8% from 2017 to 2020. 

More significant than any short-term conflicts between New Delhi and Beijing is the larger geopolitical context that India cannot ignore. Most significantly, the infamous ‘String of Pearls’ sets out to establish Chinese military presence along various maritime choke points in the Indian Ocean. This, together with the China-Pakistan Economic Corridor (CPEC) and China’s One Belt One Road (OBOR) Initiative — both of which are infrastructure development projects in locations near India — could encircle India and threaten its power projection, trade, and territorial integrity. Other Chinese initiatives such as the presence of a Chinese naval base in Djibouti, which could block India’s access to the Suez Canal and cut off trade with European markets, similarly put serious obstacles to India’s ability to pursue its political and economic interests beyond the Indian Ocean. If China is able to successfully impose its presence in these places, India would be forever relegated to a second-tier power, dependent on China for trade. 

India has a way to mitigate the risk from China: multilateral trade. What this would mean is that multiple countries would be involved in the Taiwan-India partnership; the more countries involved, the harder it would be for China to retaliate without suffering repercussions. One example of this type of trade deal is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). India and Taiwan have both demonstrated interest in joining the CPTPP; in fact, India recently struck a deal with the US, Japan, and Australia to provide COVID-19 vaccinations around Asia while also pledging a climate initiative together. 

Such multilateral avenues can be pursued for other forms of collaboration. Tellingly, China recently applied to become a part of the CPTPP to preempt Taiwan’s own application, despite the fact that the CPTPP was originally created to counter China’s massive economic clout, and that China is far removed from the free and transparent principles on which the CPTPP is founded. China recognized that if Taiwan became a part of the CPTPP, Taiwan would become less reliant on Chinese trade — one of Beijing’s points of leverage against Taipei. By offering the bigger prize of China’s involvement, China could block any moves to consider Taiwan, regardless of whether or not the CPTPP accepts China as a member. Regardless, Taiwan still applied, and has received a much better response from members than China. As pointed out in the New Delhi Times, “Most say that Japan, India, the United States, Taiwan, Canada, and a number of other nations with the rule of law joined in the CPTPP, remain the best trade option in the Asia Pacific.”

In the end, India has made an overt shift away from China and has demonstrated support for strengthening relations with Taiwan. In his opening remarks, Secretary Sawhney said, “We are at the cusp of very exciting times in the India-Taiwan partnership. The global wings of trade dynamics present an opportune window for leapfrogging India-Taiwan industrial relations to the next level.” The economic and geostrategic overlap between India and Taiwan, created by TSMC’s prominent presence and the AEP and NSP, far outweigh the potential risk created by irritating Beijing. While COVID-19 has impacted some of the dynamics, the bottom line hasn’t and won’t change: China is and will continue to be a substantial threat to Indian interests. India needs to look beyond China and boldly pursue partnerships with countries that provide viable economic substitutes, the most notable being Taiwan.