Competition between the United States and China is often framed, in the media, in military terms. But recent developments show this conflict revolves around economics, which has important implications for Taiwan.

As Taiwan’s economy is intricately linked to that of the two world powers, there has been much discussion of the economic benefits Taiwan can expect to reap, from the moving of supply chains away from China to the critical role of Taiwanese semiconductors during a global shortage. Taiwan, however, must not be preoccupied with the potential bounty to come, but rather concentrate on reforms that will make it resilient against the vicissitudes of world politics.

The Background: Economic Security Is National Security

“Economic security is national security,” reads the U.S. 2017 National Security Strategy. These exact words were repeated in the U.S. Department of Commerce’s 2018-2022 Strategic Plan, in Biden’s foreign policy address during his presidential campaign, and in the March 2021 Interim National Security Strategic Guidance. The idea clearly has bipartisan support. And while the concept of economic security is not new, it has gained traction, largely due to China’s growing economic (and, subsequently, political) influence on every continent.

But what does the U.S. mean by economic security? A RAND report supported by the Department of Defense defines it as “the ability to protect or advance U.S. economic interests, shape international interests to American liking, and possess material resources to fend off non-economic challenges.” That is, the capacity for the U.S. to pursue its economic and strategic objectives, under a rules-based order which it helped construct, unrivaled. Today, China is one of the greatest challenges to that capacity and order.

China’s blueprint for hegemony — or what it calls “national rejuvenation” — is largely oriented toward attaining economic supremacy. In 2015, China unveiled “Made in China 2025” (中國製造2025), a 10-Year action plan that aims to transform China into a high-end manufacturing powerhouse comparable to, and possibly surpassing, the U.S. and other Western powers. The plan focuses on several key sectors, including biomedical equipment and energy-saving cars. Last year, China also revealed “China Standards 2035” (中國標準2035), a plan that hopes to make it the standard setter for emerging technologies in fifteen years.


Photo Credit: Reuters / TPG Images

An aerial view shows a replica of the Eiffel Tower and residential buildings at the Tianducheng development in Hangzhou, Zhejiang province April 8, 2015.

The U.S. is concerned for at least two reasons. First, China’s industrial strategy is driven by nationalistic concerns, often in disregard of international law and norms. Its pervasive infringement of intellectual property (IP) rights is a case in point: a 2013 report by The National Bureau of Asian Research suggests that Chinese IP theft accounts for approximately 50% to 80% of the problem worldwide. Second, these ambitions pose significant security risks. Not only is data stored in China easily accessible to the Chinese Communist Party, but all Chinese companies contribute (willingly or not) to the People’s Liberation Army’s efforts to become a “world-class military by 2049” via the process of military-civil fusion. The Biden administration recently blacklisted seven civilian supercomputer entities for assisting China’s military modernization and development of WMDs.

The U.S. response to China is twofold. First, it will invest more in its domestic economy to ensure that it remains competitive. In Blinken’s words, the U.S. must “engage China from a position of strength,” which he defined as “investing in American workers, companies, and technologies, and insisting on a level playing field.” This is particularly crucial after suffering economic contraction from the pandemic. Next, it will seek to unite allies and ensure that its rules and values prevail, rather than those of China. The Senate Committee on Foreign Relations’s bipartisan bill on China, the “Strategic Competition Act of 2021,” manifests this twofold strategy.

The Economic Implications for Taiwan

Concerns for economic security have deepened economic ties between the U.S. and Taiwan. The 2020 U.S.-Taiwan Economic Prosperity Partnership Dialogue was one response to these concerns. This dialogue signaled the U.S.’s desire to balance China in some strategic areas, notably by securing critical supply chains and developing transparent infrastructure. For this reason, the U.S. has taken steps to strengthen its relationship with Taiwan, a reliable partner due to its good governance and competitive advantage in areas such as semiconductor manufacturing. This has resulted in TSMC’s recent invitation to a virtual White House summit on the global semiconductor shortage and U.S. supply chain security.


Photo Credit: Reuters / TPG Images

A man works at a construction site of residential buildings in Taipei, Taiwan, February 19, 2021.

The Future for Taiwan

Many believe that Taiwan will profit from the U.S.-China strategic competition, but this understanding glosses over a much more complex reality. The profits accumulated by certain industries are spillover effects of great power competition, which is unpredictable. It would be both myopic and dangerous to think that they will persist in the long run.

The reason is simple: the U.S.-Taiwan-China relationship is not a zero-sum game in which China’s loss, for example, naturally translates to a gain shared by both the U.S. and Taiwan. Instead, Taiwan is better described as a third party whose utility depends crucially, but not entirely, on their strategic interaction. After all, Taiwan is not an economic substitute for China. Even if it pioneers in a few key industries, it cannot replace China’s manufacturing capacity.

The U.S. has other priorities, too. The aforementioned economic partnership dialogue is a small piece in the U.S.’s grand scheme of assembling an alliance of democracies to balance China. In Asia, it appears to be working with Japan to provide an alternative to the Belt and Road Initiative. Brussels, too, will never risk the relationship with the EU’s largest trading partner, criticisms of China’s human rights record aside.

That is not to say that Taiwan is unimportant or that one should dismiss the efforts of those who have worked tirelessly to broaden Taiwan’s international space. Rather, this realization should serve as a reminder that Taiwan cannot plan to coast on the world’s disillusionment with China. It must also, to invoke Blinken, engage the world from a point of strength. To this end, it should dedicate resources to building a robust, fair, and moral economy that can help it withstand the highs and lows of international affairs.

Among many worrisome problems like low and stagnant real wages and water shortages, one issue is worth highlighting. An aging society, Taiwan will increasingly rely on migrants to support its economy. It needs to foster a safe and inclusive environment for foreign workers, regardless of occupation and nationality, and see that people who wish to live in the country feel welcome. Going forward, it cannot turn a blind eye to its problems with racism and human rights. Without advancing the rights of migrant fishermen, for instance, whose treatment was listed as forced labor by the U.S. Department of Labor and other European agencies, Taiwan will have a slim chance at a bilateral trade agreement with the United States.

Taiwan’s Strength Lies Within

A vibrant democracy that is constantly progressing, Taiwan is an inspiring country with an amazing story to tell. However, as it strives to strengthen ties with other countries, it must not believe that it is a spectator to world events, hoping for windfall gains to forestall necessary economic and social reform. Taiwan is in a position to start and continue this process from within.

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TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)

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