After over a century of relations with the Republic of China (ROC), relations that predated the ROC’s relocation to Taiwan, Panama announced it will switch diplomatic relations to the People’s Republic of China (PRC), thus leaving the ROC (Taiwan’s official name) with formal recognition with only twenty countries. Panama’s switch has been predicted for some time (see here and here), especially after the end of the so-called diplomatic truce between Taiwan and China following Tsai Ing-Wen’s election in 2016 and China’s investment in Panama (see here and here). But what does this mean for Taiwan?

Taiwan is particularly vulnerable to losing its formal diplomatic relations as a country can recognize either the ROC (Taiwan) or the PRC. Whereas the Cold War incentivized many anti-communist countries to recognize the former, the end of the Cold War and China’s own economic and political rise make foregoing relations with the most populous country difficult. With the exception of the Holy See (Vatican), few countries recognizing the ROC could be said to have ideological rationales behind the maintenance of the formal relations, with most the states relatively poor countries in need of international assistance. While both sides of the Taiwan Strait have been criticized for engaging in “checkbook diplomacy,” the number of countries that could potentially play this game — offering formal recognition in exchange of aid — at best today numbers a few dozen. Nor does the aid from Taiwan necessarily aid Taiwan in the long-run. A study of diplomatic recognition from 1950-2007 found that as a country’s exports as a percentage of GDP increased, they were more likely to recognize China over Taiwan. In other words, Taiwan’s aid, if put to good use, potentially hastens a country switching recognition to China.

Formal diplomatic relations reaffirms Taiwan’s claims to sovereignty, but does little to protect that sovereignty on the global stage. None of the countries with formal relations provide any military security to Taiwan in the event that China were to force its claims to the island. Some, such as Tuvalu and Nauru, both with under 11,000 inhabitants, are politically insignificant in international relations save their seat in the U.N. General Assembly and their potential saliency in cross-strait relations. Trade with these countries is also relatively limited.

Although it may not be domestically popular for the Taiwanese government to lose diplomatic relations, there is little that Taiwan can realistically do in the short-term. A return to checkbook diplomacy is at best a short-term response limited to a handful of poor countries and discourages deeper substantive relations. Furthermore, a growing China appears simply willing to offer larger enticements. Rather, than seek out diplomatic gain after losing Panama, Taiwan should emphasize strengthening unofficial relations. Relations with the U.S., the European Union, and Japan are crucial not only for the country’s continued security, but for economic growth. Similarly, enhancing economic opportunities with India, itself concerned about a rising China, may provide greater benefits to both sides even if formalized relations never occur.

Taiwan’s most prominent international supporter, the U.S., recently reiterated its commitments to defending Taiwan against forcible integration by China, while continuing with the official acceptance of the “one China” policy. President Donald Trump has also challenged China’s hegemonic designs in the South China Sea by having the U.S. Navy conduct Freedom of Navigation Operations. The Russian state sponsored news agency Sputnik claimed that Panama’s recognition of China instead of Taiwan amounted to a repudiation of U.S. actions in Latin America: thus, revealing that U.S.-Taiwan relations could become a weathervane for understanding U.S. willingness to support other international allies.

India’s relationship for Taiwan has also focused on people-to-people contacts, with a focus on trade and investments, which allows India to maintain its official commitment to the One China policy. A position comprehensively articulated and justified by Prashant Kumar Singh, a China expert in the official Institute for Defense Studies and Analysis in 2014. Indo-Taiwanese trade, amounting to approximately US$5 billion in 2016, recently merited the establishment of a desk by Taiwan’s Ministry of Economic Affairs within the Taipei Economic and Cultural Office in New Delhi. Recent investments by major Taiwanese companies, such as Foxconn’s planned acquisition of land in the Jawaharlal Nehru Port Trust’s Special Economic Zone near Bombay, underscore the mutually beneficial nature of such ties.

As indicated by U.S. and Indian relations with Taiwan, which are strong and strengthening respectively, the loss of Panama may or may not lead to others in Central America following suit, but it would be foolish for Taiwan to return to any form of checkbook diplomacy. Rather, greater efforts should be spent on developing ways that deepen Taiwan’s informal relations, relations that provide broader avenues for Taiwan to assert itself on the global stage.

Editor: Edward White