Over the past decade, Taiwan has lost its diplomatic partners at an alarming rate – 11 countries have switched recognition to the Peoples Republic of China (PRC), leaving Taipei with 12 partners.
Some have argued that Taiwan does not have the capacity to retain diplomatic relations with these countries or that they do not add enough to Taipei’s global position to be worth fighting for. On the contrary, official diplomatic partners are central to Taiwan’s existence as a sovereign entity, and the legitimacy they bestow in the eyes of other internationally recognized countries has significant implications for U.S. and Taiwanese efforts to deter the China from taking the island by force.
As argued in a new Atlantic Council report, a focused effort from Taipei and its Western supporters would support Taiwan’s partners’ ability and willingness to maintain diplomatic relations and prevent China from further undermining Taipei’s international legitimacy.
At present, seven countries in Latin America and the Caribbean, three in the Pacific Islands, and one each in Europe and Africa speak on behalf of Taiwan in the United Nations and support its inclusion in other international fora, which informal partners cannot or will not always do. The international legitimacy offered by formal relations is irreplaceable. Without these diplomatic partners, Taiwan is less likely to be viewed as a sovereign entity, opening the door for a permissive international stance toward any forcible action taken by China at unification.
Recent research by the Economist showed that Beijing is including language in bilateral and multilateral agreements that endorses China’s sovereignty over Taiwan and allows for “all” efforts to achieve unification, not precluding force. Beijing’s efforts to win over Taipei’s partners is setting the stage for possible unification, peaceful or otherwise.
Taiwan’s diplomatic partners serve as one piece of a larger puzzle maintaining deterrence across the Taiwan Strait. For good reason, much attention is paid to Taiwan’s capability gap with China. Yet deterrence depends not only on military capability to credibly defend or punish unification through force, but also Beijing’s perception that Taiwan and its security partners – most importantly the United States – are willing to come to Taipei’s defense. Importantly, this perception is not limited to the Taiwan Strait but extends across military, economic, and diplomatic domains. Taipei, the United States, and other informal partners, such as Japan and Australia, should emphasize their commitment to Taiwan’s international legitimacy and maintaining the status quo across the Taiwan Strait by competing more forcefully for Taiwan’s formal diplomatic partners.
Beijing has encouraged diplomatic switches from Taiwan’s former partners in large part by using economic inducements, the second and less appreciated tool of economic statecraft. Coercion often makes the headlines, as do the debt distress, corruption, and the environmental and social externalities of Chinese projects, most often associated with the Belt and Road Initiative (BRI). Yet developing countries continue to partner with Chinese firms and institutions, suggesting an unmet hunger for economic development. China’s economic engagement includes outreach, public diplomacy, and discourse power to sell Beijing’s vision of economic development and build a constituency supportive of ties with the PRC.
The promise of Chinese beneficence can be a powerful electoral or legitimating strategy for politicians and elites in developing countries. Not coincidentally, switches in recognition have often come around election time, including in El Salvador, Kiribati, Nicaragua, and Nauru. Politicians and elites in Taiwan’s diplomatic partners are aware of China’s economic weight and seek to make the most of it by eliciting promises of economic assistance, financing, and assistance from Beijing. These promises can be extravagant and are often public in nature. While they are not always delivered, for the immediate issue at hand – electoral advantage, domestic political support, or international legitimacy – public promises from Beijing still reward pro-PRC politicians with an important selling point to the electorate and elites.
Beijing’s successes require a reevaluation of Taipei’s strategy toward its remaining diplomatic partners. Taiwan’s International Cooperation and Development Fund (ICDF), the island’s foreign aid agency, does valuable work, but partners seek economic development strategies with infrastructure and financing options. Paraguay’s former president, for example, sought greater investment from Taiwan so “the Paraguayan people feel the real benefits of the strategic alliance.” The Export-Import Bank of Taiwan has been involved in several projects, such as partial financing for a port modernization project in Saint Vincent and the Grenadines, and such cooperation should be scaled up to supplement the work of the ICDF.
Still, Taiwan’s economy is smaller than that of China. The pull of China’s economy is strong, and Beijing reportedly offers overwhelming sums of money to entice diplomatic switches.
These perceptions have led to a sense of pessimism around Taipei’s ability to retain its existing partners. Such sentiments are misplaced. In the Atlantic Council report, a review of the circumstances around Taiwan’s recent losses reveal that China delivers grants, investment, or trade promises often in line with what was previously asked of Taiwan, and at sums Taiwan and its informal supporters could reasonably provide – such as $83 million in aid for Nauru, a commercial aircraft for Kiribati, and a new hospital in Burkina Faso. Beijing, of course, also offered other promises, such as vague commitments of trade and BRI projects; while sometimes ephemeral and perhaps malign in the long term, such promises can be presented to citizens and elites as progress toward economic growth. Ultimately, these countries and their leaders seek economic benefit from one of their few levers in great-power competition – their relationship with Taipei.
Taiwan should not take the same approach as China, which can come with negative consequences as documented across the BRI. Taipei – together with the United States and others – can promise and deliver investment to meet the needs of its diplomatic partners while avoiding many of the pitfalls. Such an allied approach could combine the relative strengths of Taiwan and its informal partners – Taiwan’s on-the-ground experience, the U.S. private sector, and Japanese financing, for example – to offer an economic development package featuring growth prospects and transparency, while potentially depriving Beijing of one more diplomatic switch. This price is worth paying, certainly for Taiwan but also for the United States and other Western partners.
For Washington, the U.S. International Development Finance Corporation (DFC) should be at the vanguard of this competition with Beijing and seek to partner more with Taiwan’s ICDF. Reauthorization of the DFC in 2025 should be a priority, as the direction of private-sector capital to strategic sectors and countries – including Taiwan’s diplomatic partners – will benefit the United States and countries in the Global South.
Taiwan must stop hemorrhaging diplomatic partners. Some will resist a transactional approach to Taiwan’s diplomatic partners as a reprisal of “checkbook diplomacy.” But the current strategy is not working. Taiwan’s foreign aid, and Washington’s current level of support, has not proved convincing enough to prevent diplomatic partners from switching recognition to the PRC. Beijing seeks to establish an international environment that will allow for unification with Taiwan, regardless of means. Taiwan’s partners are a small but important piece in establishing deterrence across the Taiwan Strait, and economic inducements, including trade, development financing, and investment, are needed to supplement Taiwan’s strong foreign aid programming. The Taiwan Allies Fund Act seeks to do just that, appropriating funds that in part can be used to promote the preservation of Taiwan’s official diplomatic relations. Together, Taipei and its informal partners can offer a positive vision for economic relations with the remaining diplomatic partners that rivals that of China, all while ensuring transparency and sustainability for these projects.
