Taiwan, situated geopolitically strategic location in East Asia, has emerged as a significant economic hub in the region, with its economic entanglement with global superpowers becoming a defining feature of its development. The island nation’s trade and investment are heavily reliant on the United States and China, both of which are its largest trading partners. Despite its de facto independence, many countries do not formally recognize its sovereignty, leading to economic isolation in some circles. However, its ability to adapt and thrive in a rapidly changing global economy has made Taiwan’s economic success a testament to balancing the competing interests of major powers.
Taiwan’s Economic Importance
Despite its small size, Taiwan has become a major producer and exporter of high-tech products, including semiconductors, computer components, and electronics, making it a vital player in the global market. Its strategic location in the Asia-Pacific region has made it an attractive location for international businesses. Taiwan also has a highly skilled workforce with a strong emphasis on science, technology, engineering, and mathematics (STEM) education, indicating that it will continue to play a significant role in the global economy.
Taiwan’s Economic Entanglement with Superpowers
Taiwan’s economic entanglement with global superpowers is reflected in its substantial trade relationships with the US and China. The US is Taiwan’s second-largest trading partner after China, accounting for approximately 11% of Taiwan’s total exports in 2020, valued at $34.6 billion. Taiwan, on the other hand, is the ninth-largest trading partner of the US and a vital supplier of technology products. China, on the other hand, accounts for approximately 25% of Taiwan’s total exports in 2020, valued at $78.6 billion. The economic relationship with China has had a significant impact on Taiwan’s economy since it is one of the largest consumer markets globally. However, Taiwan’s reliance on China has also created challenges, such as political pressure from China to limit Taiwan’s international recognition and independence.
Taiwan’s Economy amid pandemic
Taiwan’s economy has been relatively resilient during the Covid pandemic, with a projected GDP growth rate of 4.64% in 2021, thanks to its successful handling of the pandemic, robust domestic demand, and strong export performance. Despite the global economic downturn caused by the pandemic, Taiwan’s exports increased by 4.9% in 2020, amounting to $131.7 billion, mainly due to the increased demand for electronic products and medical supplies.
The US-Taiwan Relationship
Taiwan has become a focal point of the escalating great power politics between China and the US. The Taiwan issue has been a bone of contention since the 1950s. The US and China adopted the policy of rapprochement while managing the Taiwan issue to avoid hostility after President Nixon’s visit to China in 1972. Washington maintained quasi-official relations with the Republic of China (Taiwan) after establishing formal diplomatic relations with China in 1979, under its new framework for dealing with the island nation, known as the Taiwan Relations Act (TRA).
Pelosi’s Controversial Visit and China’s Response
The United States Representative Nancy Pelosi’s recent visit to Taiwan has created tension between China and Taiwan, given that it is the highest-level US visit to Taiwan in the last 25 years. China’s response to the visit was perceived as tepid, particularly given its approach to the Russia-Ukraine crisis. This tension led China to launch joint military exercises around the island and suspend and cancel official military dialogues and cooperation channels with the US. Ballistic missile launches, air and naval operations across the centre line and the end of Taiwan’s territorial waters, and cyber-attacks targeting government and private institutions in Taiwan have also increased. Furthermore, China has also exerted diplomatic pressure on countries that recognize Taiwan’s sovereignty, such as by withholding COVID-19 vaccines or cutting off economic ties. However, the US has continued to support Taiwan, with President Biden reaffirming the US commitment to Taiwan’s defence and security in a phone call with President Tsai wen, following Pelosi’s visit. The US has also continued to sell arms to Taiwan, which has further aggravated tensions between China and the US.
Impact on Global Power-Play
Furthermore, Taiwan’s economic success has also given it a greater voice in global trade negotiations, and it has been actively seeking to deepen its economic relationships with other countries. Taiwan’s recent admission to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a significant step towards achieving this goal, as it will allow the island nation to expand its economic reach beyond its current dependence on the US and China. Taiwan’s increasing economic and political significance in the global arena will continue to shape the dynamics of the great power competition between the US and China, as well as other global actors.
Taiwan’s economic success and its entanglement with global superpowers have made it a significant player in the Asia-Pacific region and beyond. Its strategic location, advanced technology sector, and skilled workforce have made it an important ally for the US in countering China’s influence in the region. However, Taiwan’s economic reliance on both the US and China, as well as the ongoing tensions between the two powers, have created challenges for the island nation. Nevertheless, Taiwan’s ability to adapt and thrive in a rapidly changing global economy, along with its increasing economic and political significance, will continue to shape the global power-play in the years to come.