The next twelve months will be dominated by elections, with polls expected in at least 64 countries. Of these, there are only a few that really matter in geopolitical terms. The US elections of course, especially if won by an isolationist Donald Trump (assuming he is allowed to run). India’s parliamentary elections in April will help steer the course of a superpower for the future. And in Europe, the rise of populist parties may well change the direction of the EU in the years to come. But perhaps the most consequential one has just happened this weekend, in Taiwan, where William Lai has just been elected president.
There is significant potential danger associated with what happens following Lai’s election. In the past he has been known as an advocate for Taiwanese independence: this is a redline that Beijing has said that, if crossed, would lead to assertive action being taken against what it considers to be a ‘renegade province’. If Lai does indeed move the island towards independence, then whatever China does next – perhaps a blockade or even a full invasion – could well be hard pushed-back upon by the US, Japan, and their allies. A regional conflict might easily erupt.
Western military technology, which relies heavily on Taiwanese chips, would find itself heavily compromised
Even though president Lai has now promised not to seek independence for Taiwan, the fact that he has done so previously means that Beijing doesn’t like or trust him. He is banned from visiting the mainland, and starting from such a low base of trust means that it is easier for any decisions he makes regarding the status of Taiwan to be misinterpreted, and potentially escalated.
One of the main reasons that a move towards Taiwanese independence is such a risk is because of the stance of China’s president Xi Jinping. He has often claimed that the ‘rejuvenation of China’, which he has staked his legacy on, will only be completed once reunification with Taiwan has been achieved. If the island secedes then it would be a significant blow to the credibility of not only Xi, but of the entire Chinese Communist Party. As the CCP has shown over the years, it has scant tolerance for anyone that threatens its rule.
Indeed, the CCP has repeatedly threatened action against those seeking Taiwanese independence. In the run up to this election, for example, the Chinese defence ministry said that its military would ‘take all necessary measures to resolutely smash ‘Taiwan independence’ separatist plots in any form’. In the aftermath of Lai’s election, a Chinese State Council official said that ‘Taiwan is China’s Taiwan’ and that the result ‘cannot stop the general trend that the motherland will eventually be unified and will inevitably be unified’. It is worth noting that only 17 per cent of Taiwanese want unification, according to polls, with 60 per cent wanting to sever ties with China.
Washington is fully aware that this cross-strait mismatch in ambitions could lead to conflict. Economically it would be devastating. Research by Bloomberg has revealed the price tag of Chinese aggression against Taiwan, either through invasion or blockade. If the island was cut off from international trade then the impact could be $10 trillion (£8 trillion), or about 10 per cent of the world economy. This catastrophe would be caused mainly by the disruption to semiconductors, which would see factories of all types – from cars to phones to laptops – stalled across the world. By comparison, the World Bank estimates that Covid wiped 3.1 per cent off world GDP, and the Global Financial Crisis 1.4 per cent. Even World War 2 only led to a drop of 8.1 per cent at its nadir, according to some estimates.
The effects would not just be economic. Western military technology, which relies heavily on Taiwanese chips, would find itself heavily compromised. On the other hand, Beijing – if it was in control of Taiwan’s chip factories (or ‘fabs’ as they are known) – would have easier access to the technology its military requires.
Then there is the threat to western ideals. According to the Germany-based Democracy Matrix, Taiwan is one of only two ‘working democracies’ in Asia, along with Japan. President Lai’s victory speech made clear the importance of this to the island. ‘Between democracy and authoritarianism, we stand on the side of democracy,’ he said. ‘The Republic of China, Taiwan, will continue to walk side by side with democracies around the world’. If the island’s democracy were to be snuffed out then this would put further pressure on the West’s championing of its preferred political system, one that is being actively challenged by China and Russia.
All of this considered, the fate of Taiwan has become a totem for China-US tensions. If China were to reunify with the island in the face of western opposition, then it would deliver a severe blow to the US’s credibility as a military and political ally. Countries like South Korea, Thailand, and the Philippines, all US treaty allies, would likely reassess their relationship with America and align more with China, given that it would now be the major force in the region. It could also lead to nuclear proliferation in Asia and elsewhere as governments lose trust in American protection.
The only way to reduce the probability of this cataclysm is through deterrence. Beijing needs to understand that reunification would come at a cost so high that it would be more damaging than advantageous, especially for the CCP’s rule. The US, UK, and their allies should beef up their support for Taiwan, politically, economically, and potentially militarily. At the same time, the western allies need to ensure that president Lai does not rock the status quo boat, and so encourage Beijing’s hawks.
The UK has made it clear that it does not support a change in Taiwan’s status, as has the US and other allies. But this requires working with both sides of the Taiwan Strait to keep the peace. The cost of failure could be not only the biggest economic shock the world has ever seen, but a hammer-blow to the waning dominance of American and western world leadership.
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