Abstract
The cooperation between the EU member states and Taiwan has been growing over the years, despite China’s attempts to isolate the island from the international community. While the EU adheres to Beijing’s ‘One China’ policy and does not recognise Taiwan as a sovereign state, the Union is engaged in an economic ‘balancing act’ between China and Taiwan. The European policy towards the complicated relations between China and Taiwan has consequences on several fundamental spheres, including the political, economic and security ones. But why is Taiwan so important to the EU and how could the relations between the parties evolve?
Introduction
Taiwan’s political, geopolitical and economic tensions with the People’s Republic of China (PRC) call for caution for every country that desires engaging with it on a political or economic level. China is a strong global economic player and, as such, uses its influence to push its agenda. In the specific case of Taiwan, this results in the assurance that every country that wants to engage in economic relations with the PRC embraces the ‘One China’ policy. This policy implies the acceptance of Taiwan as a Chinese province, consequently not engaging in diplomatic relations with the island. While this position is formally shared by all the member states of the European Union, over the years Taiwan has been able to find other ways of interacting with them in most areas. Indeed, despite not entertaining official diplomatic relations, the island cooperates economically with most countries of the world. The European Union and the United States’ bilateral relations with Taiwan are a clear example of this peculiar type of relation. Both the EU and the US are engaged in an economic ‘balancing act’ between Taiwan and China, even when tensions rise between the two. This analysis has the main objective of giving an overview of how the relations between Taiwan and the EU have evolved until today and how they are expected to continue in the future. Particular focus is given to the crucial economic role played by Taiwan in the European market, especially when it comes to the sector of semiconductors.
Overview of the political situation of Taiwan
The growing cooperation between the EU and Taiwan has been complicated by the situation between the latter and People’s Republic of China, which is a fundamental economic partner for the EU member states. The EU adheres to PRC’s ‘One China’ policy, thereby recognising only one Chinese government. This policy was promoted by the Chinese government to deal with Taiwan, considered a ‘breakaway province to be reunified with the mainland one day’ (BBC, 2021). For its part, Taiwan, officially known as Republic of China (ROC) according to its government, claims to be an independent country from mainland China. Consequently, to have any type of diplomatic relations with Beijing, other countries need to formally have no ties with Taipei, since Taiwan is recognised as a Chinese province. As a result, Taiwan is currently recognised as a sovereign country by only 13 countries (Davidson, 2023). To understand the necessity of such a policy, a basic knowledge of the history of mainland China and Taiwan is needed. In 1949, the Chinese civil war between the Chinese Communist Party and the Kuomintang – the Chinese Nationalist Party – ended with the defeat of the Nationalists, that fled to Taiwan and established another Chinese government in the island. While both PRC and ROC claim to represent China, mainland China has, on numerous occasions, threatened to use force in case of a formal claim of independence coming from Taiwan. Even though the diplomatic relations between the two sides have distended over the years, the situation is still rather complicated. During the Cold War several governments around the world recognised Taiwan against the People’s Republic of China. However, as the relations between the US and PRC improved, Taipei found itself increasingly isolated from the international community (BBC, 2021). Despite many governments still having informal relations with Taiwan, especially in the economic and political spheres, the island is not considered an independent country by most of the world – by none of the EU member states nor by the United Nations. This complicates matters for Taiwan, especially when it comes to its participation in international organisations. Taking the World Trade Organisation (WTO) as an example, Taiwan was able to become a member only in 2002, after years spent by the PRC blocking its entry. Even though today Taiwan is part of WTO, it is not recognised as a sovereign state, but rather as a custom territory and it is referred to as ‘Chinese Taipei’. Moreover, Beijing is often able to block Taiwan’s participation in several bilateral and multilateral free-trade agreements, strong of its global economic position. Regardless, the WTO membership helped the development of Taipei’s electronics industry, which was previously suffering from its isolation and the ‘trade barriers in key exports markets’ (Kastner, 2019). The WTO can be exemplary to understand that, despite PRC’s interferences in Taiwan’s formal diplomatic relations, informal cooperation with the international community is fundamental for Taipei’s development.
Taiwan, a fundamental economic partner
Despite not being diplomatically recognised by Western countries, Taiwan is strongly supported by the US and the EU, including assurances in case of a Chinese attack against the island. The European institutions refer to the shared values when considering their economic connections with the island as well. They share ‘similar societal challenges – ageing societies, sustainable food security, climate change, energy – and both see cooperation as necessary to promote the excellence in science and to increase the competitiveness of their industries and the access to international markets’ (EEAS, 2021). Furthermore, Taiwan is a pivotal economic partner, especially when it comes to the field of Information and Communication Technology (ICT) – meaning the field related to ‘a diverse set of technological tools and resources used to transmit, store, create, share or exchange information. These […] include computers, the Internet’ among others (UIS, 2009). Taiwan’s economy is mainly ICT-dominated and based on its exports; ‘electronic components and ICT products accounted for 53% of its total exports and 31% of its total imports in 2021’ (Chiang, 2022). In 2020, Taiwan became the 14th trading partner for the EU; in turn, the EU represented the fifth trading partner for the year 2021 and the island’s largest foreign investor for the year 2020. Over the years, Taipei ‘has heavily invested in Research and Innovation (R&I) building a large technological capability’ (EEAS, 2021); this, plus the steadily increasing demand for ICT products, has allowed Taiwan to see a solid economic growth (3% in 2020 and 6.1% in 2021) that is predicted to continue ‘in the foreseeable future’ (Chiang, 2022). Taiwan is a world leader in the semiconductor industry with the factory of TSMC, one of the biggest computer chip makers worldwide, giving the island enormous strategic importance and making it crucial on a global scale. In 2022, Taiwan was ‘the leader in world chip manufacturing with 66%’ of the global production (Nuroglu, 2022). The semiconductor industry is a key component for making ICT products; semiconductors are used in ‘the manufacture of various kinds of electronic devices’, becoming ‘key elements for the majority of electronic systems’ (Encyclopaedia Britannica, 2022). Looking at Taiwan’s overall exports, more than 40% is represented by ‘electronics parts and information technology products’ (Kastner, 2019). In light of this, the importance of having good relations with Taiwan seems obvious, especially considering the crisis related to the lack of chips during the COVID-19 pandemic. Many industries that are dependent on semiconductors, from automakers to electronics, are still experiencing cuts in production and sales. This situation has been observed since 2020, when ‘demand for work-from-home technology increased exponentially’ and industries ‘found themselves competing for the semiconductor capacity located in Asian foundries’ (J.P. Morgan Research, 2022). Given this premise, the great European involvement in cooperating with Taiwan in R&I over the years is justified by a central economic motivation. Indeed, ‘resilience of supply chains and critical value chains and the fight against foreign digital interference’ are among the European priorities for the relations with Taiwan (Bondaz, 2022). In this context, the European Chips Act has the aim of strengthening ‘Europe’s competitiveness and resilience in semiconductor technologies and applications, and help achieve both the digital and green transition’, other than its ‘technological leadership in the field’ (European Commission, 2022). European regulation on semiconductors, and the partnership with Taiwan in this context would be crucial, as it would for a broader European economic and industrial strategy. This goal is seen also in light of the aforementioned global semiconductor shortages, which had grave impacts on several economic sectors and underlined a global dependency on a limited number of actors, including Taiwan. More than €43 billion investments are expected to support the European Chips Act until 2030, and these should be matched by long-term private investment (European Commission, 2022). The EU would be able to enter the global market by expanding local microchips manufacturing, design and innovation, with the aim of grabbing ’20 percent of the global market share in microchips by 2030’ (Haeck, 2022). The European Chips Act should help European businesses to not being involved in the crossfire in case tensions between Beijing and Taipei were to escalate, involving chips manufacturing as well. Currently, the cooperation between the EU member states and Taiwan results in numerous consultations and dialogues. Furthermore, the ‘EU-Taiwan framework includes the presence of 15 Member States offices in Taipei. In addition, the very active European Chamber of Commerce Taiwan (ECCT) represents European businesses in Taiwan’ (EEAS, 2021). In turn, representative offices of Taiwan can be found in 19 EU Member States.
Current relations between Taiwan and the European Union
Taiwan is an important partner for the European Union: they ‘share common values, such as democracy, the rule of law and human rights’ and ‘are both committed to upholding multilateralism and the rules-based international order’ (EEAS, 2021). Particularly when it comes to human rights, which is one of the foundational pillars of the EU, the cooperation between the two parties is carried out through annual consultations. Numerous European programmes and institutions are in place with the aim of spreading and protecting these universal values across the world. For its part, China distances itself in this area, since human rights are notably not as widespread in the country. The cooperation between the EU and Taiwan extends to other areas, such as ‘trade and economic issues, connectivity, innovation, digital issues, green energy, circular economy, labour issues, and disaster management’ (EEAS, 2021), other than ‘education, culture, health’ (Taipei Representative Office in the EU and Belgium, 2022). The close cooperation between the parties was evident even during an unforeseen situation such as the one of the COVID-19 pandemic. In its early stages, Taiwan sent humanitarian donations to the EU member states that could not face the situation by themselves. Amongst many programmes existing, there is the European Business and Regulatory Cooperation (EVR), designed specifically for ‘enhancing visibility and projection in Taiwan of European excellence.’ In practice, the programme funds events held in Taiwan with the aim of facilitating ‘regulatory coherence and business collaboration with Taiwan and the region’ (EEAS, 2021). The European Union would also beneficiate from the participation to the Global Cooperation and Training Framework (GCTF), ‘a platform for using Taiwanese expertise to address global issues of common concern’ – public health, energy efficiency and cyber security among others – (Bondaz, 2022), co-launched in 2015 by Taiwan and the United States and joined by Japan and Australia as well. Nonetheless, the EU is facing difficulties in maintaining good relations with Taiwan and the PRC simultaneously. The preferred solution is the one of continuing recognising the ‘One China’ policy while calling for maintaining the status quo in the Taiwan Strait, while improving dialogue between the two. Indeed, the stability of the Taiwan Strait is considered a priority from a political perspective, with the encouragement of a peaceful resolution of cross-strait issues. This was expressed on several occasions, especially since 2021, by both Member States of the European Union and the Union itself. Particularly, Taiwan is mentioned as an economic partner, whereas in the previous years mentioning Taiwan at the highest political level, even as an economic partner, was a taboo, since it could imply a complication in the relations with PRC.
An escalation of the conflict between China and Taiwan would see a massive Chinese invasion of Taiwan as an unlikely scenario, especially in the short term. The more likely scenario would be ‘a range of actions on the part of Beijing, including the takeover of the Dongsha Island, the violation of Taiwanese airspace or even the organisation of a maritime blockade around the island’ (Bondaz, 2022). However, a conflict with Taiwan’s involvement would imply global effects, with disruptions in global value chains and threats to European foreign direct investments on the island. In this context, the United States is adopting a policy of ‘strategic ambiguity’, which gives no certainty on ‘whether, and to what extent’ the United States would intervene in case of conflict between China and Taiwan (Kuo, 2023). For what concerns NATO intervention, the constituent treaty does not cover the Indo-Pacific region; nonetheless, European actions – or lack of – would mean a great deal. In a conflict scenario, the European role is not clear, however its political support to US actions would be expected. After Russia’s invasion of Ukraine, it has become evident that, in case China were to attack Taiwan, the EU would find itself obligated to intervene in some manner. This would possibly result in economic sanctions to China, which seems to be aware of the matter at hand and does not seem to be willing to risk the potential economic repercussions (Lau et al., 2022). The goal for the EU remains to maintain the status quo and play a role in keeping any open conflict from happening.
Conclusion
Over the years, Taiwan has been forced to face a number of political issues due to its hostile relations with PRC, many of which relate to the relations with the international community. Nevertheless, ROC has been able to form close ties with many countries, especially the EU member states. Brussels and Taipei have numerous channels open for dialogue, but also institutions and representative offices in both their territories. Not only do they share important values, such as democracy, rule of law and human rights, but they are crucial economic and trade partners. Furthermore, over the years the strategic importance of Taiwan has become clear, especially for its economic importance in the field of semiconductors and ICT more broadly. Even though the relations between Republic of China and People’s Republic of China remain problematic, with tensions arising from time to time, the EU is able to maintain fairly good economic relations with both of them, while calling for maintaining the status quo in the area. Nonetheless, the future of the situation in the Taiwan Strait remains uncertain, since both China and the US’ actions are difficult to predict. Military standoffs between Washington D.C. and Beijing have been risked repeatedly, for example in August 2022 when a possible visit to Taiwan by US House Speaker Nancy Pelosi was disclosed. Nonetheless, following Russia’s invasion of Ukraine and the show of cooperation between the NATO member states, a Chinese attack on Taiwan would likely be met with consequences from the EU and its member states (Lau et al., 2022). Economic sanctions as the ones adopted against Russia would most probably be adjusted to the Chinese circumstances and could be extremely effective. China’s driver remains that of economic motivation, and risking the huge European market for Taiwan, no matter how valuable, seems unlikely. Apart from a confrontational context, the question remains on the evolution of the relations between the EU and Taiwan. As of the moment, the maintenance of the status quo seems to be the preferred solution for all the parties, including China and the US. Nonetheless, a broader cooperation seems natural between EU member states and Taiwan, whereas the breaking of the PRC’s ‘One China’ policy appears unlikely at the moment.
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