Taiwan offers one of the great models of modern economic and political development. In 1960 Taiwan had GDP per capita and human development levels that placed it among the least developed countries in the world. Subsequent decades saw economic growth and industrialization that not only transformed Taiwan into one of Asia’s tiger economies, but also provided an economic model that has been successfully replicated by other regional economies. In parallel with this economic evolution, Taiwan began a process of political transformation that led to three decades of Democracy.
Taiwan’s success—from an underdeveloped and resource poor island, to a regional economic powerhouse with a multiparty democratic system—comes from its national commitment to investing in its people. While other factors certainly played a role in prompting Taiwan’s transformation, including effective trade and financial policy, Taiwan has established itself as a dynamic and technology oriented economy by improving its base of human capital. Without mineral, carbon, or agricultural wealth, Taiwan recognized that its people were its most valuable national resource. Today, Taiwan has a human development index score that is comparable to France’s and GDP per capita levels similar to Germany.
This success did not come without some help. From 1950-1965, U.S. foreign assistance to Taiwan averaged 6.5 percent of Taiwan’s GDP, and achieving a high level of economic growth in Taiwan was considered a US national security priority. Following the end of WWII the US supported Chiang Kai-shek, even after the Communists expelled him from the mainland. The United States provided significant development and defense assistance, including the capital goods, industrial materials, and human capital needed to transform Taiwan into a modern industrial economy. By the 1970’s, Taiwan had joined South Korea and Japan as Asian economic dynamos whose reconstructions were underwritten by the United States.
Taiwan provides a compelling development story, but the relationship between the United States and Taiwan began in the context of the broader Cold War. During the first few decades of US support Taiwan’s political system was closed and authoritarian. Chiang Kai-shek’s Kuomintang (KMT) party maintained tight political control, and it was not until the 1980’s under Chiang Kai-shek’s son Chiang Ching-kuo that Taiwan began its process of political liberalization. Taiwan saw its first opposition party President in 2000 with the election of Chen Shui-bian of the Democratic Progressive Party (DPP), followed by another democratic transition of power when KMT candidate Ma Ying-jeou assumed the office in 2008.
Because of tensions with the People’s Republic of China (PRC), only a handful of countries maintain official diplomatic ties with Taiwan. Taiwan’s dominant political issue is cross-strait relations, and its political parties are rhetorically divided over reunification versus independence. While a strong majority of Taiwanese citizens favor maintenance of the current status quo with China, a détente the United States has supported since the 1970’s, Taiwan’s position between China and the United States is only becoming more precarious.
Taiwan’s position is changing in the context of growing economic ties to mainland China and the United States’ official rebalance to Asia. Taiwan wants strong signals of support from the United States. One way we could support Taiwan would be to include them in the Trans-Pacific Partnership (TPP). Taiwan is not currently part of the agreement, and it will be hard to include them at this juncture, but we should be prepared to open the door to future membership.
TPP membership will require an uphill climb, partially because Taiwan has consistently disappointed the United States on trade related matters. High profile disputes over barriers to U.S. pork and beef have been sticking points in trade relations, and make Taiwan’s inclusion in the already politically fraught trade deal more difficult. This is without mentioning complications associated with Chinese political opposition, which (even if managed effectively) would necessitate including Taiwan as a signatory “economy” as opposed to “country”. Taiwan is going to have negotiate in parallel to the on-going TPP process and demonstrate willingness to make significant compromises before it will be allowed to join.
As China becomes wealthier and more powerful, the space in which Taiwan can operate economically, diplomatically, and otherwise, is shrinking. Countries are hesitant to openly embrace Taiwan for fear of economic reprisal from China. Taiwan is also more economically enmeshed with China than ever— in 2014 cross-strait trade was approximately $200 billion. Regardless of the changing global landscape for Taiwan, the US should also look to maintain close ties with Taiwan, and can leverage Taiwan’s relationship with the mainland as a means of improving our own diplomacy.
Over 3 million mainland Chinese tourists came to Taiwan last year to see Chinese cultural treasures brought by the KMT as they left China, and now located in the National Palace Museum in Taipei. Mainland visitors go back to their hotels and watch Taiwanese political talk shows and see open political debate and open criticism of Taiwan’s leaders. They see freedom of religion, speech, association, and political competition along with economic prosperity. Most of all, they see that these liberties are not at odds with Taiwan’s Chinese cultural identity. Taiwan is a vision of China we should all wish for, and living proof that China can achieve its goals of growth and stability in a politically pluralistic setting. It’s important that this model continues to stand, and Taiwan maintain status quo until possibility for reconciliation that does not threaten democracy there.
Article Published in Forbes.com on May 26, 2015.