However, this advantage is diminishing as China’s economy attracts direct investment from other countries and diversifies away from Taipei’s current lock on its IT supply chain. Indeed, the nation’s trade surplus with China contracted in 2011.
As the balance of power shifts as China rises, it behooves leaders in Washington and Taipei to utilize all elements of power and influence to offset Beijing’s growing coercive capabilities over Taipei.
Strengthening economic ties with Taiwan through the Trade and Investment Framework Agreement (TIFA) and purposeful movement toward a bilateral investment treaty has been an understudied element of US leverage in preserving peace and stability in the Taiwan Strait.
This method is arguably the most beneficial and least politically sensitive means to prolong stability in the Taiwan Strait.
As the US pivots toward Asia, there is a clear understanding that Washington’s overall strategy toward Taipei needs to be supported not only by greater defense capabilities but also economic cooperation with a key Asian partner.
Nowhere are the benefits of closer economic cooperation for “soft balancing” more apparent than in the case of the Taiwan Strait.
A stronger trading relationship between Taiwan and the US would offset the nation’s increasing dependence on the Chinese market.
The resumption of the TIFA talks next month is a step in the right direction, but in order to enhance security in a non-violent and voluntary manner, Washington and Taipei need to offset China’s ability to use coercion to intimidate and compel Taiwan to unify with China on its terms.
This is an economic as well as a security imperative for the US.
Russell Hsiao is a senior research fellow at the Project 2049 Institute in Arlington, Virginia.