Ahead of this year’s presidential election, all three major candidates — William Lai (賴清德), Hou You-yi (侯友宜) and Ko Wen-je (柯文哲) — announced their support for spending 3% of Taiwan’s gross domestic product on defense. This goal dates back to the Chen Shui-bian (陳水扁) administration. It is no longer sufficient, nor reassuring to foreign supporters who fear Taiwan is not sufficiently committed to its own defense.
At the time of Chen’s election to the presidency in 2000, Taiwan’s defense spending as a share of GDP had been declining for decades. When the United States withdrew from the US-ROC mutual defense treaty in 1980, defense spending as a share of GDP stood at 7.3 percent, according to the Stockholm International Peace Research Institute. Perhaps counterintuitively, that share did not increase after Taiwan lost its one and only ally. But through the 1980s and much of the 1990s, as Taiwan’s economy grew, the People’s Liberation Army (PLA) did not pose a significant threat to Taiwan. Taiwan was able to grow its defense budget in absolute terms while committing its increasing national resources to other priorities.
Pressure on Taiwan’s defense spending grew as the country transitioned to democracy. This was only natural, as politicians grappled with competitive elections and the government became more responsive to the demands of voters. Over the course of the 1990s, the portion of the national budget pie dedicated to defense shrank from 16.5% to 8.2%.
Unfortunately for Taiwan, this reprioritization of resources came as China launched an aggressive military modernization effort. In the wake of the 1996 Taiwan Strait Crisis, Beijing learned a hard lesson: There was little the PLA could do to forestall American intervention in a Taiwan Strait Crisis. The PLA was a paper tiger.
In the early 2000s, there was a growing recognition in both Taipei and Washington that the cross-Strait balance of military power was starting to shift, albeit slowly, in China’s favor. It was in these circumstances that Chen committed to a defense spending target of 3 percent of GDP. Each president since has embraced that goal. And each has failed to meet it.
Two decades ago, the 3 percent target was sensible. China’s military modernization effort was just gearing up, Taiwan’s military was still superior to the PLA, and the United States maintained unquestionable military dominance in the Indo-Pacific. Conditions have changed for the worse over the past twenty years. Taiwan has failed to keep up with PLA advances and the PLA can now severely complicate the American military’s ability to operate in the Western Pacific.
Taiwan faces an existential threat that grows more menacing by the year, yet remains committed to a two-decade-old spending goal that — knowing what we know now — was probably insufficient at the time and which no president has come close to achieving in the intervening years.
Taiwan deserves credit for increasing defense spending in recent years. As a share of total government spending, defense spending was at 13.6% in 2022, the highest since 1996. But that amounted to only 2% of GDP. This only reaffirms concerns among some in the United Sates that Taiwan does not take seriously the threat posed by China.
Because Taiwan has consistently failed to meet its 3% goal, it has ceded significant ground to the PLA. Indeed, even if Taiwan were to achieve that goal now, it would be too little too, too late. It is far past time for Taiwan’s leaders to adopt a higher spending goal — 5 percent, where Taiwan was in the early 1990s, would be a good place to start — and to meet it.
Taiwan is a wealthy country with a developed, industrialized economy. It can afford to spend more on its own defense — especially when the alternative is to leave itself vulnerable to being swallowed whole.
Michael Mazza is a senior director at the Project 2049 Institute and a senior non-resident fellow at the Global Taiwan Institute.
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