In the past month, two important developments are poised to equip Taiwan with expanded capabilities to play foreign policy offense in an age where Taiwan’s diplomatic space is seriously constricted by a hegemonic Beijing. Taiwan Foreign Minister Lin Chia-lung (林佳龍) led a delegation of Taiwan and US companies to the Philippines to promote trilateral economic cooperation between the three countries. Additionally, in the past two weeks, Taiwan has placed chip export controls on South Africa in an escalating standoff over the placing of its diplomatic mission in Pretoria, causing the South Africans to pause and ask for consultations to resolve the dispute.
Taiwan has struggled mightily in the past two decades to combat China’s economic diplomacy, which provides market access and cheap loans to countries around the world in an effort to end their formal relationships with Taiwan or further downgrade them as in the recent case of South Africa. It has seen significant gains, with Taiwan unable to provide incentives and opportunities to counter China’s economic muscle.
Taiwan has also pursued a passive foreign policy relying primarily on the United States to provide the political weight needed to slow the pace of marginalization. Even then, it has seen a steady erosion of its position in the face of China’s revisionist rhetoric and economic thuggery. However, since the COVID pandemic Taiwan’s global economic relevance has grown significantly in both gross terms as well as in the areas where the country provides leadership.
The arrival of Lin Chia-lung to the foreign ministry has brought an important new angle to Taiwan foreign policy: economic global diplomacy. Minister Lin has identified important bilateral relationships, both official and unofficial, and led high-level delegations to promote two-way investment and cooperation. These delegations bring heavyweights in the semiconductor industry, artificial intelligence (AI) infrastructure, petro-chemicals, telecommunications and the co-development and production of unmanned vehicles to handle myriad domains. His economic diplomacy is an understandable reaction to the challenge China presents and the emergence of Taiwan as an indispensable global economic power.
As we move deeper into Lai Ching-te’s (賴清德) presidency, it is likely that the pace of Minister Lin’s activities will accelerate. China coerces many countries to smile in photo ops, but the fact remains that there is deep concern over the present state of China’s role in the global economy and the political costs that accrue from a relationship. Taiwan’s economic partnership with the United States, built on mutual trust, is a logical reaction with significant potential in the coming years given the partnership’s dominance of critical technologies.
Taiwan’s semiconductor industry is providing it access to the very pinnacle of global power. We see meetings in the White House with leading Taiwan executives and tool-in events that attract presidents, cabinet officers, legislators and leading local politicians. This importance is starting to manifest itself at a political level as it provides wind in the sails of Minister Lin’s initiatives while also providing leverage in bilateral relationships where Beijing is coercing foreign countries to constrict Taiwan’s international space.
Taiwan doesn’t only have carrots in its quiver of foreign policy arrows, there are sticks too.
Taipei is testing a new tool: chip export licensing. After South Africa repeatedly downgraded and renamed Taiwan’s representative offices and asked the mission to move out of Pretoria, Taiwan’s Ministry of Economic Affairs on September 23 proposed prior approval for 47 categories of semiconductors bound for South Africa, including integrated circuits (ICs) and memory chips. When both sides agreed to talks, the government held the notice on September 25 instead of sending it for formal gazetting, so the measure has not taken effect.
Taiwan’s assessment is that Pretoria accelerated these steps to show Beijing visible progress before the G20 summit held in Johannesburg. South Africa even sent official letters to the new address it wants Taiwan to adopt, which underscores a schedule and optics designed to curry favor with Beijing. Taiwan chose not to concede, indeed to push back, and added the threat of economic costs to the discussion.
This is the first time Taiwan has used export restrictions as a countermeasure. The goal is not technology denial over the long term, but a short-term and adjustable tool that pushes the other party to negotiate. On that measure it has already worked, since South Africa came back to the table given the difficulty in replacing Taiwan as a supplier for areas of the South African economy.
Reactions from Beijing followed familiar lines. Beijing accused Taiwan of weaponizing chips, argued the step would be ineffective and self-harming, and again stresses its One China Principle. Beijing had earlier welcomed South Africa’s downgrade and relocation decisions.
Politically, the move marks a shift under President Lai Ching te. Instead of quiet handling and statements alone, the government is prepared to use measured and executable economic actions, which fits Lai’s consistent message that sovereignty and autonomy come first. If Beijing and/or third parties add political or media pressure, the administration is unlikely to soften its sovereignty stance just to cool tensions. Without movement from Beijing on Taiwan’s sovereignty narrative, cross-strait relations are unlikely to ease.
For now, this is a pilot. Taiwan will watch how the talks with South Africa unfold and whether Pretoria adjusts course. If the outcome is positive, Taiwan may apply the same approach when other governments, under pressure from China, take harmful steps against it. That could check China’s internal efforts to constrict Taiwan’s space and expand Taiwan’s diplomatic room
Minister Lin is the carrot and export controls the stick. Two important developments that have accrued from the visionary economic policies of the 1980s and the indispensable technology partner Taiwan has become to the global economy.
Rupert Hammond-Chambers is the president of the US-Taiwan Business Council (USTBC), a senior advisor at Bower Group Asia and sits on the board of The Institute for Indo-Pacific Security.
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