China outflanking the US on Taiwan

Even as Taiwanese President Tsai Ing-wen is visiting the United States and central American states like Guatemala amid strong diplomatic protests from Beijing, foreign policy experts in Washington believe that Taiwan is losing ground in the US neighbourhood, and China is gaining the upper hand.

Recently, Honduras has decided to sever its relations with Taiwan and switch to China, and there is the strong possibility that Paraguay might walk into the Chinese camp for no other reason than that of exporting beef and soybean to China. Taiwanese now see the game in its bare elements. China has a fat chequebook, which it will use to win friends through offers of investment and aid. China is also the big market that can absorb exports from countries like Paraguay.

Apparently, Chinese officials have been holding talks with Paraguayan officials over trade. Paraguay is going into an election and the opposition’s presidential candidate Efrain Alegre had announced that he would shift from supporting Taiwan to China. It is not certain that Alegre will win, but even the ruling Colorado party candidate Santiago Pena would be tempted to look at China more favourably. Paraguayan trade turnover with China has doubled in the last eight years, and it is larger than Paraguay’s trade with the US. Paraguay is among the top 10 beef exporters in the world and the fourth largest soybean exporter.

According to Eno Michels, president of Paraguay’s Soybean Producers Association, “Having trade relations with China is going to be favourable to producers and for the country.” The Americans are of course warning that China’s aid and investment comes with problems, and it leads the countries that borrow from China into a debt-trap. China however maintains that it respects a country’s sovereign status.

More than the question of who wins and loses friends, it is clear now that China is a competitor to the US in spreading its footprint through trade and economic aid, a policy and strategy that the US had followed successfully in the decades after the Second World War, especially in its ideological rivalry with Russia, then the Soviet Union. The communist Soviet Union succeeded only partly in providing economic help, and it could not do after the mid-1970s when its agriculture declined. Today, China is a vibrant market economy and it is able to use its power to give aid and to invest in developing countries to establish its supremacy. And China is not dependent on its trade on developing countries.

China’s strong trading partners are the European Union and the US. China’s export earnings come from these two zones. Russia/Soviet Union did not enjoy this economic advantage in the 1950s and the 1960s, though the Russians played an important role in giving economic and technological aid to countries which the Americans did not trust, like India for example.

It seems the Americans are advising Taiwan to gain a foothold in multilateral organisations like the World Trade Organisation (WTO) because Taiwan remains a viable economic power in its own right, especially in the field of electronics. Taiwan’s trade relations with China are on a strong footing as well. Taiwan is struggling to retain its diplomatic status which it held till 1972 when then American president Richard Nixon travelled to China and met the Chinese leader Mao Zedong, and China was restored its status as the permanent member of the United Nations Security Council which until then had been held by Taiwan. With the growing economic power of China, Beijing is arm-twisting many countries to derecognise Taiwan. In the long term, Taiwan will remain in the shadow of China. And with American and European support, it can survive as a small, sovereign state despite China claiming Taiwan to be an inalienable part of China.