Click here to read the full report as an Adobe Acrobat PDF.

 Click here to read the full report in Chinese.

Introduction

The United States has an interest in a free, democratic, prosperous, and strong Taiwan. For decades, the United States and the Republic of China (ROC) have worked closely together to help Taiwan become a thriving democracy, a development that has advanced American interests in Asia and the Pacific Rim. The success of the U.S.-ROC partnership is evident in Taiwan's remarkable political and economic development: in mere decades, Taiwan has moved from poverty to prosperity and from autocracy to democracy.

Current trends, however, are unfavorable to Taiwan, and consequently, they pose challenges to U.S. interests. China's growing power has provided Beijing with the resources to alter the balance of military power across the Taiwan Strait, upsetting the dynamic equilibrium that has prevented the outbreak of major cross-Strait conflict for more than fifty years. Seeing Taiwan's growing national identity as a threat, the People's Republic of China (PRC) has worked to isolate Taiwan internationally. Taiwan's growing international isolation has, in turn, created pressures in Taiwan to respond by declaring its de facto sovereignty more openly, eliciting further threatening responses from China.

As this dynamic has unfolded, relations between Washington and Taipei have soured. Washington has not found the proper balance among trying to pursue common interests with Beijing, secure Taiwan's freedom and international profile, and pursue bilateral interests with Taiwan. Beijing has successfully pressured Washington to further its agenda of squeezing the island. Taipei has responded by increasing its emphasis on its sovereignty.

Allowing this dynamic to continue is inimical to U.S. interests. A broken dialogue increases the likelihood that what is now a dangerous situation will develop into an even more dangerous crisis. To break this cycle, America should reinvigorate a positive bilateral agenda with Taiwan, capitalizing on Taiwan's many strengths to expand its participation in the regional and international arenas. The United States can help Taiwan reorient its foreign policy to accentuate its role as a peaceful, vibrant member of the international community. This approach would stabilize the Taiwan Strait and help secure American interests in a prosperous, stable, and free Asia--all within the existing U.S. cross-Strait policy framework.

Why Taiwan Matters

Over the past decades, the Asia-Pacific region has been marked by rapid trade liberalization, democratization, and prosperity. Taiwan is one of the prime examples of the region's success. It is a vibrant, free society with an economy that has become central to the functioning of the global high tech market. Alongside this transformation, and particularly since 9/11, Taiwan has contributed to international security and development, including international counterproliferation and counternarcotics efforts, the promotion of democracy, and the provision of humanitarian relief. Taiwan's valuable role in the international community remains hidden to most casual observers. Many think of Taiwan as a small place with a limited impact on our interests. But with a population of 23 million (larger than treaty ally Australia), a GDP ranking twenty-first in the world (well ahead of Asian economic powerhouses such as Hong Kong and Singapore), and geography that positions it along major commercial routes (the Port of Kaohsiung handles more containers per year than any single port in Japan or South Korea), Taiwan is, by most objective standards, a major player.

For the United States, the bilateral trading relationship alone argues for greater attention to the U.S.-Taiwan relationship. Such Taiwanese companies as Asustek Computer, Quanta, Foxconn, and Taiwan Semiconductor Manufacturing Company are global industry leaders and have become crucial suppliers to U.S. titans like Apple, Dell, Hewlett-Packard, and Qualcomm. The revenues of Taiwan's top twenty-five technology companies surpass $122 billion a year, and the production value of communications equipment made by Taiwanese companies exceeded $30 billion in 2006. Dell and Hewlett-Packard alone source tens of billions of dollars in computer components from Taiwan. Taiwanese companies have captured over 80 percent of both the wireless and DSL modem markets and 70 percent of the PDA manufacturing market.

Already the world's biggest producer of computer components, Taiwan is moving rapidly into the production of telecommunications equipment. Foxconn and Quanta produced millions of iPhones for Apple, building upon relationships forged by their inclusion in the production chains for Apple notebook computers and iPods. Taiwanese companies have proven themselves extremely adaptable in a complex market in which many firms have difficulty keeping pace with the rapid rate of product evolution. In short, Taiwan is a crossroad of the global supply chain.

But U.S. interests extend beyond commerce. Americans should take pride in Taiwan's advancement as a vibrant democracy. While the Taiwanese people themselves created the democratic institutions that flourish today, American diplomacy and aid provided key assistance. Today Taiwan gets high marks from Freedom House and the U.S. State Department for its protection of civil and political liberties and its free and fair elections. Taiwan's successful democratic transition demonstrates that Chinese culture is not inimical to democracy--a powerful answer to those who claim that free institutions and popularly elected governments are the sole preserve of the West. Taiwan's democracy is a beacon to other societies seeking peaceful political liberalization.

Taiwan, formerly a developing economy, has become the kind of entity that Washington hopes for all developing countries to become. It is one of few countries to have graduated from American aid assistance, and it is now an international provider of aid. Taiwan has been one of the world's most successful economies over the past five decades. It has peacefully transformed from authoritarian to democratic. Indeed, among the aid it provides to other nations is democracy promotion assistance. If today there is a "backlash" against democracy promotion, Taiwan is a potentially powerful response. It has become a "responsible stakeholder," doing its best to contribute to global efforts to fight terrorism, proliferation, and infectious diseases, and to provide disaster relief.

If Taiwan is successfully coerced by the PRC into a settlement, against the wishes of Taiwan's 23 million people, Washington would not only lose a valuable international partner, but its interests and regional position would also suffer a severe blow. Regional allies would question the credibility of America's political commitments, as would other young democracies around the world. America's favorable position in Asia is sustained by its alliances and partnerships, and it needs their assistance to keep the region peaceful, prosperous, and free.

A coerced settlement against the wishes of the Taiwanese may carry even greater strategic significance over the long term. Chinese control of Taiwan (and, presumably, the Taiwan Strait) could effectively deny the United States and its allies access to critical sea lanes during conflict. Mainland control of Taiwan would also significantly extend the reach of the People's Liberation Army (PLA) in the Asia-Pacific region. . . .

 Click here to read the full report as an Adobe Acrobat PDF.

 Click here to read the full report in Chinese.