Why Taiwan Matters

The following speech was given by Gordon Chang (author of The Coming Collapse of China (2001) and of Nuclear Showdown: North Korea Takes On the World (2006), being delivered last Friday on Capitol Hill at the conclusion of the March for Taiwan. It explains why Taiwan really matters to free countries; that is to what's left of free countries and their freedoms.

Will Taiwan Prevail?
By Gordon G. Chang

Speech given at
March for Taiwan
Rayburn House Office Building
Washington, D.C.
April 10, 2009

By car, by bus, and by foot, you have come here. And there is one reason why you have done so. You have done so because Taiwan is important. It is important to you, it is important to me, it is important to others.

It is, for instance, important to the world’s most powerful—and most important—democracy. The United States needs to defend each and every free society from the world’s authoritarian states. And why do we need to do that? Because autocrats see themselves threatened by the presence of free people anywhere. Unfortunately, they cannot just live and let live. They cannot tolerate people who govern themselves. So the United States cannot defend itself and it allies without also defending the free people of Taiwan.

Taiwan is especially important because that small nation, by its mere existence, bedevils the most important dictatorial government of our time. The nine old men who sit on the Politburo Standing Committee rule the People’s Republic of China, a nation of 1.5 billion souls, but they feel mortally threatened by Taiwan, a country of just 23 million. These 23 million prove that people, some of whom are Chinese, can govern themselves. By governing themselves, they make everything the Communist Party says about itself an obvious lie. Taiwan is important first and foremost because it is an inspiration to people everywhere, proving that a small nation can stand up to a large regime.

Yet today those 23 million people face their most dangerous moment, and we must ask ourselves just one question: Will their young democracy survive?

These days, Taiwan looks weak, and China appears mighty as Beijing goes from strength to strength and from victory to victory. Things are going so well for Beijing that we are told that this is “China’s Century.” What place does Taiwan have in a century belonging to China? Not much of one. If all the experts are right, then an independent Taiwan is doomed. If they have correctly analyzed historical trends, then you, free Taiwanese, have no future. You will be colonized by the People’s Republic.

This imbalance means that we are at a point in history when almost anything can happen.
For many of us, it is inconceivable that a vibrant young democracy would willingly agree to join the world’s largest authoritarian state. Yet some tell us that is exactly what will happen—and that it should occur soon.

Why? Many in the pro-China camp say that Taiwan cannot compete with Chinese industry and therefore should integrate with it. From this point, they then say Taipei should reconcile with the Mainland’s leaders so that the island’s business community can participate in the booming economy across the Strait. Political integration with Beijing is Taipei’s only option, and, should Taiwan fail to unite with the People’s Republic, it will be left with nothing. According to this view, the people of Taiwan have no real choice.

Recent statistics, they argue, prove their point. Taiwan’s economy contracted a stunning 8.4 percent in the last quarter of 2008. This year, exports tumbled 35.7 percent in March,
28.6 percent in February, and 44.1 percent in January.

We are told that, in view of the precipitous fall in the economy, Taiwan needs to sign an economic cooperation framework agreement, or ECFA, with China. In short, the prevailing belief is that Taiwan needs China.

But these experts have it wrong. Taiwan does not need China. And tying Taiwan’s economy to China will be a disaster. Forgive me if the following discussion of the Chinese economy is too detailed, but this is the issue on which almost everything turns.

As bad as the Taiwanese economy appears, China’s is worse. China, at this moment, has the world’s fastest slowing economy.

According to official statistics, gross domestic product, the best measure of national economic performance, skyrocketed 13.0 percent in 2007, and it was, in all probability, higher than that. Poor sampling procedures did not properly take into account the output of small manufacturers, then the most productive part of the economy. So, if you want a figure, China’s economic growth in 2007 was about 15 percent.

Now, although Beijing doesn’t admit it, economic output is contracting. No economy has fallen further or faster than China’s. Not even Taiwan’s.

The reason for the dramatic collapse in China is clear. China has an export-dominated economy, and its exports are in freefall. They have declined every month since November. In January, they fell 17.5 percent. In February, they were down a staggering 25.7 percent. The Chinese government has indicated there was another double-digit fall in March.

And the prospect for the coming months is bleak. Orders for Chinese factories appear to be down by a third to a half this spring, the beginning of high season for the export sector. That’s not surprising because even the optimistic World Bank predicts the global economy will contract this year for the first time since World War II and international trade will decline the most in eighty years. The downturn is resulting in declining consumer demand not only in developed economies but also in emerging ones. That’s especially bad news for a China that is extraordinarily dependent on foreign markets. An exceptionally high 38 percent of its economy is attributable to exports.

In good times, an export economy is a blessing. In bad ones, however, it is a curse. As we saw in the Great Depression, it was the current-account-surplus countries that had the hardest time adjusting to deteriorating economic conditions and, consequently, suffered the most. That is proving to be the case now as well. China’s economic model, which delivered prosperity in a period of seemingly unending globalization, is particularly ill-suited to current conditions.

So Taiwan cannot rely on China to rescue it from this crisis. There is no realistic possibility of exporting more to China to feed China’s export machine because China’s export machine is itself faltering.

Some might argue that Taiwan can tap into the Chinese consumer market. That argument does not hold much water because Chinese consumers, reacting to negative news both from home and abroad, are pulling back at this time. We know that because China’s imports are also falling. They were down 43.1 percent in January and 24.1 percent in February.

Those atrocious numbers are a warning of not only further export falls but also—and more importantly—future declines in consumer spending. Another sign of weak consumer sentiment is the 1.6 percent drop in the consumer price index for February. That was the first fall in more than six years. Deflation is on the way.

Unfortunately for China, in the coming months exports will continue to plunge and consumer spending will decline. Beijing in November announced a $586 billion spending program to stimulate investment, the third leg of the Chinese economy. The plan, however, won’t work to create sustainable prosperity. It will undoubtedly create a “sugar high” in the next few months, but that will be temporary because the spending will be creating a bigger state economy and a smaller private one. In any event, technocrats in the Chinese capital are not going to be using their cash to benefit foreigners, even Taiwanese. That state money is going to state-owned enterprises and state projects.

So China has the world’s worst performing economy, and the prospects this year are dreadful. Further tying Taiwan’s economy to China’s is, quite simply, horrible strategy. It is absolutely the worst thing Taipei can do at this moment.

Yet Taiwan is not the only country that is making a mistake by contemplating a closer relationship with China. So is the United States. There are those in Washington who, in the desire to establish an informal alliance with Beijing, would like to see China absorb Taiwan in order to remove a potential source of disagreement. As Dennis Blair, then an admiral and now director of national intelligence, said in 1999, Taiwan is “the turd in the punchbowl.” Such a view, in addition to being morally repugnant, is also strategically short-sighted.

It is short-sighted for six reasons. First, it is highly debatable that the U.S. can maintain stable relations with a communist superstate that believes it should push aside America and dominate the international system. The Washington-New York axis may buy into the notion of a grand alliance with Beijing, but such an arrangement would go against ingrained American values and would not survive popular opinion in the U.S.

Second, Taiwan is an important country in its own right. It is economically powerful, and it is embedded into global supply chains.

Third, because Taiwan has become an inspiring symbol of the success of representative governance and free markets, to help it fail means gutting our own values and bolstering China’s model of authoritarianism and rigged markets. Unfortunately, many in Washington don’t believe in supporting democracy. They have forgotten every crucial lesson of the 20th century.

Fourth, our Asian policy is anchored on defending Japan. As a quick glance of a map will reveal, the main island of Taiwan and its various outlying islands protect the southern approaches to our Japanese ally. It would, therefore, be difficult for America to defend Japan if Taiwan became the 34th province of the People’s Republic. If we can’t defend Japan, South Korea would become surrounded and would surely fall into Beijing’s lap as well. With its two formal alliances gone, the United States would be out of Asia. The only thing that holds the Chinese in check is America, and Taiwan is the key to keeping the United States in the game.

Fifth, ceding Taiwan would undoubtedly embolden a territorially hungry Beijing. China asserts sovereignty over Japanese islands and the continental shelves of five southeast Asian countries.

Incredibly, it appears to maintain that the entire South China Sea is an internal Chinese lake, thereby impinging on the right of free passage on, under, and over international waters.

And the United States, even though far from Asia, is now becoming China’s target as we saw last month with Chinese ships harassing the Victorious and Impeccable, two unarmed information-gathering vessels.

Giving up Taiwan would only embolden China to press its claims with even more confidence and vigor—and it would bolster Beijing’s weak legal positions by inheriting Taipei’s territorial rights. So the place to stop the Chinese from pursuing their aggressive ambitions is Taiwan.

Sixth, abandoning Taiwan would send a horrible message to American allies, friends, and foes in the region. If we pushed Taiwan into the arms of China, no nation would ever want to help the United States in Asia—or elsewhere—in the future.

In short, America needs something it has not had in decades, a strong Taiwan policy. Instead, we have had the uninspiring equivocation of the Bush administration, which has been continued by Obama’s. Washington policy of “strategic ambiguity” has just encouraged the Chinese to test American resolve.

We have not been able to develop a sound Taiwan policy, even though it is so important for us to do so, largely because of our perceptions of China and our hopes for its future. We are trying to engage Beijing so that it becomes a “responsible stakeholder” in the international system. Yet over time, the Chinese, as they have become more powerful, have become more aggressive. So in pursuit of an unattainable goal—making the Chinese regime our friend—Washington is undermining its own strategic objectives.

It’s time for we Americans to demonstrate that we keep commitments to free peoples. We need to do that especially at this moment because hardline governments are on the march. So defending Taiwan is defending America.

So, let’s do all we can for Taiwan so that it can meet its challenges. And I am confident that it will do so. Why? For one thing, an arrogant China will overstep with one provocation too many. Hardline governments always create their own enemies. But there is a more fundamental reason why Taiwan will prevail. That’s because of you.

For all that you have done in the past and for all that you will do in the days and years ahead, I admire you, I support you, and I salute you.

Let freedom ring. Long live a free Taiwan!