What does Taiwan’s election result mean for India?

Ma’s victory and India’s dilemma

Yesterday’s Asian Balance column in Business Standard.

Taiwan’s presidential elections, since they first started in 1996, have in large part been referendums on the “One China” policy. Voters have been offered two deviations from the delicious ambiguity of the status quo: either a path towards eventual re-unification with mainland China or a dangerous path towards independence. Taiwan’s grand old party, the Kuomintang (KMT), espouses the former, while the Opposition Democratic Progressive Party (DPP) favours the latter.

The stakes, obviously, are high for Beijing — whose leaders have tried, unsuccessfully, bullying, coercion and suasion to influence the Taiwanese voter. But the stakes are also high for the Indo-Pacific region because Taiwan is critical to the stability of US-China relations, especially at a time when they both are attempting to move away from the confrontation of the past two years.

Neither China nor the United States wants the Taiwanese voter to rock the boat. Both had let it be known that they would prefer the incumbent president, the KMT’s Ma Ying-jeou, to win. In the event, on Saturday, the Taiwanese people agreed. But not before pre-election opinion polls showed that the election would go down to the wire, prompting thousands of expatriate Taiwanese from places like Silicon Valley to crowd into flights back to the island to cast their ballot.

That Ma found himself neck-to-neck with Tsai Ing-yen, his DPP challenger, is interesting. Four years ago, he was voted in after people felt that the DPP’s Chen Shui-bian was taking Taiwan into dangerous waters with his pro-independence line. Ma delivered on his campaign promise of closer ties with the mainland, sealing a major trade deal with China in 2010, boosting trade, travel, communications and investments.

China-Taiwan trade is currently around $160 billion. Taiwanese investors pumped in close to $40 billion in the four years of Ma’s first term. Chinese investors reciprocated, albeit only to the tune of $170 million. Increasing the number of direct flights to almost 100 a day brought in 2 million Chinese tourists and $3 billion in receipts. There has been a parallel improvement in official relations between Beijing and Taipei, as much in form as in substance.

Why then did Ma face a tough election? One answer is what we would call an anti-incumbency effect. As he admitted last month, there were some economic goals his government failed to achieve, especially those relating to employment and income growth. The other answer, one that goes beyond economic angst and back to the China-Taiwan question, might be a preference by voters to drag deviations from the status quo to the middle. As Russell Hsiao, a political analyst, wrote in the Jamestown Foundation’s “China Brief” last month, a majority of Taiwanese people want to perpetuate the status quo and will punish politicians who stray too far from it. This might also explain both the closeness of the contest and the verdict itself.

Over in Beijing, Ma’s victory is seen as vindication and a political triumph for President Hu Jintao. In the internal dynamics of the Communist Party of China, it is likely to empower individuals and factions close to Hu, influencing the pecking order of the new administration that will take over after this year’s party congress. Also, as Willy Lam, a Hong Kong-based commentator, points out, “if the KMT continues to rule, one can assume that tensions will be lowered further and the [People’s Liberation Army] will have no reason to ask for a higher budget.” To the extent that the issue of Taiwan’s status becomes less of a thorn in Beijing’s side, the political salience of the hawkish factions will, on the margin, diminish. This in turn can help reduce tensions with the United States.

In Washington, some commentators have already begun asking whether it makes sense to continue to allow Taiwan to poison relations between the United States and China. While it is unlikely that such a policy reversal is in the offing, it is already clear that Washington would prefer a Taiwan that doesn’t raise the temperature in East Asia. Washington’s strategic calculus, like that of the other major powers in Indo-Pacific, is about shaping a favourable balance of power, not triggering a military confrontation.

India faces a dilemma. On the one hand, the geopolitical stability suggested by a KMT government means greater economic opportunities for India to engage Taiwan. Compared to Japan, South Korea and Singapore, our bilateral trade and investment with Taiwan is negligible. The country accounts for one per cent of India’s foreign trade. At 0.03 per cent of the total foreign direct investment in India, Taiwan ranks below countries like Chile and Turkey. Bilateral trade agreements can help, but only if domestic reforms make India relatively more attractive as an investment destination.

On the other hand, a Beijing less preoccupied with issues in its backyard will find it easier to project power elsewhere, including against India.

Geoeconomic opportunities are, thus, stacked against geopolitical risks. So unless New Delhi uses the space created by Saturday’s elections to rapidly scale up economic ties, India will have little upside from Ma’s success.
Copyright © 2012. Business Standard. All Rights Reserved. [Business Standard]

Kim crosses China’s line

Brinkmanship does not work beyond the brink.

“Either a nuclear-equipped DPRK or a collapsed DPRK,” Wu Chaofan concludes, “would cause disastrous interruption of the process of China’s peaceful development.” As long as the North Korean regime was playing inside these boundaries it was possible for China to use the situation to apply strategic pressure on the United States, Japan and South Korea. The threat from North Korea prevents the United States from concentrating its resources on Taiwan, and to that extent, reduces China’s cost of maintaining a balance of power across the Taiwan straits.

So it would be terrible for China if North Korea crossed those boundaries.

…many Chinese experts and advisors are more concerned with the threat Pyongyang’s nuclear weapons poses to China’s security. After adoption of Resolution 1874, the DPRK responded with a big rally in its capital. Its leaders announced that the country would stick to its own path, regardless of whether friendly countries sided with it and the effect on international aid. Such an attitude on the part of Pyongyang is a warning that China should reconsider its national interests.

Pyongyang’s nuclear tests, which took place only tens of kilometers from the Chinese border, might cause an environmental catastrophe in a densely populated area, not to speak of the threat it is to peace and stability in East Asia and the world as a whole. Any deadly accident following Pyongyang’s nuclear tests would not only inflict enormous losses on the Korean people but also seriously damage the environment in Northeast China and the surrounding region. [China Daily]

Mr Wu quotes two Chinese scholars who essentially warn North Korea’s neighbours to be prepared for the worst. China has been unable to persuade North Korea to stand down. Meanwhile Japan and South Korea have not only taken a hard line against Pyongyang, but have—in the delicate style of East Asian diplomacy—asked China to deliver. More than the US airstrikes that the Chinese scholars warn about, the real threat to China comes from the prospect of both Japan and South Korea developing their own nuclear deterrents.

If the North Koreans don’t oblige, then China will be, well, in a soup.

One China Policy

There isn’t one.

This post was first published in November 2006. As it is pertinent to the current situation it is reproduced here, almost in its entirety

In the debate over China, many of those with any experience actually dealing with China on political issues had advised caution. Many of those whose primary experience of China has been through trade and investment advocated closer ties. The oversimplified question on everyone’s lips was a cliche: Is China a friend or foe? That, though, is a wrong question to ask. The inherent anthropomorphism in the framing of this question confuses the issue, for relations between states are not like relations between people.

The essential fact is that on a fundamental level two powers as large and as proximate as China and India cannot rise without competition. And in most spheres of this competition, it is India that is catching up.

Three games
There is competition for regional and global influence: China is taking leadership in regional groupings where it has been a member, and entering groupings where it has not. It is now the most important member in East and Central Asian groupings. It has secured a good foothold in South Asia. And it is knocking on the doors of Africa. India, on the other hand, has secured a greater role for itself in South East Asia, where it has been welcomed because it can help balance China’s influence. Japan too has recognised that India will be a necessary element of the balance of power in East Asia. [See Harsh Pant’s piece in the April 2008 issue of Pragati]

Then there is competition in the quest for energy sources and, soon, natural resources. Here too, China is ahead, but India has begun to up its game in energy diplomacy. The two are already competing in securing fossil fuels. With the India-US deal bringing India into the nuclear mainstream, the competition will extend to securing nuclear fuel too. This decade will also see the two countries on a worldwide hunt for natural resources as their economy develops.

And of course, there is competition for investment and trade, which will only intensify as China becomes proficient in the English language and India gets its manufacturing act together.

…three strategies
So yes, there’s a contest going on all right. This does not, however, call for visceral hostility. Each competition has its rules. They cannot be wished away. This is a moment of profound change in the global balance of power and India would do well to play the game according to what the rules are (and not, as in the past, according to what the rules ought to be). China’s objective—couched as it may be in the language of ‘peaceful rise’ and ‘harmonious world’—is to become the pre-eminent power in Asia. It is a game that requires China to improve its relative power. There are two strategies for winning: one, for China to develop its own power; and two, for China to contain its competitors. The principal challenge for India will be to counter this. Nuclear weapons have made it unlikely that the contest will escalate to war. It is necessary to invest in maintaining the conventional and nuclear deterrence to keep it that way. They may be important in their own right, but Tibet, Tawang (i.e. the border issue) and Taiwan are both instruments and shock absorbers in this geopolitical game.

On the surface, the energy and resources game is zero-sum, and for that reason, the prudent strategy for both parties is to compete with each other. There may be scope for co-operation; but such co-operation will not be in India’s favour until it is able to negotiate with China on a peer-to-peer basis. At this time, India should focus on closing the gap, though not necessarily taking the same route as China.

It is a matter of basic economics that greater trade and investment will leave both countries better off. The rules of the game here are entirely different from the rules of the geopolitical or the energy game. There is no good reason—not even ‘national security’—for restricting trade with and investment from China. Those concerned with national security must adapt to the contemporary era of information abundance. Although this is changing, the Indian government is playing the geo-economic game according to geopolitical rules (and perhaps, vice versa).

The upshot is that India will have to counter China’s geopolitical moves, keep pace in the quest for natural resources and engage China in trade. There is, in the end, no simple one China policy.