Taiwan is still reeling from the apparent change in U.S. policy on Taiwan, but China is wasting no time in punishing the island for it. Beijing welcomed Sao Tome and Principe's announcement that it would end diplomatic relations with Taiwan. Shortly after the announcement, Taipei accused Beijing of intentionally using the African nation's financial troubles against Taiwan. Sao Tome and Principe had previously requested $200 million in aid from Taipei, who refused, saying it would not engage in "dollar diplomacy." If Beijing knew of Sao Tome and Principe's plans in advance, or if it had a hand shaping the decision, it would have violated an unofficial 2008 agreement, under which China refrains from poaching Taiwan's allies. Beijing has apparently moved away from that agreement in recent months, resuming its severed relations with Gambia, which could encourage more Taiwanese allies to reconsider their relationship with China.
In fact, Taiwan's comment regarding dollar diplomacy says a lot about the relationship between mainland China and Taiwan. Since Taiwan lost its U.N. seats in 1971 and most of its international recognition, it has been relying on dollar diplomacy to win allies. It provided cash, aid and investment to dissuade countries from switching allegiance. The strategy worked while Taipei's economic clout was high relative to China's and helped it legitimize its claims of autonomy, despite its international isolation. But as Beijing’s economic, international and political influence grew, the strategy became less effective and encouraged many of Taipei's allies to leverage both governments against each other for their own economic benefit. It is a game that Taipei is losing more and more.
But more worrisome for Taiwan than the loss of one tiny ally is the possibility that more countries will follow suit. The Central American nations of Nicaragua, El Salvador, Guatemala and Honduras have long been considering bolstering ties with China, in the hopes of reducing their reliance on the United States. Moreover, the Vatican, Taiwan's last ally in Europe and its most important one, has been negotiating with Beijing for the past year, trying to resolve their differences. Ultimately, it wants to increase the authority of the Catholic Church in China, where the government closely monitors religious groups and institutions. The negotiations have been tense, but there is hope that an agreement will be struck. Yet, even if Taiwan loses more allies, the pain will be more symbolic than actual. Taiwan's allies are each relatively small in size and offer neither strategic nor economic advantages. And in fact, Taiwan may be beginning to gain, not lose, relevance internationally.
Taiwan's Strategic Importance
Since being colonized by European settlers in the sixteenth century, Taiwan has repeatedly been the focus of Northeast Asian politics because of its strategic geopolitical position — close to Japan and China and providing Asian countries access to the western Pacific Ocean. It has been ruled by multiple nations, including Japan and China, and became an extension of the Chinese Civil War as well as a focal point of power struggles between China, the United States and Japan.
To China, Taiwan is both the last remnant of the Chinese Civil War and the key to maritime supremacy in the region. To Japan, the island would provide a strategic base close to its key geopolitical rival, from where to expand influence across the Asia-Pacific. For the United States, Taiwan is considered an "unsinkable aircraft carrier," which the United States could use to counterbalance a rising China.
However, for the past two decades, Taiwan has kept a relatively low international profile, becoming increasingly isolated and losing its economic significance. After military tension between mainland China and Taiwan flared up in the mid-1990s, the status quo was largely established: There would be no unification, no Taiwanese independence and no use of force. Yet, despite its internationally acclaimed democratic practices and importance as a manufacturing hub, Taiwan's position has been much eclipsed by China's, Japan's and South Korea's. The imbalance stretches to the military. Though Taiwan is relatively strong militarily, it cannot compare to China, which has not ruled out a military solution to reunification.
The potential U.S. shift toward Taiwan could prove to be a double-edged sword for Taipei. But it very well may be the shock Taiwan needs to rejoin the region's power games. China is becoming increasingly assertive and nationalistic; Japan is remilitarizing and expanding its influence; the United States is a wild card, but will probably be looking for an in from which to manage the region. Thus, it may be Taiwan's hour to re-emerge as an important geopolitical asset, with significant influence in East Asia's power game.