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The Taiwan conundrum: India balancing trade, technology, and security amid Chinese belligerence

www.economictimes.indiatimes.com | October 6, 2023

History is the sum total of things that could have been avoided.
- Konrad Adenauer, former Chancellor of Germany

Adenauer, an opponent of Adolf Hitler and the Nazis, was witness to the two World Wars that the world has seen. One can understand the gravity of the words and the standpoint that he spoke from.

These words derive more significance if one looks at what is happening between Taiwan and China, with India watching from a distance.

For Taiwan, this is a pivotal moment in history. The country is at a crossroads. China is determined to bring self-governed Taiwan under its control, while Taiwan considers the US as its most dependable ally in terms of national security. Moreover, in the context of the US-China trade war, Taiwan has become a focal point of tension. Additionally, the US is closely monitoring the responses of South Asian nations, including India, in the event of a potential conflict involving Taiwan. How India handles the situation is critical to regional peace and conflict situations in the coming years.

There are reports indicating that India's defence chief and chairman of chiefs of staff committee (COSC) Lt Gen. Anil Chauhan has initiated a study to assess the broader impact of a conflict involving the island, which also includes the US and its allies.

The burning question for India is: If Taiwan loses sovereignty, can India adopt a neutral stance like in Ukraine-Russia, despite unease with a major trade partner?

The short answer is No. And there are several reasons. Most important of them is that India shares a substantial 4,000-kilometre border with China and allocates significant resources to ensure its safety from the expansionist giant nation.

What makes Taiwan so important for India?

Taiwan - a geostrategic hotspot

China claims Taiwan as a 'renegade province' and seeks reunification, leading to efforts to isolate the island on the global stage. Recently, China released an 'Integration Blueprint' for Taiwan, outlining a 21-page planning document that outlines a vision for Taiwan's economic integration with Fujian (Chinese province). China says it is a blueprint for Taiwan's future development.

Citizens of Taiwan are well aware of the current situation.

"Taiwan has emerged as a litmus test for the US’s commitment to security in the Western Pacific region. If the US were to lose Taiwan, it would signal a significant setback, as it would demonstrate a perceived inability to safeguard its allies from Chinese influence or aggression, including South Korea and Japan in the region. Given the paramount importance of Taiwan to both China and the US, the tensions between Washington DC and Beijing have escalated,” says Roger Liu, professor at FLAME University in Pune.

Liu is an expert in international politics. Liu, a 47-year-old Taiwanese native, has spent most of his life in Taiwan and the US. In the last eight years, he has been living in India. Holding both US and Taiwanese citizenship, Liu is a senior research fellow at the Research Institute for Democracy, Society, and Emerging Technology (DSET), operating under Taiwan's National Science and Technology Council.

Taiwan stands as a beacon of American-style democracy in Asia, making it strategically important to the US. “When we combine two elements — technological prowess and a robust democratic system — it becomes evident that Taiwan has assumed a critical position that the US cannot afford to relinquish,” adds Roger.

Avinash Kolhe, a retired professor of political science at Ruparel College (Mumbai) and currently pursuing a PhD in Chinese studies at the University of Mumbai says, “This rivalry isn't merely about economic rankings; it's also an ideological battle. China operates under a communist system, while the US is rooted in capitalism. The US boasts a democratic setup, characterised by a multi-party system, a free press, an independent judiciary, and vibrant civil societies — elements conspicuously absent in China. Hence, the US employs various strategies to influence China, with Taiwan being one of the pawns on this geopolitical chessboard.”

Liu explains, "For the last seven decades, Taiwan has been sheltered under the protective shield of the US. The unwavering assistance from the US in various aspects has made them not just the strongest but the sole ally capable of providing Taiwan with security. As a result, the Taiwanese people have heavily relied on the US for their security.”

Consequently, Taiwan's substantial dependence on the US for economic aid, weaponry, and military backing is notable. However, the US is not Taiwan's primary trading partner.

According to the US Department of Commerce, China is Taiwan's top trading partner. It's worth noting that India ranks as Taiwan's 14th largest export destination and 18th largest source of imports. In 2022, the bilateral trade between India and Taiwan surged to USD 8.45 billion, showcasing a 9.8% increase from the previous year.

Notably, this figure stood at USD 1.2 billion in 2001.

Taiwan's impact on India

For a territory to be acknowledged as a country in the modern global political arena, it must receive diplomatic recognition from the 193 member states of the United Nations. Presently, only 13 countries (along with Vatican City) officially recognise Taiwan as a sovereign nation. Due to this limited recognition, Taiwan is not included in the United Nations and is classified as a territory.

Despite no official recognition, India maintains strong trade ties with Taiwan, exemplified by various diplomatic engagements. In 1995, India established the India-Taipei Association as its exclusive representation in Taipei. The Republic of China (Taiwan) responded in 2012 by creating two Taipei Economic and Cultural Centres (TECC) in Delhi and Chennai.

Recently, Taiwan revealed plans to open another TECC in Mumbai, India's financial hub. Furthermore, the Taiwanese business community is represented in Delhi through the Taiwan Chamber of Commerce, established in 2013.

However, recent years have seen escalating tensions in the Taiwan Strait region due to the increasing gray-zone competition between China and Taiwan. The ongoing tensions in this region raise concerns about their potential impact on India's economy.

Some defence experts argue that should a conflict escalate between the US and China over Taiwan, it might not be limited to the island, potentially escalating into a global conflict.

If China were to assert control over Taiwan, it could wield significant influence over numerous nations globally. As a result, the prospect of this impacting India's economy cannot be ignored. Here are few ways how it will impact India:

  • Impact on trade: Though India has announced restrictions on specific Chinese products and mobile apps, imports from China witnessed a 4.16% increase, totaling USD 98.51 billion during the 2022-23 fiscal year. The Strait of Malacca and Taiwan Strait play a vital role as a pivotal maritime trade route linking India and China. Also, the trade route connecting India to countries such as Japan, South Korea and Taiwan passes through the Taiwan Strait. Any hostile action that China takes regarding Taiwan could potentially disrupt shipping and supply chains in both the Taiwan Strait and the Strait of Malacca. This disruption would have consequences for countries involved in trade within these regions.
  • Effect on IT industry: Taiwan's 'Silicon Shield' produces over 60% of the world's most cost-effective semiconductors and over 90% of the most advanced ones. Most are manufactured by a single company, Taiwan Semiconductor Manufacturing Corporation or TSMC. Consequently, Taiwan's importance in the realm of high technology is too significant for India and the world to disregard. Disruptions in Taiwan could affect India's semiconductor industry and its service-oriented economy.
  • Connectivity trouble: Secondly, India has a vested interest in the sea lines of communication passing through the Taiwan Strait and within its proximity. Taiwan plays a crucial role as a hub for submarine Internet cables with approximately 15 major cables connecting to the global virtual network through Taiwan nodes. Any security breach in these cables would disrupt global digital connectivity, posing adverse consequences for India's IT industry, e-commerce, logistics, entertainment, and other service industries. Hence, India's strategic interest on the international front is to guarantee the maintenance of peace and stability in the Taiwan Strait.

“We must take into account the heightened Chinese activities observed in the Bay of Bengal and other regions of the Indian Ocean over recent years. China employed the pretext of scientific research to deploy reconnaissance and surveillance ships or vessels that were, in reality, under the command of the Chinese Navy,” Liu says.

He adds, “Moreover, in recent years, China has been expanding its influence campaigns in countries with longstanding friendships with India, including Sri Lanka, Maldives, Nepal, and Bangladesh. From a strategic perspective, China has exerted pressure on India not only in the Indian Ocean region but also along the Line of Actual Control.”

Will China attack Taiwan?

Taiwan strives for peaceful co-existence with its neighbour China but faces challenges due to its small size in comparison.

"We share cultural and linguistic ties with the Chinese people, but China insists on enforcing the One China policy. According to their interpretation, there is only one China globally, with the People's Republic of China being the sole legitimate government, and Taiwan as an integral part of China. China compels us to acknowledge this, threatening us with force if we don't comply. Taiwan's predicament stems from our size and China's unilateral approach, making it challenging for us to avoid such conflicts," Liu says.

Kolhe believes that China is unlikely to launch a direct attack on Taiwan in the modern era, as war tends to exacerbate problems rather than solve them, as evidenced by the situation in Ukraine.

With Western countries openly supporting Taiwan, Kolhe believes China is more likely to apply pressure through diplomatic, military, strategic, and non-military means rather than resorting to physical aggression.

If China were to take any aggressive actions against Taiwan, India would naturally adopt an anti-Chinese stance, given that China would be attacking an independent nation-state, Kolhe adds.

I-T: India-Taiwan ties

Concerning global interests, India's top priority is ensuring peace and stability in the Taiwan Strait to prevent the escalation of conflict. Recent visits to Taiwan by three retired service chiefs, including former army chief Manoj Naravane, navy chief Karambir Singh, and air chief RKS Bhadauria, made in their personal capacity, aimed to enhance strategic co-operation between India and Taiwan.

India's strategic significance in Asia makes it a key player in the Taiwan issue. India's semiconductor mission aims to meet domestic needs and contribute to the global demand for chips.

The MoU that India signed to highlight its semiconductor co-operation with the US and Japan has solidified its role in this critical industry.

Meanwhile, Taiwanese companies are increasingly relocating from China to safer havens like Vietnam due to security concerns. India recognises its potential to assume a vital role in Taiwan's 'China+1' strategy, offering a practical avenue for supply-chain diversification.

For Taiwan, India's stable industrial and political environment, coupled with a skilled workforce, makes it an attractive investment destination.

Presently, about 120 Taiwanese businesses have invested over USD 1.2 billion in India, spanning various sectors such as information technology, medical devices, automotive components, steel, electronics, engineering, and financial services.

Additionally, around 2,500 Indian students study in Taiwan, highlighting the robust educational and cultural ties between the two nations.

"I believe that India and Taiwan should collaborate more closely. Looking ahead, especially in the age of artificial intelligence and semiconductor technology, there is potential for closer cooperation between Indian and Taiwanese talent. India is increasingly focusing on integrated circuit design, while Taiwan remains a manufacturing hub. When we consider the term 'IT,' it aptly symbolises the collaborative potential between India and Taiwan. 'I' for India and 'T' for Taiwan in IT represent the growing closeness in political, cultural, and technological aspects between our two nations," Liu says.

The final cut

It seems that both countries recognise the mutual benefits of co-operation, especially concerning IT and semiconductor advancements.

There’s no yardstick to follow in order to forecast India's military and strategic actions amid a potential Chinese incursion into Taiwan. India may be gearing up to offer a variety of responses tailored to specific scenarios.

Nonetheless, there's room for both nations to pursue their interests and enhance diplomatic ties.

Going by Adenauer’s words, history is the sum total of the things that could have been avoided. But it is also what nations choose to do in the present.

This article includes valuable insights from Prof. Roger Liu, Faculty of International Studies, FLAME University.

(Source:- https://economictimes.indiatimes.com/prime/economy-and-policy/the-taiwan-conundrum-india-balancing-trade-technology-and-security-amid-chinese-belligerence/primearticleshow/104138977.cms )