Will President Trump use Taiwan relations to bargain for better terms with China like President Carter and Nixon did ?

There has been some concern that President Trump will use Taiwan relations as a point of negotiation with China for more favorable business terms.

A review of Taiwan-China-USA

In one of the most dramatic announcements of the Cold War, President Jimmy Carter states that as of January 1, 1979, the United States formally recognized the communist People’s Republic of China (PRC) and sever relations with Taiwan.

From the U.S. viewpoint, closer relations with the PRC would bring economic and political benefits. Economically, American businessmen were eager to try and exploit the huge Chinese market. Politically, U.S. policymakers believed that they could play the “China card”—using closer diplomatic relations with the PRC to pressure the Soviets into becoming more malleable on a variety of issues, including arms agreements.

Carter’s announcement that diplomatic ties would be severed with Taiwan (which the PRC insisted on) angered many in Congress. The Taiwan Relations Act was quickly passed in retaliation. It gave Taiwan nearly the same status as any other nation recognized by the United States and also mandated that arms sales continue to the Nationalist government

A new era began with a rapprochement during Richard Nixon’s presidency. Nixon and his aide, Henry Kissinger, found ready partners in Mao Zedong, the Chairman of the Chinese Communist Party, and Zhou Enlai, the Chinese Premier, who also wanted to improve Sino-U.S. relations. Their efforts resulted in the Shanghai Communiqué, which laid the basis for future cooperation between the two countries even while acknowledging continuing disagreements on the subject of Taiwan. As part of this rapprochement, the two countries opened liaison offices in one another’s capitals in 1973, a time when Taiwan still had an Embassy in Washington.

Current Economic and Military Status

In 2015, the RAND think tank used open, unclassified sources to compile The U.S.-China Military Scorecard: Forces, Geography, and the Evolving Balance of Power. This comprehensive report examines U.S. and Chinese military capabilities in ten operational areas, and presents a “scorecard” for each. The analysis is presented in ten scorecards that assess military capabilities as they have evolved over four snapshot years: 1996, 2003, 2010, and 2017.

The results show that China is not close to catching up to the United States in terms of aggregate capabilities, but also that it does not need to catch up to challenge the United States on its immediate periphery. Furthermore, although China’s ability to project power to more distant locations remains limited, its reach is growing, and in the future U.S. military dominance is likely to be challenged at greater distances from China’s coast.

RAND models of attacks by these ballistic missiles on Kadena Air Base, the closest U.S. air base to the Taiwan Strait, suggest that even a relatively small number of accurate missiles could shut the base to flight operations for critical days at the outset of hostilities, and focused, committed attacks might close a single base for weeks. U.S. countermeasures—such as improved defenses, hardened shelters for aircraft, faster runway repair methods, or the dispersion of aircraft—can potentially mitigate the threat.

The models evaluate the number of fighter aircraft that the United States would need to maintain in the Western Pacific to defeat a Chinese air campaign. The results suggest that U.S. requirements have increased by several hundred percent since 1996. In the 2017 Taiwan case, U.S. commanders would probably be unable to find the basing required for U.S. forces to prevail in a seven-day campaign. They could relax their time requirement and prevail in a more extended campaign, but this would entail leaving ground and naval forces vulnerable to Chinese air operations for a correspondingly longer period. The Spratly Islands scenario would be easier, requiring roughly half the forces of the Taiwan scenario.

Economic Situation

The U.S. goods and services trade deficit with China was $336.2 billion in 2015. Goods exports totaled $116 billion; goods imports totaled $482 billion. The U.S. goods trade deficit with China was $366 billion in 2015.

Taiwan is currently our 9th largest goods trading partner with $67 billion in total (two way) goods trade during 2015. Goods exports totaled $26 billion; goods imports totaled $41 billion. The U.S. goods trade deficit with Taiwan was $15 billion in 2015.

Taiwan’s economy has become deeply linked with that of China. China is Taiwan’s largest trade partner. China takes in about 30% of Taiwan’s exports by value. Most of this growth took place during the administration of Chen Shui-bian—the island’s first president from the Democratic Progressive Party (DPP), which advocated independence from China. Nextbigfuture notes that this is an example of how all politicians lie.

Taiwan’s exports to China and Hong Kong are four times the Taiwan exports to the USA.

About 2 million Taiwanese live in China permanently, running businesses. This is almost ten percent of Taiwan’s population.

Taiwan’s GDP in 2017 is $535 billion. GDP growth has been around 1% each year for the last three years.

China’s GDP is about $11 trillion (exchange rate basis)

The US GDP is about $18 trillion.

Overall

The US would still be capable of defending Taiwan but it would involve virtually the bulk of the US Navy and Air Force. Nextbigfuture thinks it is delusional for anyone to think that the US (regardless of which President) would commit that amount of force to defend Taiwan. 20 years ago the US was utterly dominant and China would have to backoff from any military situation.

China would be able to take out any aircraft carriers that got into the Asia area.

Taiwan has not been able to truly count on a US president since before Nixon.

Obama abandoned a US favorable regime in Egypt and did not back up red lines in Syria.

All countries support their own interests.

Trump has clearly repeated he has a US first policy.

It seems obvious that President Trump would use Taiwan relations as bargaining chips. The question would be whether there would be a negotiation where a good enough offer would be made by China to get Trump to abandon Taiwan.

Trump is not unique in this regard. Past and future US presidents would and have abandoned economic and geopolitical allies.

Trump has a wider range of possible and likely actions. Trump would clearly be willing to start a trade war with China. It may even be in Trumps interest to validate his “tough on China” credentials to his supporters.

“The meetings are expected to be informal, unscripted discussions of how the two countries will address, but not immediately resolve, their differences,” said strategists at Morgan Stanley in a note to clients.

The general expectation is not much will actually happen.

Topping the agenda at Trump’s Mar-a-Lago resort in Florida will be whether he makes good on his threat to use U.S.-China trade ties to pressure Beijing to do more to rein in its nuclear-armed neighbor North Korea, which is working to develop missiles capable of hitting the United States.

If China knows that Taiwan is already integrated economically and that the US would not actually go the military wall over Taiwan, then why would China put Taiwan in as a means to leverage China ? The US would have to actively move to flip to make Taiwan the only recognized China or very actively promote an independent Taiwan. There would be little benefit and mostly negatives for any country to go against China in support of Taiwan. This is why Taiwan has been politically isolated for decades and all economic and political relations are unofficial.

Currency Manipulator Designation

A country must meet three conditions to be officially designated as a currency manipulator, and China currently only meets one of them.

1. Match: A “significant” bilateral trade surplus with the U.S. larger than $20 billion, meaning the country exports far more to the U.S. than it imports.

— China had a goods trade surplus far beyond that, of $347 billion in 2016, according to the U.S. Census Bureau.

2. No match: A “material” current account surplus above 3 percent of gross domestic product, meaning national savings far exceed investments.

— China’s current account surplus fell from 2.7 percent of GDP in 2015 to 1.9 percent of GDP in 2016, according to a Feb. 8 Reuters report citing official Chinese data.

3. No match: “Persistent, one-sided intervention” in the currency market, including repeated purchases of foreign currency (which drives up other currencies and drives down local currencies).

— China sold a record $188 billion in dollar-denominated U.S. Treasurys last year, according to news service Street Account. China’s own foreign exchange reserves have dropped $1 trillion in two-and-a-half years.

From 2003 to 2014, President George W Bush and then President Obama could have designated China a currency manipulator. China’s central bank sold its own currency and bought up foreign reserves like the U.S. dollar. U.S. lawmakers claimed the practice essentially kept the yuan artificially low, making Chinese exports cheaper and giving the country an unfair advantage over other trading partners.

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