China Power | Diplomacy | Politics

Taiwan’s New Southbound Policy and the Looming Election

With the election looming large on the horizon, Taiwan’s New Southbound Policy is obviously at a decisive juncture.

By Jeremy Huai-Che Chiang for
Taiwan’s New Southbound Policy and the Looming Election
Credit: Flickr

With Taiwan’s presidential election less than three months away, discussions on incumbent Tsai Ing-wen’s signature New Southbound Policy — which aims to expand ties with South and Southeast Asia — have remained quite muted. While public focus on the unrest in Hong Kong has shaped the 2020 elections into a pro-China/anti-China referendum, it also seems to have been a deliberate decision by the Tsai camp to not make the New Southbound Policy a focal point when discussing her foreign policy achievements, instead concentrating on successes in bilateral ties with the United States and other like-minded democratic countries. 

Clearly Tsai is not keen to let her opponent, KMT Mayor Han Kuo-yu, gain points by attacking some of the New Southbound Policy’s related negative press in the past few years, especially as recent polls indicate current electoral tactics and Hong Kong protests are successfully winning her a steady lead. 

The New Southbound Policy and an Uncertain Electoral Future  

But being as fundamental as the administration’s “regional strategy for Asia,” the campaign season silence on the New Southbound Policy does not render it anymore insignificant. On the trade front, official statistics show that trade with New Southbound Policy-partner countries increased 22 percent between 2016 and 2018, reaching $1.171 trillion last year. Investments from Taiwan to partner countries have also reached $3.92 billion in 2018, a 66 percent increase in comparison with 2016. Furthermore, the number of tourists from partner countries have also increased from 91,000 to 144,000, a sensational 60 percent growth over the two-year period.

Whether the New Southbound Policy’s continues, and what shape will it take in the future, will both be of utmost importance to Taiwan as it seeks to re-diversify its trade portfolio from China and also try to cope with the ongoing U.S.-China trade war. To date, more than 40 percent of Taiwanese exports and more than 70 percent of its outbound investments still go through China. But despite an obvious need to expand its economic engagement beyond China, the two candidates in Taiwan’s 2020 presidential raceincumbent Tsai and the KMT’s Han — have quite different views toward the orientation of Taiwan’s foreign policy, especially in regards to what role should other countries in Asia (besides China and Japan) play. 

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Han’s China Card in Economic Diplomacy

Han has been unenthusiastic about deploying immense resources to expand ties with Southeast Asia and South Asia, having criticized several times that these efforts have not brought reciprocal results to Taiwan. After being elected Mayor of Kaohsiung, Taiwan’s largest city in the south, he labeled his city diplomacy agenda as “South-South Cooperation,” which aimed to build commercial ties with southern Chinese cities and Southeast Asia. He has, however, on several occasions worryingly voiced prejudice toward Southeast Asian migrants in Taiwan. His foreign policy agenda has been largely built on a populist call to “earn money” from foreign markets, especially by moderating ties with China to expand Taiwanese exports to the country. This is in line with KMT’s tradition of criticizing Tsai’s DPP as damaging fragile cross-Strait relations, but his grassroots language stands in contrast with his KMT predecessor President Ma Ying-jeou.   

In early June 2019, Han pronounced that he would propose a strategy of “Make Money Diplomacy (發財外交)” if elected president. In mid-September, he announced with his foreign policy advisors during a livestream that he would adopt “Content Diplomacy (裡子外交)” once elected into office, a label which implicitly criticized Tsai as caring only about superficial rhetoric and not the economic ends of diplomacy. While “Make Money Diplomacy” emphasized that Taiwan should mobilize its foreign officers, business councils, retired officials and entrepreneurs to support Taiwan business outreach capacity, “Content Diplomacy” added that Taiwan’s healthcare industry and quality public health system could also help in expanding international engagement. 

Overall, the orientation of Han’s economic foreign policy has been clear: expand trade and investment ties with China. If Han does get elected, there will possibly be substantial changes to the New Southbound Policy, which may at least result in the end of the policy under its current name, or more significantly, a narrowing of its focus to only economic cooperation (letting go of the softer civil society elements) and maybe even halting the entire endeavor. With the lack of political will and overarching policy guidance, it will be challenging for Taiwan’s various governmental agencies to coordinate adequate policies that would be able to take advantage of South and Southeast Asia’s emerging markets.

Tsai’s New Southbound Policy Amidst the U.S.-China Trade War

And while the prospects of Tsai winning the 2020 Presidential elections have been increasing, the future outlook of the New Southbound Policy, however, has not been that certain. 

First, winning the presidential elections will be one thing, securing a majority in the national legislative will be another. So far, the prospects of Tsai’s DPP winning again with a margin like 2016 (69 of 113 total seats) seems pretty unlikely. This will have serious consequences for her second term’s policy agenda, especially the New Southbound Policy which has faced constant criticism from the opposition.  

Second, new thinking about the New Southbound Policy seems to be happening within the government. Comparing public releases regarding the fifth (December 2017) and sixth (August 2018) Foreign Trade and Economic Strategy Meetings (and also earlier ones) hosted by Tsai in the National Security Council, focus on the New Southbound Policy has been gradually eclipsed by concerns toward the ongoing U.S.-China trade war, which has pressured the Taiwanese government to enact policy measures in response. A significant amount of these efforts include inviting Taiwanese businesses based in China to relocate back home. The effects of this towards the allocation of governmental resources and attention are yet to be entirely played out.

Third, with rising strategic competition between the United States and China, Taiwan’s New Southbound Policy has been gradually converging with the government’s efforts to engage with the US Indo-Pacific Strategy. While publicly-available information has not shown any path-breaking bilateral collaboration on regional diplomacy yet, public statements by U.S. officials and workshops hosted with the support of American agencies have indicated that substantial cooperation may be gradually emerging. This will boost the New Southbound Policy’s engagement efforts, but may also influence the Policy’s agenda and how countries in South and Southeast Asia perceives it. While Taiwan’s engagement with like-minded countries has emphasized the importance of liberal democratic values, this might not always be music in the ears of economic development-focused officials in Asia.   

Taiwan’s Challenge to Adapt in Changing Regional Dynamics  

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With the election looming large on the horizon, Taiwan’s New Southbound Policy is obviously at a decisive juncture. Even if Tsai wins a second term, raging U.S.-China trade tensions will continue to present pressures for her administration to adapt.

Should Taiwan ramp up its New Southbound Policy, while also using it as a focal point of international cooperation with like-minded countries such as the United States and Japan? Or should Taiwan focus more on like-minded countries and downplay engagement with South and Southeast Asia? 

While strong ties with the United States in recent years have galvanized Taiwan’s confidence in like-minded countries, in the long run the first option — leveling up the New Southbound Policy  — will prove to be more strategic. It will be more difficult, and will mean facing China’s emerging influence in the region head to head, but as long-term trends in Asia indicate relatively declining U.S. influence and stronger regional states, Taiwan will have to engage with these emerging stakeholders, both directly and comprehensively. Taiwan will want regional countries to not see itself as a Cold War legacy, but a technological and economic powerhouse with which they need to maintain ties with. 

Utilizing relations with like-minded countries may provide results, but this should be no substitute for efforts to build organic collaboration and bilateral projects between Taiwan and Asian countries. And relations with like-minded countries alone, obviously, cannot substitute for strong ties with Taiwan’s neighbors beyond Japan and China. In an increasingly multipolar world, Taiwan needs to recognize this reality and enact measures to adapt.    

Taipei lost its UN seat to Beijing in the 1970s when newly independent countries in Africa and Asia voted for Beijing. While the U.S.-China rapprochement under Nixon and Kissinger was a deciding factor, it was Taipei’s inability from the 1960s to gain support among these new member states that led to its final exit. Taiwan would not want to lose more international space in the 21th Century, at least not because it underestimated the importance of emerging non-Western powers once again. 

Jeremy Huai-Che Chiang is Non-Resident Research Associate with the Taiwan-Asia Exchange Foundation and also MPhil Candidate at POLIS, University of Cambridge.