The Prospects for Taiwan-EU Cooperation

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The Prospects for Taiwan-EU Cooperation

Taiwan’s President-elect Lai Ching-te wants to bolster economic and security cooperation with the EU. Will Europe be able to meet Taiwan halfway?

The Prospects for Taiwan-EU Cooperation

Vice President William Lai (third from right), now the president-elect, meets with a delegation from the European Parliament in Taipei, Taiwan, July 26, 2023.

Credit: Office of the President, ROC (Taiwan)

Despite winning the 2024 Taiwanese presidential election by a wide margin, Democratic Progressive Party (DPP) candidate Lai Ching-te (also known as William Lai) will face a steep challenge in improving relations with the United States and European Union due to the DPP’s lack of a majority in Taiwan’s Legislative Yuan. Meanwhile, China remains displeased with the DPP’s victory, and could attempt to increase pressure on Taiwan to further reduce its interactions with the United States and Europe. 

However, Europe should aim to cultivate better trade relations and bolster security cooperation with Taiwan to deter Chinese aggression against the island. Even as the EU and its members maintain a One China policy, with sole diplomatic recognition of the People’s Republic, Europe should use Taiwan’s election results as an opportunity to both help deter any future Chinese aggression against Taiwan and strengthen its overall engagement with the Indo-Pacific region.

Beyond being “like-minded partners… of freedom and democracy” in the words of outgoing Taiwanese President Tsai Ing-wen, Europe’s interest in deterring a Chinese invasion of Taiwan stems from several economic and security-related considerations. For example, 90 percent of the world’s largest container ships traverse the Taiwan Strait annually, and most of Europe’s semiconductor chip supply originates from Taiwan. Economic pressure on Taiwan short of invasion, such as a blockade of the island, could cost the global economy $10 trillion, according to Bloomberg, amounting to more than 10 percent of global GDP. 

Moreover, as China is the EU’s largest import partner, any military conflict over Taiwan (especially if it drew in the United States) would disrupt China’s trade and supply chains with the EU. Any unchecked aggression against Taiwan would have regional consequences as well by potentially emboldening China to pursue other irredentist claims, especially in the South China Sea. In case of an invasion, the EU would likely join other advanced economies in imposing sanctions on China in response, which could exact an even heavier toll on the global financial system, depending on the scale of such sanctions. 

Although most EU policymakers are aware of the stakes, European countries could do much more to support Taiwan and deter China. 

In terms of trade, while the opposition Kuomintang (KMT) may succeed in steering Taiwan toward more trade with China through their plurality in the Legislative Yuan, China may still choose to impose further restrictions on cross-strait trade as a means of economic pressure. To reduce the risks of trade dependence on China, Lai will likely move to continue trade diversification with both the U.S. and the EU. In fact, Taiwanese officials have already signaled their interest in negotiating a trade framework with the EU

Instead of remaining hesitant on engaging in further trade and investment with Taiwan due to fear of upsetting China, Brussels should incentivize Taiwan to stay the course, especially considering that the EU is Taiwan’s largest foreign direct investor. Given the EU is the world’s largest trading bloc, its outreach could provide cover for trade with and investment into Taiwan for Indo-Pacific states that have been under Chinese pressure, like Vietnam, Malaysia, and the Philippines.

As part of these trade framework discussions, European policymakers should look to strengthen the resilience of clean energy technology development and digital trade as well, similar to the principles outlined under the U.S.-Taiwan Initiative on 21-Century Trade and the U.K.-Taiwan Enhanced Trade Partnership. Additionally, while Chinese coercion likely will not touch on Taiwanese semiconductors due to China’s own reliance on them, Europe should consider assisting Taiwan with its own economic diversification through investments, as its current overreliance on semiconductor and integrated circuit technology exports could be risky in the long term

Europe has a strong amount of political power it could leverage in support of Taiwan as well. While Europe has no official diplomatic channels with Taiwan, legislators have been able to engage in bilateral outreach, including multiple high-level delegations from the European Parliament and EU member legislatures. Previous delegations primarily focused on discussing democratic resilience and trade, but following Lai’s election, European delegations should consider prioritizing security cooperation. 

There is precedent for such engagement from Taiwan’s relations with Japan, especially under the “two plus two” dialogues between top security and foreign affairs party officials in the Legislative Yuan and Japanese Diet. In fact, the very same forums could be expanded to include other states as well, as members of the Japanese Diet who will be attending Lai’s inauguration in May have expressed interest in meeting a U.S. bipartisan delegation for the same event, which could lead to a trilateral Taiwan-Japan-U.S. strategic dialogue on managing cross-strait tensions. 

Consequently, it would be prudent for European lawmakers to follow suit in sending their own delegations to discuss what steps Europe could take to improve security cooperation with Taiwan. This is especially the case for EU members that have expeditionary capacity in the Indo-Pacific, primarily France, the Netherlands, Germany, Spain, and Italy, which could potentially coordinate with Taiwan through similar legislator-based channels. The “two plus two” Taiwan-Japan dialogues might provide some inspiration on the form these channels with Europe could take as well, or possibly even be expanded to include European legislators.

With all that has been written about China’s potential aggression against Taiwan, China may actually be looking to avoid escalation. A surprising takeaway from China’s reaction to Taiwan’s elections is that its response has so far been relatively muted, even though official spokespersons called Lai a “separatist” and “troublemaker” and China resumed military activities around the island shortly after the election’s conclusion. Some experts speculate that Chinese leader Xi Jinping aims to cool China-U.S. tensions considering China’s post-pandemic (mainly economic) problems, and the diplomatic success of Xi’s summit with U.S. President Joe Biden in November 2023.

While this trend may not necessarily continue, China’s unusually restrained response could be the biggest opportunity for Europe to increase engagement with Taiwan. Nevertheless, Europe should consider increasing its non-military engagement with Taiwan regardless of mainland China’s response.

Given that Lai’s inauguration will happen in May, there is time for European policymakers to develop a new strategy toward Taiwan. Even though the lead-up to the European Parliament elections in June will likely be a fraught contest, European policymakers should devote some attention to improving Europe’s relations with Taiwan. Taking the initiative now to meet Taiwan halfway would decisively invigorate Europe-Taiwan relations for the foreseeable future.