The European Union and Two Chinas

As is known, there is not just one China: two State entities of this name exist quite openly. These are the People’s Republic of China and the Republic of China, better known as Taiwan.

Anachronous as it may seem, the latter has actually become the world’s 21st largest economy, thus almost a G20 country. Many politicians in United Europe note Taiwan as an excellent example of a country that combines a highly successful industrial policy with a workable economic security strategy and a vibrant democracy. The island republic is ready to engage with Europe but observes, with a measure of regret, Europe’s policy towards mainland China.

How can Europe establish relations with Taiwan, and should it? Karel Lannoo from the Centre for European Policy Studies tries to figure this out.

Even with limited geographical resources, today’s Taiwan is a full-fledged economic superpower. It hosts the world’s largest chip producer, most of the world’s AI server manufacturers, and many top-end businesses in the electronic industry. Its per capita GDP based on purchasing power parity stands at USD 90,233, which ranks 11th globally.

Today the Old World’s prevalent approach is that, while pursuing its One China policy for diplomatic reasons, the European Union should not avoid including Taiwan, a well-developed economic power, among its regional partners.

A European perception is that there is no longer a reason to overly pander to mainland China, as it increasingly becomes a systemic rival to the EU. In particular, after hooking the Old World on its investments, Beijing has turned this dependency into a pressure lever.

Some overzealous politicians believe that, with the tension emerging between the EU and China, Europe could adjust its One China policy a little.

Against the backdrop of a deteriorating EU-China relationship, an enormous trade deficit due to the exploitation of the EU’s open markets, and China’s incapacity to stimulate domestic demand, the EU could give a warning shot by pragmatically bending its political line on the One China policy.

The informal contacts between Taiwan and the EU that exist today focus on non-political engagement only. As a result, many economic actors on both sides cannot easily work together, which makes it impossible to realize the full potential of the EU-Taiwan digital relationship.

The world’s current political environment is indeed an opportunity for the EU to upgrade its digital diplomacy in the Asia-Pacific and to maximize gains in its partnerships with other Asian tech middle powers, including Taiwan.

But European politicians should think thrice before they take this step. Including Taiwan among the European Union’s partners could bring a significant economic benefit. But the profit would be short-lived. It will turn into a dead loss if China’s bottomless market – with its profusion of goods, resources, technologies and billions of investments – bangs shut before Europe. And this will be serious.

Original publication: https://www.ceps.eu/the-eu-should-bend-the-one-china-policy/