Taiwan celebrated its 113th National Day on 10 October. Its growing economic and geopolitical clout and importance have seen powers the world over readjusting their policies and approaches in ensuring that key sectoral benefits are derived, while also being wary of the China factor and retaliations.
Taiwan's influence and high stakes especially in the semiconductor industry have been the pinnacle of economic and geostrategic importance to the world and especially to the Indo Pacific region. This brings another spillover impact to the direct role in upholding the principles of freedom, democracy and human rights that have been steadfast in Taiwan's domestic orientation and regional and global responsibilities.
The waters surrounding Taiwan are home to the busiest shipping lane in the world, densely filled with cargo ships and cruisers in which China, Japan, South Korea, and many other countries all depend on the shipping lanes to deliver their goods to the world, and vice versa.
Taiwan is located at the centre of the First Island Chain of the west Pacific. Taiwan's pivotal location in the Indo-Pacific serves several strategic purposes for regional powers.
If Taiwan were to become embroiled in conflict or under threat, it would not only have a severe impact on global shipping and logistics but it would also have an impact on the peace and political order of the Indo-Pacific.
Amidst escalating regional and global tensions exacerbated by increasing power intimidation and muscle flexing that have eroded the sanctity of international law and normative order and the guardrails of peace and stability, it is of utmost importance to not only uphold but to preserve and responsibly act towards building a bulwark of stability, peace and freedom in the region.
Taiwan remains a beacon in this domain, alongside with Tokyo and Seoul in East Asia in forming a Chain of Democracy along the First and Second Island Chains, remaining a vital persistent geographical mark of regional democratic cohesion and solidarity of freedom.
Not only does Taiwan hold a vital geostrategic position, it has always remained as a thriving hub for international trade and a very critical global supply chain partner.
Dominance of Semiconductor and Critical Parts
Taiwan's semiconductor manufacturing remains the most important to the world, where it produced 73 percent of the advanced processing chips, below seven nanometer, also leading the world in R&D work for developing more advanced two-nanometer processes.
The majority of the world's most advanced semiconductor manufacturing is in Taiwan, and any disruption to this could severely impact the high-tech sector and economies around the world.
Taiwan's position in the supply chain has often been underestimated, and this is more than just about the chips and semiconductors.It still holds the dominance in various related parts including components, PCBs [printed circuit boards], casings, and others.
The most valuable components in an iPhone, including core processors, 5G modems, Wi-Fi chips, and premium camera lenses, are made in Taiwan by Taiwanese companies. The island's suppliers account for nearly 36 per cent of the total materials bill for each iPhone.
Taiwan is also the leader in different parts of the tech supply chain. One overlooked element is chip packaging and testing,the last stage of semiconductor manufacturing where Taiwan controls 30 percent of global market share.
Taiwan's chips sector and its contributions to the global transition towards high technology driven economic advancement and in powering the new digital and technology based critical growth sectors have been the main pillars of global changes in key economic fundamentals and with the ripple effects of uplifting social mobility and equitable growth.
The focus by growing players in the new sectors that owe to the importance of semiconductor and related industries has enabled new drivers of economic and human development, bridging the income gap, and helped to tackle carbon and climate impact and other humanistic challenges, including poverty and forced migration.
Taiwan's trade performance is supported by the foundation of its industrial strengths. Taiwan has a holistic ecosystem of friendly industrial clusters for a highly effective industrial supply chain which enables quick responses to market changes.
This enabled Taiwan to provide highly innovative end products and outcome, as reflected in the fact that it accounts for 80 percent of the global market's share of laptops and the motherboards, and 60 percent of the world's network devices are manufactured by Taiwan.
Inclusion into CPTPP Brings Regional and Global Benefits
This transition to a new economic focus has also enabled renewed trade and supply chain resilience and reorientation.Taiwan is also well poised to contribute and take the lead in certain new economic directions in the region including different economic and trade mechanisms, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Taiwan, a formal member of the World Trade Organisation, formally submitted its application to join CPTPP on 22 September 2021. The CPTPP remains a vital new economic mechanism that will further contribute towards regional economic development, alongside with Taiwan's full derivation of its potential in boosting the overall economic and trade impact of the grouping.
The role and efficacy of the CPTPP are reflected by the extent to which companies are choosing to prefer its trading arrangements over others such as the Regional Comprehensive Economic Partnership (RCEP) and other multi-partner arrangements.
The CPTPP was designed as a new-model comprehensive economic arrangement that requires a considerable degree of societal as well as technical common ground.
Ease of doing business including mutual direct investment would naturally see positive returns, and Taiwan's complementary economic profile would be elevated.
Taiwan is an industrial manufacturing powerhouse with an open, transparent, and robust economy,where the role in the ripple positive impact to other countries' economic transition and supply chain security is immense.
According to the Internal Monetary Fund's 2023 World Economic Outlook and the Institute for Management Development's 2022 World Competitiveness Yearbook, Taiwan is the 5th largest economy among CPTPP Members and the 7th most competitive economy worldwide. It is also the 2nd freest country in Asia, and the 4th freest country economically in the world (Heritage Foundation Index of Economic Freedom, 2023).
As a free and open economy, Taiwan has resisted taking any trade restrictive measures during economic recessions, and was in fact the only economy in the Asia-Pacific region to maintain positive growth during the Asian financial crisis in 1998. Taiwan's resilient economy persiste in the face of global health crises, maintaining impressive growth of 4.22% during the 2003 SARS epidemic and 3.39% during the COVID pandemic.
Upholding Peace, Stability and Rules Based Order
If Taiwan is safe, so will be the global supply chain especially in the aspect of critical technologies and chips.
A potential conflict with China over Taiwan could become protracted and that such a war likely would favor the U.S. Iskander Rehman, a fellow with the Kissinger Center for Global Affairs at Johns Hopkins University School of Advanced International Studies., argued in his book, "Planning for Protraction," that the outcome of such a drawn-out conflict would rest on a combination of three core factors: the military's effectiveness and adaptability; the country's socioeconomic power and resiliency; and its alliance management and grand strategy.
A detailed and comparative analysis of Beijing and Washington based on these three factors has shown that Washington is in a much better position to prevail.
Bryan Clark, a senior fellow at the conservative think tank Hudson Institute, also argued that a prolonged war with China is arguably better for the US, in which a protracted war has become the norm for the U.S. military in recent decades, with the ability and wholesome capacity to be in the fight lasting for decades.
China is not in a position to sustain the kind of war being fought in Ukraine, as Clark argued, further stating that the very geographical closeness and proximity over a potential war in Taiwan just across the ocean will severely limit the long term capacity of China in which it will need the access for trade.
The ability to blunt and stop a potential invasion from succeeding right away in the first step remains crucial.
As China faces further structural and systemic challenges ranging from demographic and domestic economic challenges, these provide a new limitation on the ability to sustain a long term conflict.
America's long term staying power is pillared on its unrivalled geographical advantage, its future demographic potential and returns, its abundant natural resources, its unparalleled network of capable allies and bases across the globe and its newfound status as an energy exporter with sufficient future energy reserves and capacity, all of which provide the systemic and distinct power calculations that will take decades for any power to rival these combined power weight and gap.
In a new era of rising autocratic tendencies and policies that have further worsened the risks of conflicts and miscalculations and weakened the fabric of international order based on rule of law and international norms, all free nations and the arch of democracy must not fail the world, in standing in solidarity to defend the beacon of freedom and democracy.
Failure to do that will signal a historical misjudgment and mistake in preserving and saving the hard fought freedom and democracy and a rules based order that have preserved global peace for more than seven decades since WWII, and will allow unchecked aggression that will threaten peace anywhere.
Taiwan therefore remains a critical forefront in this overall economic and security stability based on values and norms, and defending the freedom in the Indo Pacific will mean defending the freedom of the entire world.