Taiwan’s election campaign has concluded. Voters went to the polls on Jan. 13. As has been the case in almost every election, cross-Strait relations with China were the central issue, a secondary issue being President Tsai Ing-wen’s management of the economy. The outcome of the election will largely dictate the course of Taiwan-China relations over at least the next four years. The Democratic Progressive Party (DPP) candidate and President Tsai Ing-wen’s chosen successor, William Lai Ching-te, the eventual winner, proclaims that Taiwan is already independent as the Republic of China. It should continue to diversify economic linkages away from China, strengthen military deterrence, and hope that China will eventually offer talks without one-China preconditions. The opposition Kuomintang candidate, Hou Yu-ih, called for expanded cross-Strait economic ties and dialogue with China under the one-China banner to reduce tensions while Taiwan also builds its military deterrence. China has deployed economic sticks, gray-zone military intimidation, and fake news to influence the election.

Washington has expanded its support for Taiwan’s self-defense, though less vigorously than Republican critics in Congress would like. Taiwan and the US have continued to expand trade ties in ways that will benefit Taiwan businesses though without tariff concessions that Taiwan eagerly wants. Now that Taiwan voters have elected William Lai, as the polls predicted, China will likely respond with increasing coercion. Had Hou Yu-ih been victorious, his challenge would have been to navigate between Beijing’s pressure for cross-Strait concessions and Washington’s suspicions of any such steps by Taiwan.

Let The Race Begin

As September’s cooler weather signaled that Taiwan’s election campaign was heating up, some polls suggested the race might be over. Taiwan’s Vice President and Democratic Progressive Party (DPP) candidate William Lai Ching-te held a double-digit lead over his likely opponents. Hou You-ih, New Taipei City mayor and Nationalist (Kuomingtang or KMT) Party candidate, was struggling to find his footing. Ko Wen-je, who rose to prominence as the independent Taipei City mayor and founded a third party, the Taiwan People’s Party (TPP), was competing neck-and-neck with Hou for second place in opinion polls. Billionaire Terry Guo, or Kuo Tai-ming, the founder of Foxconn, which assembles Apple products in China, had lost his bid for the KMT but was organizing an independent run for president.

Lai Offers a Reliable Face

By September, the DPP and Lai had essentially completed presenting their campaign platform. Lai had already made the obligatory trip to the US made by all Taiwan presidential candidates in the form of a transit through the US to Paraguay in August. Lai made it clear that he would continue the policies of incumbent President Tsai Ing-wen—domestic, international, and cross-Strait. At a diplomatic reception on Oct. 26, Lai assured his listeners that Taiwan would remain open to dialogue with China while strengthening the island’s military deterrence and economic resilience. He continued to insist that his longstanding commitment to Taiwan independence was consistent with the cross-Strait status quo because the Republic of China is independent, sovereign, and not subordinate to the People’s Republic of China. 

Figure 1 DPP presidential candidate and Vice President Lai Ching-te. Photo: Lai Ching-te

The one unfinished piece of the DPP campaign was selecting a vice-presidential candidate. For months, Bi-khim Hsiao, Taiwan’s representative in Washington, had been rumored to be Lai’s choice, and on Nov. 20, Lai made the decision official in a Facebook post. Hsiao quickly announced, “I am back.” Hsiao first emerged in Taiwan politics as an English interpreter to DPP presidential candidate Chen Shui-bian in 2000, subsequently winning election herself to the Legislative Yuan in Taipei and then in the KMT stronghold of Hualien. Describing her tenure as Taiwan representative in Washington, The New York Times praised Hsiao’s “powerful insider access” despite Taiwan’s “peculiar outsider status.” Hsiao’s selection gave Lai an experienced electoral politician as his partner and signaled to Washington that, like Hsiao, he would work with the US. China’s Taiwan Affairs Office labeled her immediately as part of “a double toxic duo.”

Hou Appeals to Divergent Camps

KMT candidate Hou You-ih began September by making his visit to the United States to strengthen his foreign policy credentials, meeting with a series of think tanks and Congressional offices. The Biden administration chose not to meet with Hou to maintain balance with its decision, in line with the long-standing US one-China Policy, not to meet with Vice President Lai during his August transit. Hou did meet with the chair of the American Institute in Taiwan (AIT), Laura Rosenberger, until recently a senior director at the National Security Council, which provided a de-facto administration meeting. 

During his visit, Foreign Affairs magazine published an article under Hou’s name laying out his foreign and cross-Strait policy. Hou promised “proactive pragmatism…increasing dialogue and…peace through strength.” He said that he had “no unrealistic expectations about Beijing’s intentions of seeking unification, and if necessary, by force.” At the same time, he warned that DPP policies “are pushing Taiwan to the brink of war.” Hou promised a cross-Strait policy of “deterrence, dialogue, and de-escalation.” In this article, as in other campaign statements, Hou sought to satisfy two divergent wings of the KMT—the more China-friendly KMT old-line deep Blue politicians, such as former President Ma Ying-jeou, who emphasized Taiwan’s China identity and economic ties to the mainland, encapsulated in the “1992 Consensus,” and the younger, more China-skeptical KMT officials who, like most of Taiwan’s voters, have been antagonized by China’s increasing number of gray-zone incursions into the waters and airspace immediately around Taiwan. 

Two KMT candidate selections suggest that the elder statesmen have prevailed. On Nov. 19, the KMT announced that Han Kuo-yu, its defeated 2020 presidential candidate and deep Blue favorite would lead its list of at-large candidates for the Legislative Yuan elections to be held concurrently with the presidential elections on Jan. 13. On Nov. 24, Hou Yu-ih announced that Jaw Shau-kong, chairman of Taiwan’s Broadcasting Corporation of China, a popular deep Blue talk show host, would be his vice-presidential running mate. Jaw promptly announced that he would take charge of campaigning in northern Taiwan where the preponderance of the population and of KMT voters resides. There was no indication whether that approach had been coordinated with Hou. Together, these two nominations suggest that the KMT and Hou have decided that their best chance of victory lies in mobilizing their base. Although it is difficult to assign a cause and effect relationship, polls shortly after these nominations suggested that the KMT ticket had surged to within striking distance of the DPP ticket of Lai and Hsiao.

Fewer than three weeks later, on Dec. 14, KMT Vice-chairman Andrew Hsia traveled to mainland China, the most recent in a series of visits to meet with Taiwan businesses and Chinese officials, further solidifying the image of the KMT as the party of cross-Strait relations and business. 

The Ko Wen-je Wild Card

Recognizing that neither Hou nor Taiwan People’s Party candidate Ko Wen-je seemed able to match Lai’s poll numbers alone, Ma Ying-jeou sought to bring the two of them together to run on a single ticket. Although the idea seemed plausible, the devil in the details was who would be the presidential candidate and who would take the second spot. After a series of awkward encounters in front of local media, Ko walked away, leaving Ma and the KMT looking politically inept. Later, Ko told a TV interviewer that “in my heart I am deep Green” (i.e., sharing the ideology of the DPP) and that he would continue President Tsai’s security and cross-Strait policies. 

As Ko’s poll numbers faded following the collapsed talks with the KMT, speculation has arisen whether Ko supporters might engage in “strategic voting.” Normally, “strategic voting” sees voters switching their vote from a third-place candidate to a second-place candidate to defeat the first-place candidate, in this case switching their votes from Ko to Hou to defeat Lai. However, if Ko’s supporters have the same Green blood he claims, will they choose instead to change their vote from Ko to Lai to ensure that the KMT is defeated?

National Day Rancor 

Figure 2 Emblem for Taiwan National Day 2023. Photo: Taiwan News

Amidst all the political contention and maneuvering of the past few months, Taiwan’s National Day on Oct. 10 might have seemed an opportunity for national unity and a respite from partisan rancor. However, Hou Yu-ih and Ma Ying-jeou boycotted the event the event. Casting themselves as defenders of the Republic of China against advocates of Taiwan independence, they protested that the logo for the celebration suggested that it was celebrating Taiwan’s national day rather than the Republic of China’s. 

President Tsai’s national day address offered her an opportunity on a Taiwan-wide stage to persuade voters that her policies had benefited them and that they should elect Lai Ching-te to continue them. In familiar terms, Tsai said that “peace is the only option across the Taiwan Strait,” that maintaining the status quo is the key to peace, and that Taiwan is willing to work out “a path to peaceful coexistence” with China.  While Tsai’s words might have seemed conciliatory, China’s Taiwan Affairs Office (TAO) rejected Tsai’s appeal, saying that she was “playing a double game” by urging dialogue without accepting China’s one-China principle and the “1992 consensus,” which it insists is the prerequisite for dialogue.

Figure 3 President Tsai Ing-wen at the 112th Double Tenth National Day Celebration of the Republic of China in the plaza in front of the Presidential Office Building. Photo: Wang Yu Ching

Beijing Wields Economic Stick Against Terry Gou 

The fourth candidate to throw his hat in the presidential ring was Terry Gou (Kuo Tai-ming), who had failed in the spring to win the KMT presidential nod. In mid-September Gou announced that he would collect the 289,667 signatures, or 1.5% oof eligible 2020 voters, to qualify for the ballot. By early November, Gou announced he had secured over 1 million signatures. Just before the Nov. 24 deadline to file as a candidate, Gou announced he was ending his presidential bid. Many suggested that Gou was simply acknowledging the obvious—that he was dead last in all the polls. 

Others pointed to an announcement on Oct. 22 that four Chinese provinces were launching investigations into tax and land use irregularities by Foxconn, the contract manufacturing company founded by Gou with a huge presence in China. Some analysts suggested this was a calculated move by Beijing to pressure Gou out of the presidential race, which would help consolidate the opposition camp. If so, it was also an unmistakable warning to all Taiwan businesses in China that the authorities would not hesitate to punish economically anyone involved, even indirectly, in Taiwan politics in ways contrary to China’s interests.

Beijing’s Sticks and Carrots Abound

In mid-December, China’s Ministry of Commerce concluded an investigation, which it had begun in April 2023, into trade restrictions imposed by “DPP authorities.” In a transparent ploy, MOFCOM had set a deadline of Jan. 12, just one day before Taiwan’s January 2024 presidential election, to wrap up its findings. Citing difficulties facing Mainland exporters across 2,509 agricultural and merchandise products, MOFCOM’s report claimed Taiwan has erected unfair “trade barriers” in violation of WTO rules and the 2010 cross-strait Economic Cooperation Framework Agreement.

On the heels of MOFCOM’s report, Beijing on Dec. 21 announced it had reimposed import duties on a dozen Taiwan products, mostly chemicals, which it had removed as part of the 2010 ECFA with Taiwan. The economic impact on Taiwan is expected to be limited because this basket of products covers around 1% of Taiwan’s exports to China, and the tariff changes are small. Nevertheless, the Tsai government announced a $577 million fund to aid affected petrochemical companies with export diversification initiatives. Taipei also appealed for third-party arbitration at the WTO, but China’s TAO said cross-Strait trade disputes must only be resolved through bilateral channels rooted in the “1992 Consensus.” 

Beijing could also reactivate higher MFN tariffs on up to 527 Taiwan products on the ECFA’s early harvest list, with duties reaching as high as 25-30% in some product categories. In any case, Beijing may seek to avoid withdrawing from the ECFA completely, because doing so would undermine a foundational pillar on which future cross-Strait economic agreements could rest.

As a carrot, Beijing in late December permitted grouper from “registered” Taiwan fisheries to be sold again in the mainland. China imposed a complete ban on grouper from Taiwan in June 2022, ostensibly on health safety grounds. In announcing the ban’s relaxation, China’s TAO credited KMT officials with helping to connect affected Taiwan fisheries with the appropriate mainland authorities. Taiwan’s Ministry of Agriculture called the decision “politically motivated” because multiple attempts to resolve the issue at the governmental level had been rebuffed.

China’s Military and Cyber Interventions

China has reinforced economic efforts to influence Taiwan voters through military and cyber initiatives. In contrast to 2020, when Beijing dialed back People’s Liberation Army (PLA) activity before the election, PLA activity around Taiwan has continued at an elevated pace, with the PLA launching its highest ever number of sorties in the Taiwan Strait on Sept. 18 (104) as well as the most intrusions across the midline of the Strait (40). In addition Chinese balloons have been seen periodically sailing near the island. This is done intentionally to remind voters that re-electing a DPP government will increase Taiwan’s military threat, as if to buttress their line, also used by the KMT, that the election is a choice between war and peace. 

In the cyber domain, troll groups have circulated rumors through social media according to Taiwan AI Labs, that a vote for the DPP might endanger the survival of Taiwan’s ECFA signed under the KMT administration of Ma Ying-jeou and risk the island’s prosperity. Taiwan National Security Bureau Director-General Tsai Ming-yen told Taiwan’s Legislative Yuan that China has been able to deploy fake news to create a false choice between “war or peace” in the election, seeking to frighten voters. Sandra Oudkirk, Taipei-based director of the American Institute in Taiwan, warned in a speech on Dec. 4 that unnamed “foreign actors seek to use social media and emerging technologies to manipulate public discourse, divide the public, sow discord, influence our elections, and essentially undermine confidence in our democratic institutions.” 

Washington Grapples with Taiwan’s Expanding Defense Needs

US President Joseph Biden delivered an Oval Office address on Oct. 19 where he linked the threats posed by Putin and Hamas but did not mention the PRC and its coercion of Taiwan. The next day, the White House submitted a supplemental budget request to Congress with the lion’s share of the funding earmarked for Ukraine, Israel, and securing the US-Mexico border. A public narrative soon developed describing Taiwan as a key component of the supplemental when, in fact, there is no budget item exclusively for Taiwan. Instead, the request asks for $2 billion in Foreign Military Financing for Indo-Pacific partners, a portion of which could go to Taiwan. 

Describing the supplemental’s funding for the Indo-Pacific as “wholly inadequate,” Chairman Mike Gallagher and six additional members of the House Select Committee on the CCP urged funding specifically for Taiwan. In particular, the group’s Nov. 20 letter to the House and Senate leadership proposed $2.65 billion in weapons transfers to Taiwan from US stockpiles using presidential drawdown authority. However, the appropriations bill put before the Senate in early December closely aligned with the White House’s request and did not have any special funding for Taiwan. With Republicans and Democrats deadlocked on funding measures for the US southern border, Congress will revisit the supplemental request in January 2024.

On Dec. 22, President Biden signed into law the 2024 National Defense Authorization Act (NDAA) with some Taiwan-friendly provisions. Most notably, the law instructs the Pentagon to establish a comprehensive program to advise and train Taiwan’s armed forces on asymmetric defense concepts and battlefield tactics. Currently, Taiwan’s F-16 pilots receive training at a US Air Force base in Arizona, and a small number of US military trainers make rotations on the island. The 2024 NDAA further requires the Pentagon to report to Congress on the practical steps it is undertaking to address the nine broad elements of the comprehensive training program outlined in the NDAA.

Also in December, the Biden administration authorized a $300 million sale of equipment and services to upgrade systems used by Taiwan’s military for battlefield communications and domain awareness. To some observers, this notification is notable for its timing, coming just one month before Taiwan’s 2024 presidential election and signals Washington’s desire for Taiwan to continue apace its military modernization efforts irrespective of internal political dynamics.

Taiwan Unveils Locally Manufactured Submarine 

Taiwan’s crash program to develop a diesel submarine achieved a milestone in late September with the public unveiling of a prototype. Taiwan’s navy currently operates just two Dutch-made submarines from the 1980s. The United States ceased diesel submarine production in the late 1950s, but it has provided several technologies enabling Taiwan to complete this project. The first Hai Kun, or Narwhal, class submarine will undergo sea trials in May 2024 and is slated to become operational in 2025. A second submarine is expected to be completed in 2027.

At the unveiling ceremony in Kaohsiung, President Tsai lauded the submarine program as a boon to Taiwan’s “asymmetric fighting power.” Defense experts differ over the utility of undersea capabilities in repelling a PLA invasion, however. Submarines can stealthily launch torpedoes against PLA surface ships, but land-based anti-ship missiles spread across Taiwan could achieve similar objectives and are much less expensive. The cost to build one Hai Kun-class submarine is $1.53 billion, and Taipei wants to build eight boats within the coming decade. Some strategists view a fleet of submarines as not the best use of Taiwan’s constrained resources.

Figure 4 Taiwan’s first domestically-made submarine is called Hai Kun. Photo: Wang Yu Ching

Taipei Advances Economic Agreements with the US, Canada, and the UK

The brisk pace of trade negotiations under the US-Taiwan Initiative on 21st Century Trade slowed in the fall as the United States Trade Representative (USTR) sought to conclude the Indo-Pacific Economic Framework (IPEF) trade pillar before November’s APEC gathering in San Francisco. Bowing to pressure from progressive Democrats suspicious of big tech, USTR removed the digital trade chapter from the IPEF and withdrew US proposals on digital trade at the WTO. Such moves do not bode well for the digital trade component envisioned in the next phase of the US-Taiwan trade initiative. 

In early December, Taiwan’s top trade official John Deng sought to inject fresh momentum into US-Taiwan trade talks, saying Taipei is eager to build on the initial agreement reached in June 2023. A few days later, US Trade Representative Katherine Tai touted the “excellent progress” in current negotiations covering agriculture, labor, and environment, but again shot down any suggestion of tariff liberalization. The four-month interregnum between Taiwan’s January election and May presidential inauguration could provide a window for US and Taiwan trade negotiators to make sustained progress, but the government changeover and a new Legislative Yuan could induce caution.

In October, Taiwan concluded negotiations with Canada on a robust investment protection agreement containing 70 provisions. In November, Taiwan and the United Kingdom signed a more basic roadmap, the Enhanced Trade Partnership (ETP), which envisions agreements on digital trade, green technologies, and investment promotion. ETP will function as a living agreement and is likely to expand into other areas. Taipei prioritized economic agreements with the UK and Canada because both are members of the CPTPP trade bloc that Taiwan is eager to join.

Looking Ahead—The Consequences of Choices

On Jan. 13, Taiwan’s voters elected a new president and vice president, as well as the entirety of the Legislative Yuan (LY). Hadfeither the DPP or the KMT won both the presidency and control of the LY, that party would have had a mandate to move forward with the cross-Strait policies as well as the domestic economic policies it presented to the voters during the campaign. However, given the contradictory poll indications of support for Lai and dissatisfaction with eight years of President Tsai’s government, the outcome of a DPP president constrained by a legislature controlled by the KMT and TPP came as little surprise. The last time a DPP president faced this situation, between 2000 and 2008 during President Chen Shui-bian’s administration, it led to DPP-KMT confrontation and an ugly political paralysis. As Ko Wen-je has lost the presidential race, this scenario may offer his TPP a second chance at political power by siding with either the KMT or the DPP on certain issues in the LY as their interests dictate.

The Lai Choice

Now that Lai Ching-te and Hsiao Bi-khim have won the election, they have promised a continuation of President Tsai’s disciplined adherence to the status quo of Taiwan as the Republic of China. Lai may become more forceful in insisting that this is the “independence” he has long sought. Since the DPP no longer controls the LY, they may struggle to continue Tsai’s gradual increase in the defense budget and expansion of conscription. The KMT controls the LY if it can cooperate with the TPP, it may choose to press for reductions in defense spending, describing it as a distraction from needed social spending and a provocation to China. There will be no cross-Strait honeymoon. The KMT will likely continue and even intensify the series of mainland visits by senior KMT representatives, and China will offer to meet with the KMT at increasingly senior levels as a part of its divide-and-conquer “united front” campaign. Beijing will immediately intensify its gray-zone military intimidation of Taiwan. If the DPP controls both the presidency and the legislature, Beijing may decide it needs to send some dramatic signal, such as a large-scale exercise circling the island.

Lai will likely keep his public rhetoric much along the lines of Tsai’s playbook, emphasizing openness to cross-Strait dialogue with mutual respect and without preconditions. At the same time, Hsiao will reach out through AIT and directly to the US National Security Council and appeal for US diplomatic support and accelerated delivery of armaments already committed. Lai’s first challenge will come in his May 20 inaugural address. Will he choose to offer some at least rhetorical softening of the DPP opposition to the 1992 consensus to appeal to Beijing? Will Washington press Lai to make such a gesture, and if he does, will Washington overcome its aversion to carrying cross-Strait messages to encourage Beijing to be responsive, perhaps reaching out even before the inauguration on May 20?

The DPP presidential victory combined with the KMT and TPP chance to control the LY could mean Taiwan will face confrontational domestic politics and turbulent cross-Strait seas.