Semiconductors: Taiwan’s case of 'Dutch disease'?
Policy paper by Michael Reilly
The impact of the Covid-19 pandemic on global supply chains highlighted the importance to the world of semiconductors, and dependence on Taiwan for their manufacture. In their contemporary strategic economic importance they have been likened to oil in the 1970s and 1980s.
In the late 1970s, The Economist newspaper coined the term ‘Dutch disease’ to describe how the growth of natural gas exports from the Netherlands in the 1960s led to the Dutch currency appreciating, making its manufactured exports more expensive and thereby prompting a decline in manufacturing.
This paper argues that the dominance of the semiconductor industry is having a similar impact on the Taiwanese economy. The difference is that the main symptom of the ‘disease’ is not an over-valued exchange rate, thanks to central bank policymakers who have been effective at managing it, but the ‘crowding out’ of other sectors that the dominance of the ICT industry has created.
The very success of the semiconductor industry has helped to hide these weaknesses and engendered a sense of complacency on the part of policy makers. The Taiwanese government needs to take urgent action for the country’s long-term survival.
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The shifting dynamics of Taiwanese politics: How can the US reassure in an age of pushback against the two-party system?
Policy paper by Brian Hioe
Commentators and analysts questioned whether the result of the 2024 Taiwanese presidential elections reflected a significant shift on the part of the Taiwanese voter electorate. Namely, the election results seemed to show that the Taiwanese public is more attentive than ever to domestic political issues and not merely cross-strait issues.
The battering that the Democratic Progressive Party (DPP) took in hanging onto the presidency but failing to maintain control of the Taiwanese legislature, as well as the rise of insurgent political forces such as the third party of the Taiwan People’s Party (TPP) and its presidential candidate of Ko Wen-je were seen as examples of this fact.
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Securing the Future: Why Taiwan Must Join Trans-Atlantic and Indo-Pacific Defence Networks
By Chieh-Ting Yeh
In the past three decades, the world has witnessed a spectacular rise of the People’s Republic of China from a nation in poverty to a global economic powerhouse. As China’s international weight grows, it is expanding its military capabilities and conducting military operations in close proximity to (or even within) the territorial waters of its neighbouring states.
At the forefront of China’s military ambitions is Taiwan, a democratic state that China claims as part of its territory, threatening to use force as a legitimate option to achieve “unification.” This is significant because the threat of war has, in recent years become more salient. As China turns more authoritarian, its pressure on Taiwan grows. Moreover, the Russian invasion of Ukraine has reminded the world that autocrats may initiate wars that are considered highly unlikely by Western leaders and experts.
A potential conflict in the Taiwan Strait has brought attention to how the United States and its Indo-Pacific partners (including Japan and Australia) should act in order to prepare for and prevent a cross-Strait contingency. As Europe is increasing its interest in the security of the Taiwan Strait, this paper argues that there is a need for Europe to support coordination for security contingencies with Taiwan in multilateral security platforms.
Several platforms offer opportunities for multilateral coordination on defence and security issues. Existing Trans-Atlantic and Trans-Pacific platforms, which are the subject of this paper, include the AUKUS alliance on submarine technology; NATO, which has increasingly become interested in the Indo-Pacific; and joint military exercises such as the bi-annual RIMPAC exercise hosted by the US.
However, the main target of China’s aggression, Taiwan, is often excluded from such defence conversations between the US and both its Indo-Pacific and European partners. Incorporating Taiwan into these conversations is, thus, a logical next step in transforming the rhetorical support for Taiwan professed by several of these states into concrete actions.
Download the policy paper by Chieh-Ting Yeh (PDF)