Last week, Taiwan became more isolated than ever. Panama is the latest country to break relations with Taiwan, known officially as the Republic of China, and instead recognize Beijing, the People’s Republic of China, leaving the island nation only 20 countries that recognize its legitimacy. This trend is not new: The two Chinas have battled for recognition since they separated after the Second World War. Yet this holdover conflict from the Cold War really only matters today for Taiwan and mainland China. For those countries that receive economic benefits for recognizing one over the other, it is only a matter of who offers more investment, aid, and infrastructure.
This game of winning over countries with aid and infrastructure has been the norm since mainland China and Taiwan separated in the 1950s, following China’s brutal civil war. After being run out of the country by Mao Zedong’s Communist Party, the nationalist Kuomintang led by Chiang Kai-shek established their government in Taipei, declaring Taiwan to be the “real China.” The People’s Republic of China, on the other hand, sees Taiwan as a renegade province and has as its ultimate goal its reunification with the rest of China -- their so-called One-China Policy. Since then, the two nations have been fighting over who is the “real” China by obtaining the recognition of other countries.
Taiwan has been losing its allies to mainland China since the 1970s, after it lost the recognition of the United Nations and powerful allies such as the United States. Given the PRC’s growing economy and political influence around the world, most countries have found it more beneficial to side with the Asian giant. When it comes to Panama’s change of recognition, it is right to assume this decision was mostly due to China’s growing investment in the country. The PRC is Panama’s second-largest trade partner. Furthermore, Beijing has spent billions in infrastructure around the Panama Canal, including in the construction of a new box terminal and the development of seaports, coupled with new trade and maritime agreements.
The change was a blow to Taiwan. Panama was one of Taiwan’s oldest friends and one of its most important remaining allies -- the remaining 20 nations are small, developing countries in the Caribbean, Central America, and Africa. In severing ties with Taiwan, Panama’s government recognized the PRC as the only China and the Chinese Communist Party as its only legitimate government. Furthermore, as with all nations that side with the PRC, Panama pledged to break all diplomatic relations and contact with Taiwan. Taipei believes that Panama “decided to switch diplomatic engagement toward the Beijing authorities for economic gain.” Meanwhile Panama’s President, Juan Carlos Varela, only mentioned that this change was the “correct path for his country,” without addressing Panama’s growing ties with China.
In the mid-1990s, Taiwan had as many as 30 diplomatic allies. But in this bizarre, small-scale Cold War between the two Chinas, many countries have left Taiwan, preferring Beijing’s larger aid and investment packages. In 2004, for example, Dominica severed relations with Taiwan after Beijing pledged to offer $122 million in assistance, compared to the $9 million Taiwan was offering. Grenada switched its recognition the same year, after Hurricane Ivan destroyed the island and demolished a cricket stadium Taiwan helped build. The Grenadian prime minister received support from China to rebuild the stadium, as well as other grants. Costa Rica, which had been the only country in Central America that didn’t recognize the PRC, did so in 2008 because of their growing economic relationship with China and the prospect for more trade and investment in the future.
The countries recognizing China are not the only ones who benefit. There are also economic perks for those countries recognizing Taiwan, particularly for its Third World allies. Taiwan has built or financed most of the government buildings in Nicaragua, including the presidential palace, and in El Salvador, including the Ministry of Foreign Relations. In Guatemala, Taiwan has financed some of the country's biggest and nicest highways. Taiwan has even won over countries it had previously lost to China: Saint Lucia switched back to Taiwan after 10 years of recognizing the PRC.
In exchange for all of this investment, Taiwan gets the international diplomatic support that allows its sovereignty to continue. Yet for Taiwan to remain a legitimate nation, it would have to outdo China at Beijing’s own game of influence and investment. Taiwan’s 20 remaining allies could easily get the desired foreign aid from mainland China. In fact, many countries welcome China’s deep pockets. If Taiwan runs out of friends, it would return to being a province of China and would have to cease all participation as an independent entity in international organizations, such as the World Trade Organization and the World Health Organization. It would mean, in other words, that Taiwan as we know it would no longer exist. For now it seems that the game the two Chinas have been playing for 65 years will continue a while longer. But when it comes to facing its much larger neighbor, there are surely darker times ahead for Taiwan.
