India Taiwan Relationship – Explained, pointwise

Introduction

Two recent developments have brought the India Taiwan Relationship into focus. The first was the China-Taiwan crisis precipitated by the visit of Speaker of the US House of Representatives to Taiwan in early August 2022. The ensuing crisis and possibility of Chinese invasion on Taiwan led to worries about disruption in the supply chain of semi-conductor chips used in digital devices. Taiwan is the biggest manufacturer of such chips. The second event was signing of MoU between Government of Gujarat and Vedanta-Foxconn Joint Venture in September 2022 to set-up semi-conductor chip manufacturing plant in Gujarat. Foxconn is Taiwan based company and is one the world’s biggest largest technology manufacturer. India Taiwan Relationship has remained subdued, with the Government of India maintaining restraint in order not to offend Chinese sensitivities. However, many foreign policy experts content that India should pursue its relationship with Taiwan with more vigour and counter the rising Chinese aggression.

How has India Taiwan Relationship evolved?

The founder of the Taiwan (Republic of China, ROC), Chiang Kai-shek had a warm and cordial relationship with Indian leaders (especially with Gandhiji and Pt. Nehru) in the pre-Indian Independence era. Chiang was a strong endorser of Gandhiji’s non-violent struggle against the British Empire. With India’s Independence in 1947, the Indian and Chinese nationalist governments (under Nationalist Kuomintang (KMT) Party) established embassies in each other’s countries.

However, after the Communist take-over of China in 1949, and the establishment of ROC in Taiwan, there was a change in Indian policy. India was one of the first Asian countries to recognise the People’s Republic of China (PRC under Communist Party) and its One China principle. It put a deep freeze on the Indian Taiwan Relationship during the Cold War era.

The situation began to change post-1991 collapse of the Soviet Union and the launch of India’s Look East Policy. In 1995, the two countries established representative offices in Taipei and New Delhi. Taiwan established Taipei Economic and Cultural Centre (TECC) in New Delhi and India established India Taipei Association (ITA) in Taipei. The two establishments have played a significant role in improving the people-to-people contacts, and in expansion of cultural, economic and political relations.

From 2010 onward, there has been a subtle shift in India’s One China Policy. During the Chinese Premier’s visit to India in December 2010, India did not mention support for the One-China policy in the joint communique. There has been no official mention of One-China since then. Even in the recent China-Taiwan Crisis, India avoided the mention of One China Policy in its official statement. Simultaneously, India and Taiwan sought to institutionalise their relations in order to boost bilateral exchanges. The TECC established a second office (in Chennai) in December 2012, and the Taiwan External Trade Development Council (TAITRA) opened branch offices in Delhi, Chennai, Kolkata  and Mumbai.

At the  political level, the India-Taiwan Parliamentary Friendship Forum was  established in December 2016. This includes regular visit by Parliamentarians to the other country. In order to boost people-to-people interactions, Taiwan created  the Taiwan Tourism Information Center in Mumbai in 2018.

What is the current status of India Taiwan Relationship?

Strategic

India is among the 179 of the 193 member states of the UN that do not maintain formal diplomatic ties with Taiwan. India Taiwan relations picked up the momentum due to the New Southbound Policy initiated in 2016 by Taiwanese President Tsai to have wider engagement with potential allies and partners. Through the policy, Taiwan has comprehensive engagement with Australia, New Zealand, India, South Asian and South-east Asian nations.

Although, Indo-China relations and Indian concerns to Chinese sensitivities on Taiwan dominated the strategic partnership between India and Taiwan; in recent years border tensions with China (Doklam 2017 and Galwan 2020) have compelled India to re-think its policy on Strategic Engagements with Taiwan.

Trade and Investment

Bilateral trade between India and Taiwan grew from US$ 2 billion in 2006 to US$ 5.7 billion in 2020. India and Taiwan have started negotiations for a free trade agreement (FTA) in December 2021.

Source: India Today

Although, the bilateral trade has witnessed an increasing trend in recent times, the trade is much below potential e.g., India’s exports to Taiwan contribute only 0.65% of India’s total trade, while imports form 1.02% of total trade. In comparison, Taiwan’s trade with China and the US amounted to US$ 149.2 billon and US$ 83 billion in 2020. Once the FTA is signed between India and Taiwan, it is expected that the trade between the two countries will witness big jump.

Source: ORF

India and Taiwan signed a Bilateral Investment Agreement in 2018 to promote flow of investment. The Agreement seeks to ensure protection for Taiwanese investments in line with international standards. This has followed the Double Taxation Avoidance Agreement (DTAA) signed between the two countries in 2011. The cumulative FDI inflows from Taiwan to India have been worth US$ 756 million between April 2000 to June 2022. FDI inflows from Taiwan increased almost 10 times between 2017–18 and 2018–19.

In 2022, the State Bank of India raised US$ 300 million issuing Taiwanese ‘Formosa Bonds‘, the first Indian commercial entity to do so.

The recently announced Foxconn-Vedanta Joint Venture to set-up semiconductor manufacturing unit in Gujarat is expected to invest ~US$ 20 billion over the next few years.

Cultural

Taiwan is aiming to strengthen cultural and people-to-people ties with India’s Northeastern region by exploiting its ‘tea culture‘ as a new form of soft power diplomacy.

Since 2004, Taiwan has been offering ‘Taiwan Scholarship’ and ‘National Huayu Enrichment Scholarship’ to Indian students to study in Taiwan.

In 2018, India hosted the first ever Taiwan Film Festival in an effort to showcase and promote Taiwanese culture in India.

The number of Indian tourists to Taiwan has remained at ~40,000 annually, and an even fewer number of Taiwanese travels to India as tourists. One major issue is the absence of an Indian overseas tourism office in Taipei (tourism matters relating to Taiwan have been taken care of by the India Tourism office in Tokyo, Japan).

What are the challenges in India Taiwan Relationship?

First, India Taiwan Relationship has been overshadowed by China’s aggressive stance. Despite being silent on One China Policy in recent times, India has not openly supported Taiwan at international level e.g., India has not supported Taiwan’s bid for Observer status in bodies like the WHO.

Second, India has not yet formally recognized Taiwan (ROC). This severely limits cooperation on strategic, military and economic spheres. The lack of formal linkages has also restricted ministry-level agreements and educational exchanges, leaving the potential of India-Taiwan ties unrealised and dormant.

Third, the progress of the India Taiwan Relationship has lacked a long-term strategic vision because of external uncertainties. The approach has been ad-hoc. As a result, trade and investment has remained much below potential e.g., Taiwan’s FDI in the US was US$ 13.7 billion in 2020 and US FDI in Taiwan was US$ 31.5 billion.

Fourth, Economic cooperation and investments have also been limited by factors like insufficient understanding of domestic markets, corruption, tax regulations, and linguistic and cultural barriers.

What steps can be taken to further deepen India Taiwan Relationship?

A foreign policy expert has suggested a three-dimensional approach to boost ties with Taiwan.

First, the two countries should strive to strengthen bilateral ties and expand areas of cooperation. Cooperation in the fields of culture, education (student exchange), science and technology, and development assistance should be strengthened through linking the Act East Policy and the New Southbound Policy (NSP). e.g., Recently, some Indian and Taiwanese think-tanks have concluded agreements to enhance cooperation and joint research. Taiwanese experience related to China can be utilized to enhance domestic expertise with respect to China.

Second, India should engage Taiwan through available informal and formal regional platforms e.g., Japan’s ruling party, the Liberal Democratic Party (LDP), held a security dialogue with the Taiwan’s ruling party Democratic Progressive Party (DPP) in August 2021. Such arrangement can be replicated by India. This is political engagement, yet not official as the Governments are not directly involved.

Third, Taiwan should be accepted as a part of the wider Indo-Pacific region. India and Taiwan are two vibrant democracies with shared interests and common concerns. Taiwan can be gradually involved in contributions towards ensuring a rules-based order in the Indo-Pacific.

Apart from the above, there are other possible steps.

Fourth, the Taiwanese Government has been requesting the Government to permit them to set up an office of the Taipei Economic & Cultural Centre (TECC) in Mumbai. This should be promptly granted as it would help in boosting Taiwanese investments in India.

Fifth, Countries like the US, Japan, South Korea, Australia and the Philippines regularly send Parliamentary delegations to Taiwan. India’s approach hasn’t been consistent in this regard (India-Taiwan Parliamentary Friendship Forum is inactive). India must institutionalize this process to ensure a regular exchange. This will strengthen political ties between India and Taiwan.

Sixth, India and Taiwan should push for early closure of FTA negotiations and conclude the Agreement at the earliest.

Seventh, the Parliamentary Committee on External Affairs observed in 2018 that if China was unwilling to reconsider its stance on outstanding border issues and sovereignty concerns of India, India should contemplate using all options including its relations with Taiwan. India should consider making One China Policy contingent on China following One India Policy.

Eighth, India should join the G-7 in backing observer status for Taiwan in technocratic international bodies.

Conclusion

India Taiwan Relationship has remained much below potential due to China factor. However, many policy experts have made a case for stronger ties with Taiwan, especially in the context of rising strategic importance of semiconductor chip supply chains. India has a lot to gain from having Taiwan as a strategic partner in multiple domains. Commentators have commended India’s Foreign Policy for not succumbing to Western pressures on Russia-Ukraine War or trade ties with Russia. India should extend this approach to its relationship with Taiwan to protect its strategic interests.

Syllabus: GS II, India and its neighbourhood relations.

Source: The Times of India, Foreign Policy, ORF, ORF, Indian Express, IFRI