What the US-Instigated Crisis in Taiwan Means for Europe

Salman Rafi Sheikh
CHN234111In response to Nancy Pelosi’s stubborn – and provocative – visit to Taiwan, China has initiated military drills in the Taiwan Strait. This military drill amounts to a naval blockade of not only Taiwan but prolonged drills, with live shooting in the sea, could ultimately create a crisis that will, very much like the Ukraine crisis, hit the West – especially, the EU – pretty hard. In simple words, the European continent will once again be at the receiving end of what can only be called a US effort to project its power across the world to preserve its global hegemony. Therefore, with Europe being on the verge of directly becoming a casualty of US global power politics, this could ultimately drive a wedge between the US and the EU on a long-term basis. China is, therefore, indicating its willingness to inflict an economic cost that would not only hurt Taiwan but also its supposed friends elsewhere as well. It is in this context that we need to understand China’s response to Pelosi’s visit. Let’s first see why the Taiwan Strait matters and how it is crucial for maintaining a stable economic landscape in Europe.

Consider this: almost half of the global container fleet and almost 88 per cent of the world’s largest ships by tonnage pass through the Strait. A Chinese blockade of the Strait also means that Taiwan’s Semiconductor Manufacturing sector, which accounts for almost 90 per cent of the world’s cutting-edge chip capacity, will have a very hard time reaching its destination in the West. It is for this reason that, as many reports in the western mainstream media have highlighted, many businesses across the world are already preparing to brace for the devastating impact of Pelosi’s visit.

This will have a direct – and unavoidable – impact on the US’ closest ally, the EU. As the EU’s 2016 Global Strategy document highlights, “there is a direct connection between European prosperity and Asian security.” Taiwan’s bilateral trade with the EU is around US$50 billion. In 2020, Taiwan’s total exports to the EU totalled EUR26.4 billion. This export was dominated by ICT products, machinery and transport equipment.

This direct connection is now under stress because of US adventurism. While Europe, already facing an acute energy crisis and tackling the rising cost of living due to the war in Ukraine, must have learnt a lesson in the importance and necessity of an autonomous global policy and disposition, this has not been the case. Therefore, China’s response, coupled with Europe’s inability and/or unwillingness to learn, could serve as a second consecutive shock that could force Europe to realise the cost of alliance with the US. Ultimately, what the world needs is more centres of power, including Europe as an autonomous global player, to create a new, alternative global order away from a US-dominated, dollar-centric political and economic world order established after the Second World War.

Therefore, given the Chinese response and the possibility of global supply chains being seriously disrupted by China’s drills in the Straits of Taiwan, it is conceivable that Washington might fight back with sanctions. But, just like US sanctions on Russia, sanctions on China will hurt Europe in ways that will multiply Europe’s economic problems. This conclusion is drawn directly from the fact that China is already the EU’s largest trading partner. There is deep and broad mutual dependence. A US sanctions regime on China will, therefore, mean a devastating blow to Europe’s economic life.

As the data show, the EU currently has a deficit vis-à-vis China on trade in goods. However, it has a surplus vis-à-vis China on trade in services. Estimates, therefore, show that an escalation of the situation in the Straits of Taiwan could begin a crisis in the West – especially, in Europe – on a scale previously seen during the 2008 financial crisis. Can Europe afford such a crisis at a time when it is already paying a heavy price for insensibly toeing the US line vis-à-vis Russia/Ukraine? It can continue to do so only at the expense of its economic stability, which, if disrupted, will most certainly lead to political instability, allowing those European actors who favour a ‘European’ view of the world to push more vigorously for liberating Europe of the US influence and, thus, ensure its own economic security.

As Joseph Borrell, High Representative of the European Union for Foreign Affairs, has, in the context of growing US-China global rivalry, repeatedly said, Europe needs to follow its “own path” and “act in accordance with our own values and interests.” His ultimate conclusion is that “Europe has an enduring interest to work together with China, even if difficult, on a number of global issues on which it plays a crucial role.”This conclusion is diametrically opposed to the growing calls in the US fordecoupling with China and/or imposing the worst ever sanctions on Beijing.

Europe, therefore, needs a Taiwan policy that protects its vital economic interests. While Europe may not be able to come up with a radical new policy i.e., oppose US interventionism, it can still, as voiced by European Commission Vice-President Margrethe Vestager last year in October, “preserve the status quo.”

The Chinese have no problem with maintaining the status quo in the short and long run. If the EU can maintain this stance with or without pressing the US to do the same, it can neutralise the impact of the short and long-term fallout of the Chinese response to the US attempts to disrupt – and alter – the Taiwan status quo. Anything short of that will inevitably put Europe in the line of fire.