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China starts Taiwan integration if pro-Beijing candidate wins election

National security and international trade attorney Nazak Nikakhtar speaks out in Q&A on China-Taiwan-US issues

(Taiwan News image)

(Taiwan News image)

TAIPEI (Taiwan News) — China will activate its integration plan for Taiwan if a pro-Beijing candidate wins the election, according to Nazak Nikakhtar, a national security and international trade attorney and former U.S. official at the Department of Commerce who is currently serving as the chair of National Security Practice.

During an interview with Taiwan News on Dec. 21, Nikakhtar said if the DPP wins, the U.S. will ramp up its restrictions on China's access to U.S. technology and strengthen economic and military ties with Taiwan.

Regarding U.S. Commerce Secretary Raimondo's upcoming visit to Taiwan, Nikakhtar said talking points will be the continued sales of technology to the U.S. and maintenance of the semiconductor supply chain. She predicted Raimondo will also push for more investment by Taiwanese firms in the U.S. to build up its semiconductor production base

What are the implications of a DPP versus a KMT victory in the Taiwan elections, and how will China react to the outcome?

China is obviously hoping for a pro-Beijing administration in Taiwan, and it's going to be easier to force a pro-Beijing administration to slowly start integrating with the mainland. So it will, in terms of China's tactics, coercion, and by virtue of military incursions into Taiwan's airspace, more naval drills, and economic coercion.

China is Taiwan's largest trading partner. Most of Taiwan's massive industries, including semiconductor industries, can't produce the materials without the upstream supply chains in China. So China has a huge, huge lever, right?

In terms of, first instituting a pro-Beijinjg government and then slowly starting to use, scare tactics, coercion, and economic coercion to really start easing in an integration with the mainland. And if you have a pro-Beijing government and you actually make the costs too high to resist, try to remain independent, it makes the integration much easier.

China's already rolled out an integration, a small integration plan, but an integration plan nonetheless. So in terms of Washington and the China watchers, I can't say that this was a surprise.

There's a number of us who had predicted that this was going to happen. It's not a coincidence that the two sort of pro-Beijing candidates ended up getting together, right, running on a ballot, and now I think they have the majority of the votes.

To the China watchers, to the people who keep their finger on the pulse all the time, this was certainly not a surprise to us. We knew that there was going to be something along the lines of economic coercion, plus some of the military drills, terrorizing of Taiwan, plus, short of a coup, but significant interference in the election by positioning the candidates that are pro-Beijing, positioning them in a place to win.

So it wasn't unexpected, it's just sometimes this exercise is screaming into the wind and nobody's really listening. But, 2024 is going to be a really pivotal year. Certainly China, Taiwan, the Indo-Pacific region, but make no mistake, Europe, the United States, and the democratic world.

How will US-China relations be impacted by the Taiwan election results?

Well, we could consider it both ways. If somehow the election goes with the Taiwanese independence movement (DPP), then the difficulty and the challenge gets exacerbated. The United States is definitely ... indications are looking in the past and the U.S. past policies, it's going to work harder to isolate China from technology, U.S. capital ...

It will work harder to increase trade relationships with Taiwan, military sales, etc. and China has become pretty powerful. It's not going to take any of this sitting down.

China has quite a bit of economic leverage in that region, certainly in other countries around the world, in the Latin American and Caribbean countries, in South America, in very close proximity to the United States. So it's going to make sure that the West, that Taiwan understand that it has the power to act.

And I think all of everything that we've seen now in terms of tit-for-tat policies, US export controls, China's retaliatory export controls, U.S. tariffs, China's market access restrictions, China slowly inching Western companies out of its market. That's going to accelerate at a pace that is very uncomfortable for people.

If the Taiwanese elections go pro-Beijing, and remember we have from January to to May for the actual transition to take place, but if it goes the pro-Beijing way, I think China is certainly going to feel emboldened, it's not going to feel cornered like it would if it was a pro-independence regime.

China's certainly going to feel, emboldened and that becomes an even scarier prospect because much of the U.S. economy, much of Europe's economy, much of the rest of the world's economy really depends on the supply chains that we need from China. And that's why supply chain has become a fashionable word right now, but it's very much the reality and it's the kind of reality that seeps into our military capabilities.

Without the upstream supply chains from China, our military, and the military of the rest of the world we only have the arsenal we have. We cannot make any more weapons without these supply chains from China.

And China knows that. China's known that for a long time. And if you have that kind of power over your adversary, why would you wait to use it?

China understands that the United States is accelerating efforts to reshore, onshore, friend shore supply chains. But it also understands that we haven't done that yet and it takes lead time to do that.

So right now is the point where China's strongest and relatively the United States and the rest of the world are weakest.

What are the goals of U.S. Commerce Secretary Raimondo's upcoming visit to Taiwan, particularly her meetings with semiconductor industry leaders?

This is the interesting part about, you know, I don't understand what the U.S. government is thinking. It is very much in Taiwan's interest to sell chips to the United States, to sell chips to China, to sell chips really wherever the market demand is.

TSMC is definitely a profit-driven company. When one looks at its pattern of behavior, the Taiwanese chip companies and the Taiwanese tech companies have sold a lot to China.

So to go to Taiwan and hopefully, you know, meet with the semiconductor industry leaders, I think that the talking points are going to three threefold. Keep selling to the United States, we really need your capabilities, we need your supply chains. The counter to that is if China coerces Taiwan, it doesn't have a choice. It's not going to sell.

The second talking point is come invest in the United States. We really need your capacity in the United States. We're in big, big trouble. The counter to that is since TSMC announced a fabrication facility in Arizona four years ago, there's been no progress.

It takes about 4 or 5 years to build one of these massive fabs. And literally no, I mean, really no progress has been made. Why is that?

There are the outward-facing excuses. Well, we've got workforce issues, we've got permitting, we've got this and that. The reality is, again, from the perspective of the China watchers, there is potentially quite a bit of doubt about TSMC's intentions.

And the reason is that TSMC makes substantial sales to China. It has substantial production in China, and it cannot exist without raw materials from China. TSMC's existence and the rest of the Taiwanese semiconductor industry's existence are very much tied to China.

So if you upset the CCP by doing something that is perceived by them as a win for America and, you know, a zero-sum game and not for China, it will threaten you. And so many believe that the entire TSMC announcement from the beginning wasn't sincere by TSMC, it was just to give America a little bit of a win and a talking point, while at the same time wink-wink, nod-nod China don't worry, we're not going to do anything. And the facts to date have borne this out.

I'll tell you something kind of interesting. Apparently, Taiwan has been running out of water for the semiconductor manufacturing facilities. So TSMC has picked Arizona, of all places, to build a fab when it is very well aware of the water shortage issue.

I think Secretary Raimondo is going to try to convince TSMC to invest in the United States. I think TSMC is in between a rock and a hard place. It wants to help the United States a little bit. But it also knows that China has a noose around its neck.

Finally, I think Gina Raimondo's pitch is going to be on export controls. We have to have these export controls. We know it impacts you. We really want you guys to be on board, to really restrict your exports of high-technology products to China.

To that, I would say it's not like the concept of export controls was ever new to TSMC or to Taiwan. The fact that Taiwan hasn't really been interested in controlling sensitive technology to China to date underscores the points that I had been making before.

Taiwan generally. It's between a rock and a hard place. China can collapse its economy. It can kind of crush it, frankly and so it doesn't want to do anything that angers the giant next to it.

It's in this incredibly difficult position where it may not want to transfer critical technology to China, but it also doesn't have a choice. And when we look at the history of Taiwan's weak, lax, often non-existent export controls, it's not going to do anything because it can't and it hasn't done anything to date very much, very significant because it can't.

There's going to be a lot of asks, but these geopolitical, and economic realities also make it clear that the answers to all of those asks are going to be no. I would like to see the government get a little bit more creative about solutions. Every official in the U.S. government thinks that I'm going to be the one who's going to turn this around.

The reality is that the CCP's will is too big for any one person to through some diplomatic meetings and charm offensive to turn around. I'm disappointed that the United States government isn't being more strategic in terms of its approach to wean ourselves, our allies, off China and not give it those capital flow technology advantages that we're still continuing to give it.

How do U.S. semiconductor export controls shape China’s conduct towards Taiwan?

That's an interesting question. I think that the way that our export controls will impact Taiwan is if there's US-controlled technology in an item or items produced from U.S.-controlled technology, then the U.S. controls attach to the finished item that's produced or the item that contains some US-controlled items.

When China lodged that WTO complaint against the United States on its export control rules, Taiwan jumped into the request for consultations, which is a requirement when you launch a WTO case that parties try to resolve their differences through consultations. And a lot of people looked at it and said, oh, no but Taiwan has a stake in here, it just kind of wants to be a bystander and watch how this goes.

Well, when you looked at Taiwan's language in joining the consultations, it was a little bit hostile towards the United States and then when you think about it practically, you're thinking the United States and China are in a war over export controls.

Taiwan is one of the targets of the war because the U.S. is trying to control, through its own export controls, Taiwan's tech transfer to China. So what possibly could Taiwan say during these negotiations (without angering either side)?

It turns out that I don't think the Taiwanese government was fully coordinated in the WTO, Taiwan's joining the WTO consultations. I think there are some factions of the Taiwanese government that were not consulted, but I also received confirmation that it was, in fact, written to be a jab against the United States.

The relevance of that is that it goes to the earlier point to the relevance of all this is that Taiwan, whether it wants or doesn't want, is irrelevant in terms of its own export controls to China, whether it wants to adhere to U.S. export controls as an excuse to not transfer technology to China, the lack of its own rigorous controls governing its exports of critical technologies to China.

At the end of the day, Taiwan's scared and it's not going to... Taiwan either can comply, and really anger China, or it's going to hire a bunch of lawyers to figure out how one can legally work around the tools and around the controls, and they're still somewhat built like a sieve.

You can work around them. I don't want to say fairly easily, but it's not too difficult to work around them. You can still work around them, and Taiwan is going to be highly motivated to do that, partially by fear.

I do think that there are probably isolated instances where China coerces Taiwan to try to violate export control rules and transfer critical capabilities, and critical technology to China. Look, if it's like software, if it's technical data, even if it's some equipment, these things are really hard to detect when you transfer them.

We don't have adequate end-use check people and honestly, those are the US government people who, government bodies who kind of work around those countries to make sure that there's no export control violations. Even if you had a person at every single company all the time, and I will tell you this, as a former U.S. government auditor of foreign companies, including Chinese companies, you can't detect anything without a forensic audit like a really good forensic examination. And the US government isn't equipped to do that.

Finally, China has anti-foreign sanctions laws that prohibit Chinese companies from complying with U.S. export controls, U.S. sanctions, and all types of Western laws that impede China's rise.

I think China is using that as a talking point with Taiwan. Like, what are you going to do? You're going to adhere to those laws and violate mine.

Because I think it's not a Taiwan-unique problem. The reality is for the entire world, if you do business with China, you either have to comply with China's national security laws, anti-foreign sanctions laws, etc. that actually prohibit you from acting in ways that comply with other jurisdictions' laws. And you can't have it both ways.

So it makes it really difficult for Taiwan. It makes it difficult for different countries, and it makes it difficult for companies. If I'm a company that's going to it's going to get a license from the U.S. government to export critical technologies to China, and let's say the entity that's going to receive it is a really good actor, but it's pretty sensitive technology.

Once it goes into that actor's hand and the CCP knocks on their door and says, I want that technology, they can't say no. So, I still don't understand why we license critical technology to China when we know that the export control rules that we have in place with a license will not be adhered to once the thing lands in China.