Speaker 1: Hello, welcome to Copy Time, a podcast series on Markets
Speaker 1: and Economies from DVS Group Research. I'm Tamir Beg, chief economist,
Speaker 1: welcoming you to our 136th episode.
Speaker 1: In the last episode of this podcast, we discussed techno
Speaker 1: nationalism with Alex Capri. And today we will talk about
Speaker 1: Taiwan where tech and nationalism and security all get blended together.
Speaker 1: We will have a keen Taiwan watcher to do that.
Speaker 1: Drew Thompson is a senior fellow at the S Rajaratnam
Speaker 1: School of International Studies at Nanyang Technological University. He's also
Speaker 1: a part time senior research scientist at the CN A corporation.
Speaker 1: He's been with the Lee Kuan Yew School of Public
Speaker 1: Policy at the National University of Singapore in the past
Speaker 1: and from 2011 to 2018, he was the director for
Speaker 1: China Taiwan and Mongolia in the office of the Secretary
Speaker 1: of Defense in the United States where he was responsible
Speaker 1: for supporting the secretary and managing military to military relations.
Speaker 1: Drew Thompson, a warm welcome to Kobe time. Thank you
Speaker 1: for having me. It's great to have you drew. I
Speaker 1: want to talk about Taiwan today with you and let's
Speaker 1: begin with Taiwan's President Lai Chen de
Speaker 1: known also as William Lai. But I think you just
Speaker 1: told me earlier that he doesn't go with you by
Speaker 1: William anymore. So I will refer to him as President
Speaker 1: Lai if I may. Uh President Lai has been in
Speaker 1: power for about four months. In a recent article, I
Speaker 1: think you talked about his 100 days where he said
Speaker 1: that the view and degree of satisfaction with Lai's 100
Speaker 1: days so far differ considerably in Taipei, Beijing and Washington
Speaker 1: walk us through those multiple city of assessments.
Speaker 2: Sure. So actually I was asked by the, by the
Speaker 2: publisher to submit an article because they'd read a piece
Speaker 2: in a Chinese outlet that basically said how bad lies
Speaker 2: 1st 100 days were. And, and the editor thought there's
Speaker 2: really more to it than, than Beijing's perspective. So, so
Speaker 2: I really think it does come down to sort of
Speaker 2: president line and is domestic uh contacts as well as
Speaker 2: Beijing and Washington, of course. So,
Speaker 2: so maybe starting with, with President Lai, um I mean,
Speaker 2: I think he's managed his transition pretty well. I mean,
Speaker 2: he hit the ground running, which is the advantage of
Speaker 2: being the former vice president. Um He certainly got an
Speaker 2: advantage in that the Taiwan economy is doing quite well.
Speaker 2: I mean, it's in good shape, it's, you know, growth,
Speaker 2: GDP growth is like 3% or so they predict it
Speaker 2: to maybe go up a little, inflation is under 2%
Speaker 2: and unemployment's at 3%. So you've got pretty much full employment.
Speaker 2: Uh And then in, in the sentiment index, you, you've
Speaker 2: got the Taiwan stock market being one of the best
Speaker 2: performing in Asia and it's up over 30% in the
Speaker 2: first half of, of the year. So, so, so things
Speaker 2: are kind of going his way domestically. Um He has
Speaker 2: uh uh a parliament, the legislative yuan that's controlled by
Speaker 2: the opposition party, Guomindang, uh uh the KMT
Speaker 2: and, and they, since they control the legislature that that's
Speaker 2: a potential political challenge for him, um They've thrown a
Speaker 2: couple of shots across his bow and I think he's
Speaker 2: dealt with them pretty effectively so far, but that's going
Speaker 2: to be an ongoing challenge for him,
Speaker 2: but he so far managed it well. I mean, he's,
Speaker 2: he's like any president, you know, certainly very astute about
Speaker 2: his own domestic politics. He's had a long run in
Speaker 2: politics as a, as a former mayor. So, so he
Speaker 2: knows the political field and plays it well. Um He
Speaker 2: has, I think, done something rather unique in that. He's
Speaker 2: really set an agenda that he's been able to push. And,
Speaker 2: and one of the ways he's done that is he's
Speaker 2: formed three presidential level committees similar to what the US
Speaker 2: would have and what we call the interagency, sort of multipart,
Speaker 2: multi multi government agency meetings that he chairs and one
Speaker 2: of them is on climate change, another on health care.
Speaker 2: And the last one is on whole of society resilience.
Speaker 2: Uh, and, and I think the, the whole of society
Speaker 2: resilience campaign is, is, is pretty new and I think
Speaker 2: that makes it, um, uh, pretty potentially impactful and, and
Speaker 2: I think it's worth watching. Um, it, it's, it's intended
Speaker 2: as they said to coordinate government efforts as well as
Speaker 2: mobilize society and it's not just homeland defense against blockades
Speaker 2: or invasions or the threat of natural disasters which they face.
Speaker 2: There's a typhoon currently hitting Taiwan.
Speaker 2: Um But it, it's, it's really about mobilizing civilians to
Speaker 2: be prepared and get basic training for uh like medical
Speaker 2: and emergency responder training. Um And that's an area where
Speaker 2: NGO S in the private sector can, can step in.
Speaker 2: It's also about strengthening critical infrastructure, including the power financial system,
Speaker 2: wartime communications and also reducing their vulnerability to disruptions in
Speaker 2: undersea cables. So, and the last thing I think they're
Speaker 2: really focusing on is stockpiling energy, food and emergency medical
Speaker 2: supplies so that they can withstand either
Speaker 2: prolonged natural disaster or, or a blockade, for example. So,
Speaker 2: so I think, you know, this is a pretty new
Speaker 2: and innovative um and, and potentially game changing approach to
Speaker 2: resilience in Taiwan. Um But I think it also is
Speaker 2: really important because of the signaling aspect. So rather than
Speaker 2: focusing on like how much natural gas uh Taiwan could
Speaker 2: stockpile and who's going to pay for it.
Speaker 2: I think it's going to change the population's mindset and
Speaker 2: probably raise their morale and maybe strengthen the will to resist,
Speaker 2: which is a, which is a big issue. And so
Speaker 2: it's going to give him political support to stand up
Speaker 2: to bullying and protect Taiwan's autonomy in the face of aggression.
Speaker 2: So basically, he's empowering the Taiwan people to take their
Speaker 2: future into their own hands.
Speaker 2: Um That obviously doesn't make Beijing happy. Once
Speaker 1: Drew before we go to Beijing, I just want to
Speaker 1: stay with for one second. Sorry about interrupting. Um So
Speaker 1: how popular is he uh with these uh pivots that
Speaker 1: you just talked about?
Speaker 2: So, I mean, these are fairly new developments. The, the
Speaker 2: first committee meeting he held was last week. Um So,
Speaker 2: so I don't think there's a reflection yet in the
Speaker 2: public polling, he's doing pretty well in public polls. Um
Speaker 2: I mean, as, as good as they are. Um he's,
Speaker 2: he's at around the 50% mark, which is quite good.
Speaker 2: Um in a way the risk is that his, um
Speaker 2: you know, his popularity is going to decrease because there's
Speaker 2: really nowhere else to go.
Speaker 2: Um So, so I think he's got, he's got strong support.
Speaker 2: Uh It's interesting to note that um commentators in Beijing,
Speaker 2: you know, keep pointing out that he only, he only
Speaker 2: got 40% of the vote um in the last election.
Speaker 2: And that's an indication that he's not supported by the, the,
Speaker 2: the public. But, you know, they, they don't often mention
Speaker 2: that it was a three way race. Um And that
Speaker 2: uh and that the vote was split so he didn't
Speaker 2: get an absolute majority. Um but he definitely one handedly
Speaker 2: um uh against the other two candidates.
Speaker 2: Great.
Speaker 2: So Beijing, yes. Um
Speaker 2: Beijing is, is in a way, sort of
Speaker 2: their approach to Taiwan since he's been elected is essentially unchanged.
Speaker 2: Um It, it's very static. Um I mean, Lai is, is,
Speaker 2: I mean, his, his existence is a provocation to Beijing.
Speaker 2: Um when a couple of years ago around 2017, he
Speaker 2: said sort of off the cuff that he called himself
Speaker 2: a pragmatic worker for Taiwan independence.
Speaker 2: And, and I think that that really stuck in Beijing's
Speaker 2: mind and, and as a result, even when Li Jing
Speaker 2: De is trying to be accommodating or trying to be
Speaker 2: uh self restrained, um Chinese commentators will often say, well,
Speaker 2: you know, he's just hiding his true nature. Um or
Speaker 2: you know, he's, he's a die hard, independent separatist and
Speaker 2: he's irredeemable. Um so,
Speaker 2: so so basically he has to face a pretty tense
Speaker 2: and difficult cross strait relationship from, from the day he
Speaker 2: was elected. And, and there's really very little prospect for
Speaker 2: uh cross strait engagement because China positions it as uh
Speaker 2: a precondition that, that he accepts the one China principle.
Speaker 2: Um and, and that pretty much rules out dialogue between
Speaker 2: them because it's not acceptable to, to, to his electorate.
Speaker 2: So
Speaker 2: the other thing is that Beijing really doesn't have any
Speaker 2: assurances to offer Taiwan very few incentives and, and those
Speaker 2: incentives that they do offer are not terribly attractive. Um
Speaker 2: So China has tried to offer economic integration as a
Speaker 2: potential carrot to, to get uh Taiwan closer to the mainland,
Speaker 2: but it becomes less effective when China's economy is not
Speaker 2: doing as well. Taiwan companies are are struggling to be,
Speaker 2: to be profitable and succeed in the market or enter
Speaker 2: the market. Um But more importantly, you know, China has
Speaker 2: used trade as a political coercion tool. Uh more than once,
Speaker 2: including against Taiwan, they've cut off tourists since 2016, 2020.
Speaker 2: There was a pretty dramatic
Speaker 2: incident in 2021 where um you know, China has embargoed
Speaker 2: pineapples from Taiwan. So so suddenly, you know, Taiwan pineapple
Speaker 2: farmers have lost their major market and uh it became
Speaker 2: a rallying cry for uh divestiture from China and, and for,
Speaker 2: for de risks. Um and that's been driving uh Taiwan
Speaker 2: businesses away from the mainland and into places like Southeast Asia.
Speaker 2: So, so that kind of leaves Beijing's main policy tool.
Speaker 2: Um and, and, and sort of go to response to
Speaker 2: deal with policy differences. It's military coercion and, and it's
Speaker 2: just not working on the people of Taiwan. It may
Speaker 2: serve the interests of, you know, leadership in Beijing in
Speaker 2: terms of demonstrating to their people that, that they are,
Speaker 2: you know, resolved to, to oppose Taiwan independence and anything
Speaker 2: that
Speaker 2: goes against Beijing's interest. But the military tool is not
Speaker 2: convincing the people of Taiwan that they should form a
Speaker 2: uh uh uh some sort of confederation with China. In fact,
Speaker 2: it's driving people to be more
Speaker 2: uh supportive of a higher degree of autonomy and resilience
Speaker 2: against the mainland, which is, you know, continually running uh
Speaker 2: uh military missions around Taiwan across the center line in,
Speaker 2: in increasingly complex military maneuvers.
Speaker 1: Uh drew one question on Beijing, it it's uh engagement
Speaker 1: or you know, efforts to coerce or um you know,
Speaker 1: show them with some carrots either way. Uh your your
Speaker 1: point that you know, it's not really has had any
Speaker 1: impact on
Speaker 1: improving the relationship or changing the mind of the Taiwanese
Speaker 1: political leadership. I think that's well taken. But it is
Speaker 1: still the fact that despite all the talk of Deris
Speaker 1: Taiwan remains a very large investor in China and you
Speaker 1: do have many Taiwanese professionals gainfully employed in China.
Speaker 2: There's been a dramatic exodus of Taiwanese expats from the
Speaker 2: mainland back to Taiwan and increasingly to other places. Um
Speaker 2: not, not considering the total stock of foreign direct investment.
Speaker 2: But if you look at at new foreign direct investment,
Speaker 2: I think the last year uh two years, the amount
Speaker 2: of Taiwan foreign direct investment going to Southeast Asia and
Speaker 2: South Asia, primarily India um is exceeding what goes to China.
Speaker 2: Um And I think if you add it up with
Speaker 2: what's going to the United States, um there are clear
Speaker 2: indications that there is de risking going on uh in
Speaker 2: the cross strait economic relationship.
Speaker 2: Uh It's also borne out in, in the identity issue.
Speaker 2: We can, we can talk about that some more but,
Speaker 2: but essentially the Taiwanese people increasingly self identify as Taiwanese,
Speaker 2: not as Chinese and they may speak Chinese language. Um
Speaker 2: you know, they, they have a shared history but, but
Speaker 2: that's changing in Taiwan as well.
Speaker 1: Hm. Good point. Uh All right, we'll, we'll come back
Speaker 1: to Beijing a little later but walk us through Washington's
Speaker 1: assessment of like,
Speaker 2: sure. So I mean, Washington is always going nervous about
Speaker 2: cross strait relations when they're tense. Um they uh are
Speaker 2: going to be concerned about the risk of miscalculation. Um
Speaker 2: whether that's uh China miscalculating uh Taiwan miscalculating uh or
Speaker 2: even even Washington itself. So, so I think Washington is, is,
Speaker 2: is going to be concerned about lie, possibly antagonizing Beijing
Speaker 2: um because he'll be pursuing a balance between protecting Taiwan's
Speaker 2: autonomy and their dignity and at the same time showing
Speaker 2: some restraint so that he's not
Speaker 2: overtly antagonizing Beijing. And I think that's an important posture
Speaker 2: that he has to continually manage and calibrate. And I
Speaker 2: think that's the context by which Washington views most of
Speaker 2: Taipei's actions. I mean, obviously there's strong support in Washington
Speaker 2: for human rights self determination, particularly with AAA liberal government
Speaker 2: in Washington.
Speaker 2: Um But, but there are limits to that. It can't
Speaker 2: come at the expense of of, of us interests and
Speaker 2: us interests are stable cross strait relations. So we'll certainly
Speaker 2: see Washington continuing to monitor Lai's behaviors, his speeches in
Speaker 2: a couple of days on October 10th, he'll, he'll
Speaker 2: a National Day speech. And I think there will be
Speaker 2: plenty of, of think tankers in, in Washington and Beijing
Speaker 2: analyzing word by word what he says and scrutinizing it
Speaker 2: for evidence about whether he's diverging from the status quo.
Speaker 2: But I mean, I think, I think Lii Jing de
Speaker 2: will thread that needle well, um Tsai Wen certainly did
Speaker 2: it for, for eight years. And I think at the
Speaker 2: end of the day, you know, Washington is going to
Speaker 2: be satisfied that um
Speaker 2: uh that, that Li Jing De is considering us interests
Speaker 2: as he postures himself and communicates with his own, his
Speaker 2: own people. Uh Beijing is not going to be happy.
Speaker 2: Um You know, and at the end of the day though,
Speaker 2: for Lai Jing De, it's really Washington's continued support, that's
Speaker 2: what really matters the most. And I think importantly, and
Speaker 2: I mentioned this in the, in, in the, the, the
Speaker 2: essay uh Lai Qing has done a pretty good job
Speaker 2: building a rapport and a relationship with Washington and the
Speaker 2: US government.
Speaker 2: Um It started before um before the uh inauguration in May.
Speaker 2: I remember the, it's a very long interregnum in, in,
Speaker 2: in Taiwan between the election in January and inauguration in
Speaker 2: May and the um Biden administration had pretty strong connections
Speaker 2: even before the election with, with all of the political
Speaker 2: parties that were running and that really
Speaker 2: helps build trust and, and a sense of confidence that
Speaker 2: the US interests will be protected that, that Taiwan candidates
Speaker 2: are not going to be reckless. And I think he's
Speaker 2: done a good job developing that trust, but that said
Speaker 2: he never gets a free pass. Uh, he won't get
Speaker 2: a free pass from Washington. So I think Washington DC
Speaker 2: and its perceptions are a risk that he'll have to
Speaker 2: continually manage. Looking ahead,
Speaker 1: the perception from Washington DC is a function of who's
Speaker 1: the president or there's a little more structural beyond political cycle.
Speaker 1: Uh Sort of stands on Taiwan,
Speaker 2: I think,
Speaker 2: I mean, at its best, Washington's foreign policy is based
Speaker 2: on national interests. Uh it tends to be in the
Speaker 2: context of allies and partners, you know, coming as the,
Speaker 2: the primary interest uh as well as access and influence and, and,
Speaker 2: and that's really irregardless of the party in power, both
Speaker 2: in Washington or in Taipei.
Speaker 2: Um It's, uh you know, these are, these are, you know,
Speaker 2: two governments that have long experience dealing with one another,
Speaker 2: you know, very, very experienced bureaucracies and, and professional career,
Speaker 2: civil servants that manage the relationship in multiple administrations as
Speaker 2: the political leaders shift, the managers of the relationship do not.
Speaker 2: Um And, and, and I think it's uh there may
Speaker 2: be an element of risk, but it's basically a manageable one,
Speaker 2: the um uh kmt present presidency. Certainly we saw this
Speaker 2: under Mao had a very different cross straight characteristic than
Speaker 2: the twn administration. But the US can, can deal with
Speaker 2: that just as a Taiwan administration can deal with uh
Speaker 2: shifts in, in Washington politics as well.
Speaker 1: All right. Well, we'll talk about that some more later.
Speaker 1: I'm curious about that issue. Uh but just staying with
Speaker 1: uh President Lai's uh uh you know, performance so far. So, ok,
Speaker 1: 100 days, you think that, you know, he has done
Speaker 1: pretty well from Taiwan's perspective. He has not surprised Washington
Speaker 1: and Beijing, of course, is not going to be happy.
Speaker 1: Uh What about the next 3.5 years? What lies ahead?
Speaker 2: Yeah, as Yogi Berra said, right, making predictions is difficult,
Speaker 2: especially about the future.
Speaker 2: Um
Speaker 2: But that said, you know, we, we can monitor trends and,
Speaker 2: and I don't see big paradigm shifts from what we've
Speaker 2: already seen. Um I mean, he's gonna have to manage
Speaker 2: a host of known risks. Um uh some of them
Speaker 2: including demographic risk of a, of an aging shrinking society
Speaker 2: and the impact that has on, on the economy and
Speaker 2: society and security.
Speaker 2: Uh He's got, you know, domestic political and economic risks.
Speaker 2: As I said, managing an opposition party that's quite empowered
Speaker 2: and runs the legislature. Uh He's got to manage cross
Speaker 2: strait risks. He's got to manage Washington. Uh And at
Speaker 2: the same time, he's also looking to strengthen relations with
Speaker 2: Japan and with Europe and those have been trending upwards
Speaker 2: as well. So that's added to his, his workload.
Speaker 2: Um as I mentioned before, his polls are quite high.
Speaker 2: So it's pretty certain his popularity will fall. Um that
Speaker 2: may not be a horrendous thing. Um uh If it
Speaker 2: gives him guidance in terms of, you know, what the
Speaker 2: people of Taiwan wants and how to deliver it. Um
Speaker 2: But I think those are all pretty, pretty well known knowns.
Speaker 2: Um
Speaker 2: There is a risk of, I think some exogenous shocks,
Speaker 2: unexpected ones. Um you know, he'll have to deal with that,
Speaker 2: that are really kind of irrespective of cross strait relations or,
Speaker 2: or maybe Washington. Um you've got global economic downturn risk.
Speaker 2: Uh global rise in inflation would be pretty hard on
Speaker 2: Taiwan because inflation is currently quite low. Uh wages have
Speaker 2: not been increasing dramatically, standard of living is high but
Speaker 2: but wages have not been going up. So a kick
Speaker 2: in global inflation would, would hurt.
Speaker 2: Um if you had additional stress in the global supply
Speaker 2: chain system of trade, I mean, Trump is threatening 60%
Speaker 2: tariffs on, on China if that comes to be, you know,
Speaker 2: that will be difficult on those Taiwan companies that still
Speaker 2: have manufacturing in China. But um that's as I said,
Speaker 2: trending downward and trending outward. So maybe what's more threatening
Speaker 2: would be Trump threat uh in, in, in initiating 10%
Speaker 2: tariffs across the board on every country uh which would
Speaker 2: hurt Taiwanese operating in the mainland Taiwan and Southeast Asia.
Speaker 2: So uh for trade dependent countries like Taiwan, like Singapore,
Speaker 2: this could be a a major risk that that is
Speaker 2: difficult to prepare for. Um it's important to know that
Speaker 2: Taiwan's top export destination is still China, but the US
Speaker 2: is catching up and it's probably going to exceed total
Speaker 2: exports in the near future. And again, I think that's
Speaker 2: a growing trend as manufacturing hubs shift out of China
Speaker 2: into Southeast Asia. Chinese factories are increasingly focused on supplying
Speaker 2: the Chinese market.
Speaker 2: Um You're going to see the importance of the US
Speaker 2: as an export destination rise. It's already Singapore's top export destination.
Speaker 2: Um and it's going to, I think very shortly be
Speaker 2: one for Taiwan as well. So, so I think having
Speaker 2: the US close itself off to imports would certainly hurt,
Speaker 2: hurt Taiwan. Um I I think there's another major risk that,
Speaker 2: you know, everybody has to contend with is, is you
Speaker 2: know what emanates from Beijing.
Speaker 2: Um I mean, we saw, you know, Beijing last week
Speaker 2: uh implement uh stimulus, but that wasn't expected. Uh I
Speaker 2: think that that maybe took longer than most people hoped for.
Speaker 2: Um We saw China very unexpectedly shift away from its
Speaker 2: uh zero COVID stance and, and and just open everything
Speaker 2: up and, and return to normal uh which certainly had
Speaker 2: costs on, on, on the Chinese people as well as
Speaker 2: the society. So there's an unpredictability
Speaker 2: emanating from Beijing that I think um Lai Jing de
Speaker 2: and everyone else is going to have to deal with.
Speaker 2: Um and, and maybe ultimately the mother of all political
Speaker 2: risks is, you know, what happens if Xi Jinping suddenly
Speaker 2: departs the scene. I mean, there's no anointed successor, there's
Speaker 2: no agreed to norms for succession. So I mean, if
Speaker 2: Xi Jinping suddenly uh you know,
Speaker 2: gets called for a meeting with Marx, Um you know,
Speaker 2: Beijing's palace politics could get very sporty and, and we're
Speaker 2: all going to have to deal with that, but Lai
Speaker 2: Jing in particular,
Speaker 1: yes, uh no, no shortage of unpredictability these days. I
Speaker 1: want to stay with this uh US, Taiwan trade and
Speaker 1: investment relationship a little more as you know, uh Drew
Speaker 1: TS MC is a singular point of vulnerability as well
Speaker 1: as opportunity for Taiwan because, you know, no other company
Speaker 1: makes what TS MC makes with the quantity and precision
Speaker 1: and the US administration is very keen on reducing the
Speaker 1: risk of all of those things being made in Taiwan.
Speaker 1: So we've seen under the Ira, you know, lots of
Speaker 1: incentives being given to Taiwanese manufacturers to build in the US.
Speaker 1: So when we talk about the next 3.5 years of
Speaker 1: vice presidency, would he be a cheerleader of Taiwanese companies
Speaker 1: building in Texas or Arizona? Or would he try to
Speaker 1: tread the balance because he does want that core excellence
Speaker 1: to stay in Taiwan? Because that is Taiwan's branding and
Speaker 1: source of power.
Speaker 2: Yeah. Yeah, I mean, between the Ira and the Chips Act,
Speaker 2: the US is suddenly very attractive for, for this type
Speaker 2: of manufacturing. I think it's also important. It's not just
Speaker 2: TS MC, right? I mean, TS MC is, is very
Speaker 2: much a product of its own supply chains. There's a,
Speaker 2: there's a tremendous ecosystem of companies that support TS MC
Speaker 2: and its processes. So, so it's not just TS MC
Speaker 2: setting up a factory, it's the whole supply chain to
Speaker 2: that
Speaker 2: fabrication plant moving with it. And many of those are Taiwanese. So,
Speaker 2: so it, it's potentially AAA pretty massive footprint that that
Speaker 2: will ultimately emerge. Um I don't think La Jinta is
Speaker 2: terribly concerned because Ts MC is committed to keeping the
Speaker 2: most cutting edge of the cutting edge in Taiwan. That's
Speaker 2: where they perform at their highest
Speaker 2: uh their highest efficiency levels. It's where the top top
Speaker 2: engineers are. They definitely see um uh Arizona as an
Speaker 2: important component of their global manufacturing just as they also
Speaker 2: manufacture in China too. So, so I think there's going
Speaker 2: to be diversified footprints. But
Speaker 2: II, I don't think Lai is concerned about the semiconductor
Speaker 2: industry hollowing out from Taiwan itself, partly because that infrastructure
Speaker 2: to support it, not only in the subs suppliers but
Speaker 2: also in the human capital uh uh sector and, and,
Speaker 2: and really the, you know, the, the incredible work ethic
Speaker 2: of Taiwan engineers um who are highly incentivized to work
Speaker 2: incredibly hard. Um In Taiwan plus, you know, pretty good
Speaker 2: standard of living, fairly low cost standard
Speaker 2: of living um makes it pretty competitive. So I don't
Speaker 2: think they're worried about losing that. Um I think there's
Speaker 2: enough semiconductor demand from the highest levels to lower levels that,
Speaker 2: that the TS MC
Speaker 2: position in, in, in Taiwan itself is pretty secure so
Speaker 2: they can afford to diversify. And I think that's Taiwan's
Speaker 2: benefit as well at the end of the day.
Speaker 1: Ok. So speaking of diversification, you, you've touched upon this
Speaker 1: briefly earlier, let's go a little deeper on this, which
Speaker 1: is Taiwan vis A vis Southeast Asia. Uh There's a
Speaker 1: lot of trade and commerce between this region and Taiwan
Speaker 1: and in the context of the risks of supply chains,
Speaker 1: I think there'll be far more going forward. Um What
Speaker 1: do you hear from the president and his administration as
Speaker 1: far as their Southeast Asia strategy is concerned?
Speaker 2: Um
Speaker 2: So the Taiwan Southeast Asian relationship is, is really quite,
Speaker 2: quite interesting. Um I won't get into the history but
Speaker 2: I mean, I've been watching and traveling to Taiwan for,
Speaker 2: for more than 20 years and
Speaker 2: it's intriguing for me to watch the change particularly in
Speaker 2: the last say 10 years, how Southeast Asia is becoming
Speaker 2: much more relevant in and to Taiwan. So, I mean,
Speaker 2: I think the two, the two Taiwan and, and, and
Speaker 2: the Southeast Asian region, they're really becoming very increasingly intertwined.
Speaker 2: Um and maybe I'd describe that as is too
Speaker 2: two trends, right? So call it an inward trend and
Speaker 2: an outward trend. Um So, you know, first of all,
Speaker 2: I remember Taiwan is not small, it's, it's very tempting
Speaker 2: to sit back and say, wow, you know, China is
Speaker 2: so big and Taiwan is so small but, but Taiwan is,
Speaker 2: is neither small nor nor significant. I mean, if you
Speaker 2: group it economically with Southeast Asia, Taiwan would be the
Speaker 2: second largest economy after Indonesia and it would be the
Speaker 2: second wealthiest per capita after Singapore. Um So, so
Speaker 2: as the relationship changes, Taiwan becomes increasingly important uh in
Speaker 2: a way to Southeast Asia. So on that, that outbound side,
Speaker 2: um yeah, we're now seeing Taiwan companies increasingly investing in
Speaker 2: Southeast Asia and South Asia more than they do in China.
Speaker 2: I think that's, that's an inevitable trend here.
Speaker 2: Um We talked about Taiwan companies being sort of central
Speaker 2: to these global supply chains. It's not just semiconductors, it's
Speaker 2: IC T across the board oe impart suppliers. Um uh
Speaker 2: So that electronic sector is really pretty critical and, and
Speaker 2: we saw that during COVID, when everybody began working from
Speaker 2: home and they were buying um uh they were buying new,
Speaker 2: you know, new cameras
Speaker 2: and new monitors and new computers. And Taiwan's exports soared
Speaker 2: during COVID to supply that. So, so I think as
Speaker 2: manufacturers from around the world, including Taiwan shift their production
Speaker 2: to Southeast Asia, you'll see a supply chain from Taiwan
Speaker 2: following those clients. And that's primarily landing in Singapore, Vietnam,
Speaker 2: Indonesia and Thailand. For the most part, I think some
Speaker 2: in Malaysia but, but less,
Speaker 2: but on the inbound side, we'll call it the inbound side.
Speaker 2: You've got more Southeast Asians becoming part of the fabric
Speaker 2: of Taiwanese society. So Taiwan's society is shrinking. Their population
Speaker 2: is shrinking. The fertility rate is like 1.25 which is
Speaker 2: one of the lowest in the world. So basically for
Speaker 2: every couple, you have one and a quarter Children being born,
Speaker 2: uh the sustainment rate for a population is 2.2.
Speaker 2: So, so Taiwan is, is basically running out of people
Speaker 2: and they have been for a fairly long time and
Speaker 2: Southeast Asians are stepping in to fill the gaps in
Speaker 2: the workforce and they're playing a really important role in
Speaker 2: Taiwan's economy. But that also means in their society. So
Speaker 2: the official statistic is that there are about 760,000 Southeast
Speaker 2: Asians living in Taiwan. Uh But there's actually probably a
Speaker 2: sizable number that are not counted. Uh So it's probably
Speaker 2: closer to a million
Speaker 2: and this is in a population of 23 million. So
Speaker 2: it's a pretty big, pretty big chunk. Um And, and
Speaker 2: they primarily come from Indonesia, Vietnam and the Philippines. Um and,
Speaker 2: and as I said, it's a big number of people.
Speaker 2: So when you walk around in, you know, downtown Taipei or,
Speaker 2: or a major city, particularly in the affluent areas, you
Speaker 2: see shops catering to Southeast Asians, they're selling, you know,
Speaker 2: some
Speaker 2: ball and Southeast Asian products and services and shipping, you know,
Speaker 2: shipping boxes back to Southeast Asian States. And there's a
Speaker 2: prominent chain called Coco Indo uh that you can find
Speaker 2: in sort of uh back alley. Um um you know,
Speaker 2: neighborhoods and, and, and, and where the domestic helpers and the,
Speaker 2: you know, service workers can, can go and, you know,
Speaker 2: buy their comfort food and ship their boxes home and
Speaker 2: transfer money. And um and you see Indonesian caregivers escorting
Speaker 2: the seniors in the markets, doing, doing their shopping on
Speaker 2: the weekends and, and in the mornings it's, it's an
Speaker 2: increasingly common sight.
Speaker 2: Um So, so you basically got a lot of Southeast
Speaker 2: Asians living in the homes of Taiwanese. So you've got
Speaker 2: some cross cultural uh exchanges going there in the major cities.
Speaker 2: But you're also seeing that in the industrial centers um
Speaker 2: particularly from Indonesia, Vietnam, you've got a lot of factory workers,
Speaker 2: a lot of skilled laborers who are working in these factories,
Speaker 2: particularly down south. So you can just
Speaker 2: go to a shopping center and see a lot of
Speaker 2: signage in, in, in different Southeast Asian languages where they're
Speaker 2: providing services and information. You're also seeing this in the government,
Speaker 2: public facing departments are, are, are communicating in up to
Speaker 2: seven languages. Now, um I was almost surprised that Taiwan
Speaker 2: government's news agency started issuing, uh they started a a
Speaker 2: Bahasa language service uh in, in July.
Speaker 2: So, so it's really changing Taiwan. Um And so even
Speaker 2: though countries don't recognize Taiwan for the most part, diplomatically,
Speaker 2: this labor trend is internationalizing Taiwan in a way. And
Speaker 2: I think there's maybe two big implications for this. Um
Speaker 2: I mean, obviously there's a social impact, 5% of the
Speaker 2: population give or take is, is from Southeast Asia. Um
Speaker 2: and that's going to change Taiwan's identity, right? And, and
Speaker 2: it's Taiwan is increasingly dependent on diversity and that's going
Speaker 2: to make Taiwan even more distinct from China. Then you've
Speaker 2: got political and security implications. Um Taiwan's security interests align
Speaker 2: more closely with Southeast Asia than they ever have before.
Speaker 2: Um
Speaker 2: I was, you know, doing some research on um you know,
Speaker 2: countries opposed, you know, basically which countries had opposed China's
Speaker 2: aggression in the South China Sea. So I Googled, you know, Vietnam,
Speaker 2: Indonesia pick a couple of countries and, and, and Google,
Speaker 2: you know, Indonesia condemns China's coast guard ramming a Philippine vessel.
Speaker 2: Um you know, no public statements from any of the
Speaker 2: Southeast Asian States, but the number one hit on Google
Speaker 2: is Taiwan Ministry of Foreign Affairs decries uh China ramming
Speaker 2: Philippine vessel. So, so you have, you know, Taiwan is
Speaker 2: a very vocal
Speaker 2: quarter of, of, of these sorts of, you know, peaceful
Speaker 2: resolution of conflict, international norms and, and that, that, that
Speaker 2: means there's a security alignment of interest. So, you know,
Speaker 2: even though the potential for cross strait conflict is low. Um,
Speaker 2: uh, you know, it's not imminent, it's not inevitable. But,
Speaker 2: you know, you've got a million Southeast Asians living on
Speaker 2: Taiwan who'd be pretty adversely impacted if a conflict occurs. Um,
Speaker 2: and there's, of course, economic consequences too. Right. It's not
Speaker 2: just the remittances but the impact on global trade. And
Speaker 2: I think the polls in Southeast Asia are starting to
Speaker 2: show Southeast Asian elites increasingly opposed
Speaker 2: China using force against Taiwan. Doesn't mean they're willing to
Speaker 2: stand up to Taiwan or denounce them publicly, but they
Speaker 2: definitely have an interest in not having a conflict occur.
Speaker 2: So the question will be what Southeast Asia prepared to
Speaker 2: do to, to deter China from using force. And at
Speaker 2: this point, there's not much, but I think as that
Speaker 2: trend continues, we may see some change.
Speaker 1: So the trend is certainly fascinating and um I actually
Speaker 1: want you to look a little further east from Southeast
Speaker 1: Asia or rather sorry, look West India. Uh I've seen
Speaker 1: recent stories that, you know, Indian Navy have Cooper with
Speaker 1: the Vietnamese Navy or Indian companies are, you know, exploring
Speaker 1: Southeast Asia as part of the supply chain that they
Speaker 1: could take advantage in their pursuit for manufacturing excellence.
Speaker 1: Um Do you see Taiwan India relationship, you know, feature
Speaker 1: in a prominent manner when you read like Taiwanese media,
Speaker 1: for example,
Speaker 2: and there's,
Speaker 2: I mean, hardly, I I would hardly consider myself an
Speaker 2: expert on, you know, the Taiwan India relationship. But, but
Speaker 2: my sense is that it's growing, um there are now
Speaker 2: a number of prominent Indian scholars who are resident in
Speaker 2: Taiwan in academia doing national security research.
Speaker 2: Um The Taiwan government just signed an agreement with India
Speaker 2: to facilitate migrant workers coming to India. I mentioned that,
Speaker 2: you know, you've got potentially a million Southeast Asians. Um
Speaker 2: Taiwan is looking to bring in South Asians as well.
Speaker 2: So I think maybe those are two examples. Um the
Speaker 2: uh you know Indian representative office in Taiwan is, is
Speaker 2: active and you know, meets with officials and and does
Speaker 2: representation and provides facilitation for businesses to, to invest in Taiwan.
Speaker 2: We've certainly seen um uh you know, one of the
Speaker 2: the biggest Taiwan companies hung high precision Foxconn which assembles
Speaker 2: iphones and other apple products, setting up factories
Speaker 2: in, in India. So, so I think the potential for
Speaker 2: that relationship to grow is, is definitely there. Uh but
Speaker 2: it's been starting from what I think is a fairly
Speaker 2: low base. But again, I think Taiwan's interest is on
Speaker 2: is in internationalizing. So if Taiwan businesses um are looking
Speaker 2: for opportunities to invest in India, I'm sure India will
Speaker 2: welcome them. And likewise,
Speaker 2: uh you know, if, if, if you know the big
Speaker 2: Indian companies, the Tatas of the world want to engage
Speaker 2: in Taiwan, the Taiwan Economic Ministries will certainly help them
Speaker 2: find a suitable partner, suitable locations and facilitate their inbound
Speaker 2: investments as well. So I think that's, it's a, it's
Speaker 2: a relationship primed to expand for sure.
Speaker 1: Ok. Since I'm dragging you around the region, uh, Drew,
Speaker 1: I might as well teach you up north a little
Speaker 1: bit now. Quick comments. Uh, Taiwan, Japan, Taiwan Korea.
Speaker 2: Good one. Taiwan Korea,
Speaker 2: smaller, less potential but certainly plenty of overlap. I mean, in,
Speaker 2: in some ways, I think
Speaker 2: painting a broad brush.
Speaker 2: Taiwan companies in many ways, compete with, um, South Korean
Speaker 2: ones in, in places like Southeast Asia. Um certainly the,
Speaker 2: the
Speaker 2: the South South Korean companies like Samsung are quite prominent.
Speaker 2: Uh And at the same time, I'm sure they have
Speaker 2: plenty of Taiwanese suppliers who contribute to their assembly work in,
Speaker 2: in Vietnam and elsewhere. So I think it's both symbiotic
Speaker 2: but certainly politically. Um South Korea hasn't had much interest
Speaker 2: in Taiwan or the cross strait relationship.
Speaker 2: Um South Korea has been very focused on its security
Speaker 2: issues with the North Koreans and China's support for North
Speaker 2: Korea as well as the survival of South Korean businesses
Speaker 2: in China. So, so I think that's been primarily the
Speaker 2: focus and there hasn't been, for instance, you know, not
Speaker 2: expecting to hear news that, that South Korean arms manufacturers
Speaker 2: are preparing to provide platforms or munitions to Taiwan.
Speaker 2: Um uh you rarely hear South Korean politicians talk about Taiwan,
Speaker 2: but Japan is a completely different matter. Um When Tsai
Speaker 2: Wen was elected in 2016 and Prime Minister Abe was
Speaker 2: in office, you had really a confluence of interest um
Speaker 2: where uh
Speaker 2: Prime Minister Abe had a very close relationship with Taiwan,
Speaker 2: had an affinity for them. And likewise, the, the, the
Speaker 2: President Thai and her party, the DPP and, and President
Speaker 2: Lai's party have, have, have an affinity for Japan. I
Speaker 2: think there's been an awakening in Japan about the security
Speaker 2: risks that China presents to the Japanese homeland. Um And
Speaker 2: Taiwan is a very important part of that. Uh Japanese
Speaker 2: politicians will sometimes say that if you stand on the
Speaker 2: southernmost parts of,
Speaker 2: of Japan, you can see Taiwan from Yonaguni Island. Um
Speaker 2: So Japan is concerned about the security of the Southwest
Speaker 2: Islands and, and therefore, um there's been a lot of
Speaker 2: investment in building uh military infrastructure around the, the,
Speaker 2: the Ryuu chain and, and as a result, um you know,
Speaker 2: from Okinawa down to, to, to Yonaguni, you've, you've got
Speaker 2: uh an increasingly aware and prepared and postured uh Japan
Speaker 2: self defense force. Um I mentioned, you know, socially, I
Speaker 2: think there's a lot, you know, Japanese culture is very
Speaker 2: popular in, in, in, in Taiwan. Um People can forget,
Speaker 2: you know, that,
Speaker 2: that Taiwan is not the home of, of Hello, Kitty,
Speaker 2: not the birthplace of, hello Kitty, but you wouldn't know it.
Speaker 2: Um uh So, so I think Japanese culture very, very
Speaker 2: popular in Taiwan. Um the economy, the economic relationship also
Speaker 2: quite close. Uh and the security relationship is is increasing.
Speaker 2: Um They don't have diplomatic recognition. But uh the Japanese
Speaker 2: uh defense Ministry has posted a serving official for the
Speaker 2: first time to Taiwan,
Speaker 2: um not retired officials and retired officers as they had
Speaker 2: in the past. So that's a very small upgrade. Uh
Speaker 2: But it's important for the Japanese Defense Ministry to understand
Speaker 2: um what's going on in Taiwan and Taiwan's military and,
Speaker 2: and have an open channel that, that they, they can
Speaker 2: count on.
Speaker 2: So, uh I think Japan has a very heightened concern
Speaker 2: about the military threat from China and the prospect for
Speaker 2: a cross strait conflict and, and that's, that's becoming apparent in,
Speaker 2: in Japan's posture towards Taiwan.
Speaker 1: Ok. Drew, you're nudging me into the next segue uh very,
Speaker 1: very seamlessly. Um In a recent article you wrote, I quote,
Speaker 1: China's steadily increasing coercive measures against Taiwan, but they remain
Speaker 1: to date below the threshold of military conflict
Speaker 1: essentially. When does coercion end and conflict begin? Question mark,
Speaker 1: end quote. All right, let's be clear, you're not making
Speaker 1: a prediction for a war here, but your objective is
Speaker 1: to deepen the understanding of the risks of conflict. So
Speaker 1: with that context, please walk us through the threshold scenario.
Speaker 1: Dr
Speaker 2: So yeah, I appreciate the caveat. I mean, when, when
Speaker 2: one is engaged in defense planning, um it can be
Speaker 2: a somewhat dark, dark place. Um You know, you, you're
Speaker 2: thinking about the worst possible outcomes, you know, the failure
Speaker 2: of diplomacy and, and the prosecution of a war. Uh
Speaker 2: and and that's, that's, that's hard. Um So, so just
Speaker 2: because you're planning for it doesn't mean you want it.
Speaker 2: Um it, it, what it really means is you want
Speaker 2: to avoid it, you want to prevent it, you want
Speaker 2: to deter it. So, one of the things I've been
Speaker 2: thinking about for a very long time is and particularly as,
Speaker 2: as I mentioned, China's military coercion against Taiwan has increased
Speaker 2: very steadily, especially since August 2022. And Speaker Pelosi visited
Speaker 2: um that coercion has become normalized.
Speaker 2: Um you know, Chinese navy regularly sails ships around Taiwan,
Speaker 2: including aircraft carriers, they fly surveillance planes, bombers regularly, all
Speaker 2: around Taiwan. Fighter planes cross the center line on an
Speaker 2: almost daily basis. Um You know, it it looks quite
Speaker 2: touchy. Um And, and I think
Speaker 2: as we become normalized to that regular steady military coercion,
Speaker 2: you also recognize there's a lot of other coercion going
Speaker 2: on diplomatic, economic informational. Sometimes the Taiwanese call that cognitive warfare.
Speaker 2: It's all designed to impose political pressure on Taiwan oftentimes
Speaker 2: it's called gray zone below the threshold of conflict, any
Speaker 2: of these activities. So
Speaker 2: the question for me is as it increases, is there
Speaker 2: a tipping point at what point does it become war? And,
Speaker 2: and it's pretty, pretty critical moment to consider because if
Speaker 2: you've got tensions rising and, and a conflict is becoming
Speaker 2: increasingly apparent
Speaker 2: at what point do you cross that threshold? And I
Speaker 2: think it's important for businesses as well as governments and
Speaker 2: militaries to, to sort of recognize this because that normalization
Speaker 2: of military coercion makes people complacent. Um And you may not,
Speaker 2: you may not be aware of the indications of the
Speaker 2: change in, in the phase. And, and I think that
Speaker 2: also has really important implications for how the US responds.
Speaker 2: So there's a very natural tension within the US government
Speaker 2: between the civilians. Um you know, the diplomats, the White
Speaker 2: House who really want to use diplomatic means to avoid conflict.
Speaker 2: Um and that bumps up against military officials who also
Speaker 2: want to avoid a conflict for sure, but they need
Speaker 2: to move forces to prepare for the start of the war.
Speaker 2: Um They need to move forces from the US mainland,
Speaker 2: from Guam, from Hawaii towards the conflict and they need
Speaker 2: to posture themselves to be able to take advantage of
Speaker 2: the opening phases from a position of strength, right? The
Speaker 2: first movers advantage, uh some military officers might might advocate
Speaker 2: for a show of force as a means to deter China.
Speaker 2: But the diplomats that are looking for negotiated solutions don't
Speaker 2: want to do anything to provoke Beijing because they're looking
Speaker 2: for an off ramp from the road to war and
Speaker 2: that's going to be a natural tension because diplomats, the
Speaker 2: White House are not necessarily going to want the military
Speaker 2: to move forces very visibly closer to a potential conflict
Speaker 2: because it might hurt their chances for a negotiated peaceful solution.
Speaker 2: And you, you run a risk and I think we
Speaker 2: saw that a little bit in Ukraine. Um uh We,
Speaker 2: we've seen it in past historic cases where negotiations tend
Speaker 2: to supplant military preparations. So, um so I think that,
Speaker 2: that
Speaker 2: that's a pretty key tipping point that we have to
Speaker 2: understand so that we're not behind the curve and that,
Speaker 2: and that we're not showing restraint when the other side
Speaker 2: is preparing for a conflict and ready to move or
Speaker 2: potentially even using diplomatic negotiations as a ruse as a
Speaker 2: means to, to obscure and, and prevent,
Speaker 2: prevent the adversary from, from using their military to their
Speaker 2: own advantage.
Speaker 1: Your view on the US Taiwan policy under Trump versus Harris,
Speaker 1: you've already talked about this a bit, but just specifically
Speaker 1: under Trump or under Harris, how do you see us
Speaker 1: Taiwan
Speaker 1: policy evolve?
Speaker 2: Yeah, as, as I mentioned, I'm also reluctant to make
Speaker 2: predictions about the future. Um
Speaker 2: I, I think there's very little to go on. I mean,
Speaker 1: they haven't said
Speaker 1: much, yeah,
Speaker 2: us elections are, and, and the rhetoric that accompanies them
Speaker 2: are primarily domestic. Um That's what the, the voters care about.
Speaker 2: Um So we really can just speculate on what either
Speaker 2: administration will do. Um
Speaker 2: So I, I think let's make the assumption that Washington's
Speaker 2: China Taiwan Asia policy is part of sort of an
Speaker 2: overarching approach uh to Asia. Um The relationship with treaty
Speaker 2: allies will take precedent.
Speaker 2: Um And, and strengthening partnerships is kind of an instinct
Speaker 2: or perpetual foreign policy goal for, for Washington, that's kind
Speaker 2: of left to its own devices the way Washington would go.
Speaker 2: So I think those are us constants and you can say, well,
Speaker 2: Trump is hard on allies or not Trump. Trump is
Speaker 2: very crude uh when he's talking about allies. But what if,
Speaker 2: if you're gonna be
Speaker 2: kind uh what he's essentially pushing for is, is reciprocity and,
Speaker 2: and what's sometimes referred to as burden sharing, basically trying
Speaker 2: to establish the, the value to the United States of
Speaker 2: a bilateral relationship in, in a security treaty. Um And
Speaker 2: I think that's, that's healthy. Uh I think the way
Speaker 2: Trump maybe approaches it isn't necessarily healthy but, but let's
Speaker 2: get back to the constant, you've got the alliances, you've
Speaker 2: got us interests in access, influence markets.
Speaker 2: Um The desire to strengthen partnerships. Um You've got the
Speaker 2: other major constant in Xi Jinping. Um he's going to
Speaker 2: affect either administration equally. So you have to take that
Speaker 2: into account. Um I think Xi Jinping's foreign policy and
Speaker 2: national security objectives are, are not always aligned with us interests.
Speaker 2: Um Xi Jinping can be very um
Speaker 2: uncompromising in his approaches. I mean, he set a goal for, for,
Speaker 2: for China, whether it's the China Dream or, or, or,
Speaker 2: or his economic policies that, that don't take into account
Speaker 2: us interests necessarily.
Speaker 2: So, so I don't think there's a lot of room for,
Speaker 2: for negotiation or somehow fundamentally changing the paradigm. The us
Speaker 2: isn't just going to surrender and neither is China. So,
Speaker 2: so I mentioned that Xi Jinping can also be unpredictable.
Speaker 2: So throw everything out that I say. Um and we,
Speaker 2: we don't have visibility into the policy making process, but
Speaker 2: I think it's a fairly low probability that he's going
Speaker 2: to
Speaker 2: wake up one morning and say, you know, I've misread
Speaker 2: the United States, they're not an ideological and security threat
Speaker 2: to us, you know, let's be friends. Um I, I
Speaker 2: don't think he's headed there. Um So, so I think
Speaker 2: competition is, is going to be a feature for the
Speaker 2: next administration, not only because of how Xi Jinping sees
Speaker 2: the relationship between the Communist Party and everything outside the party,
Speaker 2: including the West. Um
Speaker 2: Competition is also deeply ensconced in the US political agenda.
Speaker 2: It's a bipartisan issue and that's very evident in Congress.
Speaker 2: So I think either political candidate falls in on that
Speaker 2: scenario as president. Uh I mean,
Speaker 2: uh Vice President Harris doesn't have a lot of experience
Speaker 2: in foreign policy unlike President Biden who has very strong
Speaker 2: interests and preferences. Um So I think she doesn't to
Speaker 2: my knowledge yet have clearly designated foreign policy advisor with
Speaker 2: Deep Asia experience. Um certainly not on East Asia, China Taiwan. So,
Speaker 2: so it's questionable whether they would be in her inner
Speaker 2: circle once they are brought in. Um uh
Speaker 2: I, I would assume their outlook is going to likely
Speaker 2: conform to past democratic administrations, but that doesn't necessarily tell
Speaker 2: you anything if you compare, say President Biden to President Obama, right?
Speaker 2: And again, that may be as much about the changes
Speaker 2: in China as it is in Washington. So so Beijing
Speaker 2: thought that President Obi President Biden would, would return to
Speaker 2: a more accommodating policy like the Obama administration after four
Speaker 2: years of Trump and and all of his assertiveness and disruption.
Speaker 2: So, so I think Beijing was quite surprised and in
Speaker 2: some cases, very disappointed with Biden when he retained the
Speaker 2: tariffs that Trump initiated. Um he strengthened the alliance um
Speaker 2: network strength, strengthen the quad, he established Aus. Uh he
Speaker 2: restricted and expanded the restriction of high tech exports. Um
Speaker 2: And he's also actively encouraged reshoring French shoring to, to
Speaker 2: derisk and supply supply chains, the Chips Act, the Ira.
Speaker 2: So
Speaker 2: Harris may not recycle the Biden playbook, but she can
Speaker 2: build on that already. So it's probably unrealistic for Beijing
Speaker 2: to think that the Harris administration is somehow going to
Speaker 2: be a different path. Uh And we will suddenly start
Speaker 2: accommodating China, right? Saying, oh yeah, we should cooper and
Speaker 2: not worry about competition. I don't think that's going to happen. So,
Speaker 2: so I think Taiwan faces a slightly different risk. Um
Speaker 2: And that's the Harris administration is, is overly deliberative
Speaker 2: um uncertain about how China will respond um to, to
Speaker 2: actions that support Taiwan that basically the calculus for deterring
Speaker 2: China is different. Um And I think there's a risk
Speaker 2: that Washington self deters. Right. And that there, there's a
Speaker 2: fear that whatever they do to support
Speaker 2: Taiwan might elicit a response from Beijing. That's, that's, um, uh,
Speaker 2: particularly violent, uh, or impactful. And I, and I think
Speaker 2: that's a risk that, that Taipei is probably aware of,
Speaker 2: um, Trump. I mean, Trump is the essence of uncertainty. Um, he,
Speaker 2: he fosters that intentionally, he takes a lot of risks.
Speaker 2: He ignores a lot of conventions. Um, In some cases,
Speaker 2: I think that can be virtuous. I mean, Trump, Trump
Speaker 2: made an effort to normalize the relationship with North Korea.
Speaker 2: Um
Speaker 2: Yeah, and if you think about the Biden administration, you
Speaker 2: think about the Obama administration, neither one took a risk to, to,
Speaker 2: to address North Korea. Trump was all about risk. Um And,
Speaker 2: and I think it was a genuine approach to change
Speaker 2: the status quo and change the paradigm to offer him
Speaker 2: a very alternative future and it ultimately failed. Um But,
Speaker 2: but I think that that was indicative of what we
Speaker 2: might see. Um
Speaker 2: Now again, Kim was open to it, there was support
Speaker 2: from South Korea. Um I'm not sure you have the
Speaker 2: same factors at play with China. So I don't think
Speaker 2: uh you know Xi Jinping is able to cut some
Speaker 2: sort of grand bargain modus vivendi deal with, with Trump.
Speaker 2: I I don't think either one are prepared for it. So,
Speaker 2: so again, you've got the risk of uncertainty, the risk
Speaker 2: of how Trump communicates um you also have, of course,
Speaker 2: the risk of the, the, the,
Speaker 2: the conflation of his personal and, and national interests. Um
Speaker 2: um, but for Taiwan, you've got maybe a different calculation.
Speaker 2: Um One way to think of it is, you know, the, the,
Speaker 2: the fat tail concept, right, the curve that, that lengthens
Speaker 2: at the ends. And, uh, and, and I, I think
Speaker 2: the fat tail for Trump is really quite large at
Speaker 2: both of the ends. Um So
Speaker 2: there's huge risks with Trump, but there's also potentially very
Speaker 2: big rewards if you can get him on your side
Speaker 2: and give him what he wants. I mean, Trump is,
Speaker 2: I think almost undoubtedly going to be surrounded by advisers
Speaker 2: that are very positive towards Taiwan and quite negative towards China,
Speaker 2: quite skeptical of China and the Communist Party. Um I mean,
Speaker 2: we've seen
Speaker 2: several of Trump's former advisor, you know, call for, for
Speaker 2: recognizing Taiwan. I mean, that would be a huge coup for, for,
Speaker 2: for Taiwan. So, so that's the positive end of the
Speaker 2: fat tail. Of course, there is a big risk at
Speaker 2: the other side. Um I think there's a risk that
Speaker 2: there will be some in, in the conservative side of
Speaker 2: the political agenda who see value in
Speaker 2: supporting Taiwan because it's a good way to antagonize China
Speaker 2: and that's their ultimate goal. Um And I personally don't
Speaker 2: think that's a very good approach. It's not consistent with
Speaker 2: us national interests. Uh But there, there are possibly some
Speaker 2: who would. So it's, it's difficult to see how either
Speaker 2: administration will be good from Beijing's perspective, what they want.
Speaker 2: Um It's difficult to, to, to,
Speaker 2: to determine, you know, whether Trump is going to be
Speaker 2: truly disruptive or simply ineffective. Um From Tai Taiwan's perspective,
Speaker 2: I think Taipei is, is very experienced, dealing with transitions
Speaker 2: from one US administration to the next. They have a
Speaker 2: playbook for keeping those channels of communication open. Um And,
Speaker 2: and Taiwan's also particularly good at making its case for
Speaker 2: obtaining us support and they're also good at rolling, rolling
Speaker 2: with the punches, rolling with the brakes.
Speaker 2: So, so Taipei faces different risks from either administration um
Speaker 2: but they're accustomed to it and I think they are
Speaker 2: resilient um and they're resourceful. So I'm pretty confident Taiwan
Speaker 2: will make the best of whichever uh situation it encounters.
Speaker 1: Super, super interesting. OK. So drew the things that you
Speaker 1: just talked about are in the context of the near term,
Speaker 1: a year, two years out. Uh Would you sort of
Speaker 1: change your assessment or prediction if you will as much
Speaker 1: as you hate that word? Uh If I were to
Speaker 1: ask you to look into the region a decade from now,
Speaker 2: a decade from now? So where are we in 2034 35?
Speaker 2: Um So Xi Jinping will be Biden's age
Speaker 2: today. Um Is he still in power or not? I
Speaker 2: think that's an important question to ask. What does his
Speaker 2: successor look like and how did that succession take place?
Speaker 2: Um So I think that's an important trend to map if,
Speaker 2: if we see
Speaker 2: Taiwan, uh if we see China as, as inevitably consistently revenge,
Speaker 2: angry
Speaker 2: insecure, censoring all information within its borders, um
Speaker 2: unable to let go of century of humiliation and, and
Speaker 2: you know, Japanese history in World War Two, if, if,
Speaker 2: if all of its relationships are still antagonistic um which
Speaker 2: is part part Marxism, right? Marx was all about antagonism, right?
Speaker 2: Relationships between the superstructure of the base, you know,
Speaker 2: between you know, labor and capital, you know, I I
Speaker 2: think the Chinese see the world in very adversarial terms
Speaker 2: between the Communist Party and those outside of it. And
Speaker 2: I think if that continues, then what we see today
Speaker 2: continues and perhaps
Speaker 2: the risks increase, commensurate with China's economic success, its expansion
Speaker 2: of military power, um possibility that its soft power becomes
Speaker 2: more attractive though, I think that may be antithetical to,
Speaker 2: to increasing Marxism in, in Beijing.
Speaker 2: Um Taiwan
Speaker 2: demographics work against it. It needs to figure out you know,
Speaker 2: how is it going to
Speaker 2: protect itself, feed itself clothe itself
Speaker 2: if, if its population is shrinking at a at a
Speaker 2: steady rate, so either turn around your birth rates or
Speaker 2: figure out how do you assimilate some of these Southeast
Speaker 2: Asian migrants who are coming to, to, to live in Taiwan,
Speaker 2: a path to citizenship. And I think that's perhaps a
Speaker 2: little difficult for them to think about today, it's going
Speaker 2: to be increasingly necessary
Speaker 2: uh in 10 years. And of course, that puts it
Speaker 2: even farther at odds as, as Taiwan would effectively be
Speaker 2: moving closer to Southeast Asia than to, to mainland China. So,
Speaker 2: so 10 years from now, that could be uh part
Speaker 2: of the paradigm, uh an increasingly internationalized Southeast Asian Taiwan.
Speaker 2: Um So the US,
Speaker 2: the US just exists, right? I mean, it's, it's a
Speaker 2: country that thrives on chaos in many ways. Um It, it,
Speaker 2: you know, people who want small government, you see, you
Speaker 2: see cycles of, of, you know, strength and weakness. Um
Speaker 2: you know, you, you talk to folks older than me
Speaker 2: who have been around and they think, you know, the
Speaker 2: US is full of chaos, but it's nothing like the
Speaker 2: 19 sixties um the civil rights movement in Vietnam. So
Speaker 2: the US has a, has a way of rejuvenating itself,
Speaker 2: maybe, you know, two election cycles from now, we, we
Speaker 2: have two very capable candidates for president who can articulate
Speaker 2: a inspiring vision to the American people to pull together
Speaker 2: and continue to, you know, follow its values and, and,
Speaker 2: and lead the free world it could happen
Speaker 2: um or the cycles could deepen and strengthen. So I
Speaker 2: think I like to think of trends as being fairly consistent.
Speaker 2: Um It's just a question of their, their velocity
Speaker 1: fair enough, uh very good. Uh We'll come back in
Speaker 1: 2034 and look back at what you said. Uh Drew.
Speaker 1: Uh Thank you so much for your time and insight.
Speaker 1: Drew Thompson. Thanks for our listeners and viewers for their
Speaker 1: time as well. Kobe Time was produced by Ken Dub
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