Elections in Taiwan: What’s at Stake for the European Union?

On 13 January 2024, the Taiwanese Democratic Progressive Party (DPP) secured the island’s presidency with 40% of the vote, simultaneously losing its majority in the concurrent elections for the Legislative Yuan, its parliament. The historic election, coming at the end point of a bitterly contested 3-way race between the DPP, its historical rival Kuomintang (KMT), and the novel Taiwan People’s Party (TPP), was marked by political polarisation, the proliferation of fake news, and Chinese attempts to influence the election towards the relatively China-friendly KMT. While the world worries about escalation in the Taiwan strait, a crucial gateway for commerce for both China and the European Union (EU), the reactions to the DPP’s win suggest that the next 4 years of DPP governance may herald few seismic changes in Taiwan’s relationship with China, the United States, and the EU.

While the DPP has managed to secure another presidential term, the election has resulted in a hung parliament with the party losing its Legislative Yuan majority and thus its ability to pass legislation smoothly. The DPP ultimately obtained 51 seats, losing 10 compared to the 2020 election. The KMT, on the other hand, won 14 seats, securing a total of 52 seats in the Legislative Yuan. The TPP won an extra 3 seats to reach a total of 8. The DPP’s loss points to deep discontent within Taiwan with the DPP’s handling of the economy and domestic political issues, like the rising cost of housing, lack of wage growth, and increasing social and economic inequality. While the KMT is unlikely to cooperate with the DPP in the legislature, the election has made the TPP kingmaker. They may decide to form a coalition with the DPP in exchange for the implementation of part of their political program in domestic and foreign policy. The opposite scenario is also possible, where the TPP forms a coalition with the KMT, blocking the DPP’s policies in the hope of electoral gains in the next election by attracting disillusioned DPP voters.

Image source: Focus Taiwan through the Central Election Commission Image source: Focus Taiwan through the Central Election Commission

Notwithstanding the DPP’s loss of the legislature, EU policies towards Taiwan are expected to broadly continue with its pre-elections stance, especially regarding the EU’s One China Policy. Taiwan’s status as a microchip hub, shared democratic values, and its strategic position at the nexus of global trade means EU interest on Taiwan has been increasing, both from the EU institutions’ side and the Member States. This means a continuation of unofficial diplomatic relations with Taiwan without official recognition, aimed at furthering the EU’s trade, investments and interests in Taiwan where many European companies operate, without angering the PRC.

EU Taiwan Policy: Developments and Roadblocks

The main obstacle within the EU to further developments in its policy towards Taiwan is twofold. First, the EU institutions are divided between Parliament, the most pro-Taiwan EU organ, and the Commission and Council, who present a far more cautious stance, mainly influenced by Member States and business groups that are afraid of losing business in mainland China.

In the past 4 years, however, thanks to persistent Taiwanese diplomacy, shared democratic values, and a growing trust deficit towards the PRC, both the EU as a whole and the Member States have been growing closer to Taiwan. For example, Lithuania recently allowed Taiwan to open a representative office in Vilnius with the name ‘Taiwan’ instead of Taipei, which caused economic retaliation from the PRC. In support of Vilnius, EU High Representative for Foreign Affairs and Security Borrel stated there was ‘clear solidarity’ with Lithuania, while Member States like France expressed worry at China’s conduct in the situation.

The second and far thornier obstacle comes from Hungary and Cyprus, who oppose discussion on Taiwan within the EU’s foreign policy. Although differing in their motivation, since EU foreign policy decisions require unanimity, any substantial progress is not expected as long as these two countries do not shift their stance. Hungary, headed by Prime Minister Viktor Orban, has cultivated strong ties with the PRC and thus takes a more pro-China stance on Taiwan than any other Member State. Orban, however, is a political opportunist and has proved to be willing to negotiate his stance in exchange for EU funds and other trade-offs. 

Cyprus, on the other hand, regards Taiwan as an existential issue due to concerns regarding its own legally nebulous region of Northern Cyprus. Thus, to the Cypriot government, any discussion on Taiwan has the potential to set an international precedent that Northern Cyprus may use to further their recognition, which is unacceptable to Cyprus. This issue is so crucial to Cyprus that, even when offered to leave the room during foreign policy discussions on Taiwan, Cypriot delegates have refused any attempt at compromise. Any future evolution of the EU’s Taiwan policy will therefore need to be acceptable to Cyprus.

Effect of the 2024 EU Parliamentary elections

While EU policy towards China is not expected to shift significantly until the June 2024 EU Parliamentary elections, the result of these elections has the potential to significantly shift EU policy based on the winning coalition, which will determine the makeup of both the European Parliament and Commission. The current Von der Leyen Commission has introduced the de-risking strategy after supply chain concerns emerged during the Covid-19 pandemic, which was part of a general rebalancing and diversification away from China.

Although right-wing parties are expected to gain ground, known for being traditionally more aligned with China, the past few years have seen a gradual deterioration of the EU’s economic and diplomatic relationship with the PRC combined with a gradual but understated growing economic and strategic interest towards Taiwan. The expected result is that, even with a centre-right to right-wing winning coalition in the 2024 elections, the EU’s China policy is unlikely to return to its pre-Covid ‘golden days’, continuing the trend of a managed de-risking in strategic sectors while cordially maintaining China’s importance as a globally important market, producer, and influential member of the international community.

Why is Taiwan important for the EU?

Although the EU is the largest foreign investor in Taiwan, unlike the US it focuses mainly on economic and cultural cooperation, with very limited defence-adjacent sales, such as the French sale of a missile scrambling system in 2020. Even though a staggering amount of EU trade passes through the Taiwan strait, the EU is extremely unlikely to begin mass supplying weapons to Taiwan, unlike the US. This is mainly due to the small size of the EU’s defence industry, its economy being more intertwined with China compared to the US, China-friendly member states Hungary and Greece, and a relatively more China-friendly stance from the EU institutions compared to the US. Unlike the US, the EU is also unlikely to support Taiwan militarily in the unlikely case of an invasion for the above reasons, including the fact that to this day there exists no EU-wide common army or defence force.

One area that policymakers are increasingly worried about, however, is Chinese retaliation on Taiwan, given both the election results and the PRC’s statements and action in the run-up to the recent election. Around 40% of the EU’s trade passes by the Taiwan strait daily, and instability in the area has the potential to heavily damage EU industry. It is thus of core interest to the EU to avoid any escalation and maintain freedom of navigation and stability in the region.   

While the US’s policy towards China and Taiwan aims at disconnecting as many trade links as possible, for example by bringing advanced microchip manufacturing into US territory with generous incentives in order to secure its supply, the EU has been growing its economic stake in Taiwan with heavy investment, having become the largest source of FDI in the island. The US policy on Taiwan also hinges on the result of the approaching 2024 US presidential elections, where a victory for Donald Trump would likely herald a significant shift in US commitments over Taiwan, leaving China with more room to manoeuvre and with the risk of increasing tensions.

Despite the friendly relations between Taiwan and the US, Taiwan and the EU’s policies on China have much more in common compared to that of the US. Both Taiwan and the EU continue to have large investments in mainland China spearheaded by their companies and multinationals, both rely on Chinese trade to supply their markets, and thus must keep dialogue with China open in order to avoid an economic backlash. Although both plan to somewhat reduce or de-risk their investment in China, this is a long-term endeavour with an end result that is still far more interlinked than the US’ current China policy. The EU and Taiwan still have several areas where cooperation can be furthered, most importantly technology and semiconductors, energy and climate transition and trade links. This ensures that regardless of the composition of the Legislative Yuan and political considerations, the next 4 years promise a further enhancement of economic cooperation.

Author: Giacomo Ferri, EIAS Junior Researcher

Photo Credits: Unsplash