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On June 13, Panama severed ties with longstanding ally Taiwan and announced its intention to switch allegiance to China. In their joint statement, Panama, “recognizes that there is only one China” and Taiwan “is an inalienable part of the Chinese territory.”

Not surprisingly, Taiwan did not take the diplomatic move well. It in turn terminated ties with Panama over what it claims is to preserve the “nation’s sovereignty and dignity.” At a press conference, Foreign Minister David Lee declared that Taiwan expresses “anger and regret” over Panama’s “unfriendly” and deceptive decision.

The withdrawal of Panama leaves Taiwan with merely 20 diplomatic allies, including the Holy See, who recognize its statehood. Most of these allies are developing countries.

Following the Xinhai Revolution, Panama and Taiwan established an alliance in 1922. Over the course of the next few decades, Panama and Taiwan remained amicable allies and established trading contracts such as the 2004 Free Trade Agreement. This in effect helped Panama extend its market into Asia and influenced its Latin American counterparts to sign FTAs with Taiwan such as Guatemala, Nicaragua, El Salvador, and Honduras. Among Taiwan’s allies, Panama had the third-largest economy and gave the island an edge in Central America.

While Panama ending its relationship with Taiwan seems sudden, events leading up to the announcement make this less so. Since 2009, Panama has expressed interest in establishing a relationship with Beijing. More recently, in January, Taiwan’s President visited some of its allies in Latin America but did not stop in Panama. Additionally, in April, Panama failed to announce its successor for the vacant Taiwan ambassador position. These and other similar factors alluded to the impending end to the alliance.

With China’s growing economic footprint in Latin America, it looks to compete with the United States for dominance in Latin America. To do so, it has increased its developments and presence in Panama and also backs a project that aims to build a waterway in Nicaragua that would rival the Panama Canal, the highly used channel that provides easier access to Asia and the Americas. The United States and China are its two top users.

Taiwan’s alliances are expected to only decrease with China’s continued global expansion. It is predicted that Nicaragua, Paraguay, and St. Lucia are next on the list. As Taiwan becomes more isolated from the world, it will be difficult for it to maintain its pro-independence state.

The hostility between Taiwan and China stems from their diverging viewpoints on Taiwan’s statehood: China sees Taiwan as part of its territory while Taiwan regards itself as a sovereign nation. The Asian superpower is determined to take back Taiwan and currently has ballistic missiles pointed at the island.

There is an extensive and contemptuous history between China and Taiwan. When the Chinese Civil War ended in 1949, the victorious Communist Party of China established the People’s Republic of China (PRC). The rival Nationalist Party, or Kuomintang (KMT), and its leader, Chiang Kai-shek, fled to Taiwan, also known as the Republic of China (ROC). Many nations continued to recognize the ROC as China’s legitimate government. However, in 1971 the United Nations switched diplomatic recognition to the PRC and most nations followed. The United States maintains unofficial relations with the island.

China and Taiwan’s present relationship has been particularly strained with the 2016 election of President Tsai Ing-wen. Tsai is part of the pro-independence Democratic Progressive Party. Unlike her predecessor, Ma Ying-jeou, Tsai has not officially endorsed the 1992 “One China” policy which concedes that there is only one Chinese government. Under Ma, China eased off poaching Taiwan allies but as Panama illustrates, the regime has returned to the status quo.

Though Taiwan is reputable for its generous treatment of its allies, there are many advantages to an alliance with China. Most obviously, China is a global superpower that offers many economic and political benefits. Economically, China is the second largest economy in the world, following the United States. Politically, allying with China means diplomatically appeasing powerful foreign nations and avoiding the dangers of being considered an outlier in international affairs.

With Tsai’s pro-independence diplomacy and waning relations with China, China has felt the need to raise pressure and further isolate the island. By establishing ties with Panama, China not only severs Taiwan’s ties to a powerful alliance, but also gains economic benefits from the union.

Sarah Froehlke
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