China and Panama Establish Formal Ties: Are Cross-Strait Relations Further Deteriorating?
Photo Credit: AP
By John F. Copper

China and Panama Establish Formal Ties: Are Cross-Strait Relations Further Deteriorating?

Jun. 20, 2017  |     |  0 comments

On June 13, 2017, the People’s Republic of China and the Republic of Panama jointly announced they had established formal diplomatic relations, and Panama declared it was breaking ties with Taiwan. The reaction in Taiwan was immediate; it also reflected more hurt and anger than usual over the exit of a friend and “ally.”

The reasons for the decisions made by the two countries and Taiwan’s strong response are revealing.

First, Taiwan’s reaction. This was the third loss of a diplomatic partner since President Tsai Ing-wen and the Democratic Progressive Party (DPP) won a seminal election in early 2016 and assumed governing thereafter. Gambia and Sao Tome and Principe were the other two. Tsai’s predecessor, the Nationalist Party or Kuomintang (KMT)’s Ma Ying-jeou, had lost none except for Gambia, which had made the move subsequent to Tsai’s election victory.

Losing Panama was more agonizing than the other two. Taiwan has had friendly relations with Panama for 107 years. Panama was geopolitically important. Its decision was ominous because other countries in the region might follow suit. Furthermore, a state visit to Panama was the highlight of Tsai Ing-wen’s first foreign trip as president last year.

Also, Panama gave Taipei no warning. Even more critical, it accepted the one-China principle that includes a statement that Taiwan is territory belonging to China. Many other countries when establishing diplomatic ties with Beijing only accept the one-China policy, which is that Beijing is the legal government of China.

President Tsai immediately called a press conference and asserted angrily that Beijing had “suppressed” Taiwan on the international stage, and reasserted the position that her “country” has sovereignty. Presidential Office Secretary-General Joseph Wu condemned the move in harsh language, blaming Beijing for what happened. Foreign Minister David Lee expressed Taiwan’s “deep anger and regret.” Some observers predicted a long cross-Strait “war of attrition.”

The timing of both China’s action and Taiwan’s acerbic rejoinders hint of several broader explanations.

Leading up to establishing relations with Panama, Beijing had engaged in a relaxation of tensions with Taiwan, or at least there was a lull in the pressure it exerted to signal President Tsai that she had to accept the 1992 Consensus (an agreement whereby China and Taiwan agreed they were both part of China but could disagree on the definition of “China”). Cross-Strait trade had increased in the wake of China cutting tourists going to Taiwan and other means to damage Taiwan’s economy after the election.

Also, China had pulled its punches in engaging in punitive actions against Taiwan. Last year, President Tsai made a foreign trip that included a major stop in Panama where she met with Panama’s president and other officials, and won accolades there and at home for her diplomatic skills. China did not interfere with the visit, which some said happened at Beijing’s pleasure.

In the eyes of Chinese leaders, Tsai did not show her gratitude or reciprocate. Instead she energetically promoted Taiwan’s democracy while noting that China is not a democracy. She boasted of Taiwan’s human rights record and advanced Taiwan’s progressive social agenda including its upgrading the status of LGBTs, again citing China’s poor record in these areas.

The immediate backdrop to China deciding to establish ambassadorial relations with Panama was the Belt and Road Forum, attended by 110 nations and international organizations.

It was also reported in newspapers in Hong Kong that DPP operatives have been aiding anti-Beijing and separatist forces there. It was even heard that a fugitive from Hong Kong had fled to Taiwan and vanished, supposedly abetted by the New Power Party, a DPP ally.

Chinese leaders arguably felt betrayed by Tsai. They were angry. They sought to take revenge.

And it was an opportune time. President Tsai’s popularity as reflected in numerous opinion polls had fallen precipitously. According to several surveys, more people opposed her policies, and her, than supported either. Meanwhile some members of her party accepted the 1992 Consensus while others suggested the party drop the independence clauses in their party documents.

There was even talk that Tsai might face a leadership challenge from within her party. Meanwhile the KMT elected a new chairman, Wu Den-yih, who appeared to have the ability to unite the party and solve problems relating to China that Tsai could not.

The background noise is also telling: China’s economy was growing at over 6 percent while Taiwan’s was expanding at just 2 percent. Moreover, it appears unlikely China’s triple the rate of Taiwan’s growth situation will change anytime soon. Add to that the reality that 40 percent of Taiwan’s exports go to China, and Taiwan is becoming more dependent on production chains that pass through China. Also, China is fast building and/or quickly improving its cutting-edge companies that compete with Taiwan’s best. Taiwan has no real choice but to maintain economic ties with China.

Another part of the milieu of China’s diplomatic initiative is the fact that Sino-US relations are much improved and are, in fact, quite cordial. President Trump and President Xi had become friends at their meeting in Mar-A-Lago, Florida. The Trump administration subsequently placed considerable confidence in Beijing helping the US deal with the North Korea threat and in resolving their trade imbalance.

China’s leaders felt they could count on President Trump to maintain close ties with China and not tilt towards Taiwan.

The immediate backdrop to China deciding to establish ambassadorial relations with Panama was the Belt and Road Forum held just weeks earlier and attended by 110 nations and international organizations. Most wanted to be participants. Observers hailed the project as a game changer in terms of the global economy and more. This greatly enhanced China’s global image and its influence abroad.

Finally, the relationship between China and Panama had become an increasingly important one for both. In May last year China’s Landbridge Group purchased Margarita Island Port for USD 900 million. China is contemplating further investments in Panama including a deepwater port capable of docking large ships. COSCO Shipping Corp in China is looking at investing in land around the Panama Canal. It was natural for the two countries to establish formal diplomatic relations.

Whether one should look forward to a more serious and lasting escalation of cross-Strait acrimony is difficult to say. Right now, it looks like it.

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