From Gunboats to Nuts and Bolts

The age of major U.S. arms sales to Taiwan is probably over. But Washington can still play a key role as Taipei shifts to indigenous production
J. Michael Cole

Despite the recent optimism expressed by some of the participants at the 13th annual U.S.-Taiwan Defense Industry Conference held earlier this month in Williamsburg, Virginia, the days when the U.S. sold billion dollars of military platforms to Taiwan are probably over. It has been more than three years since the U.S. released a major arms package for the island, the longest period since the early 1990s. Barring a radical shift in Washington, we can expect that the U.S. government will maintain its current strategy of seeking to avoid angering Beijing with major sales of military equipment to Taiwan — and this despite a hardening stance in the U.S. vis-à-vis a China that, after years of cajoling, has become increasingly belligerent.

For those in Taiwan who contend that China remains a major military threat (the authoritarianism of President Xi Jinping should dispel any belief to the contrary), Washington’s reluctance to directly sell to Taiwan the defense articles that it needs — submarines, 4.5/5th-generation aircraft, modern surface combatants and so on — can be alarming, as major arms sales have historically carried the important symbolic value of political support. A decision by Washington to no longer sell major weapons systems to Taipei could therefore be interpreted as a sign that the U.S. is ready to “abandon” Taiwan.

But don’t throw in the towel just yet. An end to major arms sales — one of the lynchpins of U.S.-Taiwan relations since 1979 — doesn’t necessarily mean that Taipei has lost the support of its longstanding ally. Rather, this development reflects the current geopolitical situation, one in which China now ranks as the world’s second-largest economy in a global economic system where Beijing carries a lot more weight than it did just a decade ago. In that new context, the costs of angering Beijing are now substantially higher than they were in the 1990s, when Taiwan could open its checkbook and acquire the latest in U.S. defense technology.

Instead of abandonment, a new approach to defense cooperation between Taiwan and the U.S. — one that could better ensure that Taiwan has what it needs to defend itself against China — might be around the corner. But such a shift will not happen on its own; it must be handled properly, and decision makers in the White House and at the N.S.C. (arguably the weakest link in recent years) will have to be persuaded that continued military assistance to Taipei, even if it takes a new form, remains in the U.S.’ national interest.


Tech and blueprints

While the sale of major military platforms in future cannot be ruled out entirely, Taipei has read the tealeaves and rightly concluded a few years ago that the nature of U.S. assistance to the island was changing. Economic realities in Taiwan (insufficient defense spending), added to growing reluctance in the U.S. to sell Taiwan what it needs (for reasons that have everything to do with politics and concerns over Chinese espionage), have forced Taipei to rethink how to best prepare for future military challenges. It is not surprising, then, that even as President Ma Ying-jeou sought to improve ties with Beijing, under his watch the military nevertheless accelerated the process of developing, producing, and deploying a series of indigenous weapons systems, among them the Hsiung Feng III (HF-3) anti-ship cruise missile, the HF-2E land attack cruise missile (LACM), the “Wan Chien” air-to-ground missile, as well as various warships. Interestingly, what many of those systems have in common is their offensive nature, which seems to reflect an understanding that purely defensive articles are no longer sufficient (more on this later). And while the U.S. has always been highly reluctant to sell military equipment that could be used to attack targets in China, Washington has been surprisingly silent on Taiwan developing technology that can be used to accomplish just that (e.g., HF-2E, Wan Chien, and possibly longer-range cruise missiles).

This is undoubtedly the way ahead for Taiwan. And refreshingly, this is an issue that politicians and legislators on both sides of the political spectrum as well as within the military establishment seem to agree on. President Ma has already emphasized the need to focus on indigenous production, and to some extent his policies in recent years have reflected the rhetoric. For its part, opposition the Democratic Progressive Party (DPP) recently made the case in a defense blue paper for a major overhaul of Taiwan’s defense establishment with renewed focus on a domestic defense industry. (Tellingly, U.S. officials seemed much more receptive to the plan this year than in years past, when the DPP articulated a similar policy.)

President Xi’s recent comments on “one country, two systems” as forming the only basis for cross-strait relations, as well as his harder tone and seeming impatience on the unification issue — all of which have served to alienate people in Taiwan, regardless of their voting preference — should help focus minds and emphasize the need for a bipartisan approach to national defense, and thus facilitate cooperation between the KMT and DPP on the subject (e.g., passing budgets in the far-too-often zero-sum legislature).


Challenges and opportunities

However, good intentions and ideas alone will be insufficient to ensure a successful shift to an indigenous defense strategy. Taiwanese authorities will need to make the proper investments through financial assistance, education, research, and by expanding the number of defense firms (e.g., CSIST, AIDC, CSB) that have traditionally played a role in domestic development. Such efforts will be hugely costly and will occur as the Ministry of National Defense (MND) shifts from a conscript-based to an all-volunteer military system. Consequently, even if Taiwan saves money by no longer spending billions of dollars acquiring platforms produced abroad, the amounts of money that will be needed to ramp up the domestic defense industry will be very large, especially if Taiwan embarks on projects such as the development of submarines and fifth-generation aircraft. More than ever, Taiwan’s ability to properly invest in its national defense will be a determinant factor; meeting the stated baseline of 3% of GDP might not even be sufficient, at least not in the first few years following the initiation of such a strategy. Tough choices will have to be made, and politicians will have to explain the rationale for doing so to Taiwan’s voters.

Furthermore, Taiwan will need help from abroad. Though advanced, the island’s private defense industries and high-tech sectors have longstanding limitations, as efforts to build an indigenous submarine have made all too clear. As such, an indigenous defense strategy will require Taipei to recruit foreign engineers for development and systems integration. There are precedents for this, as with development of the AIDC F-CK-1 Indigenous Defense Fighter (IDF) and the F-16A/B upgrade program. Although major U.S. defense firms such as Lockheed, Boeing, Raytheon, and Northrop Grumman might no longer reap billions of dollars selling complete military systems to Taiwan, the opportunities for cooperation with Taiwan’s defense sector — through engineering assistance or the production of components (e.g., launchers, fire control systems, radar, et cetera) to be integrated in Taiwan — will multiply. What’s more, the U.S. government might be more amenable to this sort of behind-the-scenes cooperation than to the kind of high profile, multi-billion-dollar sale of finished equipment that will likely cause it problems with Beijing.

This is also true for non-U.S. defense firms whose governments have also been loath to anger Beijing by selling arms to Taiwan. In addition to European firms, a potential source of assistance for Taiwan’s defense industry would be Japan, which is in the process of revising its arms exports regulations. Growing hostilities between Beijing and Tokyo, added to the latter’s fears of seeing next-door Taiwan fall under Chinese control, could also serve as an incentive for closer defense cooperation between Japan, which already co-produces a number of systems alongside U.S. firms, and Taiwan. While Tokyo would not risk alienating Beijing by selling defense articles to Taiwan (and under the law is prevented from doing so anyway), Japanese firms could under certain circumstances “retire” and “loan” engineers to Taiwan to assist with its domestic programs. Although such cooperation would be likelier to occur under a DPP administration, it is believed that Japanese officials have been in unofficial contact with their counterparts in Taiwan’s MND.

Assuming that the assumptions above hold true, an additional benefit will be that Taiwan would now be in a position to shop around for defense assistance and thus lower costs by forcing competitors to place bids. This would be a major departure from Taiwan’s unhealthy overreliance on a handful of U.S. defense firms, which often has resulted in Taipei paying more than it should for acquisitions, maintenance, and upgrades while forcing it to procure platforms that may not be optimally suited for its defensive needs.

Lastly, an expanded defense sector could eventually finance itself through exports and thereby mitigate the drain on state coffers, though for this to happen a political decision would have to be made, given the controversial nature of the arms market (a DPP attempt to do this when it was in office with the creation of the state-owned “Taiwan Goal” quickly foundered after being attacked by the KMT).

As Taiwan’s domestic defense industry expands and, out of necessity, deepens its relationship with the private sector, greater attention will have to be paid to espionage by China, which would presumably increase its collection efforts to reflect Taiwan’s shift to an indigenous program. Consequently, to ensure success, Taipei will have to allocate more resources for counterintelligence, with the National Security Bureau (NSB) and Military Intelligence Bureau (MIB) taking the lead. Moreover, the security clearances necessary for one to be able to participate in such projects will have to be granted with much greater scrutiny.


Offensive defense more palatable

As discussed earlier, Washington has been less vocal in its opposition to an offensive defense strategy for Taiwan when the means to accomplish such a strategy have been systems that are not produced in the U.S. Taipei has gotten away with developing and deploying platforms that are both purely offensive and capable of hitting targets along China’s coastline, or even hundreds of kilometers inside its territory (as we were going to print, a news outlet in Taiwan reported that Taiwan may have cancelled a medium-range missile program due to U.S. pressure, though this has yet to be corroborated). Besides the fact that, with a few exceptions, the U.S. could not be accused of selling Taiwan that can be used to attack China (thus meeting a reading of TRA obligations to sell defensive technology only), Washington’s permissiveness also likely reflects a realization that Taiwan’s military strategy can no longer be solely defensive and must now have a counterforce component (i.e., the ability to strike targets inside China, such as Second Artillery Corps radar and launch sites, C4ISR architecture, air bases, air defense systems, and so on). The fact that the U.S. has “allowed” Taiwan to develop LACMs and the “Wan Chien” (a standoff missile filled with cluster bombs for use against naval and air bases, as well as radar sites) is an indication of that shift. Unconfirmed chatter about a possible sale of F-18 engines (presumably the General Electric F404 turbofan engine) to Taiwan to complete the IDF mid-life upgrade (MLU) program would, if true, also falls under that category, as the transfer would substantially improve the IDFs’ aerial combat capability, speed, and range. Whether this is true or not, transfers of this type are the kind of cooperation that could occur in future. (Editor’s note: An industry source in the U.S. denies that such a transfer has been discussed between Taiwan and GE.)

Taipei’s ability to secure the purchase of highly visible weapons systems from the U.S. is a thing of the past. Be that as it may, renewed focus on an indigenous defense industry can help revitalize Taiwan’s industrial sector while fostering quieter — and crucially, less controversial — cooperation with other countries to ensure that the island can meet its future security challenges. This new era may be less flashy and more politically uncertain, but as a means of maximizing the bang for its bucks, indigenous and counterforce are the perfectly sensible alternatives. In fact, shifting in that direction is imperative.


J. Michael Cole is editor in chief of Thinking Taiwan, a senior non-resident fellow at the China Policy Institute, University of Nottingham, and an Associate researcher at the French Center for Research on Contemporary China (CEFC) in Taipei.

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