September 16, 2002

September 16, 2002 | Commentary on Asia

United Front on Taiwan: Concerted Western Action Could Supply Subs

Because Taiwan is a democracy, one might think that democratic Europeans would share Washington's determination to deter Beijing from inflicting its will on Taiwan by force. Instead, Sinophobia continues to handicap the sale of advanced submarines to Taiwan.

Europe is China's second largest export market (the United States is first), and China now is a member of the World Trade Organization (WTO), so the trade leverage is not necessarily in Beijing's hands. But by ruling themselves out of Taiwan's multibillion-dollar arms market, European politicians stunt their own industries.

With the collapse of German engineering giant Babcock Borsig and another 700 shipyard workers out of jobs, Chancellor Gerhard Schröder might rethink Germany's ban on exporting self-defense items to Taiwan before the Sept. 22 elections, though no one would bet any money on it.

For the past 20 years, Taiwan has been in the market for a dozen advanced submarines to defend itself against the ever-modernizing Chinese submarine fleet. The Dutch submarine yard RDM sold two subs to Taiwan in 1980, and for that $1.1 billion sale, the Dutch government paid a modest price; the Chinese forced the Dutch Embassy to go four years without an ambassador.

Last year, President George W. Bush committed the United States to providing Taiwan with these submarines - even though the United States makes no non-nuclear subs. The Bush administration therefore must get Taiwan's subs from Europe, but such a deal will be shrouded in complex business mergers.

The resulting submarine project could include a hull from the Netherlands, a power plant from Germany, U.S. electronics, and assembly by European engineers in American shipyards.

European shipyards, defense firms and their workers would benefit vastly more by simply selling the subs directly to Taiwan, but because the Americans are the only ones willing to ignore Chinese threats, the Americans will get at least half of the deal. Washington ignores China's threats because the United States has an annual trade deficit with China of $98 billion to $100 billion, and America (next to Taiwan) is China's biggest source of direct foreign investment.

Europe, ironically, enjoys much the same immunity, if only it would use it. While China imports $23 billion to $29 billion worth of European goods a year, Taiwan imports about $15 billion to $16 billion. Europe clearly has more trade leverage against China.

What's more, the European Union imported $66 billion from China in 2000 and $74 billion in 2001. A final comfort to Europe is that China, now in the WTO, has less standing to make trade-related threats. So, where's Beijing's trade leverage against the European Union? There is none.

For at least five years, the Pentagon has been fretting about the growing Chinese submarine threat to Taiwan and to Western Pacific sea lanes in general. The appearance in the Chinese fleet of super-quiet Russian-built Kilo 636 subs compounds the issue. Providing Taiwan with advanced subs is the ideal strategic offset.

If German Dolphin subs are sold to Taiwan, Israel also has an opportunity to benefit. Israel likely would piggyback onto the deal and purchase three vessels, doubling its submarine fleet.

These subs would be built by the German shipyard HDW (the world's biggest non-nuclear shipyard, 75 percent of which was purchased last year by American investors) and considered among the most advanced in the world.

However, there are impediments. First, Israel will have to turn its German blueprints over to the United States and remove itself from direct involvement in the Taiwan transaction. The Germans, it seems, have signed over all intellectual property related to the designs to

Israel. The German Dolphin design also directly competes with a Dutch Moray design. Since the Dutch government claims no legal authority over RDM's 1980 sale of two submarines to Taiwan, it has deniability. If Taiwan used the RDM design, RDM engineers and craftsmen would stand to profit.

But RDM's prospects are dimming. Northrop Grumman, powered by the Israeli factor, has reportedly signed a deal with HDW to build and market the world's most advanced non-nuclear subs.

The Germans have kept their promise and never sold arms to Taiwan, but the Dutch, French and U.S. governments have. China cannot punish everyone for arms sales to Taiwan.

China's dilemma was highlighted by the 1992 fighter jet sales to Taiwan by both France and the United States. In several big-ticket purchases, France and the United States were competitors; to sanction one meant China had to buy from the other. With this in mind, European bureaucrats have concluded they can still win part of the Taiwan submarine contract without antagonizing the Chinese, provided it is laundered through the Americans.

Although the German government still professes to oppose the sale of submarines to Taiwan, a Taiwan newspaper, Liberty Times, quoted an HDW spokesman June 6 as saying, "propulsion plants [needed to build the 'no noise, no exhaust' German motors] aren't covered in the German arms export laws," and expressed "unusual optimism" about the Taiwan deal.

It appears that Berlin now hopes to cushion the blow to Beijing by telling the Chinese that sub sales are inevitable.

Europe is starting to see that a U.S.-European Union united front on arms sales to Taiwan may be the best guarantee of stability in the Taiwan Strait. China is in no position to punish the entire world for accepting Taiwan's right to exist, and cannot sanction its biggest trading partners.

If convinced the international community will oppose a military option, Beijing will be obliged to abandon threats of force against the island, and instead offer significant economic, and political, incentives to join "one China."

This, not an arms embargo against Taiwan, will enhance peace in the region. And thus, European defense firms can join their American colleagues in doing well by doing good.

About the Author

John J. Tkacik, Jr. Senior Research Fellow
Asian Studies Center

Related Issues: Asia

Originally appeared in Defense News Weekly