Taiwan Hopes to Translate Wealth Into World Clout

Money does talk. Or so Taiwan hopes.

Like a rich kid new in school, Taiwan is using its new-found wealth to win friends--and widen an international role that was sharply curbed after the world moved to recognize the mainland Communists as China’s legitimate government instead.

The little island has amassed a big bank account--$73 billion in foreign reserves--mainly from a spectacular export performance that has boosted it to the world’s 13th-largest trading nation. So now it is trying to rejoin the world’s premier trade organization, the General Agreement on Tariffs and Trade. It has opened a $1.2-billion economic development fund for “friendly nations.”

The Central Bank has stashed $4 billion into a new loan market for banks, hoping to position Taipei as Asia’s premier financial center next to Japan.

And officials from the Republic of China on Taiwan have dropped broad hints that it would be willing to help lift the crushing Third World debt burden if they could get more than a pat on the head for their efforts.

“Because of our economic power, our trading power and our financial power, the ROC is justified and entitled to be involved in international economic organizations and international affairs,” said Samuel Shieh, governor of the Central Bank of China.

Chinese officials deride Taiwan’s strategy as “dollar diplomacy” and have strenuously protested its use. But the small developing countries that have restored relations with Taiwan have nothing against money. They want it. Taiwan has it. China doesn’t.

“Taiwan’s generous aid at an appropriate moment goes far beyond our economic ties with Beijing,” a Taiwan newspaper quoted an official from Belize as saying. The Caribbean nation was one of four--the Bahamas, Liberia and Grenada were the others--that restored diplomatic ties with Taiwan this year.

Many U.S. officials, in Congress and the Administration, are also sympathetic to Taiwan.

“Clearly, their economic power is increasing their standing in the world,” said one U.S. official, who asked for anonymity. “They have earned respect. I think international organizations are looking for ways to have Taiwan participate without antagonizing China.”

But China is antagonized. The country opposes Taiwan’s entry into GATT and quickly suspended relations with Liberia, Grenada and Belize after they recognized Taiwan.

“Taiwan has used its dollar policy to lure some countries into establishing diplomatic relations in an attempt to bring about dual recognition, to create two Chinas,” said Ye Dabo, press officer with the Chinese consulate in Los Angeles. “This is not in the interests of people on both sides of the Taiwan Straits, because people on both sides want to have reunification of their country. China can only express great regret.”

Some American scholars are also concerned about the impact of Taiwan’s new aggressiveness on U.S. business interests.

“The more aggressive Taiwan gets, the more aggressive Beijing gets, the more Taiwan’s economic partners will be put into that trap . . . (of) choosing between the PRC and Taiwan,” said Anthony J. Kane, director of the Asia Society’s China Council. “Businessmen don’t like to have to worry about these issues.”

In the past decade, they haven’t had to. In 1979, the United States switched recognition to mainland China, following a global trend that began when the United Nations recognized the mainland with a seat in 1971. Taiwan lost its GATT seat and membership in other international bodies and focused instead on building non-official trade ties.

But two things have changed to help turn the tide.

First, Taiwan’s riches have given it new bargaining leverage. During the past 40 years, Taiwan has transformed itself from an agrarian society to a manufacturing giant whose people’s average individual income has grown to $7,500 from $300 in 1950. Thanks to its export success, it has amassed foreign reserves second only to Japan at $73 billion.

Since Taiwan’s own reserve needs amount to only $20 billion, Shieh said, the remaining billions amount to a lot of money for a lot of projects that could win a lot of friends.

Second, Taiwan’s president, Lee Teng-hui, has adopted a new flexibility that makes closer ties with more countries easier. In the past, Taiwan’s ruling Kuomintang party had insisted that it would not deal with any country that recognized the mainland regime instead of the Nationalists on Taiwan as China’s legal government.

But last year, Lee signaled a change when he agreed to visit Singapore, a country with which it has no diplomatic relations, and stomached being called the “president of Taiwan” in the newspapers. Since then, Taiwan has been more willing to participate in international affairs under different names--it used “Chinese-Taipei” in the 1988 Olympics--and to deal with countries regardless of their relationship with China, said Bertrand Tsai, who heads National Taiwan University’s political-science department.

“In order to win more friends in the world, we had to take a more pragmatic diplomatic position,” said Y. C. Chen of the Ministry of Foreign Affairs.

For its part, Taiwan has handed out millions of dollars in low- or no-interest loans, as well as pledges of technical assistance. For Grenada, $10 million. For Liberia, $200 million over several years. For Costa Rica and Panama, about $9 million apiece to help them set up export-processing zones.

As of November, 22 countries had applied for loans from Taiwan’s new $1.2-billion fund, called the Overseas Economic Cooperation and Development Fund. Five had been accepted, and 14 rejected on the grounds that no diplomatic ties existed or because the applications were incomplete.

Officials object to Beijing’s blast that they are “buying” friends. “This kind of relationship is based on mutual benefit,” Chen said. “It’s very common in the world. The U.S., Japan, always grant assistance to friendly countries.”

But promoting relations with tiny countries is hardly Taiwan’s ultimate goal. While the diplomatic breakthroughs with the four nations this year provided a morale boost, their populations combined are smaller than that of Los Angeles. A far juicier prize, in Taiwan’s view, is membership in the world’s premier economic organizations.

In particular, Taiwan is setting its sights on GATT. As a major trading nation, Taiwan officials said, it is only fair that they sit at the table where rules governing 80% of world trade are made. Commercial disputes are also mediated through GATT, which Taiwan would prefer to the bilateral process it now must follow. And Taiwan would like to take advantage of GATT members’ lower tariffs, not to mention the official status as a world player that GATT membership would confer on it.

To placate the mainland, U.S. officials suggest Taiwan could join as a “customs territory.” Other sticky points are what to call Taiwan and whether to accept it before mainland China, whose GATT application is pending.

Ever the world traders, officials say that support of Taiwan’s GATT application could persuade the republic to help out on Third World debt problems. With such incentives, Taiwan would consider setting up a special lending window through the International Monetary Fund or World Bank for debt relief or economic recovery programs, Shieh said.

“Honestly speaking, we have to consider to some extent the political and economic gain for our participation,” Shieh said.

Tsai added: “People want to use the resources to improve the environment, transportation problems, improve social welfare. We cannot use the money for nothing.”