Next Step : Taiwan to U.S.--We’re Back! : Taipei’s wealth is forcing the White House to re-evaluate its once-shunned ally. The carrot: a $300-billion public works program.

Last January, James Soong, the secretary general of Taiwan’s ruling Kuomintang (Nationalist Party), flew into Washington for a private breakfast chat at the home of Vice President Dan Quayle in a session that barely skirted the 13-year ban on official U.S. contacts with Taiwan.

“I think they talked about golf,” says Kuomintang spokesman Johnny Sand, who accompanied Soong to Washington. While Bush Administration officials point out that Soong is a party leader, not a government official, Kuomintang officials crow that it was the highest-level contact between Taipei and the United States since 1979, when the United States broke off diplomatic relations with Taiwan.

Party officials say Soong will attend the Republican National Convention in Houston next month, and his deputy, a former Taiwan finance minister, was at the Democratic Convention in New York two weeks ago--marking in each case the first time in more than a decade for such appearances, Kuomintang officials say.

Their presence is more than symbolic. After a decade on the sidelines, long-shunned but ever-richer Taiwan is once again moving toward center stage as a major problem for U.S. foreign policy.

The next occupant of the White House, whether George Bush or Bill Clinton, will have to make some important decisions about future U.S. ties with Taiwan.

Washington, Beijing and Taipei all quietly put off resolving the problem of Taiwan’s ambiguous status throughout the 1980s, a decade of tranquil prosperity and increasing democratization on the island. But a series of new developments--political, economic and military--suggest that some decisions cannot be delayed much longer. The status quo may not hold.

Whatever the next American president does concerning Taiwan could provoke a new crisis in relations with China, and it could have profound implications for the future of Asia.

“We’ve got to do some hard thinking about Taiwan,” says one Bush Administration official. “The situation has changed, and we’ve got to look out for our interests. . . . The downside to it is the question of whether, if the United States changes its policy, Beijing will downgrade the relationship (with the United States).”

One of the big decisions confronting the United States is whether to change current policy by stepping up arms sales to Taiwan.

Pointing to an increasing threat from China, Taiwan is making a concerted push to get advanced new U.S. military equipment, especially the F-16 fighter planes that the United States has been refusing to sell it for more than a decade. China already has acquired Russian Sukhoi 27 fighter planes and is engaged in an extensive campaign to buy other hardware and technology from Russia.

“The Chinese People’s Liberation Army is modernizing their military forces,” says Andrew N.D. Yang of Taiwan’s Chinese Council of Advanced Policy Studies. “ . . . China is acquiring modern planes, tanks and even maybe an aircraft carrier. It arouses a lot of anxieties in this country.”

The second major question is whether the United States should give a degree of official recognition to Taiwan, which now leads the world with $80 billion in foreign exchange reserves and is in the early stages of a six-year, $300-billion public works program.

Arguing that Taiwan’s spending plans could mean big contracts for American companies, some U.S. officials, especially in the Commerce Department, are urging the Administration to send a Cabinet-rank official to Taiwan. No American official at that level has visited the island since 1979.

“We are the 13th-largest trading nation in the world. The world can’t ignore this simple fact,” Taiwan Vice Foreign Minister C.J. Chen said in a recent interview.

Over the past decade, U.S. policy toward Taiwan has been fixed by the three official communiques that were worked out between Washington and Beijing as part of the process of U.S. recognition of China.

Under these, the United States has agreed not to give official recognition to Taiwan as an independent nation. It also vaguely promised, in a 1982 agreement negotiated by the Ronald Reagan Administration, to limit and eventually to phase out U.S. arms sales to Taiwan.

But many factors have changed since the last of these three communiques was signed 10 years ago:

* In 1982, Taiwan was diplomatically isolated, and the United States was virtually the only major power willing to deal with it. Now, French, German and other European government leaders--some of them of Cabinet rank--have been flocking to Taipei, looking for commercial contracts and even offering to sell planes and other weapons.

* Ten years ago, China was, in effect, the United States’ partner in strategic cooperation against the Soviet Union, and the United States was just beginning to sell military equipment to Beijing. Now, the Soviet Union has collapsed, U.S.-Chinese cooperation has been frozen and American officials are beginning to eye China itself warily as a possible future threat.

* In 1982, Taiwan was still an extremely authoritarian state. In political terms, China seemed back then to be different more in degree than in kind. Since then, Taiwan has moved quickly toward a functioning democracy, while the Chinese regime maintains a severe political repression.

Now, pointing to Taiwan’s increasing wealth, the end of the Cold War and China’s Tian An Men upheavals of 1989, some critics are arguing that the basic American policies toward Taiwan should be changed.

Former U.S. Ambassador to China James R. Lilley said last year that the United States has been “locked for too long into the three communiques” and that China’s claims to sovereignty over Taiwan are “anachronistic.”

“You can’t just stand still. You’ve got to move forward,” said Lilley, who was a private citizen at the time but has since rejoined the Bush Administration as an assistant secretary of defense.

Many in the U.S. business community here agree. American exports to Taiwan last year were $13.2 billion, $2.1 billion more than exports to China--even though China has more than 50 times as many people.

“Times have changed, and the world has changed. . . . There aren’t many countries in the world with plans to spend $300 billion,” says James O’Hearn, president of the American Chamber of Commerce in Taiwan.

Some experts say Taiwan’s $300-billion public works program is little more than a public relations gimmick, a clever repackaging for overseas consumption of a number of existing plans. But it still adds up to a lot of public spending. Experts estimate that about $50 billion to $60 billion of the $300 billion will go to foreign companies.

What is emerging is a rush by foreign companies and governments to help Taiwan spend its money. And the foreign competition extends not only to commercial contracts, but to military sales.

France has led the way. This year, French officials and executives have been trying to arrange a groundbreaking deal to sell Mirage 2000-5 jet fighters to Taiwan. The French Mirages are advanced warplanes, much more sophisticated than any flown by Taiwan’s air force. If the sale goes through, it will mark a dramatic departure from Taiwan’s four-decade pattern of relying upon the United States for most of its advanced military supplies.

“My government is too dependent on the United States,” explains Ding Shou-chung, a leading Kuomintang member. “The U.S. government values mainland China more heavily than its friends on Taiwan. “

For more than a decade, Taiwan’s air force has been flying much older American planes, F-5Es and F-104s. With the help of American technology, Taiwan has also been producing its own new warplane.

But there have been problems in the development of Taiwan’s indigenous jet fighter, which one U.S. defense official admits is “an underpowered, Mattel version of the F-16.”

Yang and several other defense experts here suggested that Taiwan is using the proposed Mirage deal as, in effect, a bargaining chip aimed at putting pressure on the United States to sell its F-16s.

A Taiwan military delegation visited Washington in June with its annual request for military equipment, including F-16s. Interviewed after the meetings, Chen said glumly, “Up to now, we haven’t been given any positive signal” that Taiwan will get the long-denied aircraft.

Indeed, some U.S. officials who strongly oppose any major change in American policy toward Taiwan argue that it will be good for the United States if the Nationalist government buys the French planes.

“Let the French sell Taiwan the planes, and let them (France) take the heat from Beijing,” quipped one of these American officials, who refused to speak for the record.

But O’Hearn says he is afraid that if France wins Taiwan’s favor by selling Mirages, it may also land the huge commercial contract that will be awarded this year for Taiwan’s fourth nuclear power plant. The French firm Framatome is competing for the work with American companies such as Westinghouse, General Electric and Combustion Engineering, he points out.

For more than a decade, European governments have shunned Taiwan for fear of offending authorities in Beijing. But this year, European officials, particularly those involved in trade and industry, have been streaming to Taiwan full of smiles and contract bids.

“More than 28 Cabinet or sub-Cabinet-level officials from Western European countries have visited Taipei,” boasted Chen last month. The French, Germans, Italians, Dutch and other Europeans are all joining the parade.

In the most surprising foreign visit of all, and the clearest sign yet of Taiwan’s eagerness to reduce its dependence on the United States, two Russian admirals went to Taipei in June, the first top-level military officials from Russia to visit there since 1949.

Chen said in the interview that “we have no plan to purchase any military hardware from Russia.” But his boss, Foreign Minister Frederick Chien, was later quoted as saying he had learned “never to say never.”

Yet while other nations rush to upgrade their ties with Taiwan, the U.S. response has been low-key.

At the beginning of the year, Assistant Secretary of Commerce Thomas J. Duestenberg visited Taipei as part of a U.S. trade mission, the highest-level U.S. official to visit Taiwan since 1979. But even that visit demonstrated how nervous the Bush Administration is about upsetting Beijing.

Duestenberg created a stir by saying before his trip that he would be meeting with Taiwan’s economic minister “on a government-to-government basis,” thus suggesting a degree of official recognition. The State Department quickly disavowed Duestenberg, saying his comments were made “in error.”

Administration officials have gone through similar contortions to make sure that Soong’s meeting with Quayle last January does not offend Beijing. An aide to the vice president told The Times that Quayle saw Soong only “in his capacity as president of the Senate,” and that the session was “just a courtesy call.”

Two decades ago, overcoming political and diplomatic pressure from Taiwan was one of the key elements in the successful drive by President Richard M. Nixon and then-Secretary of State Henry Kissinger to normalize relations with China.

Now, some of the veterans of that earlier era, within both the Bush Administration and the career foreign service, are privately resisting any major change in policy toward Taiwan that would upset the agreements they worked out with Beijing.

Pointing to Taiwan’s $5-billion-a-year trade with mainland China and the ever-growing stream of contacts between Beijing and Taipei, they argue that the U.S. policies of the 1970s have brought prosperity to the island and have worked out better than even Kissinger had hoped.

And they say Taiwan will realize it needs the United States far more than it need the Europeans. “They (Taiwan officials) can’t screw around too much with an old, vital friend, to make new friends who don’t care about the Pacific,” says one old American China hand.

Here in Taiwan, however, some elected officials say they now mistrust these assurances of American support and urgently need new military supplies from abroad to bolster Taipei’s hand in dealing or bargaining with Beijing.

“Our American friends have been neglecting our security needs for so long,” said Ding. “Compared with the mainland, Taiwan is not that important. . . .

“People (in Taiwan) are scared of China,” he continued. “These days, Taiwan businessmen say they invest in China in order to buy insurance. If we have a greater defense capability, China will look more seriously at our demands. And we may help bring about a more democratic China.”

Times staff writer Jim Mann, based in Washington, was recently on assignment in Taipei.

Some Items on Taiwan’s $300-billion Shopping List

Project: * Construction of a new north-south highway.

Cost: $13.0 billion from 1989 -- 1998.

Project: * High-speed railway from Taipei to Kaohsiung, Taiwan’s second-largest city.

Cost: $11.9 billion from 1990-1998.

Project: * Mass transit system connecting Taoyuan, Hsinchu,;Taichung, Nantou.

Cost: $7.4 billion from 1990-2001.

Project: * Construction of fourth nuclear power plant and follow-up costs.

Cost: $7.1 billion from 1991-2005.

Project: * Mass-transit system for Taipei.

Cost: $6.2 billion from 1990-2003.

Project: * Expansion and upgrading of airplane fleet.

Cost: $4.1 billion from 1991-1997.

Project: * Multi dimensional phone and communications network.

Cost: $4.1 billion from 1990-1996.

Project: * Thermal power plant for Taichung.

Cost: $2.9 billion from 1991-2001.

Project: * Sewerage construction for Taipei and other cities.

Cost: $2.9 billion from 1991-2001.

Project: * Harbor facilities and construction.

Cost: $1.6 billion from 1992-1997.

Source: Taiwan Board of Foreign Trade.

Key Dates in U.S.-Taiwanese Relations

1949-50: Chiang Kai-shek’s Nationalist Party loses civil war and flees from China to Taiwan. Chinese Communist Party declares founding of People’s Republic of China, but United States refuses to recognize it. At outbreak of Korean War, Truman Administration deploys 7th Fleet in Taiwan Straits between Taiwan and China.

1972: President Nixon travels to China and signs Shanghai Communique. It says United States does not challenge belief of both Communist and Nationalist governments that there is only one China and Taiwan is part of China.

1978-79: In second communique, President Carter establishes diplomatic relations with China, breaks off mutual defense treaty with Taiwan and agrees to withdraw forces from the island. Congress passes Taiwan Relations Act promising the United States will provide Taiwan with defensive arms and resist any use of force or coercion jeopardizing Taiwan’s security.

1982: President Reagan issues new communique with China pledging to limit amount and quality of American arms sales to Taiwan and eventually to end them; no date is given for final phaseout of arms sales.