Do American Companies Need to Take a Stance on Taiwan?

The international community—firms, states, and multilateral institutions—only has itself to blame for this latest round of coercion, because we’ve allowed Beijing’s browbeating over the years to cow us into submission. Since that strategy has gotten it what it wants, it’s only normal that the Chinese Communist Party would continue to do so.

China’s escalation has sparked a long-overdue response from the White House. While there is some irony in the Trump administration’s reference to “Orwellian nonsense,” as itself could arguably be accused of having engaged in similar practices, the push-back is nevertheless reflective of the views of a much larger segment of American society, and of growing impatience with a revisionist state that wants to dictate how we run our own affairs. Interestingly, no sooner had the White House released its statement than Julie Bishop, Australia’s Minister of Foreign Affairs, was issuing a similar warning to Beijing over its political pressure on Qantas.

This highlights a pressing need for leadership on this issue. As long as private companies feel they are alone facing off against a little-understood Chinese state apparatus and even less clear legal system, the tendency will understandably be to avoid unnecessary risks by giving in to Beijing’s demands, however “Orwellian” those may be. If pressure by the Party on how we define our own “one China” policy (ultimately this is what this is about) undermines our values and interests, then firms, with the backing of their governments, need to form a coalition and push back.

Most states, including many that have been targeted in this latest round of intimidation, only “acknowledged” or “took note” of Beijing’s claim that Taiwan is part of China upon establishing diplomatic relations with Beijing. In no way does this legally bind states, or companies, to treat Beijing’s position as an article of law.

We might want to ask whether such coercion—and the impact it has on market access—contravenes international trade regulations. If that is the case, then a coalition of governments should challenge Beijing at the World Trade Organization. A concerted effort would certainly get Beijing’s attention and has much higher chances of succeeding than a company going it alone. In international politics, principle alone does not work; Beijing needs to understand that there are consequences, and costs, for such behavior.

In a purely legal sense, Taiwan is already a distinct trade entity at the WTO, which it joined under the designation “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.” Given this, and in line with the WTO’s Annex on Air Transport Services, there is no reason why Beijing should be allowed to threaten international firms with legal action for referring to Taiwan in ways the Party disagrees with.

This is about protecting ourselves, our interests, and our values: If we keep allowing an expansionist authoritarian regime to hector us and get away with it, it can only continue doing so in the future, in escalatory fashion, and thereby further undermine our freedom of expression.

China’s sensitivity to how Hong Kong, Taiwan, and Macau are described on the websites of international businesses will become increasingly common as the Chinese Communist Party’s (C.C.P.’s) global ambitions rub up against global business interests.

People who book trips to visit East Asia still speak of going to “Hong Kong” or “Taiwan,” and the websites of airlines and hoteliers are devised to capture these keywords and win potential customers in a competitive market. The C.C.P. wants to eliminate distinct references to “Taiwan,” “Hong Kong,” or “Macau” to make the act of identifying these places as part of the People’s Republic of China (P.R.C.) as natural as sunlight. Beijing wants “Taiwan/Hong Kong/Macau, People’s Republic of China” to be the only option on the menu. This is part of a longstanding rhetorical strategy, which started with pressuring sovereign states to recognize the P.R.C. as China’s sole legitimate government.

More international companies now face a binary choice vis-à-vis Beijing’s demands: accept and profit or reject and lose. Marriott Hotels and Delta Airlines were forced to conform to the P.R.C.’s diktats, in order to continue their operations. The C.C.P. is willing to punish those who won’t comply. The Chinese Marriott International’s Chinese website was temporarily suspended from operations when it listed Tibet, Taiwan, Hong Kong, and Macau as separate entities.

This environment makes it difficult for international businesses to push back. Companies can use meet-in-the-middle options, such as listing “Taiwan - China” on a drop-down menu (as a flight search on British Airways shows, for example), although this might be considered too friendly to the Republic of China (Taiwan). For the moment, there is little space left for marketing departments to solve such dilemmas. For businesses that adopt the accept-and-profit approach, the benefits are clear. It is impossible to imagine this primary free-market motivation changing.

As the C.C.P. consolidates its global influence, it will seek to strengthen the story it tells its people and the world of its national success. It will pressure businesses and governments alike to make that a globally recognized status quo. The P.R.C. has built its legitimacy through rhetorical strategy. When Hong Kong was handed over to the P.R.C. on July 1, 1997, Beijing trumpeted it as a patriotic victory; the first time that no foreign boots occupied Chinese soil in over a century. Through the same lens of national security and pride, the P.R.C. rejects any inference that Taiwan is independent from the motherland or that the Nationalists who found refuge in Taiwan after their defeat in the Chinese Civil War should have a platform to challenge the P.R.C.’s authority.

Trump and his spokesperson have tried to push back by means of a rhetorical stand (and Trumpian tone). Their pushback might benefit from nuance; airlines follow International Civil Aviation Organization regulations, in which Taiwan, Hong Kong, and Macau are considered independent jurisdictions for coordinating flight information. In fact, when flying to Hong Kong, Macau, or Taiwan from mainland China, flights leave from the international terminal.

United States companies doing business with China need to understand Chinese sensitivities on territorial issues. After centuries of weakness during which it was forced to cede territory to foreign countries, China attaches great importance to how the country’s territorial integrity is treated. Beijing regained sovereignty over Hong Kong, a former British colony, in 1997, and over Macao, a former Portuguese colony, in 1999. Both Hong Kong and Macao now have the status of Special Administrative Regions within the People’s Republic of China (P.R.C.). Under Beijing’s concept of “one country, two systems,” both are accorded autonomy over certain aspects of their domestic affairs to an extent not enjoyed by other autonomous regions within the P.R.C. The P.R.C.’s sovereignty over Hong Kong and Macao is recognized by the United States and other countries, and these two former colonies do not have the status of independent countries.

Taiwan’s situation is more complicated. China ceded the island to Japan at the conclusion of the First Sino-Japanese War in 1895. It was a Japanese colony for the next 50 years. In 1945, the Republic of China accepted the surrender of Japanese forces on Taiwan. Subsequently, the defeat of the Kuomintang forces in the Chinese Civil War led to the establishment of the People’s Republic of China in 1949, with the Republic of China retaining its position in Taiwan. This resulted in two governments claiming to be the sole legal government of China. Both governments take the position that Taiwan was returned to China in 1945, but this was never formally certified in a peace treaty with Japan. Most member states of the United Nations have recognized the P.R.C. as the government of China, but the Republic of China on Taiwan still has diplomatic relations with nearly 20 countries in Central America, Africa, and the Pacific islands.

The United States’ position on this question is expressed in the three U.S.-P.R.C. Joint Communiques that together with the Taiwan Relations Act provide the framework for the official relationship between Washington and Beijing. When the United States formally established diplomatic relations with the People’s Republic of China in 1979, the United States recognized the government of the People’s Republic of China as the sole legal government of China and affirmed that within this context, the people of the United States would maintain cultural, commercial, and other unofficial relations with the people of Taiwan. The U.S. government also acknowledged the Chinese position that there is but one China and Taiwan is part of China. Every U.S. president since the establishment of U.S.-P.R.C. diplomatic relations in 1979, including President Donald Trump, has endorsed this framework.

The Taiwan Relations Act has enabled the United States to maintain robust unofficial relations with Taiwan, but the U.S. government does not treat Taiwan as an independent country. The May 5, 2018 White House statement regarding the letter sent by China’s airline regulator to 36 international air carriers is not consistent with the policy framework outlined above.

Taiwan is no stranger to threats from Beijing. Our attempts to participate in the global community are often blocked by Beijing or, if not excluded outright, our country is subjected to demeaning changes in nomenclature or denied the right to display our national flag.

The letter sent by Beijing to 36 international air carriers is only one of many examples of China’s attempts to erase Taiwan’s sovereignty. Over the past year, Chinese warplanes have stepped up their “island encirclement patrols” around Taiwan, and conducted live-fire military drills in the Taiwan Strait. China is engaging in an all-out offensive to economically, militarily, diplomatically, and socially isolate and marginalize Taiwan, a strategy that is increasing in intensity.

However, by pressuring foreign companies to conform to its political views, China’s intimidation tactics have reached a new level of audacity. We must not allow the normalization of this type of behavior. If left unchallenged, China will have carte blanche to coerce, threaten, and impose its will over the international business community. More importantly, it will show that the world is willing to undermine the liberal international order and cave in to the demands of a totalitarian regime.

Taiwan supports the U.S. position and calls on all major actors operating in the global community to reject China’s intimidation tactics and uphold the norms and standards that underpin the international order.

Insults alone aren’t going to cut it. If your head is locked in a rat cage, yelling “This is nothing but Orwellian nonsense!” as the fanged rodent eats your face will be cold comfort. You need leverage and an effective strategy to back up the name-calling. If leverage and a strategy cannot be found, more airlines will follow Delta’s lead and comply with Beijing’s demands.

The Trump administration is right to view China’s instruction to international airlines as an ominous development. The issue is greater than cross-Straits nomenclature. At the end of its first paragraph and the beginning of the second, the instruction makes clear that the issue isn’t so much One China as compliance with Chinese law. United is told to “immediately adopt measures to further correct situations that do not accord with Chinese law” and advised that its app “violates Chinese law.” The final paragraph informs United that, if it doesn’t comply, action will be taken “in accordance with (Chinese) laws and regulations.”

This reads like an assertion of Beijing’s right to require that any foreign company that does business with China always and everywhere comply with Chinese law. That could apply not only to website descriptions of Taiwan, but to Chinese catch-all crimes like searching for controversy and stirring up trouble (寻衅滋事), the successor to counter-Revolution (反革命) or to laws limiting the kinds of inquiry, speech, assembly, and managerial latitude that are the source of corporate innovation and profit in free societies.

That analysis will doubtless strike my Chinese colleagues as too sweeping. They might argue that the instruction to airlines is a one-off related to the most sensitive issue in U.S.-China relations—an issue on which China’s policies have been clear and consistent (and they have been). Foreign critics will doubtless be advised not to make too much of the instruction. “Don’t overthink it” has become a standard line in Chinese diplomacy—Orwell again.

But the claim of universal jurisdiction is implicit in the text. Countering that claim will require the Trump administration to work closely with American corporations and with foreign governments that share America’s disinterest in operating under Chinese law. A united front (if you will) is the best way to address Chinese overreach. The goal should be to make the operative question not What is the price to foreign companies of doing business with China?—but, What is the price to China of not doing business with foreign companies?

Convincing corporations not to comply with certain Beijing instructions will not be easy or cost-free. It will require that the Trump administration commit to diplomacy and the defense of liberal global norms. If America shirks the challenge and contents itself with hurling rhetorical grenades, a growing list of U.S. companies are likely to discover, with Winston Smith, that they love Big Brother.

At Beijing's Capital International Airport—and in every other major Chinese airport—signage directs passengers to two separate tracks. The tracks are labeled “Domestic” and “International/Hong Kong/Macau/Taiwan.” As Frances Kitt points out in her contribution, the signage reflects the simple reality that flights to these three places are not the same as domestic flights. That has been true since direct flights began to Taiwan more than a decade ago; it was true before the complaint letter; it is still true afterwards.

So why has a Chinese government agency chosen this particular moment to demand a change in how these flights are described? Surely answering this question is key to formulating an appropriate response.

One possibility is that the letter is part of a larger, deliberate campaign to challenge Taiwan's de-facto sovereignty and constrain Taiwan's international space (Brian Su mentions some other evidence for this in his contribution). Perhaps the ultimate goal is to force the Cai regime to the negotiating table, or to test the resolve of the United States and the international community to support Taiwan. If this observation is correct, it implies that, notwithstanding continued efforts to court Taiwanese investors and professionals to work in the mainland, the PRC leadership has basically given up on efforts to win the hearts and minds of the people of Taiwan. It is a simple demographic reality that the proportion of Taiwan's population that has only known life in a democratic and de-facto sovereign country is growing. If the PRC leadership has recognized that these people find it hard to imagine living under any other system (the evidence on this is mixed), then there is little point in their showing any further patience towards the people of Taiwan. This position, carried to its extreme, has worrying implications.

Another, less-likely, possibility is that the letter, and the other steps described in Su's post, are the work of free-agents in different parts of the Chinese government, seeking to curry favor with the leadership. It was widely noticed in China (and for that matter in Taiwan) that Xi Jinping's speech to the 19th Party Congress took a somewhat harsher line on opposing Taiwanese independence, and linked territorial reunification to the grand project of the rejuvenation of the Chinese nation. If there are no negative repercussions for being provocative in support of a leadership priority, then other agents in the Chinese government, and beyond, will be incentivized to do the same, if only for fear of being left out.

There are other possible explanations for the recent letter, but if any of the above arguments is correct then ignoring the current challenge would have sent a dangerous signal. Still, a more careful study of what lies behind the move might have produced a more effective response.