Taiwan has had very impressive economic growth in the past three decades, contributing to one of the largest hard currency reserves in the world (estimated at $80 billion). Taipei's defense budget has grown significantly since 1985 and now stands at about $7.4 billion a year. Arms transfers to Taiwan have risen dramatically during the 1990s in terms of quality and quantity, from just $209 million in 1980 to a record high of $5.7 billion in 1997 (see chart). Taiwan has bought advanced fighter jets, attack helicopters, and numerous missiles; future plans include a major tank procurement program and possible participation in a U.S. theater missile defense system. 

The principal issues of concern about U.S. arms supply to Taiwan are:

Driving these weapons purchases is the fear that mainland China will attempt to reunite Taiwan with it by force. Taiwan's military always has been and always will be dwarfed by its rival's sheer manpower. Taipei has sought to offset China's numerical superiority by buying the most advanced weaponry on the market. But given the fact that China is a nuclear power, it is unlikely that Taiwan could prevent a forceful takeover if the mainland were set on it. Despite bluster and threats, the Chinese government has refrained for nearly 40 years from invading Taiwan, apparently understanding that the rest of the world would not stand by and accept a forceful takeover of the island.  Moreover, despite growing military budgets in both China and Taiwan, cooperation between the two is at an all time high. Taiwan is China's largest investor. 

At the same time, China interprets U.S. (and European) sales of advanced combat equipment as a hostile and destabilizing act, which undermines such cooperation. Rather than providing stability by balancing power between the two (which would be impossible to balance, short of providing Taiwan with nuclear weapons), high-level transfers of sophisticated weapons raise the level of tension and instability between Taiwan and China. U.S. arms sales to Taiwan also complicate U.S.-Chinese relations in several unintended and unfortunate ways.  Since former Taiwanese President Lee Teng-hui's reference to "special state-to-state relations" and the subsequent election of pro-independence candidate Chen Shui-bian, China has been particularly sensitive.  

As Deputy Assistant Secretary of State Susan Shirk, testified on April 14, 1999, 

Neither the P.R.C. nor Taiwan would be served by over-emphasis on military hardware [& ].  In this age of sophisticated weaponry, I think we are all sometimes prone to equate security with military capability.  But a durable peace will rest less on arms than success in addressing differences through dialogue on a mutually acceptable basis. 

Unfortunately, the United States' record for supplying Taiwan with weaponry doesn't live up to this wisdom.  In fact, as a DOD official once tellingly put it, arms sales form "the fundamental basis of [the] relationship between the United States and Taiwan":  hardly a recipe for stability. 

Since the communist party took over mainland China in 1949, the United States has maintained close military relations with Taiwan, where the exiled Nationalist Party (Kuomitang) government fled. In 1979, however, the United States officially recognized the government of the People's Republic of China. The PRC regards Taiwan as a breakaway province, and in establishing formal relations with China, the United States agreed to regard Taiwan de facto as a part of China. Since then, Washington has walked a tight rope in its relations with China and Taiwan, including in its arms sales policies.

U.S. arms sales to Taiwan are governed by the 1979 Taiwan Relations Act and a 1982 joint communiqué with China. These two documents are not necessarily compatible. Under the former, the United States pledged to provide those arms necessary for Taiwan's self-defense. But in the 1982 Sino-American communiqué, still in force, the Reagan Administration agreed that the United States government "does not seek to carry out a long-term policy of arms sales to Taiwan, [and] that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan, leading over a period of time to a final resolution."

This policy largely held until throughout the 1980s, with annual sales to Taiwan hovering around $500 million. In 1992, however, U.S. arms sales to Taiwan jumped over 1,000 percent, with the sale of 150 F-16 fighter/bombers. The Chinese government protested the sale vehemently, saying it violated the 1982 agreement. Proponents of the $5.8 billion deal argued that the 1982 communiqué does not have the force of U.S. law, unlike the 1979 Taiwan Relations Act. Taiwan began taking delivery of the F-16 fighter-jets in May 1997.

In protest, China withdrew in late 1992 from arms transfer talks among the five permanent members of the United Nations Security Council (U.S., Russia, China, Britain and France). The talks were initiated after the 1991 Gulf War with the aim of reducing destabilizing arms sales. China has also said that its adherence to the Missile Technology Control Regime is conditional, linked to U.S. restraint in arms transfers to Taiwan (Defense News, 7-13 March 1994).

Some members of Congress view arms sales to Taiwan as a way to deliberately antagonize the Chinese.  As Sen. Jesse Helms boasted when introducing S. 693, the Taiwan Security Enhancement Act, which would mandate greater arms sales to Taiwan : "Some are going to say this is provocative. They will claim that doing these things will upset the United States' relationship with China. This is true. The Red Chinese won't like this bill." While many like Helms support arms sales to Taiwan to inflame the PRC, others in Congress merely feel that arms sales are their only way to express support for Taiwan, since 

In April 2000, Washington approved yet another package of high-tech weapons for Taiwan, including sophisticated air-to-air and anti-ship missiles and a "Pave Paws" long-range radar system. The Pave Paws system could eventually be linked to a theater missile defense system, still in development, increasing the intensity of the ongoing arms race with China. Taiwan didn't get everything on its wish-list; Taipei really wanted four destroyers with the powerful Aegis battle management system, capable of tracking over 100 land, sea, and air targets. Most independent observers believe that the Taiwanese military isn't ready to handle the Aegis warships, and the State Department feared the sale would provoke an even angrier response by Beijing. 

This compromise arms deal was an attempt to balance a U.S. commitment to China not to increase arms sales to Taiwan and a Congressional mandate to provide Taiwan with a "sufficient self-defense capability." Yet this sale, like past arms sales to Taiwan, is guaranteed to displease both sides: China feels threatened by sophisticated additions to Taiwan's arsenal, and Congress and Taiwan's elastic interpretation of "self-defense" ensures that Taiwan's need for arms will never be satiated. 

Martial law in Taiwan, in place since the Nationalist Party fled to the island in 1950, was lifted in 1987. Taiwan has relatively recently transitioned from one-party (Nationalist Party) authoritarian rule to a pluralistic democratic system. This transition culminated in the election of Chen Shui-bian, Taiwan's first non-Nationalist Party president. 

Chen was primarily elected on an anti-corruption platform, and arms sales have been a source for misconduct in Taiwan.  Graft associated with arms sales was been at the center of a scandal when  Taiwanese military officers allegedly gave arms dealers information about Taiwanese arms procurement decisions in exchange for payments. A Taiwanese navy captain was killed in December 1993, because he was about to expose a "pattern of bribery" among retired and active-duty officers and arms dealers, investigators say. In April 1994, Adm. Chuang Ming-Yao, the head of Taiwan's navy, was forced to step down because of this scandal, involving at least 8 other officers and six local arms dealers. One navy commander has already been sentenced to life in prison (Jane's Defense Weekly, 30 April 1994, 11 June 1994; Reuters, "Taiwan Scandal Taints Generals," 24 June 1994).

U.S. arms exports and the associated transfer of technology are furthering the development of Taiwan's nascent aircraft industry, both military and commercial. This will result in direct competition for U.S. companies, as Taiwan seeks to sell its aircraft on the international market.

A 1994 General Accounting Office report [NSIAD-94-140] says that "authorities in Taiwan...have indicated that they are prepared to commit billions of dollars to carry out an ambitious agenda of aeronautics industry development." According to the GAO, Taiwan's Aeronautical Industry Development Center (AIDC) is regarded by experts "as one of the most complete and sophisticated aircraft production shops in Asia."

Taiwan plans to apply knowledge, technology and production lines derived from military projects, such as the F-16 and its Indigenous Fighter Program, to the production of commercial aircraft. The AIDC and the U.S. firm AlliedSignal plan to market the F124 jet engine used in Taiwan's Indigenous Defense Fighter. The Czech Republic reportedly will use this engine in its fleet of L-159 jet trainers. British Aerospace and the Taiwan Aerospace Corporation (partly owned by the government which subsidizes about half its total costs) have entered into a 50-50 joint venture to produce, market and service BAe-146 medium-range passenger jets in Taiwan. Taiwan has offered to sell its Indigenous Defense Fighter and AT-3 jet trainers to Indonesia.

In a more recent deal, in May 1997, General Electric and Taiwan's AIDC agreed to make turbine engines for Sikorsky S-92 helicopters. Taiwanese officials were especially pleased with this deal, since it gives Taiwan access to key advanced aviation technology (AP, 20 May 1997).

Offsets associated with arms sales are driving this industrial development. Taiwan's legislative body (the Yuan) retroactively demanded Taiwan's first ever offset from an American firm in connection with the F-16 sale in 1992. The Yuan blocked payments on the package unless Lockheed provided Taiwan with technology and production contracts related to the aircraft. In July 1993 Lockheed signed a 10-year "Industrial Cooperation Agreement" worth $1.1 billion which ensures production of some of the aircraft parts and creation of maintenance depots in Taiwan. For more information on this topic, check out the Offsets Monitoring Project.

Background Information 

Speech by Randall Schriver, U.S. Deputy Assistant Secretary of State for East Asian and Pacific Affairs, to the U.S.-Taiwan Defense Industry Conference, 14 February 2003.
Speech by Richard Lawless, U.S. Deputy Assistant Secretary of Defense for Asian and Pacific Affairs, to the U.S.-Taiwan Defense Industry Conference, 13 February 2003.
CIA Factbook entry for Taiwan.
State Department Human Rights Report on Taiwan for 2002.
State Department Human Rights Report on Taiwan for 2001.
State Department Human Rights Report on Taiwan for 2000.
State Department Human Rights Report on Taiwan for 1999.
State Department Human Rights Report on Taiwan for 1998.
State Department Human Rights Report on Taiwan for 1997.
Taiwan: Recent Developments and U.S. Policy Choices CRS Issue Brief, March 2002.
Major U.S. Arms Sales to Taiwan Since 1990 CRS Report, April 2003.
The Annual Arms Sales Process CRS Report, June 2001.


Last Updated:  December 2001

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