Australia’s relationship with Taiwan is based on two overriding and related principles, which both direct policy and limit engagement. The first principle is the One China Policy adopted by Australia when Canberra recognised the People’s Republic of China (PRC) as the sole representative of China on 21 December 1972 and acknowledged ‘the position of the Chinese Government that Taiwan is a province of the People’s Republic of China’. Although formal diplomatic relations with Taiwan were no longer possible, Australia could maintain economic, trade, cultural and people-to-people links with the island — leading to the second principle, that the economic and trading relationship is the backbone of the relationship between Australia and Taiwan. The Australian Commerce and Industry Office (ACIO) has represented Australian interests in Taiwan since 1981. In 2012, it was renamed the Australian Office. Taiwanese interests are represented in Australia through the Taiwan Economic and Cultural Office (TECO).
Trade has always been the key driving force in the relationship and remains so in 2022. In 2021, Taiwan was Australia’s seventh largest export market (AUD$16.8 billion) and thirteenth largest import market (AUD$7.2 billion). Australian exports are predominately commodity based. Taiwan has consistently remained among Australia’s top fifteen trading partners since the 1980s. The economic relationship is complemented by a strong cultural relationship and friendly political interchange. There is, in addition, a significant Taiwanese immigrant population in Australia.
The Australia-Taiwan economic relationship often bumps up against the harsh political realities of Australia’s relationship with China and the One China Policy. Recognising the autonomy and democratic reality of Taiwan, Australia has applied the One China Policy flexibly. However, there are real hard boundaries on what can be done, given China’s persistent policy of isolating Taiwan on the international stage and commitment to eventual reunification. Australia’s relation with China factors into how Australia handles its relationship with Taiwan.
FTA and CPTPP Membership
The contradictions and challenges in the relationship are exemplified by the decisions by Taiwan to seek a Free Trade Agreement (FTA) with Australia in 2013 and membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2021. By the late 2010s, Taiwan remained one of the few major economies with which Australia did not share a FTA. Taiwan signed FTAs with New Zealand in July 2013 and Singapore in November that year (called Economic Cooperation Agreements, ECAs) and was keen to conclude a similar agreement with Australia. There was considerable interest in the business community. But a Taiwan FTA had to wait until Australia completed its China Australia Free Trade Agreement (ChAFTA), which came into effect in 2015. With ChAFTA bedded down, the Department of Foreign Affairs and Trade (DFAT) explored the potential for an FTA with Taipei. The Taiwanese began to advocate for membership of the CPTPP around the same time, though they did not formally apply until 2021. DFAT also considered a Taiwan FTA within the context of the CPTPP.
In the first half of 2019, DFAT put to ministers the possibility of a Taiwanese FTA and Australian support for Taiwanese membership of CPTPP. This came at a time when Australian relations were deteriorating with China over the foreign Interference laws and the exclusion of the Huawei from the Australian 5G rollout. Concerned that any movement on a Taiwan FTA or CPTPP membership would worsen the tensions with China, the idea of working with Taiwan was set aside.
By the second half of 2020, China had enforced a range of trade sanctions against Australian products; displeasure with Beijing spawned sympathy for Taiwan. Morrison government ministers indicated they were open to Taiwan joining the CPTPP, and an FTA. However, there remained concern about the effect on the already stressed relationship with China. It was felt that Australia would need diplomatic cover if it were to move on these policies — if the US joined CPTPP under a future Biden administration, for example, or concluded an FTA itself with Taiwan. As a result, the idea went nowhere.
In 2021, the idea of trade agreements and CPTPP membership remained alive. However, the Morrison government decided to take no action on either. The decision was based to a large degree on advice from various ministries and agencies concerned that any such move around the time of the AUKUS announcement would send the relationship with Beijing into a tail spin. Beijing saw the AUKUS agreement and the Quad deliberations as squarely directed at containing China and the acquisition of nuclear submarines by Australia as fitting into US war plans against China.
The Morrison government prioritised national security concerns over economic interests and Taiwan. This was consistent with long-term Australian defence policy, which did not see the defence of Taiwan as a key national security interest of Australia. In 2004, Foreign Minister Alexander Downer put on the record that Australia did not regard its ANZUS commitments to include any US-led defence of Taiwan. The rhetoric of Defence Minister Peter Dutton about Taiwan and the ‘drums of war’ in the lead up to the 2022 federal election was primarily a domestic political ploy to portray the ALP as weak on national security and China.
As the US has become more concerned about the possible defence of Taiwan the question has arisen whether and how Australia would support the US military in defending Taiwan. The Albanese government has been silent on this question to date.
Around the time Morrison government decided to put Taiwan’s CPTPP membership and FTA on the back burner, China changed its mind about CPTPP membership (and before it the failed TPP) and in September 2021 applied to join the CPTPP. The Morrison government effectively vetoed China’s application, a position supported by the Parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade.
Following the change of government in May 2022, the Taiwan issues remained on the back burner and the new Albanese administration took no action on Taiwan’s CPTPP application or showed interest in an FTA with the island.
On 18 November 2022, Prime Minister Albanese announced that Australia would not support Taiwan joining the CPTPP, citing the fact that the agreement was only for ‘nation states’ and Australia did not recognise Taiwan as a sovereign national state because of our One China Policy. This statement followed three days after Albanese’s meeting with Xi Jinping on 15 November at the G20 and has been seen in parliamentary circles and among officials as a signal to Beijing. Albanese subsequently had to walk the statement back, acknowledging that economies and customs areas could also join the CPTPP. Australian diplomats sought urgently to repair the damage and assure Taiwan that the policy had not changed. In doing so, Canberra was sending different, or at least individually tailored messages to both Beijing and Taipei.
Taiwan is already a member of APEC as an economy and a member of the World Trade Organisation (WTO) as the Customs Territory of Taiwan, Jinmen, Penghu and Matsu (the last three being smaller islands or island groups under its governance). Its status as a customs territory would allow it potentially to join the CPTPP if accepted by all other members.
Despite claims to the contrary, politicians and officials have indicated to the author that the government’s decision was primarily due to a desire by Albanese to maintain the momentum of his meeting with Xi Jinping on 15 November and to persuade China to remove its trade sanctions on Australia. The government’s priority is to stabilise relations with China and it feared that any concessions to Taiwan would lead to destabilisation of the relationship and no movement on trade sanctions. Albanese is also keen to obtain an invitation to visit Beijing.
Chinese officials have indicated that for them to lift trade sanctions, Australia would need to make some concessions and that China would meet it ‘half-way’. Among these are a reconsideration of policies and decisions that have restricted Chinese investment in Australia, from the decision to ban Huawei from the 5G rollout through to the rejection of the Chinese dairy company Mengniu’s proposed takeover of a Tasmanian dairy company. The Chinese Embassy has claimed that from the start of 2019 up to March 2022, AUD$370 million of Chinese investment had fallen through due to changed Australian investment policy. The Chinese have also sought a reform of Australian anti-dumping practices, which they contend have led to a major imbalance in anti-dumping cases, with Australia taking 111 cases against China and China only three against Australia. DFAT is confident that the few Chinese anti-dumping cases against Australia, introduced in 2020 on wine and barley, are likely to fail at the WTO. In addition, the Chinese have pushed for Australia to support their application to join the CPTPP — and as a corollary want Australia to oppose Taiwan’s application. The announcement by Albanese in November that Australia would not support Taiwan’s application can be seen as a response to China’s demands, and perhaps an easier one than reconsidering the ban on Huawei.
Australia’s ability to veto or support China’s CPTPP membership application provides it additional leverage to the Albanese government as it stabilises relations with Beijing and works towards the lifting of $20 billion worth of trade sanctions. Ruling out Taiwanese CPTPP membership for the time being sends a positive signal to Beijing. Decisions on other concessions, such as regarding investment and anti-dumping reform, could be put off until all Chinese trade sanctions have been lifted.
Despite the abovementioned possible changes of China policy, the Albanese government, like the Morrison government before it, remains firm on national security issues. It has ruled out a reversal of the ban on Huawei. Australian national security interests would regard very dimly any decision to remove the ban; such a decision would also bring the Albanese government under significant pressure from the US.
The Albanese government, aware of the sensitivity of the Taiwan issue for China, has sought to reduce tensions with China over Taiwan and to differentiate itself subtly from the US in its Taiwan policy. US President Biden has said several times (if somewhat ambiguously) that the US would defend Taiwan if it was attacked by China. Australia has not joined the US in hollowing out its One China Policy and has avoided provocative actions that US has taken in sending senior office holders to Taipei. Although six parliamentarians representing both the Coalition and Labor have planned a visit to Taiwan in late 2022, Albanese has stressed that this ‘isn’t a government visit’. This is also a return to a long-standing practice of backbench MPs visiting Taiwan that was interrupted by the COVID travel restrictions in Australia and Taiwan.
Under Labor, Australian rhetoric about Taiwan has also been more restrained and nuanced than under the Coalition. The Albanese government took note of the fact that China reacted very strongly to the 5 August joint statement by the US Secretary of State, the Foreign Minister of Japan and Foreign Minister Penny Wong which expressed concern over Chinese military exercises in the Taiwan Strait following the visit of US Congresswoman Nancy Pelosi and sought to avoid making further statements on Taiwan that would inflame tension with Beijing.
While there is sympathy in Australian government circles for Taiwan, the imperatives of the China relationship and national security considerations take precedent. That said, although there may be room to improve the trade and investment situation with China or even support CPTPP membership for China if it secures a lifting of trade sanctions in full, there is no appetite in the Albanese government to move away from national security-based decisions or AUKUS. Albanese is also willing to step back from trade deals with Taiwan in a way that he is not prepared to do on national security policy decisions. This is a continuation of the position of the Coalition governments since 2013, which delayed negotiating an FTA with Taiwan or promoting its CPTPP membership for nearly a decade largely because of the potential effect on relations with China.
Concessions on economic issues and Taiwan can mean the government doesn’t need to make any concessions on AUKUS or any other issues with implications for national security, values or human rights. We can expect no retreat on national security issues, AUKUS or human rights from the Albanese government. We can also expect that Taiwan will continue to be disappointed by Australia as far as an FTA or its CPTPP membership is concerned.