A new paper from Rice University’s Baker Institute for Public Policy argues that an annexation of Taiwan by the People’s Republic of China (PRC) would trigger economic shocks and diminish the quality of life for populations across Asia and beyond, as well as have devastating impacts on American interests and Americans’ well-being.
Gabe Collins, Baker Botts Fellow in Energy and Environmental Regulatory Affairs at the Baker Institute, and his coauthor Andrew Erickson, professor of strategy at the U.S. Naval War College, say an annexation of Taiwan would be one of the most dangerous, consequential flashpoints on the planet. The paper aims to address the economic, military and geopolitical impacts of coercive annexation, with particular focus on semiconductors, weapons systems, allies and partners.
“At stake are crucial interests such as the semiconductors that power today’s big data world and the national security of U.S. allies and partners,” the paper reads. “Neighboring states’ responses to PRC expansion could also result in the erosion of American military advantages as well as the destabilization of democracy and the international order.”
As a global commodity, microchips are as important as oil, Collins and Erickson argue. There are currently only two places in the world that produce the latest generation of silicon chips – in Taiwan by Taiwan Semiconductor Manufacturing Company Limited and in South Korea by Samsung.
“If China could capture Taiwan with minimal direct use of military force, it could potentially obtain a near-monopoly over one of the 21st century’s most critical economic inputs,” the authors wrote. “That could help to catapult Beijing into a position of global preeminence and, in turn, might allow China to dominate the world economy even in the face of sanctions.”
Semiconductors are essential to the modern economy with approximately $600 billion worth produced globally each year, according to the report. The semiconductors are added into physical items collectively worth multiple trillions of dollars, and the services delivered by these devices – such as smartphones, data centers or cars – amount to tens of trillions of dollars annually..
Collins and Erickson argue that coercive annexation brings the possibility of major disruption of Taiwan-origin semiconductor supplies that could temporarily halt technological progress and could slow global economic growth for years thereafter.
The authors argue that American policymakers must act urgently to deter PRC aggression and maximize U.S. capabilities to prevent China from coercively annexing Taiwan and creating long-term economic strife.
View the executive summary and the entire report titled “Annexation of Taiwan: A Defeat From Which the US and Its Allies Could Not Retreat” here.