Did China-Taiwan Dispute Impact Global Trade Supply Chain?
The world market was slowly trying to recover from the Russia-Ukraine war, but the tensions between China and Taiwan hit the global trade again after US House of Representative speaker Nancy Pelosi’s visit.
China’s military drills are coming out to a disruption in one of the world’s busiest trade routes and commercial travel ships, forcing the ships to reroute. This is one more geopolitical issue, putting a lot of stress on the already worn-out world supply chain.
On 4 August 2022, China started a four-day military drill involving all the military forces, including Airforce and Navy, in air spaces and seas surrounding this small island country, Taiwan. These drills presented on Thursday were a demonstration of the power and force in reply to the visit of US House Speaker Nancy Pelosi.
Earlier this week, China presented six zones around the self-governed island, Taiwan, where it would organize air and sea drills along with firearm exercises. This practice started on Thursday and will end on Sunday.
Ships and Aircraft, both traders and commercial, are warned to stay out of the released six zones during the drill. This will affect the trading for four days, which is not a good thing for the global trading chain.
History of the China-Taiwan dispute
In 1948, the Kuomintang-led ROC government was practising power in China. During the same year, a civil war started in China between the CCP and Kuomintang-led ROC government.
The CCP threw the ROC government out of power, and in 1949, the ROC government reallocated to Taiwan. The government was followed by more than 1 million people from China.
Soon after the reallocation, on 25 October 1949, the Battle of Kuningtou on Kinmen started. In this battle, the ROC armed forces defeated the CCP on the north-western part of the island. After the battle, Martial law was declared in Taiwan, which continued to be in operation til 1987.
On 25 October 1971, the United Nations General Assembly passed U.N. Resolution 2758. This Resolution recognized the People’s Republic of China (PRC) as the only legal and authorized representative of China on the global front. In response to this decision, the ROC adjourned from the U.N.
Every time there was a conflict or even a battle between the People’s Republic of China (PRC) and the Republic of China (ROC), the US always intervened in favour and support of Taiwan.
Now Nancy Pelosi’s visit has led to another spark of conflict between China and Taiwan, which is severely affecting world trade.
Impact on World Trade Supply Chains
The 110-mile-wide expressway separating the island of Taiwan and Asia, also known as the Taiwan Strait, is one of the crucial trade routes for ships carrying supplies between important economies such as South Korea, China, Japan, and the rest of the world.
According to VesselsValue, a London-based shipping consultancy, at present, around 256 container ships and other vessels have put their operations on hold in Taiwanese territorial waters due to the Chinese military drill.
Nick Marro, Economist Intelligence Unit, said that shutting down trade routes around Taiwanese waters raises the question of whether China will do it again. This will also raise concerns about what these military shows of China could mean to future trade, economic patterns, and travel, as well as to security and defence scenarios.
World trade supply chains have already been affected deeply by the COVID-19 Pandemic and the Russia- Ukraine War, and this dispute between China and Taiwan can have a similar or even worse impact on trade.
It can not yet be determined what exactly will be the impact of this dispute in the long run, but the potential loss of sales and high wages to workers are pre-determined.
The Taiwanese semiconductor industry, in case of any issue in trade routes, could inflame the global scarceness of computer chips. These chips are essential components for almost all modern electronic equipment.
Taiwanese Maritime Bureau issued notices on Wednesday, asking shipping vessels to use alternative routes for trade and travel purposes. Taiwan also deviated 18 international flight routes with the help of negotiations with the Philippines and Japan. Approximately 300 flights are getting impacted due to the rerouting, according to the Transportation Minister of Taiwan, Wang Kwo-Tsai.
Since Nancy Pelosi’s visit, China has already slammed Taiwan with some trade restraints. These trade restraints include the adjournment of exports of natural sand to Taiwan and some fish and fruit imports from the island.
However, this is not the end of the repercussions of Pelosi’s visit, but it is only the beginning. This whole situation can further ruin the relationship between the US and Taiwan with mainland China for months or even years.
Edited by Prakriti Arora