Policy Analysis No. 600

Taiwan’s Defense Budget: How Taipei’s Free Riding Risks War

Executive Summary

Taiwan spends far too little on its own defense, in large part because the Taiwanese believe the United States is their ultimate protector. The Taiwan legislature’s six-year delay and severe downsizing of a budget to pay for weapons systems that Washington has offered the island since 2001 is only one piece of evidence of Taiwan’s free riding. Although Taiwan recently approved roughly US$300 million of the original budget of about $18 billion, the underlying problem remains: even with the new appropriation, Taiwan’s overall investment in defense — approximately 2.6 percent of GDP — is woefully inadequate, given the ongoing tensions with mainland China. America is now in the unenviable position of having an implicit commitment to defend a fellow democracy that seems largely uninterested in defending itself.

Taiwan’s political leaders are creating the worst possible combination: the provocative cross-strait policy of President Chen Shui-bian and the opposition-dominated legislature’s irresponsible policy on defense spending. That is a blueprint for disaster. The People’s Republic of China has already deployed nearly 1,000 ballistic missiles across the strait from Taiwan, and Beijing’s military modernization program appears to be oriented toward credibly threatening military action if Taipei’s moves toward independence continue. A bold cross-strait policy coupled with inadequate defense spending virtually invites a PRC challenge at some point. And America would be caught in the middle.

It would be dubious enough for the United States to risk war with an emerging great power like China to defend a small client state, even if that state were making a serious effort to provide for its own defense. It would be even worse to incur that risk on behalf of a client state that is not willing to make a robust defense effort. To minimize the risk of a disastrous conflict, America should promptly terminate any implied defense commitment to Taiwan.

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Justin Logan is a foreign policy analyst and Ted Galen Carpenter is vice president for defense and foreign policy studies at the Cato Institute and author of America’s Coming War with China: A Collision Course over Taiwan (2005).