The Peter Zeihan Podcast Series - Taiwan and the US Reach a Trade Deal || Peter Zeihan

Episode Date: June 1, 2023

In mid-May, the US Trade Representative established a trade initiative with Taiwan. While this isn't a full-blown trade deal, it represents the shift in US policy towards recognizing Taiwan as an independent country. Full Newsletter: https://mailchi.mp/zeihan/taiwan-and-the-us-reach-a-trade-deal

Hey, everyone, Peter Zine here. We're going to talk about Taiwan today. So back on May 18th, the U.S. Trade Representative, Ms. Tai, finalized a trade deal with the Taiwanese. Now this isn't like a big free trade deal. This is more like in the early steps of what's necessary to negotiate a free trade deal, things on regulations and measures, basically getting all your ducks and roast so you can start the real work. But still, this is the first time the United States has ever done something like this with something that's technically not a country,

and you only do this with countries. And one of the things we've been seen over the last couple of years is the United States is moving bit by bit by bit towards formal recognition of Taiwan as an independent country. And now that we're starting formal trade talks, you would expect formal recognition of Taiwan as independence to be in the not too distant future. We've also seen this almost comical development of the White House

where Biden will treat Taiwan like an independent country that we have a defense agreement with, even though we don't formally say that it's an independent country and we don't have a defense agreement with it. And then his comments are walked back by his people. But instead of two years ago, when they were being walked back within minutes now, it takes a couple of weeks to get the walk back. So bit by bit by bit, we're easing in to a formal recognition.

And of course, no one in Beijing is happy about that. And so a couple things here. Number one, Taiwan is a major trading partner. I believe it's the 12th most intense trading partner. So, you know, several billion dollars of high-tech stuff that's valuable to everybody on both sides of the Pacific. So there's a good economic reason. And then, of course, if the Taiwanese are not in Beijing's grasp, it's an important military asset and we're now seeing the very beginnings of the sort of military partnership that we started

developing with the Ukrainians, you know, eight years ago. Now, if the Chinese were to launch an assault on Taiwan tomorrow, I have no doubt that they would win the war. Well, their military has a number of faults. It doesn't have reach. It doesn't have range. It doesn't have staying power. They're too dependent upon foreign sources for their energy and for their high tech all these things are true, but it was designed with Taiwan in mind, and Taiwan is not that far away, and for the United States to get involved, it first has to cross the Pacific, which will take several weeks. So in the Chinese mind, it would be a high-intensity campaign that would just last a couple of weeks, maybe a month, and before anyone could really get involved, and they would probably win.

And I think that's a reasonable military assessment. But whenever you're planning for war, you have to think about what happens the next day. And from the Chinese point of view, because no one recognizes Taiwan as a country, because there is no defense agreement between the Taiwanese and anyone, they would at most face some moderate sanctions that would fade out over a few years. And they think that that's something they could absolutely stomach. And if that was true, I would agree. But two things are going on. First of all, the United States has a tendency to intervene militarily in places that it finds convenient. because it has global reach,

something that the Chinese can only dream of achieving at some point this century. So the smart play, if you want to fight China, isn't a fight in the Taiwan straight. I mean, this is straight out of Sung Zoo. Don't face someone where they're strong. Face them where they're weak. China imports three quarters of its energy,

almost all of that along a path from the Persian Gulf by India, South China Sea, and then up to the Chinese coastal city. So what you do is you put a few destroyers, or equivalent, with some Marines, in the Indian Ocean, you cut the energy line. And since this is the source of most of the energy and even a greater proportion of this stuff that allows the Chinese to grow their own food, you get a deindustrialization

collapse complete with famine in six months. I would have believed that the Chinese recognized this a few years ago, but Chairman Xi has purged the system of everyone who's competent and everyone who's willing to tell him anything, not just things he doesn't want to hear, but anything, to the point that it's entirely possible that it's now just a completely group think scenario in Beijing. And that certainly seems to be the case. All the bureaucrats, all the diplomats seem to be drinking all the Kool-Aid and have lost the capacity of independent thought or any sort of meaningful penetrating analysis. And so the belief is, the actual war plan is, that they sink any American naval assets that are within reach of them as part of the Taiwan operation.

but the rest of the U.S. Navy will continue to keep the seas safe for global shipping. And this sort of disconnect between their perception of reality and the reality of American power is, you know, one of the five dumbest things I've seen in the last 20 years. And, you know, two of the other dumb things have to do with the Chinese government in recent months anyway. So am I concerned that there's going to be a war in Taiwan? Yes and no. First the no. They got to know it's not just a war they can't win over the long term,

but one that will cost them the advanced economic status that they have fought so hard to get. And it is the end of China as a modern industrialized nation state. But then there's the yes. They may have been so sunk into their propaganda that they think not only this is a winnable war, but one that the rest of the world would just sign off on. And in the aftermath of the Ukraine, where it blows my mind that I'm even considering this. But the more people I talk to are in the space on both sides of the Pacific, the myopia, the deliberate ignorance within the Chinese bureaucracy really has become breathtaking. And so the risk here is real.

It would mean the end of not just the American-Chinese relationship, but of China as an entity, but it still might happen. All right, that's it for me. See you guys next time.