The 2024 Ketagalan Forum: Indo-Pacific Security Dialogue, held on August 21, convened scholars and former diplomats from North America, Europe, and Taiwan to explore strategies for strengthening economic resilience through the diplomatic lens of supply chain de-risking.
As global tensions rise, particularly between the US and China, supply chains, trade agreements, and renewable energy are increasingly seen as diplomatic assets. This evolving geopolitical landscape is driving nations to rethink their approaches to economic security.
The security event also saw Taiwan President Lai Ching-te, former Japanese Prime Minister Yoshihiko Noda, former Slovakian Prime Minister Eduard Heger, and ex-US Ambassador to the United Nations Nikki Haley giving addresses regarding economic security and building trade partnerships.
Diplomatic strategies for economic security
Roland Paris, Director of the Graduate School of Public and International Affairs at the University of Ottawa, highlighted the need for nations to develop policies that reduce vulnerabilities while fostering partnerships with like-minded countries. He emphasized the delicate balance between economic security and global cooperation, warning against protectionism that could undermine prosperity and peace.
Paris pointed to Canada's recent efforts to navigate these challenges, citing new regulations on foreign direct investment in sensitive sectors and a focus on critical minerals vital to allied supply chains.
He provided an example of a Taiwanese company's investment in a renewable-energy-powered British Columbia battery plant, where it can produce up to 135 million lithium-ion batteries annually, aligning economic security with climate and geopolitical strategies.
Paris jokingly noted that the province might even be a "great place to put a chip fab" due to its electricity being 100% green energy powered. He finished his remarks by urging vigilance in policymaking to ensure security measures do not dismantle the foundations of global trade and cooperation.
Han-Koo Yeo, Senior Fellow at the Peterson Institute for International Economics and former Korean government official with 30 years of experience in trade, investment, and industrial policy offered his perspective on economic security.
He outlined three key points for policymakers: the importance of diversification in response to disruptions, energy security in the face of the climate crisis, and the need for enhanced international cooperation.
Yeo stressed that countries like Taiwan and South Korea, which once thrived under hyper-globalization and free trade, are now undergoing a realignment of their supply chain where trade and investment relationships have been ever more diversified, particularly with regions like ASEAN and India.
Taiwan President Lai Ching-te stressed in his opening speech of the security forum that the Southbound Policy initiated by the Tsai Ing-wen administration resulted in Taiwan's exports to 18 southbound nations reaching US$50.2 billion in the first half of 2024. Beyond forging partnerships allied with their interests, nations have to adapt to new political realities as the geopolitical landscape shifts.
When the Russo-Ukraine war started, South Korea joined the US-led sweeping trade control measures and introduced investment screening against Russia. Both of these acts are a first for the country.
Even though the US is a security guarantor in the Indo-Pacific region, the fast economic growth of China for the last couple of decades has made the country the number one trading partner of many nations stuck in the middle between these two superpowers.
Yeo uses these as examples of the new issues policymakers are facing. Yeo believes the situation is a mixed picture as the change of geopolitics in the region has offered nations to develop their own industries, spaces previously occupied by China as the world's factory.
However with the US on the trajectory of America first driven by efforts to relocate manufacturing domestically for job creation regardless of the year-end election results, the rest of the world needs to plan accordingly for the next several years. Additionally, he also pointed out the challenges Asian countries face in developing sufficient clean energy sources due to geographic and climatic constraints, suggesting that regional collaboration could be key to overcoming these challenges.
Yeo concluded by praising the Taiwan-US agreement on 21st-century trade issues. However, he called for new frameworks to incorporate supply chain and clean energy considerations—areas where traditional free trade agreements have fallen short.
Supply chains as diplomatic leverage
Franz Jessen, Former EU Ambassador to the Philippines, questioned how Taiwanese industry would respond to shifting global trade dynamics and whether Europe could adapt similarly. He noted inconsistencies in international reactions, citing examples from South Korea and the US, where views on the impact of trade tensions with China vary widely.
Jessen highlighted that these differing perspectives make it difficult to understand the current situation, describing it as a "moving target." He identified US-China tensions as a defining feature of this decade, emphasizing that economic security must be considered in both traditional trade policy and the newer focus on national security—a concept relatively unfamiliar to the EU.
Jessen discussed the EU's strong support for international agreements and the challenges posed by US-China disputes, which he echos former ASML CEO Peter Wennink's view where he believes the fight between the two nations is ideological rather than fact-based and the chip wars will continue for the foreseeable future. He warned that this ideological conflict could lead to policies where economic losses are deemed acceptable if they harm the adversary more.
Reflecting on the limited effectiveness of economic sanctions throughout history, Jessen cited examples from ancient Greece to modern-day China, arguing that China's attempts to coerce the EU have generally failed, particularly when sanctions target sectors unrelated to the original disputes. He expressed uncertainty about the future, noting the high costs associated with adjusting supply chains and bolstering national defenses in Europe.
Artis Pabriks, President of Latvia's Northern Europe Policy Centre, echoed skepticism about the effectiveness of economic sanctions, noting that they are not a "silver or golden bullet." He emphasized that a strategic mix of political, military, and economic measures is essential, likening it to a "cocktail" approach in medicine.
Sillicon shield is more than just Taiwan
Jieh-Min Wu, a Research Fellow at Academia Sinica's Institute of Sociology, discussed the concept of the "silicon shield," arguing that it is not purely "Taiwan-centric." While Taiwan's chip manufacturing prowess could make it a target—coveted by China or pressured by the US for diversification—Wu argued that the true power of the silicon shield lies in the global consequences of any disruption to the chip supply chain resulting from conflict over Taiwan.
Wu noted the potential for "asymmetric damage," where disruptions could harm the US and its allies more than China, which has advanced its semiconductor industry. This potential must be considered in strategic calculations.
Wu also discussed US "friend-shoring" policies aimed at reducing reliance on Taiwan by rebuilding domestic chip-making capacity. However, he pointed out that these efforts are costly, time-consuming, and difficult to replicate given Taiwan's decades of investment in infrastructure and a specialized workforce. Until alternative supply chains are established, the world will continue to rely heavily on Taiwan.
Wu proposed the concept of "Silicon Shield 2.0," which aims to elevate Taiwan's role in global economic security by more fully integrating its semiconductor ecosystem into international production networks. He addressed concerns that diversification could weaken Taiwan's industry, arguing that TSMC's investments in the Global North should be viewed as an extension of Taiwan's influence and strategic alignment with the US and its allies.
"Taiwan's success is a linchpin of global stability, proving that in the interconnected world of semiconductors, security for one is security for all," Wu concluded.
