Playing a New Game

A year after derecognition, some links are stronger than ever

The fading ocher-colored mansion sits like a ghost in the midst of Taipei's swirling traffic. The heavy wooden doors, surmounted by iron spikes, are sealed shut. Shards of broken glass protrude from the high, surrounding wall. The pole inside the compound that flew the U.S. flag for 63 years (first when the island was under Japanese domination, later under the Republic of China), with only wartime interruptions, does so no longer. Now a set of rough, unpainted boards nailed across the brass plaque on the gate obscures its legend: EMBASSY OF THE UNITED STATES OF AMERICA.

In the year since the U.S. extended full diplomatic recognition to Peking and consequently "derecognized" the Republic of China, the abandoned embassy in Taipei has come to symbolize the passing of the American era. Yet Taiwan has demonstrated a robust self-reliance during the past year, and its relationship with Washington has changed far more in form than in substance. Though the formal U.S. presence is gone and its last legal vestige, the Mutual Defense Treaty, is due to expire next week, other links are thicker than ever. "Both sides," says an American resident in Taiwan, "are playing the new game to the hilt."

One court for the new game is a squat, U-shaped building that formerly housed the U.S. Military Assistance Advisory Group and is now called the American Institute in Taiwan. The A.I.T., manned by temporarily "retired" Foreign Service officers, hands out as many visas to the U.S. for Republic of China passport holders as did the old U.S. embassy. More important, it serves to nurture Taiwan's ever growing commercial ties with the U.S.

This year, trade between the two countries is expected to reach an impressive total of $9.6 billion, up from $7.4 billion in 1978; it has made Taiwan the U.S.'s eighth largest trading partner. By contrast, two-way trade between the People's Republic of China and the U.S. this year will amount to $1.8 billion. Washington has quietly but systematically encouraged the bilateral trade boom. Among major recent deals: the Export-Import Bank, which sent a delegation to the island this fall, extended $500 million worth of loans during 1979. Since January, American banks have also contributed to a $200 million loan to the Taiwan Power Co. General Electric has joined with Taiwan companies on a $30 million turbine-generators project. Said Robert P. Parker, president of the American Chamber of Commerce in Taiwan, earlier this month: "We have unhesitatingly reaffirmed our confidence in Taiwan."

That confidence has been generated by Taiwan's formidable economic achievements, in spite of the diplomatic setback of U.S. derecognition. Per capita income is now close to $1,500, a more than 25% increase in two years. One particular statistic elicits envy in the West: the 25% growth in productivity last year that enabled the country to afford an average 16% industrial pay increase. Overall, foreign trade also continues to grow at a gallop. It went up by an extraordinary 35% in 1978 and rose another 20% this year. In Taipei the signs of prosperity are everywhere. Reports TIME'S Hong Kong correspondent Richard Bernstein: "The city is filled with sleeker and sleeker cars (most of them manufactured on Taiwan), color television sets, elegant and crowded restaurants, coffee shops, haute couture boutiques and every sort of expensive bar and club for well-heeled local and foreign businessmen."

The boom has commanded a new respect abroad, despite the country's diplomatic isolation. Explains a Western expert in Taipei: "There are certain objective facts that make you optimistic about Taiwan. The country exists. It has a government that governs and an army that can fight. It has excellent economic policies and a broad consensus among the people that they don't want to be Communist." The optimism has even prompted some countries that long ago abandoned Taiwan diplomatically to creep back commercially. In the past 16 months, both France and Belgium have set up new trade offices in Taipei.

Taiwan, however, is not betting its survival only on trade or on the backdoor resumption of old commercial friendships. Political isolation has only intensified the Nationalist government's concern for military self-reliance. Though the U.S. sold no arms to Taiwan during 1979, Taipei is expected to submit a long shopping list to Washington for next year. Items: replacement aircraft for Taiwan's 150 F-5Es, Harpoon ship-to-ship missiles, new reconnaissance aircraft.

At the same time, Taipei has also felt compelled to operate with a new international flexibility. For the first time in 30 years, the government has quietly encouraged Taiwanese businessmen to pur sue opportunities in some Eastern European countries, such as Poland and Hungary, though not in the Soviet Union.

Economic prosperity, however, has also brought internal political restlessness. Two weeks ago, 500 people in the southern industrial city of Kaohsiung rioted when police tried to break up their un authorized antigovernment rally; 22 of the rioters were subsequently arrested. Many of the protesters belonged to groups that have long sought a relaxation of the tight political grip on the island by the ruling Kuomintang (Nationalist Party). Other opponents of the government have been demanding "independence" for Taiwan, meaning that the island should renounce its claims to the mainland and accept the reality of Peking. For all of Taiwan's new sense of self-reliance, however, that notion still remains anathema to the government. "That concept must be eradicated," says Taiwan's President Chiang Ching-kuo. "It is contrary to the national conscience." qed

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