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Panama Takes a New Direction: From Taiwan to China
By admin June 13, 2017

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On Tuesday June 13, Panama formally cut off ties with Taiwan in order to establish ties with China. This shift in alliances seems to have no explanation, but the benefits for China are clear. President Juan Carlos Varela of Panama claims that this change is in the best interest for the country, citing China as it’s second most important trading partner and the potential value of increased commercial ties.

This comes as a surprise considering Panama and Taiwan’s strong relations since Taiwan’s semi-independence after the Chinese civil war in 1949. In fact, the new President of Taiwan, Tsai Ing-wen, made Panama her first international trip. Panama’s official comment on the topic is its recognition of one China, which it believes Taiwan is part of. Taiwan responded by accusing Panama of “bullying” and saying that it feels “anger and regret” towards this situation. They also condemn this action by calling it a “diplomatic money game.”

China claims that Taiwan is a breakaway providence; an island that few countries maintain ties with. China’s efforts in luring countries away from connections with Taiwan are related to China’s suspicions that Taiwan will attempt to gain independence in the near future. Despite a meeting between the President’s of China and Taiwan in 2016, high tensions still remain. Markedly, by the fact that China has missiles positioned at Taiwan. The number of missiles has since increased from its peak of 2,000 missiles in 2010, according to Reuters.

This is not the first country that China has urged to cut off ties with Teipai. In December of 2016, Sao Tome and Principe also changed its alliances, reducing Taiwan’s ties to 20 countries. There are also countries like the U.S., which have official ties to China and unofficial ties to Taiwan (for example, continued arms sales). Based on several similar cases, is clear that countries lean towards China for primarily economic reasons. Besides diplomatic intervention and military force, China has used other tactics to deter Taiwan’s progress and claimed that it will use force if necessary.

A handful of Central American countries recognize Taiwan, but experts say that Panama’s actions will have a strong influence on the region. This new tie has great economic advantage for both China and Panama. China is moving towards non-protectionist policies and is looking to expand its markets abroad to bolster its economy, especially its one belt, one road initiative.

As of now, China is the second main source of revenue for the Panama Canal. Business between the countries is expected to grow, as China has shown interest in opening ports. Moreover, Chinese firms hope to be involved in land development in the region. This also has positive implications for the economies of Asian countries. According to the IMF, non-protectionists policies and more flexible fiscal policy is in the interest of China’s economy, which will have large spillover effects in the rest of the region.

Read More:

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Panama cuts off ties with Taiwan, switches to China

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