Why So Little? The Curious Case of Taiwan’s Defense Spending Steven X. Li A dissertation submitting in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Washington 2020 Reading Committee: David Bachman, Chair James Lin William Lavely Program Authorized to Offer Degree: International Studies i ©Copyright 2020 Steven X. Li ii University of Washington Abstract Why So Little? The Curious Case of Taiwan’s Defense Spending Steven X. Li Chair of the Supervisory Committee: Professor David Bachman Jackson School of International Studies Taiwan’s defense budget continues to be a friction point in U.S.-Taiwan defense relations. Despite having adopted allocating 3 percent of its GDP towards defense as a target, Taipei continues to hover around 2 percent in annual defense spending. This dissertation examines the reasons for this shortfall and also assesses if 3 percent is an appropriate or meaningful target. It argues that Taiwan’s defense spending is constrained by a multitude of factors across political contexts, practical limitations, and procedural impediments. As such, using 3 percent of GDP as a standard for Taiwan’s defense spending or measurement of its commitment to self-defense, without adequately understanding all the factors, would be inappropriate and superficial. First and foremost, international isolation along with domestic necessities shape Taipei’s defense behavior politically. On the international level, geopolitical isolation makes Taiwan reliant on U.S. support but the fear of abandonment continues to motivate Taipei’s behavior in its relationship with Washington. At the domestic level, the lack of iii decision-making centrality and cohesion undermine Taipei’s ability to change. Second, financial, geospatial, and demographic realities impose practical limitations that further constrain Taiwan’s defense choices. A limited financial base forces Taipei to make investment tradeoffs in maximizing the island’s security; Taiwan’s small land mass and proximity to China makes the island prone to being saturated by defense hardware; and low birth rates and aging population negatively affect Taiwan’s defense readiness. Finally, administrative obstacles procedurally undermine the effectiveness of U.S.-Taiwan defense interactions. Washington’s restrictive approach to dealing with Taiwan and Taipei’s bureaucratic rigidity collectively undercut effective U.S.-Taiwan defense interactions. iv Disclaimer The views expressed in this dissertation are those of the author and do not reflect the official policy or position of the United States Air Force, Department of Defense, or the US Government. v TABLE OF CONTENTS Abstract iii List of Figures vii List of Acronyms viii Introduction: Overview of the Dissertation 1 Chapter One: Political Analysis 17 1.1: International Level 21 1.2: State Level 61 1.3: Individual Level 79 1.4: Political Analysis Conclusion 84 Chapter Two: Practical Analysis 87 1.1: Financial Considerations 88 1.2: Geospatial Considerations 107 1.3: Demographic Considerations 114 1.4: Practical Analysis Conclusion 132 Chapter Three: Procedural Analysis 133 1.1: Washington’s Exceptionalism Without Exceptions 134 1.2: Taipei’s Bureaucratic Rigidity 157 1.3: Procedural Analysis Conclusion 169 Chapter Four: Conclusion 171 Interviews 183 Bibliography 184 vi LIST OF FIGURES Figure 1: China and Taiwan Defense Spending as Share of GDP 19 Figure 2: China and Taiwan Defense Spending in Constant 2018 US Dollars 20 Figure 3: China and Taiwan Defense Budget as Share of Total Government Spending 20 Figure 4: Security Consensus Behind Traditional Security Environments obtained 22 from retired Taiwan Chief of Naval Operations, Richard Chen (陳永康), April 2019 Figure 5: President Trump with United States Air Force Academy graduating cadets, 34 May 2019 Figure 6: Slide extracted from Richard Chen’s presentation to Legislative Yuan 57 Figure 7: Taiwan Presidential palace in April 2012 136 Figure 8: Taiwan Air Force delegation visit to the U.S. Pentagon, 2012 137 Figure 9: U.S. Marines aircrew off-loading a pallet of relief supplies in Taiwan 138 Figure 10: Flow chart from Taiwan’s National Defense Report, 2017 159 Figure 11: Recommendation Summary 177 vii LIST OF ACRONYMS AFB Air Force Base AIDC Aerospace Industrial Development Corporation AIT American Institute in Taiwan AIT-T American Institute in Taiwan – Taipei AIT-W American Institute in Taiwan – Washington AMRAAM Advanced Medium Range Air-To-Air Missile AOR Area of Responsibility ARIA Asia Reassurance Initiative Act ATJ Advance Trainer Jets BOS Base Operating Support C5ISR Command, Control, Computers, Communications, Cyber, Intelligence, Surveillance and Reconnaissance CCP Chinese Communist Party CIA Central Intelligence Agency CNO Chief of Naval Operations CODE Cyber Offensive and Defensive Exercises COMINT Communications Intelligence DASD Deputy Assistant Secretary of Defense DoD Department of Defense DPP Democratic Progressive Party DSCA Defense Security Cooperation Agency ELINT Electrotonic Intelligence F-CK-1 Indigenously Developed Fighter viii FISINT Foreign Instrumentation Signals Intelligence FLIR Forward Looking Infrared FMS Foreign Military Sales FOC Full Operational Capability GDP Gross Domestic Product GWOT Global War on Terror HA/DR Humanitarian Assistance and Disaster Relief IA Inter-Agency IDF Indigenous Defense Fighter IDS Indigenously Developed Submarines INSDR The Institute for National Defense and Security Research IP Investment Plan JAM-GC Joint Concept for Access and Maneuver in the Global Commons JDCA Joint Defense Capabilities Assessment KMT Kuomintang LOA Letter of Offer and Acceptance LOR Letter of Requests LY Legislative Yuan MAC Mainland Affairs Council MANPADS Man-Portable Air-Defense Systems MASINT Measurement and Signature Intelligence MINDEF Minister of Defense MND Ministry of National Defense ix NCSIST National Chung-Shan Institute of Science and Technology NDC National Development Council NDU National Defense University NIPO U.S. Navy International Program Office NSC National Security Council NT$ New Taiwan Dollar O&M Operating and Maintenance ORD Operations Requirements Document OSD Office of the Secretary for Defense P&A Price and Availability PAR Pre-Letter of Request Assessment Requests PLA People’s Liberation Army PLAAF People’s Liberation Army Air Force PME Professional Military Education POTUS President of the United States PRC People’s Republic of China RIMPAC Rim of the Pacific SAM Surface to Air Missile SAR Systems Analysis Report SCO Security Cooperation Organizations SEAL Sea, Air and Land SECAF Secretary of the Air Force SECDEF Secretary of Defense x SIGINT Signal Intelligence SIPRI Stockholm International Peace Research Institute SRP Surveillance Radar Program TAF Taiwan Air Force TECRO Taipei Economic and Cultural Representative Office TNSS Taiwan National Security Survey TRA Taiwan Relations Act TSFD Technology Security and Foreign Disclosure UAV Unmanned Aerial Vehicle US$ U.S. Dollar USAF United States Air Force USAFA United States Air Force Academy xi INTRODUCTION Why any politically autonomous society interested in self-preservation would continue to underspend on defense is a conundrum, especially when faced with an increasingly existential threat from a much more powerful and hostile neighbor. Such is the case with Taiwan, a self- ruled island located approximately 100 miles off of China’s coast, which in recent years has been spending approximately 2 percent of its GDP on defense, well below its self-proclaimed goal of 3 percent. Ever since the post-Chinese Civil War split, relations between Taiwan and China have been tense, with occasional outbreaks of armed conflict. The present-day potential for conflict is as real as ever—China’s leader Xi Jinping continues to declare his desire to “reunify” Taiwan with China, by force if necessary; China’s military capabilities and show-of-force in the vicinity of the Taiwan Strait continue to increase; and China has 1200 to 1600 ballistic and cruise missiles aimed at Taiwan, which being only about 80 to 100 nautical miles away at the narrower parts of the Taiwan Strait, means missiles can start impacting Taipei five and a half minutes after Beijing decides to launch an attack against Taiwan.1 Taipei’s military spending, which should logically be the most evident expression of its commitment towards not only self-defense but also regime survival, steadily diminished from its highest point at 7.6 percent of GDP in 1979 to its lowest point at 1.6 percent of GDP in 2016.2 Since President Tsai Ing-Wen entered office in 2016, the defense budget started to see modest 1 Liu, Xing, 2009. Air Defense and Space Defense Information Systems and Their Integrated Technologies [防空防 天信息系统及其一体化技术]. China: Beijing: National Defense Industry Press. 2 Stockholm International Peace Research Institute, 2019. SIPRI Military Expenditure Data. May 5. Accessed May 14, 2019 https://www.sipri.org/research/armament-and-disarmament/arms-transfers-and-military- spending/military-expenditure. 1 increases but still only reached 2.1 and 2.3 percent of GDP for 2019 and 2020 respectively.3 By comparison, other small nations such as Singapore and Israel respectively spent 3.3 and 5.7 percent of GDP on defense in 2017. Even South Korea, which has a bilateral mutual defense treaty with the United States and 28,500 American troops based in its country spent 2.6 of GDP on defense in the same year.4 Allocating 3 percent of Taiwan’s GDP for defense spending has been a mainstay in U.S.- Taiwan