ANNUAL REPORT

19
Despite this pressure, Taiwan continues to pursue greater participation
in the international community through its official diplomatic
relations with 22 countries, efforts to expand its participation
in international organizations, such as the International Criminal
Police Organization (INTERPOL), and initiatives to strengthen economic
and unofficial diplomatic partnerships with countries other
than China. For example, one of the Tsai Administration’s main initiatives
to expand Taiwan’s international participation is its “New
Southbound Policy” of enhanced engagement with Southeast Asia,
South Asia, and Oceania.
Taiwan’s economic dependence on China—its largest trading partner—makes
it vulnerable to fluctuations in China’s economy. As of
August 2016, China remains Taiwan’s biggest export market and
top source of imports. However, compared to 2014, total cross-Strait
trade in 2015 decreased by about 11 percent, with Taiwan’s exports
to China shrinking by 13.2 percent, and its trade surplus with China
decreasing by 21.5 percent. Taiwan’s exports were hurt by China’s
economic slowdown and increased competition from Chinese
high-tech suppliers, which undercut them on cost.
The Tsai Administration also faces the challenge of a Chinese military
modernization program that has increased dramatically despite
eight years of enhanced cross-Strait economic, people-to-people,
and government ties. Broadly, the cross-Strait military balance has
shifted toward China. To meet this challenge, Taiwan has sought to
enhance its military capabilities in part by indigenously developing
platforms and weapons systems. Advanced antiship cruise missiles,
air defense missiles, and fast attack and stealthy catamaran-style
patrol ships are among the newest platforms and weapons systems
Taiwan has produced. Taiwan also seeks to enhance its military
capabilities through procurement of military equipment from the
United States. In December 2015, the U.S. Department of State notified
Congress of its approval of the potential sale of $1.83 billion
in arms to Taiwan, including two OLIVER HAZARD PERRY-class
guided missile frigates, AAV–7 amphibious assault vehicles, and antitank
missiles, among other platforms and weapons systems. Meanwhile,
Taiwan and the United States continue to move forward with
the upgrade of Taiwan’s F–16 A/B fighter aircraft.
Beyond security ties, the U.S.-Taiwan economic relationship remains
strong. In 2015, bilateral trade totaled $66.6 billion, and
Taiwan became the United States’ ninth-largest trading partner,
surpassing India, Italy, and Brazil. U.S.-Taiwan cooperation spans
many other areas as well, including environmental protection, public
health, and cybersecurity. Taiwan’s robust democracy, civil society,
and technology sector, and its vast expertise and experience in
areas such as humanitarian assistance and disaster relief make it
a strong partner for the United States in facing global challenges.
Conclusions
• In 2016, Taiwan held historic elections, in which Tsai Ing-wen of
the Democratic Progressive Party (DPP), was elected Taiwan’s
first female president and the DPP gained an absolute legislative
majority for the first time. Despite President Tsai’s pragmatic
cross-Strait policy focused on maintaining the status quo,