“Taiwan’s overall investment in defense — approximately 2.6 percent of GDP — is woefully inadequate given the ongoing tensions with mainland China ... Taiwan spends far too little on its own defense, in large part because Taiwanese believe the United States is their ultimate protector,” according to the Cato Institute policy analysis, entitled “Taiwan’s Defense Budget: How Taipei’s Free Riding Risks War.”

Justin Logan and Ted Galen Carpenter, authors of the report, wrote that “America is now in the unenviable position of having an implicit commitment to defend a fellow democracy that seems largely uninterested in defending itself.”

The report further says this scenario is aggravated by Taiwan’s internal politics, with the Democratic Progressive Party-led government calling for Taiwan independence in a more aggressive way.

These internecine struggles often result in actions that greatly provoke China, says the report, citing as examples Taiwan’s recent bid to join the United Nations under the name “Taiwan” instead of its official title “Republic of China.”

Meanwhile, Beijing’s military modernization program appears oriented toward credibly threatening military action if Taipei’s actions toward independence continue, the report says.

As China beefs up its arsenal, the disparity between the military capabilities of the two nations continues to grow, upsetting the intricate balance of power that has so far deterred the larger nation’s attack, it says.

The 1979 Taiwan Relations Act (TRA) establishes a U.S. commitment to defend the island if the People’s Republic of China ever uses military force to achieve reunification. However, U.S. military assistance to Taiwan is not guaranteed.

In the event that the United States did respond, a confrontation between the two military and trade giants could be calamitous, the report says.

“A Sino-U.S. war over Taiwan could have global economic consequences that would be felt for decades,” write the authors. “The current global economic expansion could be upended — and with it the very international structure that has underpinned U.S. leadership for decades.”

As the United States’ attention is focused on other international conflicts, “Washington’s policy has not shifted in response to these changing realities, and without increased realism in Washington, a crisis could emerge for which the United States is ill-prepared. ... Washington needs to clarify its policy on Taiwan and prevent its client state from dragging the United States toward a confrontation with China,” the report says.

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