In late December 2019, Taiwan’s Vice President Chen Chien-jen (陳建仁) traveled to Palau to commemorate the 20th anniversary of diplomatic relations between Taiwan and the Pacific island-nation. “For two decades, Palau has been our constant companion, becoming one of Taiwan’s most faithful Pacific allies,” said Chen, who thanked Palau for supporting Taiwan’s efforts to participate in international organizations, at an anniversary luncheon hosted by Taiwan’s embassy in Koror and attended by Palau’s President Tommy Remengesau, Jr. Vice President Chen’s trip was also meant to safeguard Taiwan’s current diplomatic status among the countries in the Pacific islands after the Solomon Islands and Kiribati switched diplomatic recognition to the People’s Republic of China (PRC) in September 2019, whittling down Taipei’s total diplomatic allies to 15 countries in the world, four of whom are located in Oceania.
Palau in Indo-Pacific Geopolitics
The tiny Pacific island-nation of Palau, with a population of 21,000 and comprised of more than 500 islands southeast of the Philippines and a territory spanning 459 square kilometers, plays an outsized role in the United States, China, Taiwan, and other Asian powers’ respective strategies in the Pacific islands. The United States is working with Australia to counter China’s growing influence in the South Pacific and help Taiwan retain its remaining diplomatic allies. In May 2019, then Principal Deputy Assistant Secretary of State for East Asian and Pacific Affairs W. Patrick Murphy warned of the dangers of Chinese poaching of Taiwan’s allies. “China is attempting to reduce Taiwan’s diplomatic relations in the region and that’s kind of heavy-handed,” Murphy said. “It gives rise to tensions by changing the status quo and then the possibility of conflict,” he added. He expressed concern that Chinese militarization in the Pacific would destabilize the area, as China has done in the South China Sea.
The United States, which administered Palau under the UN Trust Territory of the Pacific Islands from 1947 to 1994, currently has defense agreements known as Compacts of Free Association (CFA) with Palau, the Federated States of Micronesia (FSM), and the Marshall Islands, that will expire in 2024. Under the terms of these agreements, the United States is responsible for the defense of these three Pacific nations; the US military has exclusive access to their airspace and territorial waters, though it has not stationed American troops there. Washington, in turn, provides economic assistance to these three Pacific nations, also referred to as the Freely Associated States (FAS). The CFA also plays a factor in why Palau and the Marshall Islands continue to recognize Taipei; switching diplomatic recognition from Taipei to Beijing would risk angering Washington, their main external source of assistance.
Washington also has taken initiatives to strengthen its partnership with these Pacific islands. In May 2019, President Donald J. Trump hosted the three leaders of Palau, the FSM, and the Marshall Islands at the White House. The four countries issued a joint statement reaffirming their “interest in a free, open, and prosperous Indo-Pacific region” and resolving to address regional issues bilaterally and through multilateral forums. Furthermore, negotiations have begun to renew the defense agreements with the three Pacific nations, said US Secretary of State Mike Pompeo during his August 2019 trip to the region. A major concern is that if the United States does not renew the CFA with Palau and other Pacific island-nations, this could create an opening for China to further expand its presence in the region. One potential consequence is that Palau and the Marshall Islands would be increasingly pressured to drop Taipei and officially recognize Beijing after 2024, if not sooner. Therefore, it is imperative for the United States, Australia, and Taiwan to continually engage these Pacific islands at the highest levels of government in order to maintain Taipei’s diplomatic status quo.
Taiwan-Palau Partnership
Taiwan’s main goal is to shore up diplomatic ties with Palau and other allies in face of Chinese advancements in Oceania. In March 2019, Taiwan President Tsai Ing-wen (蔡英文) chose Palau as the first stop during her Oceans of Democracy (海洋民主之旅) state visits to Pacific island allies, including Nauru and the Marshall Islands. Later that year, Foreign Minister Joseph Wu (吳釗燮) and Council of Indigenous Peoples (原住民族委員會)Minister Icyang Parod (夷將·拔路兒) also served as special envoys to Palau. Taipei says that it and Palau possess similar ideals—such as upholding democracy and freedom—and an Austronesian heritage and culture shared by Taiwan’s aboriginal groups. But most importantly, both have supported each other over the past 20 years.
After three decades of US administration, Palau gained independence in 1994 and established diplomatic relations with the Republic of China (ROC) on Taiwan on December 29, 1999. Since then, Taiwan’s government has invested in numerous aid and development projects, in the fields of agriculture, green energy, medical and health care, and tourism in Palau. These cooperative projects and visible signs of Taiwanese-funded road and infrastructure projects in Palau have served to strengthen people-to-people ties. As a Palauan newspaper editor said, “every Palauan has a story” of interaction with Taiwan through education, medical treatment, and travels. Hospitals in Taiwan have saved the lives of thousands of Palauan people, a major reason why Palau will not break relations with Taiwan, said Palau’s ambassador to Taiwan Dilmei Louisa Olkeriil in 2018.
In return, Palau has voiced strong support for Taiwan’s international participation, most recently at the 74th United Nations (UN) General Assembly in September 2019. A few of Taiwan’s diplomatic allies spoke up on behalf of Taipei’s inclusion into international organizations. In addition to pro-Taiwan statements by Guatemala and Eswatini, Palau’s President Remengesau Jr. called for Taiwan’s participation in the UN General Assembly and other international bodies such as the World Health Assembly, International Civil Aviation Organization, and the UN Framework on Climate Change. Speaking at the UN meeting on universal health coverage on September 23, Remengesau Jr. called on the UN not to exclude Taiwan on matters of universal healthcare. “Taiwan’s universal health insurance program is a model for the world. Her support for Palau is an example of the power partnership in realizing universal health coverage,” he said. Taiwan’s Foreign Minister Wu received and thanked the presidents of Palau and Nauru, while they transited through Taiwan’s airport on their return trip from the UN meeting.
Palau under Chinese Pressure
As a small island-nation heavily dependent on foreign tourism, Palau has to carefully engage and balance the bigger powers in the region. Palau also cannot afford to lean on a single country, or limit its foreign relations to a few countries. Palau’s President Remengesau Jr. has said his country wants to be friends with everyone including China. Although Palau does not have formal diplomatic ties with China, President Remengesau Jr. has publicly expressed his desire to maintain friendly and cooperative relations with China. In a 2017 interview, Remengesau Jr. expressed gratitude for the Chinese tourists and investments in his country. If he could, the Palauan president said he would want to recognize both Taiwan and China. However, he said Palau will continue to maintain official relations with Taiwan, whom he calls a “friend and partner” that has stood with his country through “thick and thin.” The majority of Palauans support the country’s diplomatic relations with Taiwan, said Palau’s Ambassador to Taiwan Olkeriil. “We are a democratic country, and we support and promote our relationship with countries with the same system of government, such as Taiwan,” Olkeriil said.
Palau is struggling with its tourism industry, particularly after Beijing retaliated against Palau’s diplomatic ties with Taipei by banning Chinese tourist groups from traveling to the Pacific island. The Chinese government ordered tour operators in November 2017 to suspend group tours to Palau. The precipitous decline in Chinese tourists from more than 70,000 in 2016 and 55,000 in 2017 to 25,000 in the first six months of 2018 dealt a significant blow to Palau’s tourism industry, which accounts for more than 40 percent of its GDP. Palau Pacific Airways was forced to suspend service to Hong Kong and Macau via Bali due to the sharp drop in Chinese tourists. Chinese tourists made up 47 percent of total international visitors to Palau in 2016, compared to Taiwanese tourists at 10 percent that same year.
In response to China’s travel restrictions, Palau’s leader retorted that his country will not bow to Chinese pressure to abandon Taiwan. Remengesau Jr. told Japanese media said he would seek economic assistance from Japan, among other countries, to offset the losses from the Chinese side. “I approached Japan, I said: ‘Please build one or two high-end hotel-resorts in Palau’,” he said. Remengesau Jr. also asked the United States and Taiwan to help boost its sagging tourism economy. “I have approached Taiwan. I have approached the United States… Just one investment can go a long way to help maintain the economic progress of a small nation such as Palau,” the leader said.
Taiwan, in turn, announced several measures to help Palau improve its tourism industry. Taiwan’s Ministry of Foreign Affairs (MOFA) planned to send tourism and business delegations to Palau. Baushuan Ger (葛葆萱), director-general of MOFA’s Department of East Asian and Pacific Affairs, said Taiwan will offer assistance to boost Palau’s tourism business. Additionally, President Tsai said that China Airlines, one of Taiwan’s main airline carriers, would offer an additional direct flight to Palau starting June 2019, bringing the total number of weekly direct flights from Taiwan to Palau to four. President Tsai said she hopes more Taiwanese will visit Palau. Taiwanese citizens currently can visit Palau visa-free for 90 days; Palauans also enjoy reciprocal visa-free treatment.
In light of President Tsai’s re-election following national elections on January 11, 2020, Beijing may show its displeasure by ratcheting up the pressure on Taipei on the international front. The Chinese government could strengthen efforts to poach another one of Taiwan’s remaining 15 diplomatic allies, particularly the smaller Pacific island-nations. Taipei should continue to work with Washington and other like-minded countries, such as through the Global Cooperative Training Framework (GCTF, 全球合作暨訓練架構) and the Pacific Islands Dialogue (太平洋對話), to improve the economies and livelihoods of Pacific island-nations and thus lessen the risk that Taiwan’s remaining diplomatic partners would switch recognition to China for its hefty economic aid packages.
The main point: Taiwan and Palau have enjoyed a mutually beneficial relationship based on economic assistance and diplomatic support for Taiwan’s inclusion into international organizations. As Taiwan seeks to shore up diplomatic ties with Palau against Chinese encroachment, Taipei should work with Washington and other democratic countries to enable Palau to withstand economic pressures from Beijing.