Few countries will come out of the COVID-19 crisis looking better than Taiwan. While China was busy punishing Dr. Li Wenliang in January for sounding the alarm on the novel coronavirus, Taiwan was already seeking to warn the international community about the disease. It has since limited its COVID-19 death toll to only seven people in a population of more than 23 million. This stellar job managing the virus has understandably led to calls to grant Taiwan observer status at the World Health Organization, despite Chinese hostility to seeing Taiwan work with international bodies.
But we can and should think bigger. As the world now comes to terms with the economic fallout of COVID-19 — a fallout made worse by Beijing saddling emerging markets with billions of dollars in opaque loan obligations — countries that are tired of China’s cynicism should start the process of making Taiwan a full member of the International Monetary Fund, an institution tasked with ensuring that COVID-19 doesn’t precipitate a global economic crisis.
Taiwan is already a member of the World Trade Organization and the Asian Development Bank, and as the world’s 22nd largest economy, it has built up an estimated $472 billion in foreign exchange reserves, surpassing Brazil, India, and South Korea. With the IMF’s 189 members pledging to work for exchange rate stability and balanced growth in trade, it’s nonsensical to leave out a country of Taiwan’s significance. Through IMF membership, Taiwan could take part in the fund’s economic monitoring, contribute to the IMF’s resources, and share the views of a society that has successfully lifted itself out of poverty.
A U.S. push to give Taiwan a seat at the IMF is long overdue. In 1994, State Department official Winston Lord testified to Congress that the United States would support Taiwan’s membership in any international organizations where statehood was not a prerequisite. Congress has since reaffirmed this policy in no fewer than seven laws, including unanimous passage of the recently enacted TAIPEI Act. Unlike the WHO and other U.N. agencies, the IMF doesn’t require countries to be U.N.-recognized states before admitting them, a distinction that the IMF has repeatedly shown it takes seriously.
In a comprehensive study on the IMF’s membership, the IMF’s longtime general counsel Joseph Gold concluded, “There are no rules or even informal understandings on the extent to which an applicant must have been recognized by members or other international organizations before the Fund will regard it as eligible for membership.” In fact, since IMF membership is open to countries rather than states, “the Fund makes its own findings on whether an applicant is a ‘country,’ and it makes them solely for its own purposes.” To wit, in 2009, Kosovo became a member of the IMF (and the World Bank) despite not being a U.N. member state.
So Taiwan’s membership is not a legal conundrum but a political one. Some IMF shareholders would surely prefer to sidestep the issue rather than run afoul of the Chinese regime (no matter how crucial Taiwan is to the global economy) in the belief that yielding to Beijing on this subject is better than jeopardizing the broader goal of keeping China committed to multilateralism. But China itself has made this argument moot.
Organizations such as the IMF are a way station for Beijing while it goes about shaping a future where these institutions are not needed. China has already set up the Contingent Reserve Arrangement and the Asian Infrastructure Investment Bank to rival the work of the IMF and World Bank. Additionally, Beijing’s official loans to foreign countries (estimated at over half a trillion dollars) have been doled out without regard to multilateral standards worked out by the Paris Club and the Organization for Economic Co-operation and Development, which tees up a debt crisis in emerging markets that the IMF is now supposed to resolve.
Unfortunately, previous attempts by the IMF to encourage more responsible behavior from China’s leaders have fallen short. In 2016, for instance, IMF shareholders agreed to include the renminbi among the elite group of currencies determining the value of the IMF’s Special Drawing Rights, even though China’s central bank was controlled by the Chinese Communist Party and RMB usage in global reserves was minimal. In the end, however, the fund’s validation of the RMB did little to spur financial reforms in China, to say nothing of respect for the rule of law and global norms on human rights.
As the IMF now considers potential changes to its shareholding, hope is suiting up for battle against experience again, with some countries lobbying for China to have a stronger voice in the IMF. That’s why I’m sponsoring legislation that would prohibit an increase to China’s shareholding until Taiwan is offered membership, or at least is allowed to participate meaningfully in the work of the IMF.
Since the U.S. can veto changes to IMF shares, our leadership here is essential. Permitting Taiwan to join the IMF is not about putting the U.S. on a collision course with China. It is about moving on from the myth that China will change if sufficiently flattered. The U.S. and its allies should renew institutions such as the IMF that have helped secure a peaceful order. This means welcoming countries that, unlike China, want to play by the rules.
Rep. Anthony Gonzalez, a Republican, represents Ohio’s 16th Congressional District. He is a member of the House China Task Force.
