Panama Cutting Ties With Taiwan For China Impact for Trade?

Taiwan has lost one of its twenty one allies, and that is Panama. The Central American country is the latest to end its diplomatic ties so as to establish relations with China instead. The Panama government said it only recognised ‘One China’ and that Taiwan was a part of it. China long considers Taiwan as a breakaway province and only a couple of nations maintain ties with Taiwan. So what does it mean for the economy as well as international trade. In this article, we would try to assess these factors deeper. For more articles, such as the recent spat between the four Middle Eastern nations cutting diplomatic relations with Qatar, click here

Understanding The Key Reason Behind The Switch

One of the main reasons behind the switch is the fact that China’s increasing global influence due to its rapidly increasing economic as well as political powers. On the other hand, Several Chinese companies have been investing heavily in to Panama’s sea ports. This is so as to develop the ports in Panama. Furthermore, there have been Chinese state owned firms who have expressed interest to develop the Panama Canal, which is a seventy five kilometer canal route in Panama that connects  the Atlantic Ocean to the Pacific ocean. This canal of historical value began its constructions in the late nineteenth century and till this very day, remains as a key route for the international maritime shipments. For example, in 2016, China invested an estimated nine hundred million dollars into Panama’s largest port,which is known as Margarita Island Port. The investment as a result, gave the company a ‘intimate access’ to one of the globe’s key distribution centers for goods. In addition, The same Chinese company had invested another large sum of millions into a terminal at the Atlantic Ocean Part of the Panama Canal. This investment was so as to facilitate more ships being able to cross the canal to the Pacific ocean side of it.

Apart from the above mentioned instances, there have been many investments as well as expansions into Panama by Chinese companies. Therefore, by considering the examples aforementioned, it can be concluded that a key reason for the move by Panama to establish ties with China was for the economical gains that Panama could benefit from. Furthermore, with China seeking to lead the world in reviving the Silk Road for the twenty first century under the initiative called “One Road, One Belt”, partnering with as many countries as possible in key strategic areas are very crucial to ensure its success. For instance, there are currently more than 65 countries in the One Road, One Belt initiative across the globe. China is seeking to connect the world through land as well as maritime routes all across the world. By establishing relations with a country in the Central American Region, it will assist the country in making the ambitious project a success. You can read more about the One Belt, One Road initiative over here.

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