Taiwan experienced a period of extreme poverty after World War II and the Chinese Civil War. Farming was the most common way to earn a living during the early 1950s, contributing to a low Gross National Product (GNP) per capita of $200 USD (at 1950s price levels) and extreme income inequality. Taiwan’s economic conditions shifted after the land reform began in 1949 and again in the late 1950s when the government prioritized export-oriented growth. Although the export-oriented growth model had a significant impact on Taiwan’s success, aid from the United States also made a lasting impact. Here is information about the history of U.S. foreign aid to Taiwan.

History

From 1950 to 1965, Taiwan received a significant portion of U.S. economic aid. Over this period, Taiwan received around $100 million USD in monetary assistance each year, which accounted for almost 9% of Taiwan’s gross domestic product (GDP).

The focus of foreign aid to Taiwan evolved throughout the years as living conditions improved and U.S. foreign policy objectives shifted. After the Chinese Civil War, people had minimal access to necessities like food and clothing. Starting in the early 1950s, U.S. foreign aid to Taiwan prioritized economic aid and provided military materials due to the widespread poverty and economic and political instability. With this aid, Taiwan was able to stabilize the political situation, which prevented the government from directing all funds toward defense and raising taxes on a population that already struggled financially.

In the mid-1950s, the U.S, directed aid toward infrastructure projects and industrial development. About 37.3% of aid funds went toward infrastructure, 21.5% to agriculture, 25.9% to workforce development and 15.3% to industry. The final stage of U.S. aid programs emphasized shifting from import-based industries to export-oriented growth. However, after 1960, the United States concluded that Taiwan had “graduated” from the aid programs and moved to cut concessional assistance. 

Current US Aid to Taiwan

The United States no longer provides the island with development assistance but continues to offer military financing loans and contribute to disaster preparedness. Before the suspension of the U.S. Agency for International Development (USAID), the organization initiated emergency response and joint training programs that have increased Taiwan’s ability to withstand natural disasters and military pressure from the People’s Republic of China (PRC).

Although disaster preparedness is an objective of aid to Taiwan, military support has been the primary focus of U.S. assistance in recent years. The National Defense Authorization Act of Fiscal Year 2023 and the Consolidated Appropriations Act, 2023 allow for the U.S. to provide up to $10 billion in grant assistance over five years and up to $2 billion in loans.

The goal of current U.S. aid is to maintain peace and stability in the Indo-Pacific region, while 20th century aid was intended to promote economic and social development. The demand for poverty-reducing aid programs diminished as previous initiatives proved successful, which explains this shift in U.S. aid objectives.

The Outcome of Foreign Aid

Taiwan recognizes that it owes much of its progress to the foreign aid it received over the decades. Today, the World Bank considers Taiwan a high-income economy. It is one of the world’s largest producers of semiconductors and electronics and is a driving force behind innovations in artificial intelligence. 

Foreign aid to Taiwan spurred economic development and substantially improved the well-being of Taiwan’s population. Taiwan’s GNP per capita was $1,132 USD by 1976 and $12,396 USD in 1995. With a higher GNP per capita, Taiwan’s population had more job opportunities, a more equitable income distribution and access to basic necessities like food, health care and education.

From 1953 to 1995, the mortality rates in children under 5 decreased from 21.1 per 1,000 to 1.9 per 1,000, while life expectancy increased by 3.2 years for men and 5.9 years for women as a result of lower income inequality. “By using this aid, we were able to build up our infrastructure… And we were also able to set up our import substitution industries…” remarked Ma Ying-jeou (馬英九), President of the Republic of China (Taiwan) from 2008-2016, in a speech. With U.S. assistance on infrastructure, industry and defense, Taiwan increased GNP per capita and established more income equality, improving life expectancy and the overall quality of life for its citizens. 

These improvements in health and economic outcomes demonstrate that foreign aid to Taiwan has made a noteworthy impact. At a time when the United States is reassessing its foreign aid commitments, it must recognize the positive influence of foreign aid on Taiwan’s success and rapid reduction of poverty.

– Haley Parilla

Haley is based in Cape Coral, FL, USA and focuses on Business and Politics for The Borgen Project.

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