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Oren, Howrey LLP and Arnold, White & Durkee Centennial Professorship in Law @ UT Austin. “The History Intellectual Property as The History of Capitalism.” Case Western Reserve Law Review. Vol 71: Issue 2. 2020. Pp 572-583. //InTr

Most fundamentally, the history of intellectual property should be understood as part of the process of commodification. The appearance of the set of legal relations we call today intellectual property was, first and foremost, part of the relentless and all-encompassing process of expanding the commodity form, as applied to various kinds of information. This process happened on the ground in changing practices of increasingly subjecting information to general market exchange. But it also involved a conceptual change—a new specific way of understanding information. Both the practice and the concept had a distinctive structure consisting of three different conceptual elements. First, to become a commodity, information had to become a “thing” or an object. In premodern times, various kinds of information were understood in fluid terms as living human knowledge, a dynamic process, or even as an aspect of persons.139 Before information could become an object of market exchange, a thing to be bought and sold, this dynamic character had to be wrestled to the ground—it had to become an object. The first phase of creating intellectual property then was constructing the relevant informational objects. Second, these informational objects had to be “first transformed into bars in the head and in speech before they are exchanged for one another.”140 In other words, informational objects had to be understood as reducible to their abstract and commensurable exchange value and as produced in order to extract this value from any possible market. A third and last aspect was the question of drawing borders: what kinds of information were to be subjected to this form and what kinds had to be left outside it? The distinctive structure of commodified information gradually came to be embedded in the applicable legal forms. It is this embodiment of the commodity form as applied to information which distinguishes the unique phenomenon of intellectual property. Information was far from completely unregulated prior to the appearance of intellectual property, as attested by many premodern institutional arrangements such as guild regulation of craft secrecy, restrictions on the immigration of skilled craftsmen, patronage, and censorship. 141 What separates these and many other forms of regulating the production and dissemination of information from the later-coming intellectual property is exactly the commodity form. Commodification, then, is a powerful concept for understanding the development of the distinctly modern phenomenon of intellectual property. At the same time, commodification was neither a preordained uniform structure nor an unchanging, static one once appearing. The process of development was rife with contestation and negotiation, rather than the progressive extension of a readymade structure. Each of the three conceptual dimensions of commodifying information gave rise to many puzzles such as what exactly was the object of exchange, how was its value to be measured, what exactly could be owned or bought and sold, and what constituted interference with property rights. There was also friction with deeply held ideological commit– ments, most prominently various forms of aversion to ownership of knowledge. And often there was resistance from various interested groups who resorted to both the conceptual loose ends and countervailing ideology. The result was specific and unique patterns of commodifying information, patterns that were not identical in all contexts or places and remained dynamic over time. This history accounts for both the conceptual unity and the internal diversity of the area of intellectual property: the field’s overarching principle is the commodification of information while its different subfields are marked by the different patterns of commodification as those developed historically (with further variation within each field). The development of these patterns is a rich vein to be mined by historians. And the story to be told is threefold, encompassing the emergence of: the general, distinctively modern, framework of commodifying information, i.e., intellectual property; the carving out of the general sub-areas within it; and also the phenomenon of incomplete commodification. The latter refers to the fact that, in some contexts, ideological resistance and interest groups’ tussles produced incomplete commodification: the demarcation of certain kinds of information as residing outside the domain of commodification.142 Some examples of this include news,143 basic scientific research, 144 and what came to be known as “moral rights” that in the continental tradition emerged as extra-territorial islands deliberately designed to insulate certain human interests from market commodification. 145 Again, these different patterns of incomplete commodification, their negotiation and dynamic shift over time, as well as their geographical migration and cross-influence, holds promising prospects for historical exploration. A second element of situating the history of intellectual property within the history of capitalism is uncovering the development of how this area came to play a constitutive role in important junctures of the structure of modern economic relations. The rise of intellectual property was not limited to the creation of a mechanism for the market exchange of information as a consumer good. In various ways, intellectual property rights acquired a deeper structural role in the organization of economic relations. As Michael Zakim observes: “The knowledge economy is not . . . a ‘post-industrial,’ and certainly not a ‘postcapitalist,’ development.” 146 In other words, the growth and transformation of business in the nineteenth century was, in fact, the first information age with “the capital of mind” playing a major role in it.147 This was true of applied knowledge pertaining to the material world that was the basis of the physical infrastructure of capitalism: everything from innovations such as railroads, telegraphy, and telephony that constituted the transportation and communication revolutions, to the designs of the new machines and chemical processes that powered factories.148 It was also true of new knowledge of manip– ulating the social and commercial spheres such as accounting and filing systems, business statistics, or financing schemes that constituted the business revolution.149 Ownership under intellectual property rights was potentially relevant for all of those infrastructural assets. In some cases, this meant straightforward extension of proprietary rights, most commonly patents and trade secrets.150 Other cases, such as business statistics 151 or accounting systems, 152 involved struggles, sometimes resulting in incomplete commodification. The point is that intellectual property rights came to play a structural role on this deeper level of the system’s knowledge infrastructure. Commodification of information unfolded not just with respect to consumer markets but also as a regulative principle of the system’s infrastructure. Intellectual property rights also played a structural role with respect to business organization. Until after the Civil War, assignment of patent shares played a major role in structuring business partnership around innovative technologies. 153 In the absence of general incorporation that became available only around the mid-century, assigning patent shares was the direct vehicle for molding business structure.154 Similarly, geographical licensing supplied the foundations for a form of territorial franchising in an age where nation-wide operation by a single business entity was rare.155 Somewhat later, patent pools that created schemes for licensing a multitude of rights necessary for particular technologies began to play a broader organizational role in shaping and regulating the operation of entire industries.156 Both share-assignments and pools, rather than limited to being mechanisms for overcoming transaction costs in transferring ownership or permissions from sellers to buyers, were more fundamental important instruments of structuring business. Around the turn of the twentieth century, business organization mushroomed dramatically in scope and scale with the corporate R&D lab becoming a central mode of innovation.157 In this context, patents, which now were often held in portfolios, became instruments of corporate security.158 Firms used such portfolios to try to obtain predictability and “rationality,” draw the borderlines of their zones of operation and negotiate industry-wide arrangements.159 As a top official of an AT&T subsidiary put it in 1926, referring to patent licensing arrangements: The regulation of the relationship between two such large interests as the American Telephone & Telegraph Co. and the General Electric Co. and the prevention of invasion of their respective fields is accomplished by mutual adjustment within “no man’s land” where the offensive of the parties as related to these competitive activities is recognized as a natural defense against invasion of the major fields.160 In copyright, the structural role of rights in business organization was developed later. As relevant industries as well as the applicable copyright framework grew more complex, this structural role became more significant. One early example is the music industry, where early in the twentieth century right portfolios were the vehicle of maneuvers to try to control the industry161 and where later organizational patterns of businesses and intermediaries came to revolve around the copyright framework. One last structural role of intellectual property worth mentioning here pertains to trademark law. In this area, the structural role with respect to general patterns of economic activity is exactly the line dividing traditional trademark law as a form of anti-fraud protection from its gradual propertization, meaning its becoming truly a branch of intellectual property (which is still contested even today). 162 Goodwill, that elusive asset that shrewd businessmen began to sell and license around the mid-nineteenth century,163 is a double abstraction. It is the commodification of business success. Commodification took here its usual two-step course: first, reducing the dynamic and evanescent character of everything that made a business successful into an object, securing it in place by mooring it to a symbol; then, making this new object the subject of market exchange. Through the market exchange of a new object called goodwill, commodification came to be applied not only to informational consumer goods and various elements of capitalism’s infrastructure, but to business success itself. Trademark law built around goodwill supplied the constitutive legal forms. The somewhat younger cousin of goodwill—the brand—and its legal form further extended this process to encompass a particular key feature of business success: the power to cultivate and channel human desire. To succeed, businesses needed to harness human desire to buy. A major development of capitalism, embodied in the rise of the advertisement industry, was erecting a systematic mechanism for cultivating and channeling preferences or “needs.”164 Brands emerged as semiotic receptacles for the product of this mechanism: petrified crystals capturing and mooring down the dynamic process of channeling human desire. The (incomplete) extension of trademark law to protect the value of brands and facilitate their market exchange was the process of commodifying the value of molded human desire as embodying selling power.165 Commodifying selling power as captured by semiotic commercial devices laid, in turn, the foundation for yet another business organization form heavily reliant on intellectual property: the modern franchise.166 The third distinctive aspect of intellectual property studied as part of the history of capitalism is conceptual. The context of ownership of information had been one where basic latent assumptions characteristic of a market society that usually remain silent were often challenged, wrestled with, or at least momentarily forced to the surface. In other words, ownership of information is where naturalization tends to burst at the seams. The reason for this is that ownership of intangibles destabilizes one widespread strategy of naturalization, meaning: physicalization. Physicalization is the representation of a social relation between people as a physical (and hence “natural”) relation between things or between things and people. 167 Property is an area where physicalization abounds, where legal relations between people masquerade as physical relations between people and things.168 But this has never worked smoothly with intellectual property. As the name implies, intellectual property, at least once understood as such, wears its nonphysicalism on its sleeve. In the words of Justice Oliver Wendell Holmes Jr., these are rights “in vacuo” that create “a prohibition of conduct remote from the persons or tangibles of the party having the right.”169 And this obvious intangibility of the object of property tended to disrupt the disguise of the property relation as a physical one. The upshot of this dynamic was that in some moments intellectual property’s disruption of the physicalist naturalization extended to all property rights170 and indeed to all legal relations.171 This is not to say that physicalization has ever been banished from the area of intellectual property. Nevertheless, it is less stable and more prone for disruption in the context of ownership of information. Thus, intellectual property has been an area where occasionally a window had opened offering a view beyond at least some of the naturalizing assumptions of a market society and forcing participants to wrestle with the questions that then came into view. It is therefore an opportune area of study for the historian of capitalism. The above are three reasons why there is a remarkable fit between the frame of the history of capitalism—properly understood—and the subject of intellectual property. First, the history of intellectual property is a fascinating case study of capitalism’s basic unit: commodification. It demonstrates both the general logic and how the specific context in which it unfolds matters a great deal. Second, in various ways, intellectual property has played an important structural role in the consolidation and development of capitalist economic organization. Finally, intellectual property is a context where some of the naturalizing assumptions of a capitalist society, at least in some specific moments, tend to float to the surface and be laid bare to contend with, both for the historical actor and the historian. Other reasons for this remarkable fit may occur to the reader.

. Non-Infection-Related And Non-Visit-Based Antibiotic Prescribing Is Common Among Medicaid Patients

Michael A. Fischer (mfischer@partners.org) is an associate professor of medicine at Harvard Medical School and an associate physician in the Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital, both in Boston, Massachusetts. Mufaddal Mahesri is a research specialist in the Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital. Joyce Lii is a programmer in the Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital. Jeffrey A. Linder is the Michael A. Gertz Professor of Medicine in the Division of General Internal Medicine and Geriatrics, Northwestern University Feinberg School of Medicine, in Chicago, Illinois. – op

Beijing expressed strong opposition on Thursday to Washington's second sale of arms this month to the Taiwan region, saying that what the United States has done to assist the Democratic Progressive Party authorities' attempt to seek "independence" through military buildup will only backfire. The remark was made as the US State Department approved on Tuesday the sale to Taiwan of drones and missiles for an estimated $360 million. It was announced only two weeks after the US administration decided to sell $80 million worth of F-16 fighter jet spare and repair parts to the island. Speaking at a regular news briefing, Foreign Ministry spokesman Lin Jian said the US' arms sales to the Taiwan region, regardless of China's opposition, seriously violate the one-China principle and the three China-US joint communiques, especially the Aug 17 Communique of 1982. Such sales gravely undermine China's sovereignty and security interests, harm China-US relations and peace and stability across the Taiwan Strait, and send a gravely wrong message to "Taiwan independence" separatist forces, he said. "China strongly condemns and firmly opposes the US' frequent arms sales to Taiwan, which embolden the DPP authorities as they stick to the 'Taiwan independence' position and make deliberate provocations on the one-China principle." It shows once again that the biggest threat to cross-Strait peace and stability, and the biggest source of damage to the cross-Strait status quo, are the separatist moves for "Taiwan independence "and connivance and support for such moves from US-led external forces, Lin said. Noting that the Taiwan question is at the core of China's core interests, and the first red line that cannot be crossed in China-US relations, Lin said no one should underestimate China's firm determination and strong ability to oppose "Taiwan independence "and safeguard its sovereignty and territorial integrity. "China urges the US to ... stop the dangerous trend of arming Taiwan, stop its connivance and support for 'Taiwan independence' separatist forces, and stop endangering cross-Strait peace and stability.

Such costs might be acceptable in exchange for peace and security. But spheres of influence during the Cold War did not prevent the Soviets from repeatedly testing American redlines in Berlin, causing high-stakes crises in which nuclear war was a real possibility. Nor did those spheres prevent the two sides from competing sharply, and sometimes violently, throughout the “Third World.” Throughout history, spheres-of-influence settlements, from the Thirty Years’ Peace between Athens and Sparta to the Peace of Amiens between the United Kingdom and Napoleonic France have often ended, sooner or later, in war. The idea that spheres of influence are a formula for peace rests on assumptions that often go unexamined: that revisionist powers are driven primarily by insecurity, that their grievances are limited and can be easily satisfied, that the truly vital interests of competing powers do not conflict, and that creative statecraft can therefore fashion an enduring, mutually acceptable equilibrium. The trouble is that these premises don’t always hold. Ideology and the quest for greatness—not simply insecurity—often drive great powers. Rising states are continually tempted to renegotiate previous bargains once they have the power to do so. Offering concessions to a revisionist state may simply convince it that the existing order is fragile and can be tested further. Conceding a sphere of influence to a great-power challenger might not produce stability but simply give that challenger a better position from which to realize its ambitions. Consider the situation in the western Pacific. The most minimal Chinese sphere of influence would surely include Taiwan. Yet if Taiwan became a platform for Chinese military capabilities, the defense of other U.S. allies in the region, such as Japan and the Philippines, would become vastly more difficult. Nor would such a concession likely satisfy Chinese ambitions. A growing body of literature by scholars such as Toshi Yoshihara, James Holmes, Liza Tobin, and Elizabeth Economy suggests that China desires at the very least to push the United States beyond the chain of islands running from Japan to Taiwan to the Philippines. Even a limited Chinese sphere in the western Pacific would serve as a springboard to this larger objective. Meanwhile, the United States will have sacrificed a number of critical advantages by pulling out. A free Taiwan offers proof that Chinese culture and democracy are not incompatible; subjugating Taiwan would also allow Beijing to remove this ideological threat. Worse still, the United States would lose the edge that comes from being the only great power without significant security hazards near its borders. It was only after the United States achieved dominance in the Western Hemisphere that it could project power globally. Russia and China, by contrast, still have to deal with U.S. allies, partners, and military presences in their own backyards—a circumstance that diverts resources they might otherwise use to pursue more distant ambitions and compete with the United States at a truly global scale.

Program Manager and Associate Fellow, Geoeconomics Center; Intellectual Property Rights in the U.S.-China Innovation Competition; CSIS; https://www.csis.org/analysis/intellectual-property-rights-us-china-innovation-competition

The United States is engaged in a competition for technology and innovation leadership with China, with both nations making significant investments in their domestic innovation systems while seeking to undermine the other’s innovation system. The United States, for instance, has implemented export controls and investment restrictions to slow China’s rate of technological innovation, while launching innovation initiatives covering emerging energy technologies, quantum computing, and wireless communications, among other industries. As the competition intensifies, many policymakers and analysts are caught up in the blow-by-blow of this industrial policy race. However, by focusing on these high-profile policies, they risk overlooking a fundamental driver of innovation: a system of secure and market-based intellectual property (IP) rights. IP rights are foundational for a strong innovation system. By converting ideas into property, secure IP rights allow firms to safely license their innovations, fostering more collaboration across the economy. A secure IP system also gives market actors the confidence to share their expertise and information with others, expanding the knowledge base of the innovation system. Further, the temporary ownership of an innovation afforded by an effective patent system provides the rents and hence the incentive for entrepreneurs and investors to take on the risks of driving new ideas to the market. For these reasons, the community of inventors, entrepreneurs, and start-ups repeatedly emphasizes the importance of secure IP rights in providing a path to market entry, growth, and fair participation. This view is validated when taken in the aggregate: academic studies find that secure IP rights positively affect innovation and economic growth in developed economies. Given the benefits of a robust, market-based IP system, the United States would seem to have the long-term advantage in any innovation competition with China. Yet, a series of court decisions and pieces of legislation over the last two decades has weakened IP rights in the United States, potentially undermining the competitiveness of the U.S. innovation ecosystem. China, in contrast, has spent decades strengthening IP protections to encourage innovation and attract private investment. While the United States remains the gold standard for IP protections, this standing should not be taken for granted. To effectively compete with China, the United States should reprioritize the development and maintenance of a system of secure IP rights to promote the strength and competitiveness of its innovation system.

RING OF FIRE Eurasia has often been a deathtrap for aspiring hegemons: there are too many nearby enemies that can make common cause with offshore superpowers. For almost 40 years, a rising China avoided strategic encirclement by downplaying its global ambitions and maintaining friendly relations with the United States. But that period is over. As Beijing has become more aggressive in the South China Sea, the Taiwan Strait, and elsewhere, it has engendered hostility nearly all around. Over the past five years, the United States has abandoned engagement and embraced neo-containment. Washington has carried out its largest naval and missile expansion in a generation, imposed its most aggressive tariffs since World War II, and implemented its tightest restrictions on foreign investment since the Cold War—all directed at China. Arms sales and military support to frontline states have increased; U.S. technological sanctions are threatening to destroy Huawei and other Chinese firms. In 2021, China’s deputy foreign minister complained that “a whole-of-government and whole-of-society campaign is being waged to bring China down.” The United States’ turn against China has contributed to a broader backlash against Beijing’s power. In Northeast Asia, Taiwan has become more determined than ever to maintain its de facto independence, and the government has approved a bold new defense strategy that could make the island extremely hard to conquer. Japan has agreed to cooperate closely with the United States to fend off Chinese aggression in the region. Through its own belligerence, Beijing has given the U.S.-Japanese alliance an explicitly anti-China cast. The countries around the South China Sea are also starting to hedge against China. Vietnam is acquiring mobile shore-based missiles, Russian attack submarines, new fighter aircraft, and surface ships armed with advanced cruise missiles. Singapore has quietly become a significant U.S. military partner. Indonesia increased its defense spending 20 percent in 2020 and another 21 percent in 2021. Even the Philippines, which courted China for most of President Rodrigo Duterte’s term, is now reiterating its claims in the South China Sea and ramping up air and naval patrols. China’s ambitions are provoking a response beyond East Asia, too, from Australia to India to Europe. Everywhere Beijing is pushing, a growing cast of rivals is pushing back. The Quadrilateral Security Dialogue—a strategic partnership that includes Australia, India, Japan, and the United States—has emerged as a focal point of anti-China cooperation among the most powerful democracies in the Indo-Pacific. The new AUKUS (Australia–United Kingdom–United States) alliance unites the core of the Anglosphere against Beijing. The United States is forging overlapping mini-coalitions to ensure that advanced democracies stay ahead in key technologies, while the G-7 and NATO are staking out tougher positions on Taiwan and other issues. To be sure, counter-China cooperation remains a work in progress, because many countries still rely on trade with Beijing. But these interlocking partnerships could eventually form a noose around Beijing’s neck. FLAMING OUT China is a risen power, not a rising one: it has acquired formidable geopolitical capabilities, but its best days are behind it. That distinction matters, because China has staked out vaulting ambitions and now may not be able to achieve them without drastic action. The CCP aims to reclaim Taiwan, dominate the western Pacific, and spread its influence around the globe. Xi has declared that China seeks a “future where we will win the initiative and have the dominant position.” Yet that dream is starting to slip away, as growth slows and China faces an increasingly hostile world.

PSI’s report “Why Public-Private Partnerships (PPPs) don’t work” explores the importance of public investment. This accompanying report examines private sector motives, capabilities, influence and performance. It is the culmination of thirty years experience with and assessment of privatization, in countries both rich and poor. It demystifies the shadowy PPP processes, most of which hide behind confidential negotiations to protect commercial secrecy. There are no public consultations, lots of false promises, and incredibly complex contracts, all designed to protect corporate profits. There is also a fair amount of bribery, as privatization contracts can be extremely valuable. PPPs are used to conceal public borrowing, while providing long-term state guarantees for profits to private companies. Private sector corporations must maximize profits if they are to survive. This is fundamentally incompatible with protecting the environment and ensuring universal access to quality public services. The report concludes that PPPs are an expensive and inefficient way of financing infrastructure and services. The report is an excellent working paper that PSI is proposing to affiliates to better understand privatization and its dangers. The different arguments need to be considered on their own merits and in conjunction with the others, as privatization is an inherently complex process. Unions can extract information from this reference document and apply it to their specific contexts.

Only 0.05% of startups get VC funding (CB Insights) Venture capital is defined as a temporary equity investment in young, innovative, non-listed companies, aka startups. Many promising startups seek venture capital as a way to secure investment, but it’s extremely competitive and rare. A mere 0.05% of startups get VC funding. 25. 75% of venture-backed companies never return cash to investors (Failory) Startups certainly use the capital they raise, but often don’t return it. Research shows that three in four startups backed by VC never end up returning their cash to investors. Meanwhile, as many as 30-40% of investors never get back their entire initial investment from a startup. VC startup failure 26. Less than 5% of startups break even on cash flow (The Wall Street Journal) Less than 5% of startups succeed enough to meet a specific revenue growth rate—or even break even on cash flow. An estimated 30-40% of high-potential startups fail as far as needing to liquidate all assets, as well as investors losing all of their original invested money. 27. 25-30% of VC-backed startups still fail (The Wall Street Journal) Experts from The National Venture Capital Association estimate that 25% to 30% of startups backed by VC funding go on to fail. As a general rule of thumb for startups, out of every 10, about three or four fail completely. The other three or four return their original VC investments, and only one or two will produce substantial returns. 28. The average investment check from a VC firm is $2.6 million for seed stage companies (Fundable) Statistics show there are around 462 active venture capital firms that invest in around 3,700 deals per year. Although a tiny percentage of companies are ever funded by a VC, the average investment size is noteabout at around $2.6 million to seed stage startups.

In 2018, our report History RePPPeated – How Public-Private Partnerships are failing challenged the increasing promotion of Public-Private Partnerships (PPPs) as a silver bullet to finance development projects. It showed that PPPs often come at a high cost for the public purse and citizens, an excessive level of risk for the public sector and have a negative impact on democratic governance. Since then, the context for the continued promotion of PPPs has become even more complex and uncertain. In early 2020, the arrival of the Covid-19 pandemic highlighted how market-based models cannot be relied upon to deliver on human rights such as health, education and water provision, and the fight against inequalities. In 2022, the upsurge in the cost of living, the energy crisis and the climate crisis have further highlighted the failures of the current economic model and the urgent need to build a different one. However, calls for an increasing role for the private sector in the financing of infrastructure and public services, and for PPPs in particular, continue to grow. Currently, PPPs are being promoted through a vast array of tools and by a wide range of institutions, including bilateral donor agencies, United Nations agencies and multilateral development banks (MDBs). The World Bank Group continues to be at the forefront of the promotion of PPPs, and of the use of private finance in development more generally. The rationale is that PPPs may help overcome challenges in the financing, implementation and delivery of infrastructure and public services, based on the assumption that the private sector brings additional finance, and that private companies are inherently more efficient than the public sector in delivering high-quality public services. This overlooks evidence that points to the contrary and the fact that decades of structural adjustment programmes and austerity policies have left public services underfunded. This report is the second in the History RePPPeated series and is once again the result of a joint civil society effort from organisations around the world. Through emblematic cases across four continents, the report provides an in-depth analysis of various kinds of PPP projects in both the global south and north. It also analyses emerging trends in the intervening four years since the first report was published, particularly in light of the Covid-19 pandemic and the multiple crises facing the world. According to Eurodad’s estimates, since 2012 the amount of money invested in PPP projects in the global south has been volatile. The onset of the pandemic in March 2020 led to a drastic decline in investments in PPP projects, in line with the slowdown in the global economy – from US$99 billion to US$57 billion, which represents a 42 per cent decline. While in 2021 there were signs of recovery (US$63 billion), this is still not enough to anticipate an upward trend. However, the intense promotion of private finance in development, and of PPPs in particular, by MDBs – and increasingly also by the International Monetary Fund (IMF) – is leading to substantial reforms in developing countries’ laws and regulatory and policy environments at the national and local level. Many developing countries have enacted PPP laws and have set up ‘PPP Units’ to scale up their capacities to implement PPP projects. This suggests a problematic redefinition of the policy space for public service provision, which seems to be focused on attracting private investors. In recent years, the evidence of the failures of PPPs has continued to pile up, especially in terms of their fiscal and human impact. The high fiscal cost of PPPs is due to the high cost of capital; the expectation of profit from the private partner; the high transaction costs associated with the negotiation of complex PPP contracts; and the high likelihood of renegotiation. These higher costs are rarely justified by proven efficiency gains in delivering public services. Of serious concern, particularly in the context of a growing debt crisis and a forecast of a global recession, is that they can create a ‘hidden debt’ for the government, which adds to their overall indebtedness. The human cost of PPPs is evident around the world, as this report shows, and is affecting different aspects of people’s lives. It is especially, but not exclusively, evident in PPPs in public services delivery, and is ultimately due to the fact that private companies, unlike the state, are accountable to their shareholders, and not to citizens. Access to services like health, education and water is increasingly dependent on citizens’ capacity to pay, which transforms rightsholders into consumers. Especially problematic are PPPs in the health sector, where the introduction of commercial imperatives in the delivery of healthcare can undermine the right to health and the achievement of Universal Health Care (UHC). One of the most emblematic examples of the failures of PPPs is the World Bank-supported Queen Mamohato hospital in Lesotho. This project first came under the spotlight for the rapid escalation of its initial cost – up to more than half of the country’s health budget. In 2021, at the height of the Covid-19 pandemic, all nurses at the hospital were sacked for their strike action demanding equal pay to government employed nurses. This and numerous other disputes, and financial challenges, led to the premature termination of the PPP contract. Netcare, the biggest company in the PPP consortium, transferred the hospital back to the government.

L. Barth Reller, Melvin P. Weinstein, Lance R. Peterson, John D. Hamilton, Ellen Jo Baron, Lucy S. Tompkins, J. Michael Miller, Catherine M. Wilfert, Fred C. Tenover, Richard B. Thomson, Jr. Lance Peterson Northwestern University Medical School, Evanston, Illinois. Jhon D Hamilton Duke University Medical School, Durham, North Carolina Ellen jo Baron Stanford University Medical School, Stanford, California. Lucy s tomspon Stanford University Medical School, Stanford, California J michale Miller Centers for Disease Control and Prevention, Atlant. Cathrine M Wilfer Duke University Medical School, Durham, North Carolina. Fred C tenover Centers for Disease Control and Prevention, Atlant. Richard Bb tohompson JR Northwestern University Medical School, Evanston, Illinois - op

Modern medicine has led to dramatic changes in infectious diseases practice. Vaccination and antibiotic therapy have benefited millions of persons. However, constrained resources now threaten our ability to adequately manage threats of infectious diseases by placing clinical microbiology services and expertise distant from the patient and their infectious diseases physician. Continuing in such a direction threatens quality of laboratory results, timeliness of diagnosis, appropriateness of treatment, effective communication, reduction of health care-associated infections, advances in infectious diseases practice, and training of future practitioners. Microbiology laboratories are the first lines of defense for detection of new antibiotic resistance, outbreaks of foodborne infection, and a possible bioterrorism event. Maintaining high-quality clinical microbiology laboratories on the site of the institution that they serve is the current best approach for managing today's problems of emerging infectious diseases and antimicrobial agent resistance by providing good patient care outcomes that actually save money.

Additional push and pull incentives will be necessary to guarantee a synergistic relationship between AS programs and the pharmaceutical industry [21, 22]. One such program is the Developing an Innovative Strategy for Antimicrobial-Resistant Microorganisms (DISARM) Act, first introduced in the US House of Representatives in 2019 [31]. While not yet signed into law, the Act calls for higher non-DRG reimbursement payments for QIDP drugs approved on or after 1 December 2014 if indicated for infections with high morbidity and mortality rates [24]. To qualify for the payments, which are supposed to plug gaps in the NTAP program, hospitals must meet specific criteria, including establishing an AS program that reports data to the CDC National Healthcare Safety Network (NHSN) Antimicrobial Use and Resistance (AUR) module or a similar surveillance system [31]. The FDA, National Institutes of Health, and CDC would perform specific functions under the DISARM Act. To further break down barriers related to antimicrobial R&D, these agencies will be asked to study and provide recommendations to other stakeholders [24, 31]. Finally, a study assessing the utilization and consequent resistance development would be performed by the CDC and reported out for future optimization [24].

Surge capacity is the ability to rapidly mobilize to meet an increased demand. While large amounts of federal funding have been allocated to public health laboratories, little federal funding has been allocated to hospital microbiology laboratories. There are concerns that hospital laboratories may have inadequate surge capacities to deal with a significant bioterrorism incident. A workflow analysis of a clinical microbiology laboratory that serves an urban medical center was performed to identify barriers to surge capacity in the setting of a bioterrorism event and to identify solutions to these problems. Barriers include a national shortage of trained medical technologists, the inability of clinical laboratories to deal with a dramatic increase in the number of blood cultures, a delay while manufacturers increase production of critical products and then transport and deliver these products to clinical laboratories, and a shortage of class II biological safety cabinets. Federal funding could remedy staffing shortages by making the salaries of medical technologists comparable to those of similarly educated health care professionals and by providing financial incentives for students to enroll in clinical laboratory science programs. Blood culture bottles, and possibly continuous-monitoring blood culture instruments, should be added to the national antibiotic stockpile. Federal support must ensure that companies that manufacture essential laboratory supplies are capable of rapidly scaling up production. Hospitals must provide increased numbers of biological safety cabinets and amounts of space dedicated to clinical microbiology laboratories. Laboratories should undertake limited cross-training of technologists, ensure that adequate packaging supplies are available, and be able to move to a 4-day blood culture protocol.

New approaches to antibiotic reimbursement are being explored in the United States in Medicare and in Europe through the work of Chatham House and DRIVE-AB. Traditionally, Medicare payments for inpatient antibiotics are based on Medicare severity diagnosis-related groups (MS-DRGs). The MS-DRG system is based on a set of fixed payment rates derived from the average treatment costs for a group of bundled services defined by specific diagnoses and other clinical characteristics. 27 While this creates incentives for hospitals to operate efficiently, MS-DRG rates based on historical average costs can create disincentives for hospitals to use newer, more expensive technologies not yet accounted for in the MS-DRG calculations. New technology add-on payments are viewed as a promising workaround. Introduced in 2001, such payments are a bridge to reimburse hospitals for the excess costs of new technologies not yet accounted for in the MS-DRGs during the first two to three years of product marketing. 28 Fidaxomicin for the treatment of Clostridium difficile diarrhea was granted new technology add-on payments beginning in 2012, providing an additional $868 per course, but only when the cost of the case exceeded the standard MS-DRG amount. 29 Fidaxomicin was superior to vancomycin, whose generic cost is about $120 per fourteen-day course of treatment, in sustained cure of C. difficile diarrhea, while noninferior on initial resolution. 30New technology add-on payments provide only short-term reimbursement adjustments for hospitals—that is, only long enough for the added cost to be reflected in the standard DRG amount. This process may have limited financial impact. In the first three months only thirty-eight new technology add-on payment claims were submitted by hospitals to CMS for fidaxomicin. Fidaxomicin recently failed to receive an extension of the add-on payment beyond the initial two years. Furthermore, these payments are awarded only for new technologies with demonstrated “substantial clinical improvement” over existing therapies—a challenging requirement for antibiotic development, since most antibiotic clinical trials for approval are designed to demonstrate noninferiority rather than superiority. In 2014 the Centers for Medicare and Medicaid Services (CMS) denied a new technology add-on payment for dalbavancin for failing to demonstrate “substantial clinical improvement” over existing therapy for acute bacterial skin and skin structure infections. 31 Dalbavancin was not superior in efficacy or safety to vancomycin but claimed improved convenience through once-weekly dosing. 32 In March 2014 the Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms (DISARM) Act of 2014 was introduced in Congress. DISARM, if passed, would create an additional add-on payment to the MS-DRG, similar to the new technology add-on payment, but as a permanent carve-out. This payment reform would apply only to antibiotics used in acute care hospitals that receive payments under Medicare fee-for-service (Part A) while participating in the Antimicrobial Use module of the CDC’s National Healthcare Safety Network (or an alternative program determined by HHS). Because DISARM is budget-neutral, one challenge faced by hospitals is that the increased payments for qualifying antibiotics would come from a lower base rate for the MS-DRG. As originally introduced, DISARM applies to most qualified infectious disease products. The practical effect may be to exempt most new hospital antibiotics from the MS-DRG and, therefore, from the pressure to limit low-value treatments created by the DRG system. Once again, a more effective alternative would be to target incentives to the antibiotics that most improve outcomes for patients. This alternative version of DISARM is being explored in Congress because it results in a significantly lower budget impact and targets incentives more carefully. In the outpatient setting, reimbursement rates for antibiotics are typically based on average selling price or some cost-to-charge ratio. Traditionally, low rates are a result of competition with low-cost generics and the absence of demonstrated superiority. 33 Even if DISARM or similar reforms allow for higher prices, add-on payments as a percentage of drug price and conventional outpatient reimbursement still encourage higher sales volume instead of rewarding appropriate use. Comprehensive payment reforms for both settings are needed that move away from price/volume models toward rewarding better outcomes for patients and appropriate use, while ensuring appropriate access for patients.

What is stopping China from invading Taiwan? In the past, it was overdetermined that Beijing would not use force to compel reunification. Not only did China lack the capabilities to execute a swift and decisive conquest of the island, but China’s leaders since 1979 used to believe that peaceful unification was both possible and vastly more preferable to military solutions. Today, however, the military balance of power has shifted decisively, enabling an amphibious invasion from a capabilities standpoint in the not-too-distant future, while prospects of peaceful unification have faded. As such, it is now something of a conventional wisdom that a Chinese invasion has become more likely than not. We agree with these pessimistic assessments. Of course, no analyst can say with certainty when or why a war over Taiwan might be triggered. Those who project auras of inevitability are wrong to do so. But the changing geopolitical situation around Taiwan cannot be ignored. It is only because deterrence across the Taiwan Strait was strong that past crises over the island’s political status could unfold without causing an invasion. Now that deterrence has weakened, there are few if any guardrails to prevent current or future crises from escalating to become a full-blown war. This is a combustible situation — one that warrants urgent attention from Taiwanese and American leaders. For Taiwan to regain security, the deterrence gap should be closed and the odds of destabilizing crises emerging should be lowered. What Is Making War More Likely? The balance of power across the Taiwan Strait used to serve as a tight constraint on China’s freedom of maneuver. In the past, Taiwan’s armed forces — especially its air force — constituted a significant barrier to a Chinese invasion. As recently as 2002, the Department of Defense’s report to Congress on Chinese military power assessed that Taiwan’s air force enjoyed “dominance of the airspace over the Taiwan Strait” and maintained “a qualitative edge over” its Chinese counterpart. But this is no longer the case. To be sure, China still has reason to fear a U.S. military intervention in a war over Taiwan, but the threat of such an intervention has been made deliberately uncertain. It would be wrong to dismiss “strategic ambiguity” as a dud deterrent. But it is becoming increasingly clear it may not be sufficient on its own to deter an invasion. This is because Chinese strategists have had decades to plan for this eventuality. As a result, the United States no longer possesses clear escalation dominance. People’s Liberation Army doctrine is optimistic about managing escalation, which perhaps increases the likelihood of a first strike against forward-deployed U.S. assets in East Asia of the sort that might significantly undermine U.S. capabilities for stopping an invasion. And, of course, there is always the possibility that nuclear-armed China could successfully deter Washington from joining a conflict over Taiwan, as Russia has in Ukraine. Various “self-deterrents” that once held back China have weakened, too. For example, leaders in Beijing once worried that absorbing Taiwan into the People’s Republic would pose significant social, political, and economic challenges — so much so that unification was sometimes viewed as more trouble than it was worth, at least in the short term. Not anymore. At the same time as the balance of power has shifted, Chinese government incentives for restraint have also eroded. Those who talk about deterrence usually focus on the credibility and potency of threats made against a potential aggressor — that is, an adversary’s expectations about what will befall them if they do something unwanted. But such constraints are only part of a would-be aggressor’s overall calculation about whether to use force. States also consider what will happen to their political, social, and economic interests if they do not use force. The 2022 National Defense Strategy put incentives for restraint at the heart of the concept of deterrence: Deterrence is strengthened by actions that reduce a competitor’s perception of the benefits of aggression relative to restraint. Effective deterrence requires the Department to consider how competitors perceive U.S., Ally, and partner stakes, commitment, and combat credibility; their perception of their own ability to control escalation risks; and their view of how the status quo will evolve – in part as a result of U.S., Ally, and partner actions – if they do not use force. This sophisticated understanding of deterrence is directly applicable to assessing Chinese government decision-making today. What are the costs to China of exercising restraint? With reference to Taiwan, we think four key variables speak to this point: the strength and resilience of the “One China” discursive framework; the rate of economic growth in China; the trajectory of “tech wars” involving the United States, Taiwan, China, and other relevant economies; and China’s perception of a closing window of opportunity to resolve the Taiwan dispute on favorable terms. Restraint Variable 1: “One China” Since the Shanghai Communique in 1972, a “One China” framework has been at the foundation of U.S.-Chinese relations. Of course, there has never been agreement over what the One China concept means, precisely. Beijing has a One China principle, for example, while the United States maintains a One China policy — with each capturing very different political understandings regarding the status of Taiwan. But even so, the common language of “One China” has served as a useful discursive framework to help mediate the deep estrangement that defined ties between the United States and the Chinese Communist Party before 1972. The One China framework worked in the past because all sides tolerated — albeit sometimes more, sometimes less — the ambiguity that accompanied the compromise. Since 2016, the One China idea has become increasingly devoid of practical meaning. This began to some extent haphazardly, with President-elect Donald Trump speaking with Taiwan’s president on the phone, but since then a bipartisan pattern of disregard has become the norm in U.S. politics. In our new monograph, Deterrence Gap: Avoiding War in the Taiwan Strait, we count 27 “firsts” since 1979 that have occurred since Trump’s phone call with Tsai Ing-wen in 2016. These “firsts” range from Taiwan’s chief of the general staff visiting the White House, to deputy assistant secretaries of defense visiting Taiwan, to the State Department terminating previous restrictions on U.S. government contacts with Taiwanese officials. To be clear, for many of these developments, action-reaction cycles are in operation. We do not hold the Chinese government guiltless in the process that is destroying the status quo. Quite the contrary. But what matters for our present argument is this: Chinese analysts increasingly fear that the United States will reverse its One China policy and create a de jure or de facto defense alliance with Taiwan. This makes peace — and restraint — less beneficial for China in the short to medium term and creates powerful incentives for China to seek a non-peaceful resolution of the Taiwan dispute before the situation (from the Chinese Communist Party’s perspective) further deteriorates. Restraint Variable 2: Economic Trends The Chinese Communist Party rules China by mixing strategies of co-optation and coercion with claims to legitimacy. Over the past generation, legitimacy has been directly connected in China to economic performance. However, some observers now strongly suspect that economic growth in China has plateaued. This spells danger for cross-strait relations. For although we are skeptical of pure “diversionary war” arguments, slowing growth is important for a few reasons. First, the erosion of economic competence as a hallmark of Communist Party rule might push China’s leaders to become more indulgent of nationalist pressure as a means of shoring up domestic support. Second, slowing growth means that there is a diminishing chance of Taiwan’s citizens opting to join the People’s Republic for some sort of economic payoff — something that was at least plausible in the not-too-distant past. Finally, China’s economic slowdown threatens military spending as the Chinese state runs into a fiscal cliff by mid-century. This means that time will not solve all of China’s problems vis-à-vis Taiwan. On the contrary, time might be running out to make a move on Taiwan during propitious conditions. Restraint Variable 3: Tech Wars America’s export controls on semiconductors and related technologies are intended to prevent China from overtaking U.S. military, science, and technology power. In effect, Washington has launched a direct challenge to the Chinese government’s “innovation-driven development” strategy. The logic to these controls seems straightforward: Why should China’s economy and military benefit from technologies largely designed in the West and manufactured in Taiwan? Counterintuitively, however, export controls might have some unintended consequences — namely, by decreasing the net costs of a Chinese invasion of Taiwan in the short term while creating pressures for Beijing to act before the U.S. military can reap the rewards of the emerging military-technological revolution. These dangerous side-effects of the tech war have been almost universally overlooked despite hefty international relations literature on economic interdependence and the expected costs of war. In the past, one of the deterrents that protected Taiwan from invasion was the so-called “Silicon Shield.” The gist of the shield was that Taiwan’s position at the heart of the global semiconductor industry would add huge economic costs to a Chinese invasion. Although this in itself may be inadequate to deter such an invasion, it was one of a cluster of deterrents that operated in a concurrent and overlapping fashion, ensuring that the likely costs of an invasion outweighed the perceived benefits. But restricting the export of semiconductors to China from Taiwan is entirely at odds with the Silicon Shield. In effect, China is being made to bear in peacetime the costs that it otherwise would have suffered only in wartime. Even worse, the export controls impose additional time pressures on China writ large. The costs of recreating the technologies involved in extreme ultraviolet lithography are tremendous. As a former deputy director of the White House Office of Science and Technology Policy put it, “At some point, you’re replicating all of human civilization.” The allure of just taking such machines, the majority of which are located in Taiwan, may seem simpler. Another form of this pressure is military, as the People’s Liberation Army watches others — with easy access to massive compute — “intelligentize” faster than it, contributing to a “better now than later” dynamic, which we consider a final key variable reducing Chinese restraint. Restraint Variable 4: The Future Balance of Power The general context for a potential closing window of opportunity is set by the plateauing of the Chinese economy and the likelihood it will not be able to fully exploit the current military-technical revolution due to export controls. These trends suggest that, over the long term, time may not be on China’s side. What about in the shorter term? There is good reason to see relative Chinese military power as peaking this decade. Despite the increasing alarm animating both military and civilian analysts, by some metrics U.S. military power is actually declining this decade due to where the United States is in its modernization cycles. This is especially true of the Navy. According to the Congressional Budget Office, which analyzed three possible plans submitted to Congress by the Department of Defense for 2023: “the lethality of the fleet, as measured in part by the total number of missile cells, would decline by 13 percent until 2032.” This number includes both vertical launch cells and torpedo tubes. The falling numbers for this decade contrast in particular with the numbers projected after the 2020s, when “the number of torpedo tubes would increase, compared with the number in today’s fleet, by 40 percent to 50 percent.” The Air Force, in contrast, does not face such a drastic decline in lethality, but the most significant system it is investing in for modern peer-on-peer warfare, the B-21, will not be available in mass until the 2030s. The B-21 will recapitalize capability that has atrophied over decades, as the Air Force became centered around short-range fighters not particularly suited to stopping a Chinese invasion of Taiwan. For their parts, the Marine Corps and Army are both modernizing their force structures and training to be more relevant for the Taiwan “pacing scenario,” and by the 2030s both are likely to possess significant new formations and capabilities. At the same time, the results of Japan moving defense spending from 1 percent of GDP to 2 percent will begin to be felt, too, as will rising defense budgets and longer conscription terms in Taiwan. The Chinese government, of course, will not stand still throughout the 2020s. Certainly, more Renhai Cruisers and J-20 fighters will be commissioned. But such incremental Chinese progress will not change the overall pattern, which is that China has mostly completed a modernization cycle begun in the late 1990s, while the United States is still in the midst of one. A reinvigorated U.S. Navy increasingly centered on submarines and smaller combatants instead of hugely expensive and potentially vulnerable aircraft carriers, an Air Force with long-range bombers, and a Marine Corps and Army with long-range missiles and dispersible capabilities poses a much more significant threat to an invading Chinese force than exists today — or this decade. In all, the combination of eroding constraints and loosening restraints is a toxic mix, implying that whatever might have been doing the heavy lifting of dissuading China’s leaders from invading Taiwan in the past is likely not operating today. Given the high probability for major provocations relating to the Taiwan issue going forward, especially as Taiwan’s Democratic Progressive Party enters an unprecedented third presidential term in a row, and that fact that two recent pollssuggest that more than half of China’s population already support armed unification, the upshot is that the Chinese leadership is becoming less likely to act with restraint compared to the past. Restoring Deterrence In a previous article published in Parameters, we proposed a strategy for Taiwan to deter a Chinese invasion, one that did not rely on an uncertain U.S. military intervention. This comprised four main elements: A pre-planned resistance campaign, multilateral economic sanctions, regional balancing behavior, and a targeted campaign of scorched tech that would see Taiwan threaten to destroy or disable their semiconductor industry if China were to invade. These are all deterrents that Taiwan and its friends could develop quickly. Even if not as severe as a U.S. threat to intervene on Taiwan’s behalf, they are credible deterrents in the sense that China could have a high degree of confidence in these threats actually being carried out in response to an armed attack. Beyond these ideas, what else can be done to repair deterrence, bolster reassurance, and avoid war? The most important point, as we argue in our follow-up monograph, Deterrence Gap, is that Taiwan and its partners should not repeat the mistakes of the past by assuming deterrence to be fixed and immutable. It is not. All deterrents decay over time, and deterrence across the strait will be in a state of peak decay this decade. Taiwan and its friends should realize the gravity of the situation. They need quick fixes — potent and credible deterrents that will cause China’s leaders to question their ability to seize Taiwan in a fait accompli. Betting too heavily on deterrents that will come online next decade might actually increase risk this decade by generating a “better now than later dynamic.” And all concerned should avoid the siren call of symbolism, which provokes, over substance, which deters. This decade, there is still low hanging (substantive) fruit that should be exploited. Taiwan’s political leaders should consider allowing the Taiwanese air force to change its intercept doctrine so it does not wear out its pilots and airframesby intercepting every Chinese flight into its Air Defense Identification Zone. The Taiwanese air force could also prioritize its air defense mission: denying the People’s Liberation Army Air Force command of the air would be vital in a conflict, and ground-based launchers will be more suitable for this than expensive fighters. As well, procuring and training across services to achieve massed precision fires will be key to challenge the People’s Republic of China’s defensive systems in an invasion. Unfortunately, given the huge cost and long timeline for entering service, Taiwan’s much ballyhooed submarine programis likely a distraction from the fundamentals of developing the hardware and software for an effective “anti-navy.” Taiwan’s armed forces should instead prioritize the acquisition, production, and employment of mines, drones, and missiles. Mines are likely Taiwan’s best way to “buy time” with minimal risk to Taiwan’s armed forces, while drones could bolster Taiwan’s defenses via decentralized and attritable systems that could wreak havoc on an invading force, and missiles —especially if road-mobile — combine resilience with lethality. Russia’s war in Ukraine has shown that such systems would need to be accessible in mass (i.e., thousands not scores). Taiwan should also continue building out access to a reliable low-earth orbit satellite network to help preserve communication ability in the event of a blockade or invasion, but it should prioritize systems resilience in this process. All of these actions are practical in the next few years. The only thing required is prioritization. Finally, regional powers — especially Japan, but also South Korea, the Philippines, and Australia — should be clearer about their own likely responses to a Chinese attack on Taiwan. These states have the most to lose from a Chinese bid to overturn the status quo. While it is unrealistic to expect regional governments to announce firm commitments to Taiwanese security, it would certainly help the cause of stability in East Asia if they would announce a willingness to impose economic punishments, political sanctions, and increase defense spending in response to an invasion. For peace to be likely in the Taiwan Strait in the 2020s, Taiwan and its friends will need to take radical action to develop short-term constraints on Chinese action but also look for ways to encourage internal restraint among Chinese decision-makers, something that will require recognizing practically what the Department of Defense has recognized theoretically: that if China comes to view the evolution of the status quo in increasingly negative terms, its incentives not to use force are correspondingly reduced.

Last week, Taiwan announced plans to increase its total defense spending to a record NT$606.8 billion (US$19.1 billion), equivalent to 2.6 percent of GDP. While this might seem like good news, the reality is that this represents only a 3.5 percent nominal increase over last year’s budget of NT$586.3 billion and a smaller increase in real terms with inflation standing at roughly two percent. Most important, the proposed budget still falls far short of what the island should be investing in defense. Ironically, the smallest growth in Taiwan’s defense budget in half a decade is coming at a time when defense spending should be accelerating to confront the growing threat that Taiwan faces. To give credit where it is due, President Tsai Ing-wen reversed years of stagnant military spending, pushing through seven consecutive increases and nearly doubling Taiwan’s defense budget over the course of her tenure. Just as important, Tsai has extended compulsory military service from four months to one year, prioritized asymmetric weapons such as missiles and mines, invested in Taiwan’s defense industrial base, and initiated an overhaul of Taiwan’s reserve forces. She is leaving a much stronger military to her successor than the one she inherited. More on: Taiwan Taiwan Strait These substantial increases to Taiwan’s defense budget and a heightened focus on improving its military’s combat capabilities reflect the far more dangerous international environment for Taiwan. As noted in our recent CFR-sponsored Independent Task Force report on Taiwan, Russia’s invasion of Ukraine serves as a reminder that war is not a relic of the past but is instead a tool that countries continue to employ to satisfy their territorial ambitions. It also demonstrates that authoritarian leaders with few internal political constraints can and will bear substantial costs to pursue their legacies. Read the Full Report U.S.-Taiwan Relations in a New Era Chinese leader Xi Jinping has employed greater military, diplomatic, and economic pressure on Taiwan and imbued cross-strait issues with greater urgency. Although he has not put an explicit timeline on achieving unification with Taiwan, Xi has repeatedly linked unification to the “rejuvenation of the Chinese nation,” which he has stated must be achieved by 2049. Xi’s report to the Twentieth National Congress of the Communist Party of China in 2022, for instance, noted, “Resolving the Taiwan question and realizing China’s complete reunification is…a natural requirement for realizing the rejuvenation of the Chinese nation.” In his March 2023 speech to the National People’s Congress, Xi asserted that achieving unification “is the essence of national rejuvenation.” While Beijing continues to assert a preference for achieving unification through peaceful means, it has embarked on a remarkable military modernization campaign, and preparing for a war in the Taiwan Strait has been the People’s Liberation Army’s (PLA) top priority. CIA Director William Burns has noted that the United States knows “as a matter of intelligence” that Xi has ordered the PLA to be ready to invade Taiwan by 2027. China’s official defense budget is now $224 billion, nearly 12 times Taiwan’s defense spending. China has developed an array of capabilities intended to win a war in the Taiwan Strait—principally ballistic missiles, submarines, modern air defense units stationed on China’s east coast and reclaimed land in the South China Sea that can range beyond Taiwan, and advanced fighters and long-range bombers. As a result of these sustained investments, the military balance in the Taiwan Strait has dramatically shifted in China’s favor. China has more than 1,900 fighter aircraft to Taiwan’s 300, 71 submarines to Taiwan’s 2 (although Taiwan has an additional 2 World War II–era submarines, they are only used for training), 45 frigates to Taiwan’s 22, and 36 destroyers to Taiwan’s 4. In addition to its quantitative strength, the PLA now fields nuclear-powered submarines, fifth-generation fighter jets, and other cutting-edge capabilities that Taiwan’s military lacks. The Military Balance in the Taiwan Strait Heavily Favors China Estimated military assets as of 2022 Infographic details relative military strength of China over Taiwan, revealing China's significant advantages when it comes to troops, air power, and naval power. China Taiwan Active duty forces = 100,000 170,000 2,035,000 Artillery = 1,000 1,200 9,800 Principal surface combatants = 10 57 139 Fighter jets = 100 300 1,900 Bombers and attack aircraft 0 450 = 100 Submarines = 10 2 71 Source: U.S. Department of Defense. While Taiwan cannot be expected to match China’s military spending dollar for dollar, it will need to both spend more and invest that money wisely to maintain deterrence. In practice, this means procuring more anti-tank and anti-aircraft missiles, investing in rapid mining capabilities, developing drones and unmanned underwater vehicles, expanding domestic defense industrial capacity, and hardening critical infrastructure. Given its limited resources, Taiwan will have to make difficult decisions and divest some legacy platforms in favor of investing in a greater quantity of cheaper systems. Asia Unbound CFR fellows and other experts assess the latest issues emerging in Asia today. 1-3 times weekly. View all newsletters > Analysts often focus on defense spending as a percentage of GDP as a critical indicator of how seriously a country is taking the threats that it is facing. Taiwan’s defense spending, at around 2.6 percent of GDP, outpaces many NATO allies such as the United Kingdom, France, Italy, and Germany. At the same time, however, Taiwan’s defense spending is not commensurate with countries that face similar existential threats such as Israel, whose 2022 defense spending totaled 4.5 percent of GDP. The United States, by comparison, spends 3.5 percent of GDP on defense, and during the Cold War routinely spent between 5 to 10 percent of GDP. Another way to look at the extent to which Taiwan (or any country) prioritizes defense is to look at its military budget as a percentage of total government spending. As Richard Bush recently showed, however, while the threat Taiwan faces has consistently grown for the past two decades, its defense spending as a percentage of the total government budget has remained remarkably stagnant at around 11 percent (in both 2001 and 2019, for instance, Taiwan allocated 11 percent of its government budget to defense). Taiwan will need to make difficult tradeoffs in the years ahead and will need to prioritize defense spending over other areas. Over the past seven years, Taiwan has made substantial progress in digging itself out of the hole it put itself in due to years of stagnant defense budgets and the misallocation of limited military resources. But it has more digging to do, a task that will only become more difficult as China continues to improve its military capabilities with an eye on Taiwan. Tsai’s successor will need to make sustained investments in defense and use that money wisely to deter Chinese aggression.

Although China continues to state a preference for unifying with Taiwan through peaceful methods, it has never renounced using force. Indeed, for the past two decades its military modernization has focused on developing capabilities that would enable it to forcefully conquer Taiwan, ranging from ballistic missiles to advanced fighter jets and the world’s largest navy. China’s military, the People’s Liberation Army, has increased the scale and sophistication of its military drills around Taiwan in recent years, honing its combat capabilities. As the prospect of gaining control of Taiwan peacefully becomes more remote, with Taiwanese identity rising and Taiwanese interest in unifying with the People’s Republic of China (PRC) declining, China could conclude that using force is the only way to achieve its political objectives. Why China Wants Taiwan Although the People’s Republic of China has never ruled Taiwan, its leaders view the island as Chinese territory—a renegade province that must be brought under Beijing’s control, by force if necessary. Chinese leader Xi Jinping has called unification with Taiwan the “essence” of the country’s “rejuvenation,” which he has stated needs to be achieved by 2049, the one hundredth anniversary of the PRC. Accomplishing that goal militarily, however, would prove highly challenging. Like Ukraine, Taiwan is a young democracy bordering a much stronger authoritarian power that does not believe it should exist as an independent state. After Russia’s invasion of Ukraine, many Taiwanese people have concluded that a Chinese invasion of Taiwan needs to be taken seriously. China is investing huge sums to develop the capability to bring Taiwan under its control by force, if need be. At the same time, invading Taiwan or mounting a successful blockade would be the most complex military operation in modern history, and China’s military has not fought a major war in more than seven decades. A Treacherous Crossing To invade Taiwan, China would have to conduct an extraordinarily complex military operation, synchronizing air, land, and sea power as well as electronic and cyberwarfare. The Taiwan Strait, over ninety miles wide, is incredibly choppy, and due to two monsoon seasons and other extreme weather events, a seaborne invasion is only viable a few months out of the year. Transporting hundreds of thousands of soldiers across the Taiwan Strait would take weeks and require thousands of ships. Each crossing would take hours, allowing Taiwan to target the ships, mass troops on potential landing sites, and erect barriers. China would need to shift military assets to its eastern coast and undertake other visible preparations for an invasion, which Taiwan and the United States would likely be able to detect. Some questions remains about whether China has the naval vessels it would need to invade Taiwan successfully. China’s amphibious fleet is relatively small, and although Beijing will likely turn to civilian ships to sustain and supplement an invading force, those take longer to unload and would be more vulnerable to Taiwanese missiles. The Eastern Theater Command, which would lead a military operation to take Taiwan, carries out combat training in Zhangzhou, Fujian Province, China, on Aug 27, 2022. Vehicles enter a passenger roll-on/roll-off ship, which could be used to support military operations, at the port of Yantai, Shandong Province, China, on December 19, 2023. Few Places to Land Even if Chinese troops successfully cross the strait, few deep-water ports and beaches in Taiwan could accommodate a large landing force. Beijing would also have to assume Taiwan could destroy its major ports at a conflict’s outset to prevent an invader from using them. Taiwan’s west coast has shallow waters extending from most of its beaches, meaning they are not ideal for an invading force. Taiwan’s east coast is lined by cliffs that are too steep for an invading force to scale. Moving to Taiwan’s major population centers is only possible via a few narrow passes and tunnels, which Taiwan can destroy or defend. The D-Day operation in World War II was the largest amphibious invasion in military history, involving seven thousand ships and almost two hundred thousand troops who crossed the nearly one-hundred-mile English Channel. Over a period of three-plus weeks, 850,000 troops landed on the beaches of Normandy to liberate France. A Chinese amphibious invasion of Taiwan would likely have to dwarf D-Day in scale. Due to the shallow water, China would have to anchor ships far from Taiwan’s coast and move equipment to the shores slowly, making the ships vulnerable to Taiwanese missiles and artillery. Taiwan has also invested in defenses, from mines to anti-landing spikes, and mobile missile launchers. Despite China’s rapid military modernization and its focus on preparing for military scenarios in the Taiwan Strait, Taiwan has inherent defensive advantages that China will find difficult to overcome. Mountainous and Unforgiving Terrain Even if China’s military successfully established a beachhead on Taiwan, it would struggle to navigate the mountainous terrain to secure the island. Taiwan’s military, by contrast, has the advantage of knowing the land and terrain and how to defend it. Taiwan has mountain peaks reaching over twelve thousand feet. Taiwanese troops could hide in those mountains and wage a guerrilla warfare campaign. The Fuxing mountains of New Taipei City are seen on November 16, 2019. The Fuxing mountains of New Taipei City are seen on November 16, 2019. Sam Yeh/AFP/Getty Images Traversing those mountains to move inland would be challenging, rendering Taiwan’s east coast far less useful and forcing invaders to focus on attacking the island’s west coast. In addition, although Taiwan has major ports located in the south, moving to the north is also hard because there are few major roadways and many river crossings. As a result, a Chinese invasion would likely have to focus squarely on the ports and beaches located near Taipei. Strategic Chokepoints With few viable beaches and ports to choose from and the difficulty of moving forces across the island, China’s concentration would turn to Taiwan’s capital region, home to over one-fourth of its population. China’s military would seek to seize control of Taipei and depose Taiwan’s government. Driven by the political objective of establishing full control over Taiwan, China would need to seize control of Taiwan’s capital of Taipei. However, gaining control of Taipei to establish full control over Taiwan would be enormously difficult. Few routes lead into the city, which sits in a bowl, ringed by mountains that defenders can utilize to target an invading force. To prevent China’s military from seizing the capital, Taiwan can choose to destroy the city’s major port and the tunnels and highways leading into the city. Even if China’s military entered Taipei, it would have to consider conducting urban warfare. Costly Urban Warfare Given the island’s terrain, most of Taiwan’s twenty-three million people live in a handful of cities, with seven million residing in Taipei. To conquer Taiwan, China would therefore be forced into urban combat, fighting street by street. That approach would mean a slow, costly invasion. Taiwan has inherent advantages that will make an invasion difficult, expensive, and uncertain. Still, the Taiwanese people’s will to fight and resist will likely prove more decisive than mountains, ports, roads, or the ocean. If China conducts the operation with little opposition, it can probably navigate and overcome those obstacles. However, if confronted with millions of people determined to repel an invasion, China will face a much tougher task. The challenges that an invading force would face, however, have not stopped China from preparing for that very scenario. Following the inauguration of Lai Ching-te as Taiwan’s new president in May 2024, China showed its displeasure by launching two days of intensive military exercises surrounding Taiwan. Admiral Samuel Paparo, the commander of U.S. Indo-Pacific Command, commented that the exercises “looked like a rehearsal” for an invasion. “We watched it. We took note. We learned from it. And they helped us prepare for the future.”

Large-scale Chinese military drills near Taiwan are taking place just days after William Lai Ching-te, of Taiwan's ruling Democratic Progressive Party (DPP), was sworn in as president of the self-governing democratic island on Monday. In his inauguration speech, Lai vowed to defend the island's democracy, and called on China to end its military intimidation. The leadership of the People's Republic of China (PRC) under President Xi Jinping considers self-ruled Taiwan as Chinese territory that must be "reunited" with the mainland, by force if necessary. On Thursday, Chinese Naval Colonel Li Xi told state media the drills are "strong punishment" for "separatist acts" three days after Lai was sworn in. Su Tzu-yun, a research fellow at Taiwan's Institute for National Defense and Security Research (INDSR), told DW that the exercises are part of a long-running pattern "using military means to send political signals." Taiwan's Defense Ministry condemned the drills as an "irrational provocation" and mobilized sea, air and ground forces in response, adding that "all officers and soldiers of the armed forces are prepared." Taiwanese capability to defend itself against China's much larger People's Liberation Army (PLA) has in recent years seen defense spending increase along with the expansion of asymmetric warfare capacity, also known as the "porcupine" strategy. This involves using smaller, but highly effective, weapons to make an invasion by a larger force prohibitively costly. According to a recent US Congressional report on Taiwanese defense, Washington is pushing for an asymmetric approach that "envisions Taiwan investing in capabilities intended to cripple an amphibious invasion through a combination of anti-ship missiles, naval mines, this includes the use of unmanned aerial vehicles (UAVs), like the domestically developed drone "Albatross II," which was unveiled last year. Low-cost munitions like mobile coastal defense cruise missiles (CDCMs) can destroy China's expensive naval vessels and equipment. Stealth fast-attack craft and miniature missile assault boats are other relatively cheap but highly effective equipment. They can be dispersed among fishing boats across Taiwan's ports. Sea mines and fast mine-laying ships could also complicate the landing operations of any invading navy and other similarly small, distributable, and relatively inexpensive weapons systems." Geography is another asset in Taiwan's defense. A full-scale invasion of the island would require sending hundreds of thousands of troops across the Taiwan Strait, which would be a long and laborious operation involving thousands of ships that would be vulnerable to attack. "Invading Taiwan or mounting a successful blockade" would be the "most complex military operation in modern history," involving synchronization of air, sea and land forces, along with cyberwarfare, writes David Sachs, an Asia fellow at the US Council on Foreign Relations. Sachs points out that the monsoon season means that a landing operation could only take place a few months out of the year. Additionally, there are few deep-water ports or large enough landing sites on beaches, which an invading force would need. The east coast of the island is lined by cliffs that provide a natural barrier to a large-scale invasion. The shallow water of the west coast means large ships would need to anchor further offshore. Sea mines, combined with fast-attack craft and missile assault boats, along with land-based munitions positioned on shores and nearby islands, would counter the PLA in its most vulnerable position before it could establish a beachhead. And even if an invading force were able to establish a beachhead, Sachs emphasizes that Taiwan's mountainous terrain limits military operations. The capital, Taipei, is situated in a bowl ringed by mountains, with a few entrance points allowing an advantage to defensive positions. Taiwan has also prepared its cities for guerrilla warfare in case the PLA does succeed in getting boots on the ground. Man-portable air-defense systems (MANPADS) and mobile anti-armor weapons, such as high mobility artillery rocket systems (HIMARS), can be used in urban fights, while buildings can be turned into barracks. Taiwan has also invested heavily in larger weapons systems. The United States is Taiwan’s Top military benefactor, and for decades, Washington has sold arms to the island under the Taiwan Relations Act, which allows for the supply of "defensive" weapons. Taiwan is still waiting for the delivery of $19 billion (€17.52 billion) worth of purchased US military equipment, including fighter jets, tanks, missiles and smaller weapons. Under Lai's predecessor Tsai Ing-wen, from 2019 to 2023, Taiwan's government has increase defense spending by an average of nearly 5% per year, and as a percentage of GDP increased from 2% to 2.5%. Defense spending is set to increase again in 2024, albeit at a slower rate, coming in at $18.8 billion.

Taipei, Taiwan – The past month has been busy in the Taiwan Strait. China’s People’s Liberation Army (PLA) made 225 sorties into Taiwan’s Air Defense Identification Zone (ADIZ) – an area monitored by the island’s military – over 18 days in September and conducted large-scale naval exercises earlier this month. While these events occurred in international waters and airspace, they were meant to intimidate Taiwan and remind the self-ruled island’s leaders that Beijing has not ruled out the use of force to take control of the territory it claims as its own. By some estimates, a huge military modernisation campaign could make the PLA capable of mounting an invasion by 2027. With a population of just 23 million and a military of 169,000 active service personnel, Taiwan is dwarfed by China’s population and military strength. The PLA is the largest standing army in the world with 2 million members and it has much stronger air, naval and firepower than Taiwan, according to the International Institute for Strategic Studies (IISS), a London-based think tank. At the island’s National Day celebrations on October 10, Taiwan’s President Tsai Ing-wen said it was her dity to protect the freedoms and way of life of Taiwan’s people. “In the midst of tremendous internal and external pressures, Taiwan’s democracy has grown and thrived… and we have emerged with even greater resilience,” she said. “The Taiwanese people,” she added, “will be a democratic and free people for generations to come.” Tsai, who is in her second and final term in officer, has previously used the occasion to outline defence initiatives and modernisation plans. So, faced with such an existential threat just 180km (111 miles) across the Taiwan Strait, just how prepared is Taipei to face a war with China? In such an uneven fight – how can Taiwan defend itself? World history is filled with cases of a smaller force defeating, or at least seriously delaying, a superior power using well-known tactics such as guerrilla warfare, attacking supply chains, making use of weather and terrain, and simply refusing to meet an attacking army. Known as “asymmetric warfare”, this strategy is thousands of years old and includes the Vietnam War and the Taliban’s defeat of United States forces in Afghanistan. Perhaps ironically, asymmetric warfare was also used successfully by Chinese leader Mao Zedong to defeat Chiang Kai-shek and the Republic of China’s military in the 1940s, leading its nationalist government to retreat to Taiwan, setting the stage for today’s tensions. Beijing’s Communist Party still claims Taiwan as its own nearly 75 years on, while democratic Taiwan has de facto abandoned its claims to mainland China. Contemporary Taiwan has also adopted a strategy of “asymmetric warfare” by which it intends to make any military assault so difficult, challenging and bloody that the PLA will consider the cost of invasion too high due to the number of casualties, financial cost and inevitable political ill will at home if things go badly – not to mention the risk of turning Beijing into a global pariah. What kind of preparations has Taiwan made? Taiwan’s military has been doing its best to play catch-up under Tsai. Since taking office in 2016, she has worked to reform the military by raising its budget each year, supporting domestic defence projects like manufacturing submarines, reforming Taiwan’s reserve system with an “All-Out Defense Mobilization Agency,” and extending conscription for young men between the ages of 18 and 36 from four months to one year. Taiwan has weapons systems such as the US-made Patriot air defence system as well as its homegrown Tien Kung or “Sky Bow” surface-to-air anti-ballistic missiles, and Hsiung Feng anti-ship missile systems. Under Tsai, Taiwan has aggressively tried to build up its military capacity, buying primarily from the US, although the island has indirectly acquired technology from overseas for projects like its domestic submarine programme – which received varying levels of assistance from the US, UK, Canada, Australia, South Korea, India and Spain. In 2023 alone, Taiwan ordered $1.55bn in weapons and services from the US, including infrared tracking systems for F-16 jets, munitions, spare parts for aircraft and technical support. Other purchases during Tsai’s tenure have included drones, anti-tank munitions systems, Paladin Medium Self-Propelled Howitzer artillery systems, AIM-9X Sidewinder air-to-air missiles, Stinger surface-to-air missiles, MK-48 Mod6 Advanced Technology heavyweight torpedoes, AGM-154C JSOW air-to-ground missiles as well as field communication equipment and training packages, according to purchase orders approved by the US State Department. A Taiwanese soldier launches a US made Stinger missile during a live-firing exercise Taiwan is equipped with a variety of US-made weapons and equipment, including Stinger missiles [File: Ann Wang/Reuters] Unfortunately for Taiwan, however, the US has a $19bn backlog in weapons sales owed to Taiwan thanks to COVID-19 supply chain disruptions and the diversion of weapons to Ukraine. They include important items like Harpoon Block II Missiles that are critical to coastal defence. Together, these weapons allow Taiwan to track the PLA, push back on an attack, mount an offensive and make it difficult for China to score an easy victory as well as simply roll over its military. Taiwan has historically been seen to have some geographic advantages despite being an island and potentially isolated or cut off from supplies. Experts like Eric Chan, a non-resident research fellow at the Global Taiwan Institute, describe Taiwan’s mountainous terrain and dense urban areas as “unforgiving” for an invading force. The Taiwan Strait is a notoriously challenging environment and if a force made it to Taiwan, the common belief is that there are only a limited number of beaches suitable for an amphibious invasion. At the same time, however, there is increasing scepticism in some quarters, including the US military, about how much those natural defences will help, given the growing strength of the PLA, said Chung Chieh, an associate research fellow at the Kuomintang-affiliated National Policy Foundation in Taipei. As a result, Taiwan has adjusted its defence plan to factor in immediate urban warfare, he said, given that about 79 percent of Taiwan’s main island is considered built-up. But Taiwan does have an “X factor” in the form of a “determined” population willing to defend themselves and their island home, according to Tony Hu, US Department of Defense senior director for China, Taiwan, and Mongolia. It is widely believed that in the February 2022 full-scale invasion of Ukraine – a common point of comparison for any future Taiwan-China war – Russian President Vladimir Putin vastly underestimated Ukrainian resolve. Analysts say if Chinese President Xi Jinping is surrounded by too many “yes men”, he could risk the same. “I think the people around Putin were telling him that once we show strength to go in, they’re going to be so happy that Mother Russia has returned,” Hu told Al Jazeera. “They will all embrace us. And I think he’s genuinely surprised at the determination of the Ukrainian people to defend themselves. And I believe Taiwan will do the same.” The official is not the only one. In February, IISS observers said that “Beijing’s perceptions of Taiwan’s will to fight a sustained campaign and its capability to do so would almost certainly be a significant factor in its calculus of potential military options.” What is the US role in Taiwan’s defence? Besides selling Taiwan weapons and engaging in training exchanges, the US is considered the wildcard should there be a conflict between Taiwan and China. Taiwan’s government, known formally as the Republic of China, was a one-time ally of the US during World War II and the two sides maintained diplomatic relations throughout the early Cold War. When Washington broke off relations in 1979 to recognise Beijing as the sole representative of “China,” it did so with the proviso that the US would provide Taiwan with enough “defensive articles” such that the island could “maintain a sufficient self-defence capability”, according to the 1979 Taiwan Relations Act. Whether this extends to the US military actively intervening in defence of Taiwan and not just providing weapons and intelligence has been left purposefully vague, although President Joe Biden has been less equivocal and suggested that his administration at least would defend Taiwan. At the same time, the war in Ukraine has shown the potential limits to the domestic appetite in the US to defend other governments, even if they are also “like-minded democracies”. What can Taiwan learn from Ukraine? Taiwan and Ukraine are very different battlefields thanks to geography and other political factors, but experts like Chieh agree that one of the key lessons has been the importance of stockpiling basic weaponry such as ammunition. “Washington, DC is currently worried about 2027, when Xi Jinping’s term expires and he may need to seek re-election, there may be relatively high military risks on the Taiwan Strait, so [its] current plan is that Taiwan must significantly improve its homeland defence capabilities before 2027,” said the National Policy Foundation’s Chieh. Two Black Hawk helicopters landing at Taiwan's international airport during military exercises Black Hawk helicopters prepare to land at Taoyuan International Airport during the annual Han Kuang military exercises in July [File: Ann Wang/Reuters] “In the meantime, it’s asked us to increase our stored ammunition, because Taiwan is not like Ukraine, which has land neighbours with NATO countries. Taiwan is an island, so once [the PLA] starts to attack Taiwan, it will be very difficult to transport supplies to Taiwan,” he said. Another important lesson from Ukraine is the importance and precariousness of communication lines. During an invasion, cell towers and communication equipment are often some of the first things to go. While Ukraine was supported by StarLink, company CEO Elon Musk’s reported order for the service to be disconnected during a key Ukraine drone attack on Russian ships shows that even the best programmes can have their limitations. If the same support was extended to Taiwan, it may not get all the support it needs and could be subject to the whims of a mercurial tycoon such as Musk. What can Taiwan improve? Quite a few things need improvement, according to experts, beginning with more civilian control of the military and better coordination between both sides. Where countries like the US have a defence secretary who is separate from military leadership and can provide alternative viewpoints and follow-up on reforms, Taiwan has no equivalent, said Chan. The civilian government also lacks national security expertise. Much of this has to do with Taiwan’s history. Before democratisation in the 1990s, Taiwan was a single-party state led by the Kuomintang and controlled under martial law from 1949 to 1987. While its transition to democracy went relatively smoothly, there can at times be some “resistance” to change at the top of the military leadership and disconnect over reforms, according to people familiar with the situation. The military also has ongoing reputational issues among some Taiwanese due to its association with the old regime. Military experts universally agree that even more work needs to be done on Taiwan’s reserve programme and conscription training. Taiwan’s leadership must also consider realistic issues like how to integrate civilians into a defence apparatus much like Ukraine’s Territorial Defense Force and handle complex fighting like urban warfare and a war where there are likely to be very few “delineated front lines”, said Chan.

Taiwan’s best military strategy for deterring a Chinese invasion is one that relies on asymmetric defense to prevail in two critical operations: surviving a conventional strike campaign and denying amphibious forces from establishing a beachhead or capturing a logistics hub like a port. An asymmetric defense strategy, also called a “porcupine” strategy, uses large numbers of smaller, less complex capabilities to counter a stronger opponent instead of matching them system-for-system. For example, when facing a large navy, an asymmetric defense strategy would lean on ground-based missiles and unmanned air and watercraft instead of building larger ships. What does successful deterrence look like for the United States, and what cost are we willing to pay for it? Focusing Taiwan’s self-defense posture on asymmetric defense is a change from Taiwan’s current approach, which tries to walk a middle path between asymmetric capabilities and traditional military capabilities like manned fighter aircraft and large warships. Taiwan wants to have a flexible military that it can use to respond to a wide variety of threats. Arguments favoring flexibility emphasize that China is likely to pursue coercive pressure tactics against Taiwan, which traditional capabilities are better at countering. Continuing to pursue flexibility, however, carries real risks for Taiwan. Traditional military capabilities are generally more expensive to acquire and maintain than asymmetric ones, and Taiwan — despite a recent spending uptick — has chronically underspent on defense. This creates significant tradeoffs between traditional and asymmetric capabilities. The People’s Liberation Army (PLA) is also well-equipped to target and destroy Taiwan’s traditional capabilities and the logistics facilities that support them. Without prioritization, Taipei risks fielding a military that is poorly prepared to do many things instead of doing one thing well. Taiwan should prioritize asymmetric defense because it is the strategy that can best offset the PLA’s advantages. Mobile anti-ship and anti-air capabilities with large stockpiles of munitions are the most critical kinds of capabilities for Taiwan to build up. Unmanned vehicles of all ranges and sizes, especially those that can be operated with a small logistics footprint, are essential for conducting battlefield reconnaissance and attacking ground forces. Operationally, Taiwan needs to use these asymmetric capabilities to survive against a Chinese conventional strike campaign and deny the PLA’s ground forces a lodgment on the island. Prevailing in these two operations is essential for Taiwan’s defense for three reasons. First, Taiwan will likely be fighting these operations alone even in the event of rapid US military intervention. Second, Taiwan’s current, flexible military posture is not optimized to prevail in these operations. Third, success or failure in these operations could prove decisive to the entire conflict. The United States should use its considerable leverage as Taiwan’s primary source of military aid to push Taipei toward asymmetric defense. Washington should only sell Taiwan asymmetric capabilities from this point forward and support Taiwan’s defense industrial base so it can manufacture more US-designed weapons and avoid long wait times for US-made weapons. The United States should also assure China that arms sales are limited to improving asymmetric defense and avoid actions that stoke Beijing’s ire but do nothing to help Taiwan. This mix of security assistance and assurances is essential for buying Taiwan the time it needs to fully implement the asymmetric defense strategy.

The federal government is planning to invest considerable funds into promoting startups investing in artificial intelligence, climate, quantum, or biotechnology, for example, and into increasing exit opportunities for German and European startups. According to the latest plans, a further €1.6 billion from the so-called Future Fund (also known as the Investment Fund for Future Technologies), which was previously held as a strategic reserve, and €150 million from the special assets of the European Recovery Program (so-called ERP special assets) are to be made available for this purpose.Nowadays, the promotion of startups and young companies is a declared goal of every economic nation. This applies all the more to companies that develop and promote modern technologies that are intended to ensure the competitiveness of markets, especially in international comparison. It goes without saying that Germany cannot afford to ignore this development. The federal government has recognized this and initiated appropriate measures. The aim of this article is to provide an overview of the history of state support for startups in Germany and to highlight the latest developments in this area. STARTUP STRATEGY 2022 - LONG OVERDUE Historically, German companies have always produced innovations that have not had to shy away from international comparison. These new developments have benefited and continue to benefit both the national economy as a whole and individual citizens. The federal government’s goal is to maintain this level of innovation for the future and promote young companies even more strongly.At €18 billion, the total investment volume in the German venture capital market had already almost tripled in 2021 compared to the previous year. In an international comparison, however, the share of venture capital investments in Germany in relation to gross domestic product in the corresponding year was mediocre at best—at just 0.47%. The German government recognized the latter and adopted its first comprehensive startup strategy on June 27, 2022 in order to ensure with a variety of measures and investments that Germany as a business location not only remains sustainable in the long term, but also develops into a leading startup location in the medium term. A total of €10 billion is to be made available under the Future Fund by the end of 2030. If additional funds provided by private and public partners are added to this, a total of over €30 billion in venture capital is to be raised over the corresponding period.The Startup Strategy 2022 is composed of a total of 130 measures, which are to be implemented during the current legislative period. The fact that 45% of the measures had already been fully implemented by September 2023 is a testament to the successful start. The practical implementation takes place through a variety of differently structured funding programs, under which founders and young entrepreneurs can apply for substantial funding for their ideas. Some of these so-called modules of the Future Fund will be presented below before concluding with the latest developments in the area of state startup funding. FUNDING PROGRAMS - STATUS QUO INVEST - Grant for venture capital The Invest program is certainly one of the best-known funding programs for startups. This is hardly surprising, as it has been in existence since May 2013. The aim of the Invest program is to promote investments by private individuals in startups. The fact that over 17,000 applications for the acquisition grant with a total volume of over €267 million had already been approved by October 31, 2022 demonstrates the effectiveness of the program. The Invest program was extended for another four years in February 2023 and grants subsidies for investments by private investors in young and innovative companies, in particular for investments by so-called business angels—i.e., people who take a financial stake in companies and often support the founders with expertise and contacts—especially in the early stages. Investors can receive state subsidies of up to €100,000 in addition to their own investment. The minimum investment limit has been reduced from €25,000 to €10,000. This is intended to motivate private individuals in particular to invest in companies with innovative business ideas that are still in their infancy. DeepTech & Climate Fund (DTCF) The aim of the DTCF is to promote startups in the field of high technologies. Financial support from the state is particularly important here, as the companies in question have a high demand for capital, and the development of marketable products usually takes a relatively long time. At the same time, however, the earnings prospects are correspondingly lucrative if a high-tech product actually makes it onto the market. The focus of funding here is on companies in the fields of robotics, AI, quantum computing, blockchain, process automation, digital health, and fintech. As a co-investor, the DTCF invests exclusively together with partners from the private sector. The maximum funding amount per company in all financing rounds is limited to €30 million. In the first financing round, the DTCF invests at least €1 million. The DTCF always acquires a share of less than 25% of the voting rights.The DTCF will run for at least 25 years (from 2021), with a total investment volume of up to €1 billion available by the end of 2030. High-Tech Gründerfonds (HTGF) The HTGF is one of the long-established funds in Germany and has been providing financial support to technology startups since 2005. The funding is aimed in particular at companies from the digital tech, industrial tech, life sciences, and chemicals sectors. Founders from the relevant business areas and young companies (maximum three years old) are eligible to apply. The majority of shares in the respective startup must be owned by management in order to be eligible for funding. HTGF invests up to €1 million per seed round, either as lead investor or together with other investors. A maximum of €4 million is available as equity per startup. Venture Tech Growth Financing (VTGF 2.0) VTGF 2.0 is the successor to VTGF 1.0, which was launched in 2019 and, in contrast to the above examples, is structured as a debt-based fund. In line with the predecessor program, VTGF 2.0 involves joint financing by the federal government and private lenders. The state-owned KfW banking group and the federal government are making a total of €1.2 billion available for this purpose up to 2030; funding is possible across all growth phases and in amounts from €1 million up to €125 million. The participation of a private lender is always required, which generally assumes a financing share of 50% and on the same terms (pari passu) as KfW. LATEST DEVELOPMENTS - QUO VADIS? As outlined at the beginning, a further €1.6 billion from the Future Fund and €150 million from the ERP Special Fund are now to be made available to promote startups in Germany and make the Federal Republic competitive, particularly in the field of high technologies. According to a joint press release from the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Climate Protection dated February 7, 2024, the plan is to use the corresponding funds as follows: Together with private investors, KfW is to use €850 million for direct investments in young tech startups. The aim is to make the supported companies internationally competitive and to establish Germany as a future-proof location in the tech sector. Germany plans to invest a maximum of €500 million in exit financing for European tech champions. Together with European partners, the aim is to establish a European exit initiative and lay the foundation for ensuring that successful German and European startups do not switch to non-European markets for exits. KfW is to invest €200 million to ensure the continuation of the successful Growth Fund Germany, in particular by mobilizing further capital from institutional investors. Finally, €200 million from KfW is to be invested in impact venture capital funds. These are funds that are not only intended to generate financial returns, but also aim to achieve positive social or ecological effects under the heading of impact investing. Specific projects in which the aforementioned funds are to be used are now being developed. Gradual implementation is planned for the end of 2024. CONCLUSION For a long time, venture capital investments were neglected in Germany. The federal government mainly relied on the initiative of founders and investors. State funds were made available to an insignificant extent, especially in international comparison. However, the federal government has now clearly recognized that such an approach will not be able to secure the competitiveness of the German startup scene in the long term. In times of transforming globalization and realigning supply chains, it is all the more important that Germany pulls out all the stops and does not shy away from corresponding investments in order to remain competitive on an international level or to become competitive in some areas. The actual implementation of the planned projects remains to be seen. However, it is certain that the federal government has recognized the importance of supporting young local companies, particularly in the high-tech sector, and is prepared to provide the necessary funding.