In the last 50 years, the US extended its security commitment to many countries, while pursuing strategic ambiguity towards Taiwan. To understand these decisions and their implications, we develop a model where a great power (e.g., the US) chooses whether to protect an actor (e.g., Taiwan) in the event of another great power’s aggression (e.g., China). Neutrality invites Chinese aggression; protection leads to moral hazard (e.g., lower Taiwanese defense investments). We show that the strategy that maximizes deterrence is an ambiguous strategy (in the Ellsberg sense): China is deterred as if the US would defend Taiwan, and Taiwan acts as if the US would not. Extending the model, we show that this strategy can only be adopted by a great power who is sufficiently stronger than its competitor. When China reaches similar power as the US (and can also offer security guarantees), then the US would extend its security commitment to Taiwan, giving up on some deterrence to keep Taiwan from switching sides. We argue that this finding can explain why the US is about to abandon strategic ambiguity towards Taiwan, and why great powers expand their portfolio of security commitments when the balance of power gets closer to parity (e.g., NATO and Warsaw Pact).
Salle C2-16