China and the United States are not on a collision course over Taiwan -- yet. But diplomatic sources here feel that unless the Reagan administration develops more adroitness in handling the Taiwan issue, much of the momentum for closer Sino-American ties, built up both by Republican and Democratic administrations, could be destroyed.
The warmth generated here by Secretary of State Alexander M. Haig Jr.'s mid-June visit could be dissipated by mounting irritation over what is regarded as the ambiguity of the Reagan White House's Taiwan policy.
If the conservatives who urge President Reagan to show more generosity toward Taiwan have a certain political weight in the new administration, in China, Vice-Chairman Deng Xiaoping and his friends must watch out for party stalwarts who ask whether the Deng policy of concentrating on economic modernization and of looking towards the peaceful reunification of Taiwan can in fact succeed.
On one hand, the administration has stressed the global strategic significance of the US-Peking relationship in opposing Soviet expansionism. Mr. Haig was authorized to tell his Chinese hosts of a National Security Council decision lifting a ban on arms sales to China on a "case-by-case basis."
On the other hand, the White House gives the impression that while it will not change the nongovernmental nature of Taiwan relations, it wants to accord them more "dignity" and thus somehow to upgrade them.
For instance, during his visit to Peking Mr. Haig gave his Chinese hosts one firm assurance, it is understood here: The Reagan administration would honor the previous Carter administrations commitment to keep relations with Taiwan purely unofficial.
When White House Deputy Press Secretary Larry Speakes echoed this commitment more recently, he referred to the Taiwan authorities as "the government of Taiwan," thus canceling out the intended effect of his statement and causing the official New China News Agency to label his remarks as "stupid and ludicrous."
Chinese sources here say that, like Washington, they recognize the global strategic importance of a close, cooperative relationship with the United States. But this does not mean Peking has given Washington a license to do as it pleases with regard to Taiwan. Peking has repeatedly stated that it stands squarely on two points of the joint communique establishing diplomatic relations between the United States and China on Jan. 1, 1979.
First, "The United States recognizes the government of the People's Republic of China as the sole legal government of China." Second, "The government of the United States of America acknowledges the Chinese position that there is but one China and Taiwan is part of China."
The Reagan administration emphasizes the Taiwan Relations Act passed by Congress in April 1979 as the basis of its relations with Taiwan and says this act does not contravene the joint communique. Peking has never liked the Taiwan Relations Act and has consistently said so, from the time of the Carter administration.
A recent article in Peking's newly revived Journal of International Studies flatly characterizes the Taiwan Relations Act as "contravening the joint communique and international law."
The joint communique says that, within the context of American recognition of the People's Republic, "The people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan. But the Taiwan Relations Act drops the word "unofficial" and talks only of "commercial, cultural, and other relations between the people of the United States and the people on Taiwan."
The act does, however, make clear that relations with Taiwan will be conducted through the American Institute in Taiwan or "such comparable successor non-governmental entity as the president may designate," and states that "employees of the institute shall not be employees of the United States."
What the Chinese dislike the most about the act, however, is its commitment "to provide Taiwan with arms of a defensive character" and "to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan."
Sino-American negotiations to establish diplomatic relations were stalled for years because of China's refusal to concede that it would seek the reunification of Taiwan only through peaceful means and its concomitant insistence that the United States stop supplying Taiwan with arms.
A breakthrough was achieved only when the Chinese hinted that if the United States publicly said it expected a peaceful solution of the Taiwan question, Peking would not contradict it. As for arms sales, "We will never agree to your selling arms to Taiwan," Mr. Deng told US Ambassador Leonard Woodcock Dec. 15, 1979, "but we will set that aside in order to achieve normalization."
In other words, as one source familiar with the negotiations puts it, "there was not even an agreement to disagree." There was only a setting aside of the argument, in the hope that time and changing circumstances would make it obsolete. Under Deng, Peking has embarked on a determined campaign to achieve a peaceful reunification with Taiwan. What Peking does not want to do is to commit itself publicly exclusively to peaceful means.
Not only is this a matter of sovereignty for Peking -- the right of a central government to take any and all measures it considers necessary on its own territory -- and the US and all other countries recognizing Peking have acknowledged that Taiwan is part of China.
It is also a matter of practical negotiating tactics. Peking thinks it will have no leverage at all over Taiwan if, in proposing various means of achieving a peaceful reunification, it completely gives up the threat of force. Peking has made repeated overtures to Taiwan for a dialogue aimed at the eventual reunification of the island with the mainland.
Mr. Deng himself has told various interviewers that Taiwan could continue to enjoy its present economic and social system, and a considerable degree of local autonomy, after reunification. He has even said Taiwan could have its own Army. There is however one fundamental demand that Taiwan would have to accept -- to give up its claim to be the Republic of China and accept the status of being one of the provinces of the People's Republic.
Meanwhile, Peking has abolished customs duties on goods imported directly from Taiwan. It has proposed direct postal links between the mainland and Taiwan, and exchanges of visits by people on both sides. Taiwan has rebuffed every suggestion, considering them tricks designed to lull the islanders into a false sense of security.
Tension in the Taiwan Strait is at an alltime low. There is a flourishing smuggling trade across the strait, as well as indirect trade through Hong Kong and Japan. Last year Taiwan-mainland trade is believed to have reached $300 million, and this year it may be higher.
What would be the sale of American arms, especially of a new generation of fighter aircraft, do except to heighten tension once again in the Taiwan strait, Peking's advocates ask. If Taiwan gets a new generation of fighter aircraft, Peking will have to think about doing the same. Sino-American relations would go into a tailspin, and Taiwan's own flourishing economy would be affected as well because of the uneasiness of foreign investors, actual and potential.
An upgrading of US-Taiwan relations also would not serve the long-term interests of peace in the Taiwan Strait or of Taiwan's own security, Chinese sources argue. Such an upgrading would affect not only the leadership but millions of ordinary Chinese. It would inevitably be taken as a sign that the United States intended to keep Taiwan separate from the mainland -- to continue its pre-normalization policy of "one China, one Taiwan." It would make further development of Sino- American cooperation impossible.
Diplomats here believe that the US national interest is not served by trying to keep China and Taiwan separate. The only US national interest is that reunification, if it comes, be achieved peacefully.
Taiwan is a problem with highly emotional overtones left over from history between Peking and Washington. The joint communique solved the major aspects of the problem, and left aside for the time being those aspects it was unable to solve.
The Taiwan Relations Act, although objectionable to the Chinese, follows the main thrust of the communique in specifying that US-Taiwan relations be conducted through non-governmental entities.
Taiwan today does not face any imminent threat of invasion from Peking. It has flourishing trade ties with most of the world's countries. Some day or another it will have to come to terms with the mainland, but almost all non-Chinese observers agree this must be worked out by the Chinese themselves.
For the United States to appear to be taking sides in the Taiwan-Peking dispute by significantly stepping up the quality of arms supplied to taiwan, or by upgrading relations with Taiwan, can only harm its relationship with China without really benefiting Taiwan except in terms of a very short-lived, short-sighted satisfaction on the part of the Taiwan authorities.