WASHINGTON — The Taiwan Policy Act contained $4.5 billion in military aid for Taipei when Bob Menendez of New Jersey and James Risch of Idaho – the Democratic chairman and top Republican on the Foreign Relations Committee first introduced the bill in August with the aim of deterring a possible invasion or blockade by China in the coming years.

That number ballooned to as much as $10 billion through fiscal 2027 when the security components of the sprawling bill made their way into the FY 23 National Defense Authorization Act, which Congress passed earlier this month. That bill authorizes as much as $2 billion per year in Taiwan Foreign Military Financing, or FMF, a State Department-run program that allows other countries to purchase U.S. military equipment using grants or loans.

But Taipei will have to settle for U.S.-backed loans instead of grants next year after losing out on a behind-the-scenes Capitol Hill battle. The FY 23 omnibus spending bill that Congress released on Tuesday stipulates that the assistance must come in the form of loans – at least for the next fiscal year. Taiwan would be required to pay back the loans within a 12-year period.

This marks a loss for Taiwan, whose diplomatic office told Defense News last week that Taipei hoped that the assistance would be “allocated as grants.”

“The Biden Administration simply has not made Taiwan – or pushing for funding a Taiwan security assistance package – a priority,” Risch told Defense News. “That is reflected in the disappointing security assistance funding levels in the final funding bill. This is a huge missed opportunity and very concerning. In the next Congress, I will continue to press for robust funding for Taiwan’s defense against China.”

Risch and Menendez succeeded in attaching numerous security aid provisions from their bipartisan Taiwan Policy Act into the FY 23 National Defense Authorization Act. But they lost a subsequent battle with the congressional appropriators who drafted the omnibus spending bill and who opted to use loans instead of grants for Taiwan FMF.

The Democratic chairman and top Republican on the Senate’s State Department appropriations panel – Chris Coons of Delaware and Lindsey Graham of South Carolina, who co-sponsored the original Taiwan Policy Act – argued that the grants for Taipei could force the State Department to reprogram funding from other accounts. They worried that the funding would compete with, or potentially compromise, other budget priorities such as global humanitarian assistance.

The omnibus legislation does increase the State Department topline to $59.7 billion, a $3.6 billion boost above FY 22 levels. The bill also requires the State Department to report on how it intends to use the Taiwan FMF loans to the Appropriations Committee within two months after it becomes law.

Risch and Menendez joined Reps. Gregory Meek of New York and Mike McCaul of Texas – the Democratic chairman and top Republican on the House Foreign Affairs Committee – in a letter last week urging Senate and House leaders in each party to appropriate $500 million in FMF grants for Taiwan alongside another $500 million in Ukraine FMF.

“Unfortunately, FMF has been chronically underfunded, with less than 5% of FMF supporting foreign policy concerns in the Indo-Pacific and Eastern Europe,” they wrote to House Speaker Nancy Pelosi of California, Minority Leader Kevin McCarthy of California, Senate Majority Leader Chuck Schumer of New York and Minority Leader Mitch McConnell of Kentucky.

While Ukraine received neither FMF grants nor loans in the omnibus, the bill did include approximately $28 billion in emergency security assistance for Kyiv. The Biden administration did announce in September that it would provide Ukraine with $1 billion in FMF loans.

Of the 25-plus countries that receive FMF annually, the major recipients are Israel ($3.3 billion), Egypt ($1.3 billion) and Jordan ($425 million).

Taiwan’s $850 billion-per-year GDP is significantly higher than all three of those countries, and Taiwanese lawmakers have approved an $18.3 billion defense budget for FY23 — a 13.9% increase over FY22. The FY 23 National Defense Authorization Act stipulates that Taiwan must increase its defense budget every year to remain eligible for U.S. FMF — be they grants or loans.

The defense authorization bill also prioritizes the transfer of excess U.S. defense articles to Taiwan and contains provisions intended to speed up the foreign military sales process for Taipei amid a multi-billion-dollar backlog of weapons the island nation has ordered from Washington due to numerous contract and production delays.

It also authorizes $1 billion a year in presidential drawdown authority from existing U.S. stockpiles to transfer defense articles to Taiwan in the event of an emergency — the same authorization President Joe Biden used to send billions of dollars in aid to Ukraine as it defends itself against Russia’s invasion.

A report accompanying the omnibus bill also notes that it funds another authorization from the defense bill – International Military Education and Training to “enhance Taiwan’s defense capabilities and strengthen interoperability between the United States and Taiwan.”

Bryant Harris is the Congress reporter for Defense News. He has covered U.S. foreign policy, national security, international affairs and politics in Washington since 2014. He has also written for Foreign Policy, Al-Monitor, Al Jazeera English and IPS News.

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