American policy toward Taiwan had a “bandwagon” effect. By October 1974, Taiwan had diplomatic relations with only thirty-two countries, as opposed to sixty-five in 1969.
On January 1, 1979, the United States formal relationship with Taipei came to an end when diplomatic relations were institutionalized with the People’s Republic of China. The American Embassy in Taipei was closed, the Mutual Defense Treaty was allowed to expire, and the country was expelled from the World Bank and the International Monetary Fund.
By 1981, only twenty countries recognized the Nationalist government on Taiwan, although many more retained trading relations with it.
The US trade relationship with Taiwan also remained strong. Even though the Mutual Defense Treaty was terminated on January 31, 1979, the US resumed the sale of military equipment and arms to the country on January 2, 1980.
As a consequence of American actions toward Mainland China and Taiwan, the United States had weakened the international position of the Soviet Union, and had “enabled Peking to purchase the American airliners, scientific instruments, and chemical, industrial, and agricultural products needed for China’s modernization.”
The Soviets reacted boldly to what they perceived to be a Chinese-American geopolitical alignment against Soviet interests in Asia and the Third World.
Embarking on a new period of global expansion ” … Brezhnev in the 1970s added a long-missing Soviet combat increment to the political attack on Western interests in the Third World which Kruschev between 1955 and 1964 had conducted with subversion, propaganda, economic aid, threats, and weapons supply.”
The Soviets began
a large military build-up … [and] attained rough nuclear parity with the United States, thereby redressing the strategic and conventional power imbalance that had affected the outcome of the 1962 missile crisis. Emerging as a genuine global power with a blue-water capability, the Soviets established a military presence in Cuba and the Caribbean with their electronic monitoring facility at Lourdes, outside Havana, and with the Soviet Navy’s routine port calls …. Most critically, the Soviets started in 1975 to embark upon an expansionist surge that carried them, directly or indirectly through Cuba, into Africa, Nicaragua, Central America, and Grenada.
Fortunately, for the Soviets, their interests and those of many Third World nations coincided, particularly on the issue of colonialism, an issue so intensely felt in the Third World that it overrides other considerations.
In fact, the emerging world was more deeply concerned with issues of colonialism than with issues of international security. As a result, three American administrations (Nixon, Ford, and Carter) were embarrassed by Soviet actions and by the strong domestic dissension which complicated US policy.