Identifier
Created
Classification
Origin
04TAIPEI3093
2004-10-05 09:07:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

TAIWAN: TIME FOR TIFA

Tags:  ETRD ECON KIPR EAGR ECPS PGOV IPR 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003093 

SIPDIS

STATE FOR EAP/RSP/TC AND EB/TPP/BTA, STATE PASS AIT/W AND
USTR, USTR FOR KI AND FREEMAN, USDOC FOR
4431/ITA/MAC/APOPB/MBMORGAN AND
3132/USFCS/OIO/EAP/ABACHER/ADESARRAN

E.O. 12958: DECL: 10/01/2014
TAGS: ETRD ECON KIPR EAGR ECPS PGOV IPR
SUBJECT: TAIWAN: TIME FOR TIFA

REF: A. TAIPEI 0069


B. TAIPEI 0096

C. TAIPEI 0533

D. TAIPEI 1033

E. TAIPEI 1600

F. TAIPEI 1907

G. TAIPEI 1998

H. TAIPEI 2375

I. TAIPEI 2475

J. TAIPEI 2571

K. TAIPEI 2672

L. TAIPEI 2877

M. TAIPEI 2900

N. TAIPEI 2929

Classified By: AIT Director Douglas Paal, Reason 1.4 b/d

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003093

SIPDIS

STATE FOR EAP/RSP/TC AND EB/TPP/BTA, STATE PASS AIT/W AND
USTR, USTR FOR KI AND FREEMAN, USDOC FOR
4431/ITA/MAC/APOPB/MBMORGAN AND
3132/USFCS/OIO/EAP/ABACHER/ADESARRAN

E.O. 12958: DECL: 10/01/2014
TAGS: ETRD ECON KIPR EAGR ECPS PGOV IPR
SUBJECT: TAIWAN: TIME FOR TIFA

REF: A. TAIPEI 0069


B. TAIPEI 0096

C. TAIPEI 0533

D. TAIPEI 1033

E. TAIPEI 1600

F. TAIPEI 1907

G. TAIPEI 1998

H. TAIPEI 2375

I. TAIPEI 2475

J. TAIPEI 2571

K. TAIPEI 2672

L. TAIPEI 2877

M. TAIPEI 2900

N. TAIPEI 2929

Classified By: AIT Director Douglas Paal, Reason 1.4 b/d


1. (C) SUMMARY: Taiwan's recent change in attitude towards
making efforts to resolve long-standing bilateral trade
concerns with the U.S. has led to real improvements in the
environment for intellectual property protection,
agricultural trade, telecommunications liberalization, and
pharmaceutical access requirements, and is about to pay
dividends in the form of the establishment of a National
Communications Commission and a data exclusivity regime for
innovative pharmaceuticals. Setting a schedule for TIFA
discussions will reinforce this new "can do" attitude.
Holding out for additional gains risks jeopardizing not only
Taiwan's continued cooperation, but also the influence of
those responsible for driving the return to engagement on the
U.S. bilateral trade agenda. END SUMMARY.


2. (C) Since Taiwan's entry into the WTO in January 2002,
the US-Taiwan bilateral trade relationship has been marked by
Taiwan foot dragging on implementation of WTO accession
commitments and frustration on the part of US policy-makers
over Taiwan's unwillingness to enact promised changes. In
August 2003, US Trade Representative Zoellick wrote a letter
to Premier Yu Shyi-kun, laying out in detail our bilateral
trade concerns and holding out the promise of high-level
economic discussions, including resumption of discussions
under the Trade and Investment Framework Agreement (TIFA),if
Taiwan could demonstrate it was implementing its commitments

in IPR, agriculture, pharmaceuticals, and telecommunications.
Over the past 12 months, Taiwan has made significant
progress in resolving many of our outstanding bilateral trade
questions, including significant improvements in the
enforcement of intellectual property rights, liberalization
of fixed line telecommunications, and moving to create data
exclusivity protection for innovative pharmaceuticals and
establish a workable rice quota regime.


3. (C) Even more significant than these positive steps is
what appears to be a sea change in attitude among Taiwan
officials responsible for trade policy. The new cabinet,
inaugurated in May, has moved with heretofore unseen purpose
and coordination to push difficult changes through both the
bureaucracy and the Legislative Yuan (LY). Taiwan officials'
cooperation has clearly been motivated by the promise of the
resumption of high-level trade discussions under the TIFA.
Taiwan officials view resumption of high-level economic talks
with the United States (which they hope will lead to a Free
Trade Agreement) both as a quid pro quo for their efforts to
make difficult political decisions, and as a political
strategy to counter their economy's growing entanglement with
China. We have made clear that restarting TIFA is a
necessary precondition before the possibility of entering
negotiations a US/Taiwan FTA could be considered. Taiwan
views the possibility of a FTA with the U.S. as the key that
could unlock closer economic relations with other key
regional trading partners. The continued effectiveness of
key policy makers essential in pushing the bureaucracy to
address U.S. bilateral trade concerns will be heavily
influenced by their ability to deliver economic engagement
with the U.S. (refs H, I)

--------------
IPR Environment Dramatically Improved
--------------


4. (U) AIT has reported extensively on Taiwan government
actions to improve the IPR climate. The frequency of
inspections of Optical Disk (OD) factories continues to
increase, while the number of infringing goods and equipment
seized by Taiwan enforcement agencies has dropped to half
2003 levels. In December 2003, Taiwan officials, working in
cooperation with rightsholders and in coordination with other
enforcement authorities, broke up two major counterfeit
software manufacturers. The National Police have increased
the frequency of their raids against manufacturers and
sellers of pirated goods, leading to an increase in arrests.
Four Taiwan enforcement agencies cooperated in the
investigation, raid, and closure of a major OD counterfeiting
operation in May that was suspected to account for as much as
ten percent of illegal OD manufacturing in Taiwan.

5. (U) Shipments of all counterfeit products from Taiwan
seized by U.S. Customs in FY03 dropped to less than three
percent of FY02 levels and fell even further in the first
half of FY04. After a concerted lobbying campaign by Taiwan
government officials, Taiwan's legislature passed revisions
to the copyright law that substantively meet the demands of
U.S. based rightsholders groups for stiffer penalties for
counterfeiters and protection for technical protection
measures, adding to amendments from 2003 that made sale of
counterfeit goods a public crime. Taiwan has also moved to
create a specialized IPR court that is scheduled to begin
operation before the end of 2004. (refs B, C, E, and K)

-------------- --
Telecom Liberalization in Process - NCC Holding
-------------- --


6. (U) Taiwan's Directorate General of Telecommunications
(DGT) announced in September the opening of a one-month
bidding period for new entrants into Taiwan's fixed line
telecommunications market. This is the result of legislation
passed in December 2003 that mandated liberalization of the
fixed line market by allowing new entrants to apply for
licenses to enter the market twice yearly and by
significantly reducing capital and build-out requirements.
In December 2003, the legislature also passed a bill
authorizing the establishment of a National Communications
Commission modeled on the US FCC. The implementation bill
has been held hostage in the legislature by partisan
wrangling, first over the number and composition of
commissioners, and more recently over unrelated broadcast
media licensing requirements. The executive branch remains
committed to pushing this bill through at the earliest
possible opportunity. (refs A, G, and M)

-------------- -
Pharmaceuticals: Engaging on DE and Validation
-------------- -


7. (C) In spite of bureaucratic obstinance and strong
opposition from local industry, Premier Yu and the Minister
of Health have forced a bill to protect pharmaceutical data
through the Ministry of Health and Executive Yuan. It is now
awaiting action by the LY Environment and Health Committee.
The bill provides five years of protection for new chemical
entities and three years for new indications. In response to
industry's remaining concerns, the Department of Health has
privately offered assurances that they will draft
implementation regulations favorable to innovative
pharmaceutical manufacturers. In meetings with
representatives from PhRMA in June 2004, the Board of Food
and Drug Administration (BFDA) agreed to consult with
industry in revising the methodology for determining Risk
Priority Numbers (RPNs) used to identify companies for
on-site inspections. In March, the LY passed legislation
that substantially increased penalties for manufacturers,
distributors, and sellers of counterfeit pharmaceutical
products. (refs D, F, L, and N)

--------------
Rice CSQ,s on Track
--------------


8. (SBU) Taiwan's Council of Agriculture (COA) recently
recommended adopting U.S. supplied draft language on a
country specific quota (CSQ) system for rice imports on the
condition that we accept Taiwan's high out-of-quota duty rate
and negotiate with Australia, Thailand, and Egypt on specific
quota amounts. Taiwan also agreed to abandon its proposal to
leave ten percent of public imports open to all countries as
a "global quota." U.S. industry reportedly supports further
discussions in TIFA talks. Like the other economic
ministries, Taiwan's COA has also recently evidenced a
greater willingness to work with the U.S. to resolve
bilateral trade issues. Implementation of Taiwan's rice
import commitments has dramatically improved. For example,
in 2004 no public tenders were cancelled because price bids
exceeded a COA-imposed ceiling price. In addition, COA has
been fully cooperating in efforts to re-open Taiwan's market
to U.S. beef.
--------------
Time to Engage is Now
--------------


9. (C) COMMENT: Taiwan's recent willingness to engage on
our bilateral trade agenda is based on the belief that doing
so will bring a positive return in the form of renewed
high-level economic discussions under TIFA. This
understanding has been reinforced in our regular meetings
with all levels of the Taiwan economic policy community.
Taiwan officials will undoubtedly push for a U.S. commitment
to future FTA negotiations, but understand that TIFA must
come first, before any possibility of discussing an FTA can
be considered. The suspension of high-level economic
discussions in 2002 was an effective strategy to force
Taiwan's trade policy bureaucracy to stop basking in the warm
afterglow of WTO accession and refocus attention on resolving
U.S. bilateral trade concerns. But this strategy is reaching
the limits of its usefulness. By committing now to a
schedule for TIFA talks, we can reinforce Taiwan's
willingness to engage and continue to make progress on
bilateral trade issues, including dismantling non-tariff
barriers to trade and reaching an agreement on a CSQ for
rice. Postponing TIFA discussions would deal a severe blow
to those in the Taiwan government who have been the most
forceful advocates of engagement with the U.S. to resolve
concerns on IPR, pharmaceuticals, rice and telecoms. Failure
to deliver engagement with the U.S. will damage or even
destroy their ability to be helpful in the future. Now is
the time to build on the positive momentum of the past
several months by raising the level of engagement on economic
issues.
PAAL