Identifier
Created
Classification
Origin
04TAIPEI3343
2004-10-27 07:42:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

CHEN SURPRISES HEWLETT-PACKARD CHAIRMAN ON

Tags:  ECON EAIR PREL CH TW 
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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 003343 

SIPDIS

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 10/20/2014
TAGS: ECON EAIR PREL CH TW
SUBJECT: CHEN SURPRISES HEWLETT-PACKARD CHAIRMAN ON
CROSS-STRAITS

Classified By: AIT Director Douglas H. Paal, Reason 1.4 (B/D)

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003343

SIPDIS

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 10/20/2014
TAGS: ECON EAIR PREL CH TW
SUBJECT: CHEN SURPRISES HEWLETT-PACKARD CHAIRMAN ON
CROSS-STRAITS

Classified By: AIT Director Douglas H. Paal, Reason 1.4 (B/D)

Summary
--------------


1. (C) In what Hewlett-Packard (HP) Taiwan has described
privately as an &ambush,8 President Chen publicly called on
visiting HP chairman Carly Fiorina to promote cross-Strait
direct charter flights with Beijing. HP responded by
publicly declining any role in dealing with political matters
such as cross-Strait relations. HP had understood that the
meeting would not include press and would only be a courtesy
call. However, HP should not have been surprised by Chen's
desire to use the event to further the cause of direct links
and may have worsened the situation by attracting further
media attention. HP told AIT/T econ and comm officers that
the row may cause HP to reexamine future plans for business
in Taiwan. End summary.

Dueling Statements
--------------


2. (U) On Friday, October 15, Hewlett-Packard's visiting
chairman and CEO Carly Fiorina paid a courtesy call on Taiwan
President Chen Shui-bian. During the meeting, Chen read a
statement to the press calling on Fiorina and HP to send a
message to Beijing promoting direct cross-Strait charter
flights. The meeting received broad media coverage in
Taiwan. A few hours after the meeting, HP released a short
statement explaining that businessmen should concentrate on
business, and political questions should be solved by
politicians. The statement said HP would not participate in
any political discussions. On Saturday, the Presidential
Office released its reaction to HP's rebuttal. The
President's spokesman said that HP had misinterpreted Chen's
speech. He said Chen had not intended to solicit Fiorina's
help as an intermediary; he had only wanted to underscore the
benefits of direct transportation links to both the public
and private sector. The spokesman noted that the President
doesn't need a private sector go-between to deal with
cross-Strait relations.

HP Angry and Frustrated
--------------


3. (C) HP was angry about the way the meeting was handled

and the content of the President's statement. According to
Rosemary Ho, Managing Director of HP Taiwan, the Presidential
Office had requested the meeting and gave HP no warning that
the content would be so political and sensitive. When HP
scheduled the meeting they provided a list of
business-related topics for discussion. The Presidential
Office told them that there was no time for so much substance
and the meeting should instead be a friendly exchange of
courtesies. HP also believes it had a clear understanding
with the Presidential Office that there would be no press at
the meeting. Ho said that she had confirmed the no press
conditions several times before the meeting. Furthermore,
reporters and cameras left immediately after the President's
statement, giving Fiorina no opportunity to respond publicly.


4. (C) Ho stated that although HP had previously called
privately for direct charter flights, they have never done so
publicly. She noted that in earlier discussions with
Ministry of Economic Affairs officials they have maintained
that they would deny promoting charter flights if exposed
publicly. HP may fear difficulty doing business in the PRC
if it becomes too closely linked to Chen Shui-bian and his
cross-Strait agenda. HP is particularly sensitive to PRC
concerns on cross-Strait issues right now, so soon after the
PRC's cool reaction to Chen's overtures in his October 10
National Day speech. HP is the biggest foreign buyer of
Taiwan products. In Chen's own statement he pointed out that
HP accounted for one third of the total value of Taiwan
products sold to foreign firms. So, HP was especially
dismayed that the President would treat Taiwan's biggest
customer in this way.

Presidential Office Offers Different Version of Events
-------------- --------------


5. (C) Presidential Office aide Liu Shih-chung offered a very
different version of events. Liu said it was HP that asked
for the meeting, and denied that there was any intention to
"ambush" Fioirina. "Frankly, we treated this just as one of
the other many courtesy calls the president has each day,"
Liu remarked, adding that little effort was put into
preparing the president to discuss substantive issues. Liu
attributed HP's reaction to hyper-sensitivity on Ho's part.
Liu asserted that Ho met with President Chen in 2003 and
offered to "use her contacts in Beijing" to help jumpstart
direct charter flights. Liu said that Chen humored her by
saying that he welcomed her efforts, but it appeared in
retrospect that Ho left convinced she was authorized by the
president to serve as a special channel. Liu suggested that
Ho, witnessing recent PRC discrimination against pro-DPP
business people on the Mainland, feared that Chen's comments
on direct links might remind Beijing of her past efforts as a
self-appointed "secret envoy" for the Chen administration.
Separately, Mainland Affairs Council (MAC) Senior Vice
Chairman Chiu Tai-san offered a similar assessment. "Chen's
public remarks at the meeting were simply a rehash of the
same points he has used in every single meeting with business
leaders or Taishang (Taiwan investors) over the past three
weeks," Chiu asserted.

HP Reevaluating Taiwan Plans
--------------


6. (C) After the spate of media coverage of the
controversial meeting caused in large part by HP's public
rebuke of the President, HP is keeping quiet for now. They
have not made any public statement since Friday evening's
short press release, and will wait until media attention is
fully drawn to other issues. However, Ho told AIT/T that HP
would now reexamine its plans for business in Taiwan in light
of the run-in with the President.


7. (C) HP has a strong interest in establishing charter air
cargo flights from its factories in Shanghai to Taipei. HP
has been developing a plan that would expand the use of
Taipei as a logistics hub for notebook computer deliveries
around the world. HP ships 36,000 tons of notebook computers
every year by airfreight primarily from Eastern China --
enough to fill 366 planes. According to Ho, HP estimates it
can save USD 30 million per year by shipping notebook
computers from assembly plants near Shanghai to the U.S. and
Europe via Taipei instead of directly from Shanghai. Because
cargo space on flights out of Shanghai is so costly and
unpredictable, HP believes that it can achieve these savings
if it can take advantage of reliable charter flights from
Shanghai to Taipei. Ironically, the President's effort to
promote this key element in HP's plan may lead HP to
reconsider its strategy to Taiwan's detriment economically.

Comment ) Impact on Business and Cross-Strait Relations
-------------- --------------


8. (C) In the meeting with AIT/T, HP's Ho was clearly
frustrated and angry at Chen's office. The perception that
Chen "ambushed" Fiorina has compromised HP Taiwan within the
firm and damaged HP's goodwill toward Taiwan. In addition,
the executive director of the American Chamber of Commerce in
Taiwan told AIT/T that the effects may well spread to other
multi-nationals in Taiwan who may think twice before meeting
with the President and possibly other high-level officials as
well. Ho expressed dismay at the President's motivation for
taking this approach, noting that it could actually harm
efforts to establish direct links by alienating businesses
that would otherwise be natural allies.


9. (C) However, HP must share some blame. Ho and her
associates should not have been surprised by the change in
ground rules for the meeting, which may have been due in part
to miscommunication. The Presidential Office may have
mistakenly understood that HP's concern about the press
applied only to certain business-sensitive issues that were
included in HP's original suggested topics for discussion.
Furthermore, Chen's frequent use of the press at high-level
meetings to pursue his public relations goals is well known.
Even after confirmation of &no press8 ground rules, HP
Taiwan executives should have been prepared for the
possibility that they would be ignored. They may also have
overreacted to the content of his statement, which did not
break new territory for Chen. Their press statement in
response only attracted more media attention to the incident.
It is likely that this was just a miscalculation on the part
of the Presidential Office. Taiwan officials have
consistently told AIT/T that making progress on Taiwan's
terms on direct air links and charter flights in particular
is one of the President's highest priorities. Unfortunately,
this latest maneuver was probably counterproductive.
PAAL