NEW LY LINE-UP MAY MODERATE TAIWAN POLITICAL

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003941

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 12/11/2014
TAGS: PREL PGOV TW
SUBJECT: NEW LY LINE-UP MAY MODERATE TAIWAN POLITICAL
DISCOURSE


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


1. (C) Summary: The Pan-Blue's surprise victory in the
December 11 Legislative Yuan (LY) election should help reduce
extremism in Taiwan's political discourse. President Chen
Shui-bian will be under pressure to moderate his offensive on
sensitive issues like cross-Strait relations and
constitutional reform. KMT Chairman Lien Chan's offer to
work with the Democratic Progressive Party (DPP) government
to pursue the national interest appears to signal to the
voters that he has heard their unhappiness with the gridlock
of the last four years. LY action on the USD 18 billion
special defense procurement budget may be an early test of
these election night gestures. The poor showing by both the
People First Party (PFP) and Taiwan Solidarity Union (TSU)
should marginalize voices on both ends of the political
spectrum, theoretically allowing for a more reasoned policy
debate on defense and other topics. Of course, early signs
of cooperation could prove short-lived, and there remains a
real possibility that the two sides will return to gridlock.
End Summary.

Move to the Middle
--------------


2. (C) The new LY line-up (Pan-Blue 114, Pan-Green 101)
should help moderate the tone of Taiwan's future political
discourse. The Pan-Blue's LY majority greatly reduces
chances for action in the coming four years on sensitive
issues like radical constitutional reform. The Pan-Blue
majority is also likely to reassure Beijing, and could put
pressure on President Chen to be seen as moderating his more
extreme views on cross-Strait policy. Electoral setbacks for
Lee Teng-hui's TSU and James Soong's PFP should also
marginalize voices on both extremes of the political spectrum.


3. (C) A key factor in the future course of policy making
will be the ability of the DPP to work with the new Pan-Blue
LY majority. KMT Chairman Lien Chan's election night offer
to cooperate with the DPP government on national policy is an
encouraging sign that the two political camps may seek to
mend the divisions that have plagued Taiwan's political
debate since March 20. Another positive development was the
fact that Lien did not make reference to his election eve
demand that Chen give the Pan-Blue the right to appoint the
next cabinet. Lien advisor Ho Szu-yin told AIT that the
cabinet proposal was simply "election rhetoric" and that the
Pan-Blue would respect the president's constitutional right
to select his cabinet. President Chen Shui-bian responded to
Lien's goodwill offer with a similarly conciliatory message
in his post-election address at DPP headquarters. Chen
characterized the December 11 election as the start of a new
era of reconciliation and cooperation between the two
political camps, but he also promised to try to keep his
campaign promises.

Special Budget: An Early Test
--------------


4. (C) An early test case for the two sides' ability to
cooperate will present itself when the current LY reconvenes
in a lame-duck session. The LY is still required to take
action on the government's regular budget and will also have
an opportunity to address the USD 18 billion special defense
procurement budget. Before the election, senior KMT
officials promised AIT that they would work with the
government on the special procurement budget after the
campaign. KMT LY Speaker Wang Jin-pyng and other party
officials cited pressure from Soong's PFP as the cause of the
KMT's September decision to reverse its previous supportive
stance on the budget.

Political Realignment: New Variables?
--------------


5. (C) The KMT's gains relative to its PFP allies adds a new
variable to the already strained relationship between the two
Pan-Blue parties. In his first public appearance after the
election results were announced, PFP Chairman James Soong
suggested that it was KMT's unwillingness to cooperate with
the PFP that caused Soong's party to lose its 12 seats. The
PFP's setback is likely to significantly weaken its hand in
possible future KMT-PFP merger talks. For his part, KMT
Chairman Lien Chan suggested that he may be willing to step
down from power in the coming months. Flanked by KMT Vice
Chairmen Ma Ying-jeou and Wang Jin-pyng, KMT Chairman Lien
Chan told a crowd at KMT party headquarters that he would
fulfill his term as party chairman (Note: which runs until
July, 2005),but said that a major goal of the opposition
alliance will be generational change among its leadership.

Comment: A Good Result
--------------


6. (C) The new LY line-up reduces some of the more immediate
problems for U.S. interests. The Pan-Blue victory makes it
unlikely that controversial proposals such as radical
constitutional reform will be implemented in the next three
to four years. The poor performance by Lee Teng-hui's TSU is
also likely to quiet voices opposed to greater economic and
political engagement with the Mainland. The KMT's strong
showing vis-a-vis its PFP coalition partner also offers some
possibility of a more reasoned debate on defense procurement.
If President Chen and KMT Chairman Lien follow through on
their election night offers of cooperation, Taiwan may also
have an opportunity to break the gridlock of the past four
years. However, the past four years of gridlock between the
DPP executive and the Pan-Blue legislature is a reminder to
restrain optimism. There is a backlog of issues -- ranging
from rebuilding the military to financial and regulatory
reform to economic opening to cross-Strait trade and
investment. While signs of a more reasoned political
discourse may be short-lived, the political alignments
resulting from this election should encourage both sides of
the partisan divide to move in the right direction.
PAAL