PRIME MINISTER AHERN'S TRIP TO CHINA NETS DEALS

C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000107

SIPDIS

E.O. 12958: DECL: 01/28/2015
TAGS: PREL PHUM ECON ETRD EINV SOCI SCUL
SUBJECT: PRIME MINISTER AHERN'S TRIP TO CHINA NETS DEALS
FOR IRELAND


Classified By: Political-Economic Counselor Mary E. Daly; Reasons 1.4 (
B) and (D).


1. (C) Summary: The January 17-21 visit to China of
Ireland's largest ever trade delegation advanced the GOI's
"Asia Strategy" of raising Ireland's commercial profile in
the Pacific region, though the extent to which Prime Minister
Ahern used the opportunity to press Beijing on human rights
remains unclear. The trade mission boosted bilateral trade,
which has grown 170 percent since 1999, and aimed to spur
Chinese investment in Ireland, which is minuscule due to high
Irish business costs. University links were also a
significant focus of the visit, mainly for their potential to
raise funds for Ireland's cash-starved higher education
sector through increases in the Chinese student population.
Irish Foreign Affairs officials disagreed with press reports
that Prime Minister Ahern had been soft on human rights and
on the proposed lifting of the EU arms embargo against China,
noting that Ahern had been stronger in private sessions with
Chinese counterparts. The officials added that Chinese
comments on the embargo suggested that larger EU Member
States had been making promises to Beijing on the issue.
Notwithstanding these officials' comments, Post continues to
doubt that Ireland would be prepared to fight EU consensus on
the ban's removal, just as we suspect that Ahern was not
prepared to jeopardize the success of Ireland's largest ever
trade mission with pointed messages on human rights. End
summary.


2. (U) Ireland's largest ever official trade delegation
returned home the weekend of January 21 after a successful
week-long visit to Beijing, Shanghai, and Hong Kong. Led by
Prime Minister Bertie Ahern, the 300 person-strong delegation
consisted of representatives from 121 Irish firms, 7
universities, a host of technology institutes and English
language schools. Four Cabinet members also took part:
Agriculture Minister Mary Coughlan, Enterprise Minister
Michael Martin, Education Minister Mary Hanafin, and
Communications Minister Noel Dempsey. Reportedly, agreements
worth more than euro 125 million were signed, including, most
notably, a deal by agri-business giant Kerry Group to acquire
Hangzhou-based foods company, Lanli, and a commitment by
property developer Treasury Holdings to build a
housing/office/leisure complex on Chongming island near
Shanghai. The visit reciprocated trips to Ireland by Premier
Wen Jiabao in 2003 and Vice Premier Huang Ju in 2004, and
Prime Minister Ahern met with Wen, President Hu Jintao, and
National People's Congress Chairman Wu Bangguo while in
Beijing. During discussions with Ahern, President Hu
committed to visit Ireland in late 2005. On January 26,
moreover, Vice Foreign Minister Zhang Zhijun arrived in
Dublin for an immediate follow-up to the Irish visit.

The GOI's Asia Strategy
--------------


3. (SBU) The trade delegation was central to the GOI's "Asia
Strategy," which Prime Minister Ahern had launched after his
first visit to China in 1998, according to Geoffrey Keating,
Department of Foreign Affairs (DFA) Counselor for Bilateral
Economic Relations, who participated in the trade mission and
spoke with econoff afterward. Keating said that the
Strategy, as outlined in a 1999 government white paper, aimed
to raise Ireland's profile in Asia and to help Irish firms
exploit commercial opportunities afforded by Asia's economic
rise, particularly in China. In line with the Strategy,
Deputy Prime Minister Mary Harney had led sizable trade
delegations to China in 2002 and to Japan in 2003. Keating
noted that Irish-Chinese economic relations had benefited
from this outreach, with 250 Irish firms now doing business
in China and two-way trade having increased 170 percent since
1999 and 40 percent since 2003. (In the first 11 months of
2004, Chinese exports to Ireland stood at euro 2.3 billion,
while Irish exports to China were euro 577 million;
indigenous Irish firms, as opposed to Irish-based foreign
multinationals, only accounted for euro 43.2 million of Irish
exports to China.) Keating added that, following the
delegation's visit last week, Ireland's Department of
Enterprise, Trade, and Employment (DETE) had been tasked to
update the Asia Strategy paper, looking ahead to 2010.


4. (SBU) The Irish trade delegation's visit also had the aim
of spurring Chinese investment in Ireland, which at the
moment was minuscule, econoff was told by Zhu Meidao, Chinese
Embassy Economic/Commercial Counselor in Dublin. Zhu said
that larger Chinese firms were intrigued by the success of
U.S. companies in Ireland (whose investment stock in the
country is valued at USD 55 billion, roughly five times the
U.S. investment stock in China),and he cited Prime Minister
Ahern's statements in Beijing about Ireland's attractiveness
as a base for EU-focused operations. He cautioned, however,
that rising wages and other production costs in Ireland were
a disincentive to investment by Chinese firms. Zhu recalled,
for example, that China's largest construction firm,
Zhongjian Gongcheng Gongsi, had come to Ireland in 2002 at
Deputy Prime Minister Harney's invitation to take part in an
urban infrastructure project, only to pull out within a year
due to cost overruns. One promising possibility, according
to Zhu, was Chinese investment in the Shannon Free (Trade)
Zone, whose authorities conducted briefings as part of the
trade mission. He explained that China knew well the
corporate tax advantages and other investment incentives
offered by Shannon, as former President Jiang Zemin had
visited the area in 1980 and had brought back ideas that were
later incorporated in China's Special Economic Zones in
Shenzhen and Guangzhou.

Promoting the Business of Education
--------------


5. (U) University relationships were a significant focus of
the mission, particularly from the perspective of education
as business, econoff was told by Frank O'Conor, International
Education Manager of Enterprise Ireland, the
business-promotion agency that organized the delegation.
O'Conor noted that 15 education-related agreements were
reached, including, most critically, a protocol signed by
Education Minister Mary Hanafin and her Chinese counterpart,
Zhou Ji, on mutual recognition of higher education
qualifications. O'Conor said the protocol would underpin
Enterprise Ireland's goal of tripling by 2008 the
university-level Chinese student population in Ireland, which
now stands at roughly 2,900. (An estimated additional 29,000
Chinese students are enrolled at English language schools
that are not part of the university system. The GOI and
Chinese Embassy are uncertain as to that number, however,
since Ireland does not track departures from the country.)
O'Conor noted that Chinese university students currently pay
euro 8,000 to 15,000 per year in tuition and that a tripling
of this student population would make more funds available to
the cash-starved higher education system. (Irish students
are exempted from paying university fees, a serious resource
constraint on state-funded Irish education.) He added that
an increase in Chinese students would be a critical piece of
Enterprise Ireland's effort to double the total revenue
generated by foreign students to euro 600 million by 2008.


6. (C) Ironically, Minister Hanfin had to contend with
complaints from English language schools' representatives
within the delegation about new student visa restrictions,
said the DFA's Geoffrey Keating. He noted that Ireland's
Department of Justice (DOJ) announced during Christams week
that foreign students (who currently can work 20 up to hours
a week and have been a boon to Ireland's low-end services
sector) would be forbidden to work unless they were enrolled
in a course lasting longer than one year. The new regulation
targeted a number of bogus language schools that were
providing visa application materials to Chinese who primarily
intended to work in Ireland. The language schools, observed
Keating, had protested the regulation, claiming that it would
seriously reduce their Chinese student populations, which had
quintupled since 2000. He added that the DOJ had not
sufficiently consulted inter-agency before "springing" the
regulation and that a thorough government review would be
conducted before the regulation's scheduled enactment in
April. Chinese Commercial Counselor Zhu told econoff that
the Chinese Embassy had not opposed the regulation, but had
voiced concerns about the impact on Chinese students' ability
to pay living expenses in one of the EU's most expensive
countries. Zhu pointed out that more than 90 percent of
Ireland's Chinese students were from the northeastern
Liaoning and Shenyang provinces, where economic conditions
were less favorable than in Beijing and along China's coast.

The EU Arms Embargo and Human Rights
--------------


7. (C) Irish newspapers reported Prime Minister Ahern as
saying that the lifting of the EU arms embargo against China
was inevitable and that Ireland was aware of China's desire
to end the embargo as a matter of respect and equal
treatment. Cliona Manahan, DFA's Political Division
Counselor for Asia and a participant in the Prime Minister's
discussions with Premier Wen Jiabao on the arms embargo, told
econoff that media reports had not reflected the balance in
Ahern's comments. Ahern, she recalled, had told Wen that
"there was still work to be done on the embargo issue," both
in terms of the Chinese delivering on human rights and the EU
finalizing an acceptable Code of Conduct. Manahan said the
discussions had strengthened her earlier impression that
larger EU Member States had complicated the issue by making
promises to the Chinese Government about the embargo. She
remarked that Ireland knew the implications that the arms
embargo posed for U.S.-EU relations; China also understood
the agitation that the issue had created among East Asian
neighbors. She added that Ireland had no intention of
selling weapons to China even if the ban were lifted,
consistent with Ireland's position against arms trading in
general.


8. (C) Manahan also disagreed with media comments, including
by the local Amnesty International office, that Ahern had
soft-pedaled human rights in order to secure contracts for
delegation members. (The comments were prompted by an Irish
Times report that Ahern had said Ireland could not take a
stronger line with China on human rights than had been taken
by larger EU Member States.) Manahan pointed out that
journalists had not been privy to the discussions on human
rights, which, she added, were free-flowing, forthright, and
focused on individual cases. She noted that the discussions
had benefited from the fact that the Irish government
officials involved were well known to their Chinese
counterparts, with Ireland having led the EU-China Human
Rights Dialogue as EU president in 2004. According to
Manahan, the Irish side had been clear about the drift in
China's commitment to deliver on human rights, and Ahern had
asked his interlocutors to expend more energy on this front.
She remarked that the EU-China Human Rights Dialogue, now in
its eleventh year, remained the best tool for Member States
to convey their collective concerns to Beijing.

Comment: Ireland's Opaqueness on China and Human Rights
-------------- --------------


9. (C) Manahan's read-out notwithstanding, the Irish DFA has
been cagey with Post in past conversations as to Ireland's
exact position on the lifting of the EU arms embargo. For
example, although DFA officials have noted the need for an
acceptable Code of Conduct and for Chinese progress on human
rights, they have consistently avoided our direct questions
on whether Ireland opposed lifting the ban in the current
circumstances. Similarly, econoff asked Manahan several
times about the accuracy of reports that Ahern had used the
word "inevitable" in discussions on lifting the ban, but she
repeatedly deflected the question. We continue to doubt that
Ireland would be prepared to fight EU consensus on the ban's
removal, just as we suspect that Ahern was unwilling to
jeopardize the success of Ireland's largest ever trade
mission with pointed messages on human rights. The
broad-based trade, diplomatic, education, and cultural links
that the trade mission helped to advance, however, should
give more weight to whatever future messages the Irish
leadership might deliver to Beijing on human rights.
KENNY