Identifier
Created
Classification
Origin
05TAIPEI1070
2005-03-11 08:30:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

TAIWAN'S SPLIT PERSONALITY ON TRADE POLICY

Tags:  ETRD EAGR PGOV 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 02 TAIPEI 001070 

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 AND USDA FOR FAS/ITP

E.O. 12958: DECL: 03/08/2010
TAGS: ETRD EAGR PGOV TW
SUBJECT: TAIWAN'S SPLIT PERSONALITY ON TRADE POLICY

Classified By: AIT DIRECTOR DOUGLAS PAAL FOR REASONS 1.4 (b/d)

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001070

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 AND USDA FOR FAS/ITP

E.O. 12958: DECL: 03/08/2010
TAGS: ETRD EAGR PGOV TW
SUBJECT: TAIWAN'S SPLIT PERSONALITY ON TRADE POLICY

Classified By: AIT DIRECTOR DOUGLAS PAAL FOR REASONS 1.4 (b/d)


1. (C) SUMMARY: Taiwan displays a split personality when it
comes to trade policy. Open trade is desirable for the
manufacturing and industrial sectors, but on agriculture,
Taiwan takes a decidedly protectionist approach. Despite a
dramatically improved environment in bilateral trade over the
past year, AIT has seen growing protectionism in the
agricultural arena. We plan to undertake a program to
highlight the dichotomy in its trade policies to a wide range
of Taiwan officials and recommend inclusion of this topic in
the working level trade talks scheduled for March 30-31 in
Taipei. End Summary.


2. (C) Taiwan supports an open trade policy for its
manufacturing and industrial sector, but takes a decidedly
different approach when it comes to agricultural trade. Even
as Taiwan presses for access to the US market for orchids and
cooked poultry products, it has: dragged its feet on
finalizing a decision to reopen its market to US beef;
notified anti-biotech import-export regulations to the WTO;
made heavy use of special safeguards; and taken a very slow
route in resolving technical issues over imports of US apples
and half a dozen other agricultural products. US agencies
and AIT are working closely with Taiwan agricultural
officials on each of these issues and making incremental
progress.

Focus on Protecting Agriculture
--------------


3. (C) The larger issue is that Taiwan is fundamentally
committed to a protectionist agricultural trade policy. The
farming community constitutes a substantial force in Taiwan's
political system and has done so for decades. All political
parties have strong roots in the agricultural sector and
support protectionist polices that have resulted in
subsidization of a traditional resource/labor-based
agricultural sector that is an inefficient producer of rice,
chickens and hogs. Despite agriculture constituting only two
percent of GDP, agricultural interests are able to

effectively compete with the water-hungry electronics
industry to determine the allocation of 35 percent of
Taiwan's scarce water resources.


4. (C) Aligned with the G-10, Taiwan actively opposes
agricultural trade liberalization in the WTO Doha Round.
While it is prepared to establish a country-specific quota
system for public-sector rice imports, it is not willing to
contemplate a general liberalization of its rice trade.
These policies seem predicated on maintaining a protected
agricultural market for the foreseeable future. Such
policies actually hinder efforts to shift its farmers into
producing specialized higher-value added products that could
effectively use the limited land space available on this
mountainous island of 14,000 square miles. In addition, the
misallocation of land and other resources undermines Taiwan's
economic efficiency.


5. (C) AIT observed Taiwan's split personality on trade
policy in the very recent past. At a March 1 lunch meeting
hosted by Franco Huang (Chih-peng),the Director General of
the Board of Foreign Trade, Huang categorically stated that
Taiwan would continue to ally itself with the G-10 and its
agenda of limited agricultural trade liberalization. In the
prior week, on February 24, John Chen, the newly appointed
Director General of the Ministry of Foreign Affairs
International Organization bureau, visited the Director to
discuss APEC and WHO issues. Chen smoothly and confidently
told us that Taiwan is fully supportive of US trade goals in
APEC, viewing the proposals by the US as good for trade in
general and for Taiwan in particular. Chen acknowledged that
Taiwan has some issues in agricultural trade, but said that
Taiwan is prepared to deal with those issues.

Taiwan Linking US Beef to Chicken?
--------------


6. (C) Part of the discussion with Huang concerned the
timetable for lifting the ban on US beef imports. BOFT said
that it thought that a decision "would be made soon," but
quickly added that it will be difficult for officials to
explain to farmers why they are lifting the ban on beef when
it has been taking such a long time to get Taiwan cooked
poultry approved for sale to the US. During bilateral
meetings held during the APEC High Level Policy Dialogue on
Agricultural Biotechnology discussions in Seoul March 1-3,
Council of Agriculture Vice Minister Lee Jen-chyuan suggested
the same kind of linkage. Further, contacts in the COA have
suggested to us privately that the ban on beef will not be
lifted until Taiwan sees some movement on the poultry issue.
(Note: The AIT/W - TECRO letter of March 7 setting the dates
for the visit by USDA's Food Safety Inspection Service (FSIS)
to inspect Taiwan's meat inspection and processing regime may
be a useful tool to demonstrate US progress on Taiwan's
interest in selling poultry to the US. AIT ECON and AG
sections advised COA and BOFT officials of this letter the
morning of March 8, prior to the afternoon meeting of the
interagency panel charged with handling the beef ban. End
note.)

Reduced Visibility in Ag Biotech Discussions
--------------


7. (C) In past APEC biotechnology discussions, Taiwan has
been an active, contributing participant in member economies'
discussions. During this most recent discussion, however,
Chinese Taipei was relatively silent. It made no
presentations, provided one meaningful intervention, and
offered no substantive comments during the development of the
Dialogue recommendations to the Senior Officials. Part of
the reason for the delegation's reticence may have been the
early return to Taipei of the delegation leader, COA Vice
Chairman Lee Jen-chyuan. The COA chairman notified Lee on
March 1 that he needed to return to Taipei, apparently to
deal with issues raised by Taiwan's Legislative Assembly.
Unfortunately, we see Taiwan's lackluster participation as a
signal of a lack of interest on the part of Taiwan's Council
of Agriculture in the biotechnology discussions and a lost
opportunity for Taiwan to be an active and visible
participant in an international trade organization. While
Vice Chairman Lee appears ready and willing to forge ahead on
modernizing Taiwan's domestic agricultural policies, COA
Chairman Lee Ching-lung appears intent on maintaining the
status quo in agricultural policies. Prior to AIT
intervention, the COA Chairman was not going to allow Vice
Chairman Lee to attend the APEC Biotech discussions.

Delayed Technical Discussions
--------------


8. (SBU) There have been additional irritants in the
agricultural trade relationship. For over ten years the US
and Taiwan have been alternately hosting technical-level
discussions on agricultural trade concerns. Despite a
decidedly improved trade relationship evident in 2004, COA
repeatedly delayed setting dates for the technical
discussions and in the end reneged on its written commitment
to host the talks in the second half of February 2005. While
the agencies involved have confirmed new dates in June, it is
dismaying to have Taiwan's agricultural officials treat their
commitments in so cavalier a fashion. In essence, Taiwan has
passed on the entire year when it was its turn to host the
annual discussions. As a result, resolution of technical
issues impacting trade has slowed considerably.


9. (C) Comment: We recognize that Taiwan's agricultural
policies are the product of many years of domestic political
pressure, protection and a protectionist attitude. However,
we think now could be a useful time to point out Taiwan's
trade policy anomalies to officials across the government.
To this end, we are setting up meetings with officials from
the National Security Council, the Ministry of Economic
Affairs, the Council for Economic Planning and Development
and the Ministry of Foreign Affairs. We would also recommend
that this topic be included in the working level trade talks
now set for March 30-31 in Taipei. End comment.
PAAL