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2005-04-01 03:46:00
American Institute Taiwan, Taipei
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						C O N F I D E N T I A L SECTION 01 OF 05 TAIPEI 001575 



E.O. 12958: DECL: 03/30/2015

REF: A. TAIPEI 03667

B. TAIPEI 00315

C. TAIPEI 00372

D. TAIPEI 03430

Classified By: AIT Director Douglas Paal; Reasons: 1.4 (B/D)

1. (C) Summary. Taiwan lacks a viable foreign policy
strategy to counter Beijing's growing international clout and
global campaign to isolate Taipei. Taiwan foreign policy
experts anticipate that a domestic crisis could be brewing as
Taipei becomes diplomatically marginalized around the world
and Taiwan government officials refuse to face this reality.
Growing legislative and media scrutiny, as well as Beijing's
economic power, are making it increasingly difficult for
Taipei to match Beijing's "check book diplomacy" campaign.
Taipei officials privately acknowledge that Taipei's
international position is worsening at the hands of Beijing,
but they have been slow to develop new ideas or a long term
strategy to combat the PRC and maintain international
diplomatic space for Taiwan or even to position themselves
for a negative outcome. There are some new initiatives aimed
at the 25 countries that still recognize Taiwan, including
encouraging closer business ties, using NGOs to advance
diplomacy, and highlighting Taipei's democracy and
humanitarian aid expertise to distinguish Taiwan from the
PRC. However, these efforts will have only limited
effectiveness, because most of Taiwan's diplomatic partners
are less concerned about democracy than about long-term
development projects. On the larger international stage,
Taipei has done little to counter Beijing's momentum, and
most Taiwan officials appear content to rely on the U.S. as
Taipei's primary foreign policy bulwark. End summary.

A Domestic Crisis?


2. (C) Taiwan foreign policy watchers tell AIT that a
domestic crisis is brewing in Taipei as a result of Beijing's
global campaign to isolate Taiwan (ref Taipei 03667).
Beijing's efforts have become increasingly coordinated,
organized, and creative, as evidenced by Taiwan's loss of
Vanuatu in Fall 2004 and Grenada in January 2005 to the PRC
(ref Taipei 00315). According to Lin Cheng-yi, Director of
the Institute of International Relations (IIR) at National
Chengchi University, Taiwan now has 25 diplomatic partners,
compared to 29 in 2000, when the Democratic Progressive Party
(DPP) came to power. Lin speculated that if the DPP
government lost 3-4 more countries to the PRC, this could
have domestic repercussions. However, Lin continued, most of
the Taiwan public does not see a big difference between 29 or
25 nations as long as the status quo of around 25 nations is
maintained. (Note: Taipei's nadir of diplomatic partners was
22 in the 1970s after Taiwan withdrew from the UN. End
note). Lin said if the number dropped below 20, however, the
government would almost certainly face a major domestic

political backlash. He personally believed such a
development was likely to happen relatively soon and that the
government was not prepared for the domestic fallout.

3. (C) Former National Security Council (NSC) official and
DPP International Department Deputy Director Hsieh Huai-hui
separately concurred with Lin, stating that losing even a few
more countries to the PRC would be politically devastating.
This would have a tremendous psychological effect on the
island's population, she explained, since diplomatic
recognition is an important component of Taiwan's
self-identity and confidence. Hsieh told AIT that she was
not certain Taiwan would be able to maintain its diplomatic
partners in the future and that the government must be
prepared to face the prospect of being diplomatically
isolated. Lai I-chung, Foreign Policy Director at the
pro-Green Taiwan Think Tank went even further, telling AIT
that Taipei was on a path to diplomatic disaster. Taiwan, he
said, was finished if it lost many more of its diplomatic
partners. The PRC would then have sufficient political and
economic leverage to isolate Taiwan, which would compromise
Taiwan's global economic competitiveness and force its
corporations to relocate to the PRC to survive.
Government Officials in Denial


4. (C) Taiwan's foreign policy officials, however, appear to
be in denial over Taiwan's growing diplomatic isolation and
the potential domestic fall-out of losing a significant
number of formal relationships. In contrast to the bleak
assessments given by outside foreign policy experts,
officials from the NSC and the Ministry of Foreign Affairs
(MOFA) told AIT that it was inconceivable Taiwan would lose
all, or even most, of its diplomatic partners. MOFA Section
Chief for Eastern Caribbean Affairs Luis Yang and NSC former
Deputy Secretary General Antonio Chang separately told AIT
that Taipei might lose "a few here and there," but that there
would always be at least 15 or 20 nations that would
recognize Taiwan, which was, they thought, "enough." When AIT
asked current NSC Deputy Secretary Parris Chang about the
recognition issue, he dodged the question and changed the
subject. Chang also refused to speculate if there were a
minimum number of nations that must recognize Taipei for
Taiwan's government to remain legitimate. Victor Chin,
MOFA's Director General for North American Affairs simply
insisted to AIT that formal diplomatic partners are essential
and that Taiwan would do whatever were necessary to retain

. . . And Lacking a Strategy


5. (C) MOFA and NSC officials have been slow to adopt, or
even face the need for a new long-term diplomatic strategy
and have been content to rely on outdated policies to counter
Beijing. As IIR's Lin put it, MOFA has been in crisis
management mode for years -- racing to save countries, but
not developing any long-term strategy. This reactive mode,
he said, was ineffective and alternative strategies must be
adopted. Taiwan Think Tank's Lai assessed Taiwan's foreign
policy simply and pessimistically as incoherent and "complete
chaos." The DPP's Hsieh remarked that MOFA must encourage new
ideas and be more flexible in its diplomatic strategy. She
added that the government should be more proactive,
culturally aware, and show its partners that they are very

Concern Over Domino Effect


6. (C) Taiwan government officials do admit that Taipei's
international position is worsening and expressed concern
that the loss of additional diplomatic partners in the
Caribbean and Central America could signal the beginning of a
domino effect. Lamenting that Taipei could not match
Beijing's incentive packages, MOFA's Yang noted that St.
Vincent and the Grenadines and other Caribbean nations could
soon follow on the heels of Grenada. MOFA Central America
Branch Chief Hsie Miao-hung told AIT that if Taiwan lost
Panama, then other nations in Central America, arguably
Taiwan's most important region, would likely follow, causing
a chain reaction that would change the strategic landscape
for Taiwan.

Government Beginning to Wake Up


7. (C) MOFA and NSC officials are beginning to adopt some new
strategies to try to slow Beijing's relentless advance.
MOFA's Hsie told AIT that Taiwan was working to distinguish
itself from Beijing. She believed that Taipei should
highlight the fact that for several decades Taiwan had been a
stable partner and dependable supporter for many nations.
Hsie also said Taipei was trying to highlight Taiwan's
democratic values and its generosity in providing
humanitarian aid. The PRC, she noted, often promised a lot,
but did not deliver in the long run. NSC's Chang argued that
the PRC was an unreliable partner and, noting that Taiwan has
a growing image problem abroad, said that Taipei must do more
on the public diplomacy front. To that end, he said, Taiwan
was planning a new public diplomacy campaign in the U.S. and
elsewhere to undergird Taipei's sagging reputation abroad.

Forced to Use NGOs


8. (C) Taipei is also increasingly seeking out NGO partners
to act as intermediaries for its activities abroad. Taiwan
diplomats believe that increasing cooperation with NGOs is a
possible avenue for multilateral diplomacy and will help
Taipei circumvent Beijing's campaign to isolate Taiwan in the
international community. For example, Taiwan is working
through the NGO Mercy Corps in provide aid to Iraq (ref
Taipei 00372). MOFA NGO Affairs Committee Chairman Michel Lu
explained to AIT that using NGOs was Taipei's only viable
option to establish a presence in Iraq and that they were
pleased with their Mercy Corps partnership and viewed it as a
model for future Taiwan diplomacy. In addition, he said, the
Chen administration was eager to enhance its relations with
international organizations and Taipei was reaching out to
NGOs because it had been unsuccessful in its efforts to join
international organizations, largely because of PRC

ICDF Playing a More Visible Role


9. (C) Taiwan's international aid organization, the
International Cooperation Development Fund (ICDF), is playing
an increasingly central role in Taiwan's diplomatic strategy
to counter Beijing. Given a growing backlash at home and
abroad over less ethically acceptable forms of foreign
assistance, the ICDF is a visible and legitimate aid
organization. Taipei views the ICDF as a possible avenue for
diplomacy and works hard to promote the organization as a
global humanitarian organization via international
conferences, glossy brochures, and professional video
productions. The foundation is self-financed from
investments of its USD $1 billion endowment from government
coffers since it was established in 1996. The ICDF serves
nations that continue to recognize Taipei with humanitarian
assistance projects similar to USAID. According to the
ICDF's Deputy Secretary General Carlos Liao, the ICDF will
play an increasingly central role in Taiwan's diplomatic
strategy to enhance relations with its partners. The
organization operates in close accord with MOFA directives
and targets its aid on nations that recognize Taipei. In
2003, approximately $57 million was approved for direct

Looking to Business For Help


10. (C) Taipei is also seeking to use its business expertise
and corporate prowess to its diplomatic advantage. During
Vice President Annette Lu's March 2005 visit to Central
America, she highlighted Taiwan's commercial benefits and
expertise in technology to Central American nations.
According to MOFA's Chin, the Vice President's delegation of
153 members included a large Taiwan business contingent.
Chin told AIT that Taipei is promoting the construction of a
technology park in Honduras and is encouraging business
leaders to invest and promote commercial ties in Central
America. Taipei is also promoting free trade agreements with
some of its diplomatic allies. However, it is not certain
how willing Taiwanese businesses are to go along with the
government's plan, particularly since many of the nations
targeted by the government have little economically to offer
Taiwanese companies.

But No Bidding War


11. (C) Officials at both the NSC and MOFA say that they are
adamant that Taiwan cannot and will not engage in "check-book
diplomacy." Long the mainstay of Taiwan's diplomatic
strategy, growing LY and media scrutiny as well as Beijing's
economic power are making it increasingly difficult for
Taipei to match Beijing's campaign around the globe with
under-the-table payments to political parties and foreign
leaders (ref Taipei 03430). The NSC's Chang told AIT that
recent Taiwan aid scandals involving Nicaragua, Costa Rica,
and Panama have had an impact on Taipei's aid approach. He
added that there is more oversight in the aid process and
that lump sums are not given out as freely to leaders as
before. Rather, Taiwan's future foreign aid system will be
more focused on real aid projects that can make a
developmental difference in the country. Chang added what is
probably the main reason for the change in the policy -- that
Beijing has more resources than Taiwan and Taipei simply
can't compete anymore.

Content to Rely On The U.S.


12. (C) Taipei's core foreign policy is still to rely on the
U.S. for support. Despite some new policies, MOFA appears
content to follow this well-hewn approach, accept its
international fate, and look to the U.S. to save Taiwan in
the wake of Beijing's growing power. The NSC's Chang said
that Taipei hoped for increased cooperation with the U.S. in
Latin America and the South Pacific. In Europe, MOFA and NSC
officials have largely ignored new EU members in Eastern
Europe in their lobbying efforts and are content to let the
U.S. take the lead in opposing the EU arms embargo. Even
Taiwan Think Tank's Lai argued that Taipei's diplomacy is not
going to work on its own and that increased U.S. support
would have a dramatic impact on Taiwan's diplomatic survival.

Comment: Reality is Against Them


13. (C) Taiwan officials seem to have concluded that there is
little they can do in the wake of the PRC's growing
international influence. It is clear Taipei does not have an
effective plan for how to deal with the quandary it faces.
Practically every MOFA official AIT met with pleaded for
increased U.S. support. Few are confident that Taiwan can
keep its 25 formal diplomatic relationships for long in the
face of Beijing's money diplomacy and pressure tactics. Yet
no one in government seems willing to contemplate what would
happen if Taiwan lost even the minimal international space it
has carved out for itself.

14. (C) Taipei's emerging strategy of portraying Beijing as
an unreliable partner, emphasizing Taiwan's democratic
attributes, and utilizing NGOs will not meet the challenge
from Beijing. Taiwan does have much to offer in the
technical and financial assistance arena, but new strategies
that promote this experience are not likely to be effective
with its diplomatic partners. The majority of nations that
recognize Taiwan are not concerned about technical assistance
or Taiwan's democratic values. More often than not, the
biggest factor in the recognition game is simply money and
how much of it flows into leaders' pockets, a reality that
gives Beijing the upper hand. As long as Taipei continues to
rely on a policy of focusing on nations that are typically
poor and corrupt, it will continue to lose the check-book
diplomacy battle, country by country, because Beijing has the
resources and the strategy to outbid Taipei.

15. (C) This trend and Taiwan's inability thus far to adopt a
realistic strategy to cope with the risks poses a significant
challenge both to Taiwan and to U.S. efforts to support
Taiwan. We will explore these risks and possible response
strategies in subsequent cables.