Identifier
Created
Classification
Origin
05TAIPEI1708
2005-04-08 08:46:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

USTR CALLS ON TAIWAN

Tags:  ETRD ECON KIPR EAGR TW IPR 
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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 06 TAIPEI 001708 

SIPDIS

STATE FOR EAP/RSP/TC, STATE PASS AIT/W AND USTR, USTR FOR
KI AND FREEMAN

E.O. 12958: DECL: 04/07/2015
TAGS: ETRD ECON KIPR EAGR TW IPR
SUBJECT: USTR CALLS ON TAIWAN

Classified By: Acting Director David Keegan, Reason 1.4 b/d

C O N F I D E N T I A L SECTION 01 OF 06 TAIPEI 001708

SIPDIS

STATE FOR EAP/RSP/TC, STATE PASS AIT/W AND USTR, USTR FOR
KI AND FREEMAN

E.O. 12958: DECL: 04/07/2015
TAGS: ETRD ECON KIPR EAGR TW IPR
SUBJECT: USTR CALLS ON TAIWAN

Classified By: Acting Director David Keegan, Reason 1.4 b/d


1. (C) Summary: The USTR Director for Taiwan and Hong Kong
met with government officials and US business representatives
in Taipei to discuss ongoing bilateral trade concerns and the
delay of proposed meetings under the Trade and Investment
Framework Agreement (TIFA). Eliminating barriers to
agricultural trade dominated the discussions, but USTR also
raised registration and protection of pharmaceuticals,
praised Taiwan for progress made in the protection of IPR and
suggested consideration of a bilateral government procurement
agreement. Taiwan officials were forthcoming on rice
negotiations and willing to work with the US on beef exports,
but other items on our agriculture trade agenda saw little
progress. DOH officials promised consultation on
implementing regulations for data protection and blood use,
but were unable to offer a plan to address pharmaceutical
pricing issues. US overtures on a bilateral government
procurement agreement were met with skepticism. Taiwan
officials were uniformly eager to resume TIFA meetings as
soon as possible. USTR informed Taiwan officials that the US
is committed to continued trade dialogue with Taiwan but
personnel changes in USTR make it impossible to confirm a
time for TIFA talks. COMMNENT: Taiwan officials continue to
restrict ag trade in ways not consistant with WTO membership
and push a US/Taiwan FTA as a means of balancing Chinese
rather than expanding trade. Taiwan officials fear they are
too open to trade with the US thus derailing plans for a
hoped for FTA. We can expect Taiwan to resist adding new
items to our bilateral trade agenda in the hope that the US
will agree to open FTA discussions. End Summary and Comment.



2. (C) USTR Director for Taiwan and Hong Kong Scott Ki met
with officials from the Ministry of Economic Affairs (MOEA),
Bureau of Foreign Trade (BOFT),Department of Health (DOH),
Council of Agriculture (COA) the National Security Council
(NSC),and representatives of the American Chamber of

Commerce in Taipei on March 30 and 31 to discuss bilateral
trade issues. He was accompanied by AIT/W Economic Director
Rick Ruzicka and AIT/T staff. FAS/USDA Taiwan Desk Officer
Lori Smith also attended meetings on agriculture and trade
issues.

MOEA Deputy Minister Chen: Ag Trade Reciprocity
============================================= ==


3. (C) Ki noted that agricultural trade concerns topped his
current agenda and that Taiwan's restrictive agricultural
trade policies were at odds with more liberal regimes for
other goods. Chen responded that the COA and DOH were slowly
changing their attitudes on trade but that there was a sense
in the Taiwan government that the US agriculture market was
also restricted, especially to Taiwan poultry. MOEA Deputy
Minister Steve Chen appeared to be unaware of the provision
in the March 24 DOH announcement that would require US beef
exporters to certify that cattle had been born, raised, and
slaughtered in the US. He suggested that the language might
have been lifted directly from the Taiwan/Panama Free Trade
Agreement where it was included to prevent transshipment of
non-Panamanian cattle. Chen suggested that since the
requirement appeared to be unrelated to health concerns it
would be easier to modify and suggested that AIT raise the
issue directly with DOH Food Safety Bureau Director General
Chen Lu-hong.


4. (C) Turning to issues long on the bilateral trade agenda,
Ki requested that Taiwan take the lead in negotiations with
Thailand and Egypt of country specific quotas (CSQ) for rice.
After noting that US farmers would likely lose market share
after the imposition of CSQ, Chen referred the issue to COA.
In response to a question on the progress of the National
Communications Commission (NCC) bill, Chen said the
government was still pushing for a massive reorganization and
that he expected the NCC would be passed as part of that
package. Chen asked whether Taiwan could begin active
promotion of a Free Trade Agreement with the US and suggested
that a bilateral government procurement agreement could be
one aspect of an FTA negotiation. Otherwise, Taiwan would
still prefer to join the WTO Agreement on Government
Procurement and will continue to ask for US and EU assistance
to achieve that goal.

AmCham Airs Concerns on Med Reimbursements, Registration
============================================= ===========


5. (C) In a meeting attended by the Executive Director of
the American Chamber of Commerce in Taipei and the heads of
committees on IPR, Infrastructure, Medical Devices,
Pharmaceuticals and Telecommunications, Ki heard a litany of
US business concerns as well as praise for the Taiwan
government in IPR enforcement. The head of the IPR committee
said that many of the concerns of the past several years had
been or were in the process of being addressed including the
mitigation of an onerous power of attorney requirement and
improved enforcement against optical media piracy. Judicial
sentences were dismissed as too weak and internet sales and
trade dress were raised as problems without suggested
solutions. Counterfeit and parallel imported pharmaceuticals
were noted as a major concern that the Taiwan government
seemed unable to address.


6. (C) Unfair pharmaceutical pricing/reimbursement by
Taiwan's National Health Insurance (NHI) remains at the top
of AmCham's list of complaints, but the industry was
encouraged by the passage of a data protection law in January
and is eagerly awaiting a chance to comment on the
implementing regulations. Medical Device manufacturers
raised their concern about a DOH requirement that mandates
registration of Class one, two and three medical devices by
June 20 and the unwillingness of DOH to provide import
licenses even if the process cannot be completed in a timely
fashion. Manufacturers shared concerns about NHI
reimbursement and the common practice of reusing single-use
products, a practice they attributed in part to Taiwan's
perverse reimbursement policy.


7. (C) Telecommunications committee members noted that there
has been little change in the past six months in the Taiwan
telecom market. A long promised sale of Chunghwa Telecom
shares might again be postponed, discouraging competition in
the fixed line market. The NCC organization bill was once
again about to be submitted to the Legislative Yuan but
political disagreements over the appointment of commissioners
made passage uncertain. The Infrastructure committee praised
Taiwan for agreeing to a liability cap in the standard public
works contract but complained that terms and conditions still
did not allow for arbitration and that more contracts were
being tendered at the county level where practices were even
more inconsistent. A Taiwan conference on energy policy to
be held in June was expected to include an AmCham speaker on
energy security. The AmCham Executive Director noted that
Taiwan's list of banned Chinese imports remained substantial
and that this violated Taiwan's WTO commitments.

COA Willing to Take on Rice...
==============================


8. (C) In a meeting with COA, Vice Minister Lee Jen-chyuan
agreed that Taiwan would take leadership in negotiations with
Thailand and Egypt over CSQ for rice. Ki assured COA that
the US was willing to consider creative ways to resolve the
quota issue, including increasing the percentage of allocated
rice imports in the private sector. Lee noted that Thailand
and Egypt should be motivated to reach an agreement since
Vietnam and China were poised to enter the Taiwan market and
take market share aware from them. Lee asked the US to
consider withdrawing its WTO objection on Taiwan,s rice
regime in order to increase pressure on Thailand to agree to
the CSQ proposal. Ki replied that USTR believes it is
premature to withdraw the objection before the CSQ and tariff
schedule issues are resolved.

...But Regulations Rule on other Ag Trade Issues
============================================= ===


9. (C) On the issues of Taiwan restrictions on blood,
tallow, and meal, Ki emphasized that transparency and
adherence to international standards were crucial. Taiwan
regulations are often inconsistent with international
standards and are more trade restrictive than necessary. The
representative from Taiwan,s quarantine bureau (BAPHIQ),Dr.
Yeh, responded that in the case of tallow, relevant documents
had been received and were currently under review, in the
cases of pork and poultry meal relevant documents and lists
of producers had been requested but not yet received by
BAPHIQ. Only when all documents had been received would
BAPHIQ conduct a risk assessment. Ki suggested that current
regulations were more restrictive than international norms
and that a risk assessment was unnecessary. Nevertheless,
BAPHIQ insisted that Taiwan regulations required it and
requested the US provide them with relevant documentation.


10. (C) AIT Agriculture Chief noted that World Organization
for Animal Health (OIE) practice allowed a risk assessment
only if there was shown to be some risk. Yeh responded that
BAPHIQ needed to assess the level of US risk before setting
appropriate restrictions. BAPHIQ insisted on inspecting
processing facilities in the US prior to certification. FAS
Taiwan desk officer Smith noted that the US doesn,t request
to inspect every foreign facility, but BAPHIQ again responded
that such inspections are required by Taiwan regulation. Lee
noted that Taiwan producers had been waiting several years
for approval of Taiwan poultry exports, contrasting it with
the relative speed of Taiwan,s process to reopen the market
to US beef exports and suggested that reciprocity should be
applied. (COMMENT: This tying together of unconnected SPS
issues is becoming more common in BAPHIQ. This practice
further undermines their claim that their practices are based
in sound science. END
COMMENT)


11. (C) Turning to apple imports, AIT AgChief said that he
understood the BAPHIQ inspection team had released its report
and hoped that it could be adopted in time for the apple
market to be reopened this year. He asked that the report be
sent to APHIS as soon as possible and that it contain no new
requirements. Yeh responded that the requirements of the
apple work plan were not a problem; rather the problem lay in
compliance. The inspection team found that some US packers
were not following the protocol. BAPHIQ planned to send a
letter to APHIS suggesting that the current protocols be
better enforced. BAPHIQ would like to discuss perceived
shortcomings of the current workplan with APHIS prior to
reopening the market. Ki noted that the discussions on
issues other than rice had been disappointing. Vice Chairman
Lee agreed but suggested the US should show as much patience
as Taiwan had in its quest to export orchids and poultry to
the US.

NSC Seeing the World Through Red Tinted Glasses?
============================================= ===


12. (C) In a meeting with NSC Connie Yang Guang-hwa, Ki
again emphasized that Taiwan,s agricultural import standards
were not consistent with accepted international standards in
trade restrictive ways. Yang insisted that the Taiwan public
needed to be reassured that decisions were being made for
technical, not political reasons and that US agricultural
products were safe. But now every policy decision was being
interpreted through the prism of China,s anti-succession law
and there were those who would accuse the government of
selling out Taiwan,s public health in an attempt to win US
support versus China, she said. AIT AgChief replied that
there was ample scientific evidence to support lifting of the
ban on US beef ban and that the birthplace of individual
cattle had no relevance to potential for BSE transmission.
Yang wondered why, if the age of the cattle were known, the
birthplace could not also be determined. AIT AgChief
explained that there were other practices and techniques
short of requiring a birth certificate to determine the age
of cattle and that he was cooperating on ways to overcome the
problem with DOH Vice Minister Chen. Yang agreed that the
agricultural sector in Taiwan needed to be liberalized but
said that all consideration of those reforms had been halted
as the government considered how best to respond to China,s
anti-succession law.


13. (C) Ki explained to Yang the need to postpone TIFA talks
until it was clear who will be appointed Deputy USTR. Yang
expressed disappointment with DUSTR Shiner's inability to
travel to Taiwan and with the lack of enthusiasm for a
US/Taiwan FTA among US industry groups. Ki noted that the US
business community was concerned that Taiwan may want to use
a US/Taiwan FTA as a tool against China rather than as an
opportunity to develop closer cooperative links with China.
Yang replied that Taiwan saw an FTA as a means of
diversifying trade patterns away from China as a means to
counter Chinese influence over Taiwan's economy and that US
support was needed before others would consider including
Taiwan in regional trading arrangements. In a separate
dinner with Ruzicka, AIT Deputy Director and Econ Chief, DPP
Legislator Tsai Ing-wen also raised the FTA issue. She
echoed Yang in saying Taiwan needs an FTA to strengthen its
economic relations with the West and to encourage other
countries, like Korea, Singapore and Japan, to enter into
FTAs with Taiwan.

GPA: Waiting for the WTO
========================


14. (C) Government procurement issues continued to be a
concern for US industry, noted Ki. The US remained committed
to supporting Taiwan,s accession to the WTO GPA, but
progress in Geneva appeared to be stalled. Ki suggested the
possibility of a bilateral GPA as specified in Taiwan,s WTO
accession agreement with the US. Yang dismissed concerns
about unfairness and lack of transparency in the Public
Construction Commission, contrasting Taiwan,s procurement
market with China. She insisted that government procurement
issues should be addressed multilaterally through the WTO and
opined that the second quarter of 2005 was Taiwan,s best
chance if the US and EU were willing to push.

Taiwan's IPR Protection Continues to Improve
============================================


15. (C) Meetings with the Taiwan Intellectual Property
Office (TIPO) were positive and reflected Taiwan,s improved
efforts at IPR enforcement and the recent decision to shift
Taiwan from the Special 301 Priority Watch List to the
standard Watch List. TIPO Director General Tsai Lien-sheng
appreciated the decision but announced that Taiwan would not
be satisfied. He noted that the Executive Yuan required
relevant agencies to meet quarterly to report on IPR
protection. The Ministry of Justice (MOJ) was coordinating
enforcement bodies to increase inspections. Tsai noted that
movie box office revenues were up 20% over the same period in

2004. Government use of illegal software had been eliminated
while penalties for use of pirated software had increased.
Tsai announced that 50,000 computer shops in Taiwan had

SIPDIS
qualified to display a sticker announcing they do not sell
pirated software.


16. (C) TIPO Deputy Director Jack Lu added that Taiwan is
taking steps to address internet piracy including setting up
a task force to track down sales of fakes on-line and by
working with ISPs to enforce takedown notices when illegal
content is discovered. TIPO continues to work with the MOJ
to encourage the Judicial Yuan to include criminal cases in
its proposed IP Court. A public/private working-group to
discuss controversial "fair use" guidelines has been unable
to reach consensus and negotiations have been suspended. The
duties of the Export Monitoring System (EMS) have been
officially transferred to Taiwan Customs, which has been
conducting a series of training sessions for staff sponsored
by rightsholders. Customs has already made several seizures
of counterfeit products. The EMS budget has been transferred
to IP enforcement bodies to support additional computer
technology purchases and a study of regional IPR enforcement
systems. Ki applauded TIPO for its recent efforts and urged
that they be continued.

BOFT, MOEA Still Pushing for FTA
================================


17. (C) The Bureau of Foreign Trade Director General Franco
Huang Chih-peng was disappointed to hear that DUSTR Shiner
would not be able to travel to Taiwan as had been suggested
in November. He was eager to continue the dialogue at a high
level. Huang echoed Chen and Yang's comments on government
procurement, noting that Taiwan was committed to accede to
the WTO GPA and worried that the US would lose interest in
supporting Taiwan,s goal if a bilateral arrangement were in
place. Ki reassured Huang that US support for Taiwan,s
entry into the GPA would not be diminished and offered to
draft a proposal to consider bilateral government procurement
and investment treaties between Taiwan and the US. Huang
noted that the Public Construction Commission (PCC) had
explicitly identified a bilateral GPA as a bargaining chip in
an FTA negotiation, but added that BOFT would be happy to
discuss the idea.


18. (C) MOEA Minister Ho Mei-yueh welcomed USTR's visit and
thanked USTR for downgrading Taiwan from the Special 301
Priority Watch List. Ki again raised our concerns over
agricultural trade issues, especially the lack of progress on
apples and concerns about the lack of a final agreement on
beef imports. Ho noted that the technical problems were
easier to solve than the political ones. Ho pressed for a
TIFA meeting before the end of the year and mentioned that
when she had meet with DUSTR Shiner in December 2004, they
had discussed ways to attract US business support for an FTA.
Ho then turned to the benefits of a US/Taiwan FTA for
Taiwan,s textile industry, noting that Taiwan,s economy is
shifting out of manufacturing and into high tech and
services, but that these manufacturing jobs were still
necessary for Taiwan,s lower skilled laborers.

DOH Promises Consultation on Regs
=================================


19. (C) At the Department of Health, Ki praised DOH's
science-based approach to assessing BSE risk and agreeing to
open to US beef exports and to work with AIT to ensure that
US beef could come into Taiwan as announced March 24. Hsiao
Mei-ling, Counselor to the Minister of Health, agreed that
Taiwan was also eager to see US beef enter the market.
Turning to pharmaceutical related issues, Ki noted that the
US was pleased to see that the Data Protection bill had been
passed by the Legislative Yuan and that we strongly
encouraged DOH to include US pharmaceutical manufacturers in
discussions of implementing regulations. Dr. Yu from the
Bureau of Pharmaceutical Affairs (BOPA) replied that BOPA was
setting up a consultative committee comprised of Taiwan,s
six active pharmaceutical associations; much like the one
that had been created to discuss the original draft data
protection bill. Implementing regulations are to be
announced by August 2005. Yu noted that bio-products will be
considered new chemical entities and be eligible for full
protection under the law.


20. (C) Implementing regulations for the National Blood law
are also in the process of being drafted. Dr. Qu from the
Bureau of Medical Affairs (BOMA) welcomed comments from US
companies but noted that the regulations could not subvert
the intent of the law. Ki responded that the law appeared to
violate WTO national treatment commitments and that there was
no clear process or timeline for the drafting of these
regulations. Counselor Hsiao committed to discuss the
implementing regulations with interested US companies as soon
as they were drafted. On registration and validation issues,
Ki was assured by the Bureau of Food and Drug Analysis (BFDA)
that discussions with PhRMA would continue and that US
concerns would be fully considered in the assignment of risk
profile numbers and the drafting of methodology.

Still Looking to Cut Costs
==========================


21. (C) Turning to the National Health Insurance (NHI) price
volume survey, Ki asked for an explanation of how the 802
surveyed items were chosen. NHI staff reported that the
majority were chosen based on allegations of illegal pricing
from competitors, most of the rest were the result of NHI
monitoring for unusual pricing behaviors. NHI believed this
regular practice was the only way to ensure that
reimbursement prices more accurately reflected transaction
prices. Ki told Hsiao that the US industry believed that
price cuts fall most heavily on their products and that the
price volume survey data was flawed. He suggested NHI find
another means to address the pricing gap commonly referred to
as the black hole. Hsiao replied that DOH was aware of the
fiscal problems but had been constrained by politics from
increasing premiums, cutting benefits, or making other
changes to improve the health of the healthcare system.

COMENT: Restricting Trade to Encourage FTA Negotiations?
============================================= ===========


22. (C) Discussions of continued restrictions on US Beef
exports were intentionally kept to a minimum in an attempt to
avoid politicizing the issue, instead keeping it at a
technical level where it could be more easily resolved. This
strategy appears to have been successful. COA's willingness
to take the lead on rice CSQ negotiations with Thailand and
Egypt is encouraging; with the imminent entry of Vietnam into
the market both should be willing to come to an agreement.
However, BAPHIQ, Taiwan's quarantine agency, continues to
restrict agricultural trade in ways that run counter to WTO
principles by using excessive regulation not backed by sound
science to restrict market access. Several Taiwan officials
noted the speed with which Taiwan had moved to reopen to US
beef and suggested that the US should reciprocate by moving
more quickly to approve Taiwan pork and poultry exports.
Taiwan's policy leaders continue to see an FTA with the US as
a means to diminish China's influence rather than as an
opportunity to expand trade, a myopic tendency seemingly
exacerbated by China's passage of the Anti-Succession Law. A
frequent comment from our Taiwanese interlocutors was that
Taiwan was too open to trade and therefore the US did not see
an FTA as a priority. Their reluctance to discuss a
bilateral GPA appears to be based on this belief. If so, we
can expect Taiwan to be reluctant to consider adding anything
new to our bilateral trade agenda in the near future. End
Comment.
KEEGAN