CHEN SHUI-BIAN: SURPRISES AHEAD?

1. (C) Summary. The moderate "presidential" persona that
President Chen Shui-bian has cultivated for the past four
months masks a hard driving political tactician who continues
to work backstage to destroy the opposition Pan-Blue majority
coalition. The &reconciliation8 agenda of this moderate
Chen is in sharp contrast to the historical Chen, who for
four years pushed Taiwan to the limits on constitutional
revision, name change, and referenda, greatly exacerbating
cross-Strait tensions with Mainland China. Chen, moreover,
has shown himself to have a penchant for surprise. This
report discusses some of the possibilities for Chen surprises
and the tools with which he could reassert his more hardline
agenda, given the current state of opposition fragmentation
and renewed pressure from Mainland China. End Summary.

Controlling Cross-Strait Agenda


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2. (C) Following his Democratic Progressive Party (DPP)
setback in the December 2004 Legislative Yuan (LY) election,
President Chen Shui-bian wrapped himself in a "presidential"
mantle emphasizing "reconciliation and coexistence8 in
Taiwan domestic politics and cross-Strait relations. Behind
this more moderate facade, however, Chen continued his
political maneuvering, deftly manipulating People First Party
(PFP) Chairman James Soong to fragment the Pan-Blue
coalition, and consolidating his Pan-Green coalition with the
March 26 &million-person8 protest against Beijing,s
Anti-Secession Law that mollified his &deep-Green8
independence flank. (Ref A)



3. (C) Over the past three weeks, however, Chen has faced an
array of new challenges. Mainland China,s coercion of
long-time Chen supporters, notably Chi-mei founder Hsu
Wen-lung and ex-Acer CEO Stan Shih, directly threatened
Chen,s political base, and the high-visibility KMT visit to
Beijing undercut Chen's hopes for taking control of the
cross-Strait agenda (Refs B,C). With Chen's options limited
-- the LY election demonstrated lack of support for immediate
independence and Beijing,s Anti-Secession Law clearly
demarcated the permissible -- stabilizing and improving
cross-Strait relations was Chen,s only realistic hope for
establishing a presidential legacy. (A variety of Taipei
political operatives, both "Green" and "Blue," tell AIT that
the search for a legacy is one of Chen's main goals for his
final three years in office.) The KMT cross-Strait
initiative, however, threatened Chen,s option for pioneering
a cross-Strait settlement and left him cornered, with little
room to maneuver, and angry.

Destabilizing Options


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4. (C) Moderate DPP and KMT supporters have expressed
concern to AIT that a cornered Chen might revert to his old
independence ways. Chen, moreover, has shown himself to have
a penchant for surprise and finding creative ways around
political obstacles by veering suddenly in new policy
directions. Moderate DPP contacts tell AIT that they have
worked hard to get Chen onto his current course and keep him
there. They -- and moderate Blue supporters -- express
particular concern over a series of challenges that Chen,s
current policy line will face in the months ahead and which
could derail the moderate track Chen has been following since
December.



5. (C) If Chen were to resort to his pro-independence roots,
upcoming events and tools he might use to destabilize and
push a hard line agenda include:

-- May 14 National Assembly election: The current atmosphere
of distrust and anger in the Pan-Green camp, could stimulate
Chen to return to fundamentalist pro-independence themes he
employed in the presidential and legislative campaigns )-
new constitution, name change, and referendum. The
government,s earlier decision not to respond to overtures
from Beijing before May 14 (Ref E) indicates the importance
the DPP places in those elections. Nevertheless, the
December LY election experience, which brought home to Chen
the political limits of these themes, could serve as a
cautionary note.

-- December 5 mayor/county magistrate elections: These
local elections offer another venue for Chen and the DPP to
resurrect some of the more provocative themes they adopted in
the 2004 presidential and legislative elections. Local
elections in Taiwan, however, tend to focus largely on local
issues and personalities, and are not readily conducive to
such issues as cross-Strait relations and constitutional
change. Nonetheless, the December elections will give Chen a
number of opportunities to speak to rallies of southern, deep
Green supporters. These venues have in the past led Chen
into some of his most dramatic rhetorical excursions.

-- Constitutional reform: The push for Constitutional reform
has been a constant through Chen,s first five years in
office and a litmus test of &Green-ness.8 Chen's May 2004
inaugural address renewed his campaign promise to establish a
new constitution by 2008, but he promised not to change name,
flag, territory or national anthem. During the December 2004
LY campaign, President Chen again pledged that the current
constitution would be revised, with a referendum in 2006 and
a "New Taiwan Constitution8 in 2008 (Ref F). Since the LY
elections, however, constitutional change, beyond the LY
amendments passed last August, has been rarely mentioned.
Chen did leave theoretical wriggle-room when he announced
that he would not raise controversial issues but could not
rule out others doing so. If Chen does return to pushing
constitutional change, however, he would still confront the
requirement for 75 percent LY approval of any amendments
beyond the August 23 legislative referendum reforms. Any
change not supported by the KMT is consequently dead on
arrival.

-- Name change: While Premier Hsieh has downplayed the issue
of changing the name of institutions from &China8 to
&Taiwan,8 this is still a highly emotive theme that could
be refurbished.

-- Referendum: The call for referendum, which has raised the
temperature of cross-Strait relations in the past, would be
even more destabilizing given the Anti-Secession Law. After
Taiwan officials briefly threatened to hold a "defensive
referendum8 to counter the Anti-Secession Law, the
referendum issue fell by the wayside in favor of the March 26
&million person8 protest rally. The May 14 election,
however, is likely to be a competition for non-mainstream
voters, raising the risk of TSU and PFP appeals to save their
parties and offering a public platform for TSU and other
pro-independence elements to press for a referendum. Though
Chen Shui-bian has not mentioned the referendum issue in
recent weeks, the visceral anger he feels over the KMT visit
and the coopting of Hsu, Shih and other DPP business leaders
could bring him back to the referendum issue again.
Nevertheless, this option will still be limited by the
requirement that any referendum question must be approved by
fifty percent of all eligible voters, a very high threshold
that the Pan-Green camp would like to reduce, but with
limited prospects.

Comment: But the Landscape has Changed


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6. (C) Despite Chen Shui-bian,s penchant for surprise and
dramatic policy shifts, the political landscape of Taiwan has
substantially altered in the past four months in ways that
limit his options. Expectations for another round of
constitutional reform were dependent on the Pan-Green
coalition winning a clear majority in the December LY
elections, with the DPP setback effectively sidelining talk
of constitutional reform. While constitutional reform, name
change, and referenda, could rear their heads if the
situation continues to sour, the likelihood is not high, as
Chen has apparently accepted the lessons of the December LY
election, and the Anti-Secession Law has clearly demarcated
the boundaries of the permissible, limiting Chen,s room for
maneuver. Moreover, the about-face of Hsu Wen-long and
resignation of presidential advisor Stan Shih demonstrated at
close range the changed political environment in Taiwan, a
fact that Chen and supporters recognize, as evidenced by
their low key response to both incidents.



7. (C) While Chen has succeeded in dividing the Pan-Blue
coalition, the chances that he and the DPP might establish a
workable LY majority are slim, and that they might then
pursue a radical agenda nearly nought. (On the contrary,
there are nascent signs that Chen's divisive tactics could
backfire and push the PFP back towards the Pan-Blue camp.)
Rather, Chen,s very day-to-day governing will depend on his
and Premier Frank Hsieh,s ability to repeatedly cobble
together ad hoc, issue-by-issue majorities -- a process that
will leave precious little time or political capital for
pushing a hard line &Green8 agenda.
PAAL