COMING WEEKS OFFER KEY OPPORTUNITIES, RISKS

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002144

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 02/01/2015
TAGS: PREL PGOV PINR CH TW
SUBJECT: COMING WEEKS OFFER KEY OPPORTUNITIES, RISKS

REF: A. TAIPEI 2126


B. TAIPEI 2001

C. TAIPEI 2063

Classified By: AIT Director Douglas Paal, Reason: 1.4 (B/D)


1. (C) Summary: The period following the May 14 National
Assembly (NA) election is expected to offer a critical window
for movement on both domestic and cross-Strait policy.
President Chen Shui-bian plans to renew his push to create a
cross-party consensus behind greater cross-Strait economic,
and perhaps, political contacts. Reconciliation between the
ruling and opposition party leadership will also be required
to break the deadlock in the Legislative Yuan (LY) that has
continued since the legislative elections last December.
There will be only a narrow window between the NA election on
May 14 and the recess of the current LY session, sometime
before June 1, to take action on the Special Defense
Procurement Budget and other key legislation. If party
leaders fail to seize this window of opportunity for domestic
political reconciliation, the July contest for leadership of
the KMT and the onset of the December 2005 local election
campaign could put opportunities for major progress in
cross-Strait relations and domestic policy in jeopardy. End
Summary.

Carpe Diem
--------------


2. (C) The two weeks following the May 14 National Assembly
(NA) election may offer a critical window for Taipei to make
major strides in cross-Strait and domestic policy. Aides to
President Chen Shui-bian say they will attempt to arrange
meetings for the President with KMT Chairman Lien Chan and
People First Chairman (PFP) Chairman James Soong, either
individually or as a group, as soon as balloting closes on
May 14 (Refs A/C). Chen will seek to use the meetings to
build a consensus behind the government's plans for renewed
cross-Strait dialogue and, if possible, secure Pan-Blue
participation in some form of a Cross-Strait Peace and
Stability Committee. If and when Chen secures opposition
support for the government's policy of engagement with the
PRC, the Chen administration plans to proceed with contacts
with both Washington and Beijing over the creation of a
channel and formulation to facilitate cross-Strait dialogue.
Cross-Strait policy officials also emphasize that Taipei is
still set to move ahead in June on measures to liberalize
economic interaction with the Mainland that were delayed by
PRC passage of the Anti-Secession Law. Chen's advisors
believe that recent USG pressure on Beijing to reach out to
the government in Taipei in the wake of the successful visits
by the two Pan-Blue leaders may offer the first real
opportunity for the Chen administration to establish formal
contacts with the PRC.

Special Defense Budget a Critical Test
--------------


3. (C) Presidential aides say the key test for the
President's reconciliation initiative will be whether the
Pan-Blue leaders agree to take action on the Special Defense
Procurement Budget and other critical legislation during the
current Legislative Yuan (LY) session (Ref B). Democratic
Progressive Party (DPP) officials say that it will be hard to
bring Chen's own base behind his plans for expanding
cross-Strait contacts if the Pan-Blue continues to use its LY
majority to frustrate other government policies, especially
in the wake of the Lien/Soong visits to Beijing. However,
the window for legislative action is limited given the
requirement that the LY must recess before the NA can meet.
Under current rules, the NA must meet within 10 days of the
validation of the May 14 NA election results. The Central
Election Commission (CEC) is expected to make this validation
on or around May 20, with most political observers expecting
the NA to open on June 1.


4. (C) Legislative floor managers tell AIT that chances for
the LY completing work on the Special Defense Budget before
the late-May recess are slim. However, if the package can be
voted out of the Procedure Committee during its May 17
meeting (or May 24 meeting, if the LY is still in session by
then),then the LY will be able to take action during a
summer Extraordinary Session. The Democratic Progressive
Party (DPP) has already announced it plans to call for a
Extraordinary Session after the NA recesses, and LY President
Wang Jin-pyng has publicly suggested he would support a
session in either July or August (Note: under the
constitution, the NA can only meet for up to 30 days, and
given the limited agenda, the NA might finish its work as
early as mid-June). While there are still details to be
worked out over the final composition of the Special Defense
Budget package, DPP LY officials tell AIT that an agreement
by the four LY party caucuses to address the issue in an
Extraordinary Session would signal that the budget will be
enacted.

Worst Case Scenarios
--------------


5. (C) Presidential aides express concern privately that if
the Pan-Blue leaders, and Lien Chan in particular (Ref C),
refuse to participate in a high level meeting after the NA
election, action on a range of major policy initiatives may
have to wait until 2006. Attention in both camps is already
turning to the December magistrate/mayor election. While the
election is likely to focus on local issues, the amount of
political and economic resources that county magistrate and
city mayors can bring to future legislative and presidential
elections make the December campaign critical to both sides.
Thus, prospects for inter-party reconciliation during the
Autumn LY session, even if a more pragmatic opposition leader
emerges from the July 16 KMT Chairmanship race, are dim.


6. (C) Prospects for post-NA election cross-partisan
reconciliation may be brighter than heated pre-election
campaign rhetoric would otherwise suggest. The DPP and KMT,
which are both campaigning in favor of the proposed
constitutional reforms, are expected to cooperate in the
immediate aftermath of the May 14 election to enact
implementing legislation that will permit the NA to convene.
A major setback for the DPP on May 14 could provoke a sharply
negative reaction from within the Pan-Green base, potentially
weakening Chen's mandate to reach out to the two opposition
parties. However, the President has intentionally lowered
expectations for a DPP victory in the days leading up to the
vote, reducing the risk for a repeat of the Pan-Green
backlash that followed the party's setback in the December,
2004 LY election.

Comment: A Unique Opportunity
--------------


7. (C) The coming weeks may offer the first real opportunity
to move beyond the gridlock in domestic politics and chill in
cross-Strait relations that have plagued Taiwan over the past
three years. Leaders on both sides acknowledge that the
public is losing patience with partisan infighting and
uncertainty in cross-Strait relations. AIT will continue to
press all sides to take advantage of the post-May 14 window
to establish a domestic consensus behind accelerated
cross-Strait contacts and to take action on the Special
Defense Procurement Budget. AIT will also encourage the Chen
administration to actively explore positive signs that
President Hu Jintao may be moving to replace the stale Taiwan
policy line of his predecessor with something new, and
perhaps more flexible.
PAAL