President Chen Tells Congressman Mark Kennedy He

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SUBJECT: President Chen Tells Congressman Mark Kennedy He
Will Promote Special Military Budget


1. (SBU) Congressman Mark Kennedy from Minnesota's Sixth
District met with Taiwan President Chen Shui-bian June 5
during a two-day trip to Taiwan. Kennedy praised Taiwan
opening its beef market to U.S. imports and progress on the
protection of intellectual property. He recommended
relaxation of government regulations that restrict
businesses, especially their cross-Strait activities.
Congressman Kennedy also urged President Chen to ensure the
passage of Taiwan's Special Defense Procurement Budget.
President Chen reaffirmed his commitment to the Special
Budget and pledged to use upcoming television appearances to
promote it. End Summary


2. (SBU) President Chen began the meeting with Congressman
Kennedy by expressing appreciation for his support of Taiwan
in the House of Representatives. He noted Congressman
Kennedy's positions on Taiwan participation in the World
Health Assembly, the European Union's proposal to lift its
embargo on arms sales to the PRC, the PRC's Anti-Secession
Law, and other Taiwan-related issues. Congressman Kennedy
in turn praised Taiwan's close relationship with the United
States, its support for democracy and embrace of free
markets. He underscored U.S. appreciation for Taiwan
reopening its beef market to U.S. exports. He also
complimented Taiwan's progress on the protection of
intellectual property (IP),noting that he had visited a
Taipei night market the previous evening and found scant
evidence of counterfeit goods in marked contrast to rampant
IP violations in a Beijing market he had visited earlier in
his trip. He asked President Chen to ensure that Taiwan
makes further progress on market access for U.S. goods,
emphasizing medical products, which are produced in large
numbers in Minnesota.


3. (SBU) Congressman Kennedy also asked President Chen to
remove unnecessary regulations that impede business in
Taiwan. He noted that Taiwan, like the United States, is
working on finding ways to stay competitive economically as
economies like China with the advantage of low wages grow
rapidly. He remarked that Taiwan was a very easy place for
Americans to live, and Taiwan could further capitalize on
that advantage in attracting investment by relaxing some
regulations. As an example, he explained that his son would
be working a paid internship with Caterpillar Corporation in
Beijing this summer. However, under current Taiwan
regulations, foreign students were unable to obtain this
kind of paid internship. Congressman Kennedy also commented
that restrictions that limit the amount of investment a
Taiwan-based company can invest in the Mainland also have a
negative effect on Taiwan's investment environment.


4. (SBU) President Chen assured the Congressman that his
administration was working on these and related concerns.
He noted that the following day he would meet with music
industry leaders and assure them of his commitment to the
protection of intellectual property rights. He also
welcomed the resumption of Trade and Investment Framework
Agreement (TIFA) discussions in late 2004 and reiterated
Taiwan's interest in seeing these lead to discussion of a
free trade agreement.


5. (SBU) Regarding Taiwan's Special Defense Procurement
Budget, which would allocate funding to purchase USD 18
billion worth of weapons from the United States, Congressman
Kennedy expressed U.S. concern that the passage of this
legislation was taking so long. He explained that in the
United States, political parties have a tradition that
partisan differences end at the border. He urged President
Chen to work towards resolving the political controversy
surrounding the Special Budget and ensure its passage. He
pointed out that he had delivered a similar message to
Legislative Yuan Chairman Wang Jin-pyng the previous day.
Congressman Kennedy also noted that some critics of the
weapons purchase believe that it is unnecessary because the
United States will defend Taiwan. He asked that Taiwan not
take U.S. assistance for granted.


6. (SBU) President Chen reaffirmed his commitment to defend
Taiwan and assured Congressman Kennedy that all Taiwan
people, regardless of political affiliation, are committed
to Taiwan's security. He said that Taiwan would shoulder
the burden of its defense and not shift that burden to the
United States. According to President Chen, those who
oppose the Special Budget are not counting on the United
States to defend Taiwan. Instead they believe that the PRC
will not attack Taiwan and that Taiwan can therefore disarm.
He stated that he does not want an arms race with the PRC;
he wants to prevent war. He argued that by being ready for
war, Taiwan could have hope for a permanent peace. He
expressed his goal of seeking a permanent peace across the
Taiwan Strait and his plan to increase Taiwan's defense
expenditures to 3 percent of GDP.


7. (SBU) President Chen described in detail the timing of
the various weapons purchase proposals and their approval by
the U.S. government in order to emphasize that they were
originally put forward by the Kuomintang (Nationalist) Party
(KMT) administration that preceded Chen's Democratic
Progressive Party (DPP) administration. He commented that
the two major opposition parties had changed their positions
and currently opposed the Special Budget for various
political reasons that had changed over time. First, the
opposition parties looked for advantage in the December 2004
Legislative Yuan elections; then they sought Chinese
approval to smooth the way for the visits of Lien Chan and
James Soong to the PRC; and most recently, the Special
Budget had become an issue in the campaign for chairman of
the KMT. President Chen speculated that with the fading
influence of the "China fever" that ensued in Taiwan
following the Lien and Soong visits and following July's KMT
chairmanship election there would be an improved political
environment for passage of the Special Budget. He pledged
to push for the passage of the Special Budget in upcoming
television appearances and other planned media events.


8. (U) Congressman Kennedy's office has cleared this
message.

PAAL