C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002732

SIPDIS

DEPT FOR EAP/TC
COMMERCE FOR 4400/ITA/MAC/M-BMORGAN
PLEASE PASS AIT/W

E.O. 12958: DECL: 06/22/2015
TAGS: ECON ETRD EAIR PREL CH TW
SUBJECT: CROSS-STRAIT CONTACTS - INDUSTRY ORGANIZATIONS
STANDING BY

REF: A. TAIPEI 1091

B. TAIPEI 2243

C. TAIPEI 2565

D. BEIJING 9506

E. TAIPEI 2595

F. TAIPEI 2596

G. TAIPEI 2654

Classified By: AIT Director Douglas H. Paal, Reason 1.5 d

Summary
--------------


1. (C) On June 13, Taiwan Premier Frank Hsieh announced
that the Taipei Airlines Association (TAA) and the Taiwan
External Trade Development Council (TaiTRA) could lead
delegations on behalf of the Taiwan government in cross-
Strait negotiations on direct charter flights and fruit
trade, respectively. Taiwan has not yet identified an
organization to discuss tourism issues, but media
speculation has identified the Taiwan Visitors Association
(TVA) as a possible candidate. In discussions with AIT/T
the leaders of these three organizations indicated that
they have not yet been given specific instructions to
initiate discussions. However, each is prepared to act
when instructed. Despite some discouraging comments from
TAA's chairman, the two sides seem closest to negotiations
on charter flights. End Summary

Taipei Airlines Association
--------------


2. (C) Premier Frank Hsieh on June 13 designated the Taipei
Airlines Association as the Taiwan organization authorized
to lead discussions with the PRC on cross-Strait charter
flights. On June 20, TAA Chairman Tony C.C. Fan told AIT/T
that TAA was prepared to lead such discussions, but the
Taiwan government had not yet given TAA any instructions.
In addition, Fan had to cancel a previously scheduled
trip to the Mainland the same week, because, as Fan put it
"the timing was too sensitive." He said that to date,
TAA had not been contacted by PRC counterparts to arrange
discussions, nor had it been engaged in any sort of
informal contacts with PRC aviation authorities. Fan also
informed us that he had signed a non-disclosure agreement

regarding matters related cross-Strait charter negotiations
at the request of Taiwan's Mainland Affairs Council (MAC).


3. (SBU) As in an earlier discussion with AIT/T (reported
ref A), Fan is relatively pessimistic about prospects for
cross-Strait charter flights because of different
priorities on the two sides. He emphasized that cargo
flights are clearly the first priority of the Taiwan
government, which has indicated that it has not yet
received a clear enough response from the PRC on its
willingness to proceed with cargo discussions. Fan
reiterated that Taiwan airlines' interest in passenger
charters is not high because their flights are already
fully booked during holiday periods that some have proposed
for passenger charters. He also underscored cargo capacity
shortages among PRC carriers that limit PRC interest in
cargo charter flights.

Taiwan External Trade Development Council
--------------


4. (U) Premier Hsieh also designated the Taiwan External
Trade Development Council (TaiTRA) as the Taiwan
organization authorized to lead discussions with the PRC on
fruit export issues. However, according to press reports,
the KMT-controlled Taiwan Provincial Farmers Association
(TPFA) sent a delegation to Beijing on June 22 where it
discussed some fruit export issues with the PRC's Cross-
Strait Association on Trade Exchanges. MAC officials have
publicly warned the TPFA that its leaders could face heavy
fines and jail sentences of up to 5 years if found guilty
of negotiating an agreement with the PRC without proper
authorization. TPFA officials have indicated to the press
that TPFA would not sign any sort of agreement with PRC
counterparts.


5. (C) On June 21, TaiTRA President Chao Yuen-chuan told
AIT/T that his organization is also prepared to lead cross-
Strait discussions on behalf of Taiwan. He reported that
PRC authorities had indicated earlier the same day to
TaiTRA's Beijing representative that they would respond to
the proposal of fruit trade discussions with TaiTRA within
two weeks. Some observers have questioned whether Beijing
would accept TaiTRA as an interlocutor because of its
former semi-official status. Chao emphasized to AIT/T that
TaiTRA was a completely non-governmental organization and
that this issue should not prevent discussions.


6. (C) Chao said that TaiTRA had not yet received any
formal instructions from the government on how to proceed
with fruit export discussions. (Note: Although Chao may
not have received instructions, his boss TaiTRA Chairman
Hsu Chih-jen, who is a former classmate of President Chen,
told AIT/T Commercial Section chief that he had discussed
TaiTRA's role in this process with senior administration
officials. End note.) Nevertheless, Chao identified
certificates of quarantine and certificates of origin as
the two main issues that would need to be resolved by
cross-Strait discussions on Taiwan fruit exports to the
PRC. As a result, he expected that a representative from
Taiwan's Bureau of Animal and Plant Health Inspection and
Quarantine (BAPHIQ) would need to participate in the
negotiations. He also speculated that a MAC representative
would participate. (Note: The PRC already informally
recognizes BAPHIQ certification for Taiwan agricultural
goods. The PRC refused to permit MAC officials to
participate in the negotiations that took place in Macao in
January to discuss Lunar New Year charter flights. End
note.)


7. (C) Chao also downplayed the importance of Taiwan fruit
exports to the PRC. He pointed out that Taiwan exported
USD 3.5 billion worth of agricultural goods in 2004, but
fruit accounted for only USD 86 million and fresh fruit
only USD 35 million. Although the PRC proposal could
dramatically increase Taiwan's fruit direct exports to the
PRC, which amounted to only USD 895,000 last year, the
impact on Taiwan's overall agricultural trade would be
small, according to Chao. (Note: Chao's figures on fruit
exports to the PRC are significantly lower than data in a
Council of Agriculture and Ministry of Economic Affairs
report to the Legislative Yuan, reported ref B. However,
both figures are small compared to Taiwan's overall
agricultural exports. End note.)

Taiwan Visitors Association
--------------


8. (SBU) The Taiwan government has not yet identified an
industry organization that would be formally authorized to
represent Taiwan in cross-Strait negotiations on removing
restrictions on PRC tourist travel to Taiwan. One MAC
contact indicated that Taiwan was not yet ready to identify
an organization to discuss tourism, because the issue is
complicated by security and immigration concerns. In
addition to the semi-official Straits Exchange Foundation
(SEF), which is officially responsible for consular issues
related to Taiwan visitors to the PRC, two industry
organizations have been named in the press as possible
cross-Strait negotiators on tourism - the Taiwan Visitors
Association (TVA) and the Travel Agency Association of
Taiwan (TAAT). (Note: Ref C reported AIT/T conversation
with TAAT. End note.)


9. (C) In a July 16 meeting with AIT/T, TVA Chairman Chang
Shuo-lao argued that TVA is well qualified to lead cross-
Strait negotiations on tourism. Unlike TAAT, TVA
represents a broad range of tourism-related businesses,
including hotels, amusement parks, gift shops, and
transportation companies. He explained that TVA is a
private non-profit organization, but receives funding from
the Taiwan government's Tourism Bureau in addition to
member contributions. He said that TVA had already
established good relations with the PRC's China National
Tourism Administration. However, he indicated that TVA
would not lobby the government to represent Taiwan.
According to Chang, Taiwan officials have not formally
contacted TVA to discuss this matter.


10. (C) Chang also emphasized that the issues that would
need to be addressed in cross-Strait tourism discussions
were related to Taiwan sovereignty and security. He noted
that discussion of issues like identity verification,
traveler safety, and travel agency regulations would
require direct government involvement in the negotiations.
Chang believes that MAC and the PRC's Taiwan Affairs Office
will have to be directly involved in the discussions.


11. (C) Chang told us that he believed increased tourist
travel from the PRC could be a major benefit to Taiwan's
economy. He noted that only about half of the almost 3
million foreign visitors to Taiwan last year were true
tourists. The other visitors were traveling on business or
to visit family. He added that although domestic tourism
is high, it is concentrated on the weekends, leaving excess
capacity during the week. Chang said that he had recently
accompanied tourism-related businesses to visit MAC Vice
Chairman You Ying-lung and urge MAC to reduce restrictions
on PRC travel to Taiwan. A point they made to MAC was that
tourism businesses could not move to the Mainland like many
Taiwan factories had.

Comment - Charter Flights Most Promising
--------------


12. (C) Taiwan industry associations stand ready to
negotiate with PRC counterparts on cross-Strait economic
initiatives. Despite some discouraging comments from TAA's
Fan, the two sides seem closest to negotiations on charter
flights (as reported ref G), where negotiations for Lunar
New Year passenger charters in January, using the "Macao
model," set a clear precedence. Fan is also chairman of
one of Taiwan's most successful wireless and cable modem
manufacturers. He expressed frustration with the airline
industry in his meeting with AIT/T. His own enthusiasm for
cross-Strait charter flights may be low, but this will not
interfere with negotiations once Taiwan and PRC authorities
are ready. End comment.
PAAL