PAN-BLUES RETURN TO BEIJING TO CONTINUE PRODUCE

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002968

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 07/08/2015
TAGS: PGOV TW
SUBJECT: PAN-BLUES RETURN TO BEIJING TO CONTINUE PRODUCE
EXPORT TALKS


Classified By: AIT Dep. Director David J. Keegan, Reason(s): 1.4 (B/D).


1. (C) Summary: On July 7, a joint delegation of KMT and PFP
representatives began a two-day trip to Beijing to continue
talks aimed at allowing Taiwan fruit growers to export
duty-free into the PRC market. The PRC continues to snub the
official Taiwan government entity responsible for negotiating
fruit export issues, the Taiwan External Trade Development
Council (TAITRA),choosing instead to contact Pan-Blue
interlocutors. On July 6, The Mainland Affairs Council (MAC)
rejected a Pan-Blue invitation to send a government
representative with the delegation, and reiterated that any
trade agreements reached with the PRC would be invalid
without explicit government approval. KMT contacts told AIT
that although the details of a duty-free agreement were
reached in late June, because the PRC has not yet announced
its terms, the KMT requested another visit in order to
persuade Beijing to go public as soon as possible. KMT
leadership is hopeful that by delivering a duty-free export
agreement to Taiwan's fruit growers, they will be able to
weaken support for President Chen Shui-bian among Taiwan's
central and southern agricultural communities. DPP sources
told AIT their candidates may suffer at the polls this
December as a result of a KMT public-relations coup over any
export deal, but in the long term, KMT cooperation with the
PRC will hurt their presidential candidate in 2008. End
Summary.

Duty-Free Exports: A Means to an End
--------------


2. (C) In early May, after Lien Chan returned from the
Mainland, PRC Taiwan Affairs Office director Chen Yun-lin
announced that the PRC would give Taiwan a pair of pandas,
loosen restrictions on PRC tourism to Taiwan, and allow
Taiwan fruit to enter the Chinese market duty-free. KMT
Spokesman and KMT Central Committee Mainland Affairs
Department Director Chang Jung-kung told AIT that the fruit
export issue was very important to KMT Chairman Lien Chan,
and that since May, the KMT sent at least two teams of
negotiators to China to iron out the export agreement
details. Press reports state that by late June, during an
unannounced visit by the Pan-Blue controlled Taiwan
Provincial Farmers Association (TPFA),an agreement had been
reached regarding all technical details for the export of
Taiwan fruit to China, including quarantine and country of
origin certification matters. Despite this agreement, to
date the PRC has not formally announced the terms of the
duty-free program. According to Chang, the PRC invited the
TPFA delegation to return for additional talks after KMT
leadership made it known it would like to continue
discussions. Chang said the goal of the July 7 trip is to
persuade the PRC to make the terms of the duty-free
arrangement public, which he expects Beijing to do two or
three days after the delegation returns to Taiwan.


3. (C) As originally announced on July 4, this trip would
have been TPFA's second visit to the mainland to discuss
fruit export issues. Chang explained that in order to reduce
the chance of being criticized by the Chen government for
conducting unauthorized negotiations, KMT leadership decided
on July 5 to have KMT and PFP representatives visit Beijing
in their individual capacities, and not under the TFPA
banner. PFP legislator Vincent Chang (Hsien-yao),Director
of the PFP Central Policy Committee, who was originally
slated to participate in the July 7 visit, told AIT the
reason TPFA was removed from the visit was because their
leadership and KMT leadership both wanted to control the
potentially lucrative duty-free export benefit. The KMT won
this battle, and forced the TPFA out. KMT Spokesman Chang
also noted that although PFP Deputy Legislative Speaker Chung
Jung-chi was originally named as part of the delegation,
after discussions with the PFP, he was later removed to avoid
the appearance of high-level official government involvement.


4. (C) The KMT's Chang said there are three reasons why the
PRC has thus far refused to conduct trade negotiations with
TAITRA: 1) TAITRA's full Chinese name includes the phrase
"Republic of China," and Hu wants to avoid conducting talks
that could be construed as "state to state" level discussions
with the Taiwan government; 2) TAITRA's chairman is a close
personal friend of President Chen Shui-bian, and Hu is eager
to avoid the appearance of close contact between himself and
Chen; and 3) Hu prefers to work with Taiwan through civil,
non-governmental groups.


5. (C) Chang, who participated in Lien's discussions with Hu
Jintao in April, said that for the past two years, Hu was
under enormous public pressure to "resolve the Taiwan
problem." Following Lien's visit, popular opinion toward
Taiwan improved dramatically, easing that pressure. Chang
said that Hu again believes that Taiwan reunification is a
real, if distant possibility, and that Hu's strategy is to
avoid military conflict at least until the Shanghai Expo is
held in 2010. Chang explained the current KMT strategy is to
avoid conflict with Beijing, while extracting as many
economic and other benefits as possible from the PRC's
newfound willingness to cooperate. Chang said that if
duty-free fruit exports do go forward, he is not afraid of
any kind of "tit-for-tat" from Beijing; i.e. demanding access
to Taiwan's produce or other markets. Chang explained that
Hu wants to deprive President Chen of any reason to criticize
the PRC or its motives, and is far too clever to hand Chen
such a large club.


6. (C) Chang admitted that the fruit export negotiations were
begun in hopes of weakening support for Chen Shui-bian among
his traditional power base: agricultural communities in
central and southern Taiwan. If the KMT can deliver a
duty-free agreement, Chang explained, President Chen will be
put in the uncomfortable position of having to reject it as
an unauthorized, extra-governmental accord, denying farmers
potentially valuable access to Mainland markets and
alienating the farmers in the process, or acceding to the
agreement, thereby handing a political victory to the
Pan-Blue camp. Chang said the KMT hopes that the PRC will
expedite the opening of its markets in order to boost KMT
prospects in the year-end local elections.

DPP Sees Short-Term KMT Gain, But Long Term Loss
-------------- ---


7. (C) On July 6, a delegation of six KMT and PFP
legislators, led by Executive Director of the KMT Central
Policy Committee Tseng Yung-chuan, extended an invitation to
the Mainland Affairs Council (MAC) to include its own
representatives in the July 7 visit to Beijing. (Note:
Beijing had earlier stated it would not oppose the
participation of a government representative. End note.) The
invitation was declined. Press reports quote MAC
Vice-Chairman You Ying-lung reiterating the government's
position that TAITRA is the only institution authorized to
discuss trade-related issues with the PRC. MAC Chairman
Joseph Wu later told the Taiwan press that in conducting
trade discussions with the TPFA and not TAITRA, China's
intention was to undermine the authority of the Chen
government. Wu added that by inviting MAC to participate in
the visit, the KMT was hoping to get the government's
endorsement, and to "enhance the importance" of the trip. Wu
urged opposition parties to cooperate with the ruling DPP to
make China respect the authority of the Taiwan. government.


8. (C) The Director of the DPP's Chinese Affairs Department
Dong Li-wen told AIT that the Chen government does not oppose
produce exports to China, but must insist that all trade
negotiations be conducted through the designated government
agency. If Beijing is unwilling to work through Taiwan's
elected government, the problem lies with Beijing, and not
President Chen. Dong argued that since the value of Taiwan's
fruit exports to the mainland is small, the real importance
of the fruit export issue is not economic, but political.
(Note: AIT concurs that the economic impact any duty-free
export program will be minor. End note.) The Chen government
considers it to be part of a larger PRC strategy to use the
KMT's desire to weaken President Chen to drive a wedge
between the DPP and KMT, making cooperation between them
impossible, thereby precluding Taiwan from forming a coherent
response to China.


9. (C) Dong said the KMT played the China card hoping to
score political gains against the DPP, but the first round
ended up a tie. Dong explained that although the popularity
of Lien and the KMT rose dramatically after Lien's visit to
the PRC, the KMT did poorly during the subsequent National
Assembly election, in which the DPP won the majority of
seats. Dong conceded the KMT strategy to lure farmers away
from the DPP might work in the short term, causing DPP
candidates to suffer during the year-end local elections, but
he remains confident that the KMT's overt cooperation with
the PRC will hurt them badly come the 2008 presidential
election. Dong told AIT that Beijing's policy toward Taiwan
has not changed -- it will not recognize Taiwan as a
sovereign, independent country, it works actively to
frustrate Taiwan's international relationships, and it
continues to threaten Taiwan militarily. Dong believes that
in cooperating so closely with the PRC, the KMT has made
itself vulnerable to claims that it too supports opposing
Taiwan independence by force -- an insurmountable black mark
for any presidential candidate.


10. (C) Comment: The KMT seems to lack a clear vision of
where they want Taiwan's relationship with the Mainland to be
twenty years from now. In response to a pointed question
regarding the KMT's long-term vision for Taiwan, KMT
Spokesman and Central Committee Mainland Affairs Department
Director Chang was unwilling or unable to say whether the KMT
wanted an economically integrated but politically separate
Taiwan, complete economic and political unification with the
mainland, or something in between. Chang said the KMT is now
focused solely on doing whatever it takes to restore itself
to power. The DPP is taking much the same approach,
subordinating vision to the need for short-term political
victories. End Comment.
KEEGAN