DIRECTOR'S INTRODUCTORY CALL ON MAINLAND AFFAIRS

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001139 SIPDIS SIPDIS E.O. 12958: DECL: 03/31/2016 TAGS: PGOV PREL ECON ETRD CH TW SUBJECT: DIRECTOR'S INTRODUCTORY CALL ON MAINLAND AFFAIRS COUNCIL CHAIRMAN JOSEPH WU, MARCH 30, 2006 REF: A. 2005 TAIPEI 4572 ¶B. TAIPEI 0980 ¶C. TAIPEI 1071 TAIPEI 00001139 001.2 OF 002 Classified By: AIT Director Stephen M. Young. Reason(s): 1.4 (B/D) ¶1. (C) Summary. Taiwan and the PRC will meet in early July to discuss direct cargo and passenger charter flights and increasing the number of PRC tourists visiting China, Mainland Affairs Council Chairman Joseph Wu told AIT Director Young on March 30. Wu described a deep sense of frustration among Taipei authorities over the actions by Beijing to constrict Taiwan's "international space" and their concern over the visit of Hu Jintao to Washington. End Summary. Next Steps -------------- ¶2. (C) Mainland Affairs Council (MAC) Chairman Joseph Wu (Chao-hsieh) told the Director in their meeting on March 30 that Taiwan and the PRC will meet in early July to discuss cargo and passenger charter flights and, perhaps, increasing the number of PRC tourists visiting Taiwan. Noting that the negotiations for this year's Lunar New Year cross-Strait charter flights had progressed quickly in November 2005 after the more complex cargo/passenger flight issue was taken off the table, Wu said he hoped the cargo/passenger flight issue could now be separately resolved. Taiwan's goal, he said, is year-round charter flights. ¶3. (C) On the issue of PRC tourists, Wu told the Director that Taiwan hopes to increase the number from 110,000 last year to 250,000 tourists, with a daily average eventually approaching 1,000. Taiwan originally proposed the tourist expansion in 2001, Wu explained, but the PRC did not respond until last November, when it dispatched a tourism delegation to Taiwan (see Ref A). After four months, however, Wu mused, Beijing has yet to follow up on that visit. ¶4. (C) Other than these two sets of issues, Wu told the Director, there are no cross-Strait negotiations of any kind underway. Turning Frustration to Advantage -------------- ¶5. (C) Wu described to the Director the deep sense of frustration among Taipei officials. On the one hand, the opposition parties are completely uncooperative on defense, cross-Strait and other issues. On the other hand, the PRC is spending "tons of money buying our diplomatic allies," blocking Taiwan participation and international organizations, and otherwise squeezing Taiwan's international space. The PRC is also sucking up the bulk of Taiwan's overseas investment, Wu stated, with nearly 70 percent of Taiwan overseas investment last year going to the PRC, rising to 85 percent in February, the most recent month for which statistics are available. The ruling Democratic Progressive Party's (DPP) election defeat in December 2005, Wu argued, had led Beijing to conclude that its divide-and-conquer tactics were succeeding and encouraged it to continue marginalizing Taiwan. ¶6. (C) The Director responded that he well understood Taiwan's frustration over Beijing's actions -- ignoring the democratically-elected leaders of Taiwan, relentless military build-up, unnecessary and provocative Anti-Secession Law, and united front tactics with the Pan-Blue opposition. The challenge, however, is for Taiwan to keep a cool head and not let frustration drive its actions. The worst thing would be to allow the PRC to drive a wedge between the U.S. and Taiwan, because U.S.-Taiwan friendship and cooperation are critical to regional peace and stability. ¶7. (C) The cross-Strait situation is not entirely one-sided, the Director stressed. There are many pressures for change and opening from within China. China, moreover, is a country encircled by vibrant and emerging democracies -- South Korea, TAIPEI 00001139 002.2 OF 002 Japan, Taiwan, Philippines, Malaysia, Thailand, India, Afghanistan and Kyrgystan. This reality, he suggested, argues against Taiwan succumbing to frustration and panic, and for patience, maintaining defense capabilities, and taking advantage of economic opportunities in the PRC. Taiwan also needs to more effectively play to its strengths by utilizing its impressive economic development and democratic political system to effectively enhance Taiwan's international space. Taipei should not limit itself to just competing with Beijing for diplomatic partners, which are actually not nearly as important as many in Taiwan seem to believe, as demonstrated by the continuing significance of South Korea, Japan, the U.S., and the UK long after formal diplomatic relations ended. ¶8. (C) Chairman Wu demurred, countering that while democracy was Taiwan's strong suit and while Taiwan appreciated President Bush's praise for Taiwan's democracy, domestic political realities constrain the government. As a democracy, Taiwan must recognize that Taiwan voters do, in fact, care about Taiwan's formal relations with other countries, as former Foreign Minister Mark Chen's replacement shortly after Senegal broke relations with Taiwan demonstrated. When President Chen came into office in 2000, Wu explained, he was determined to change Taiwan's diplomacy and to develop a positive foreign policy based on assisting other nations on health, agriculture, economic development, and democratization. During his own tenure as the president's Deputy Secretary-General in 2002-03, however, Wu told the Director that he had observed at close hand the deep emotional impact the loss of diplomatic relations had on President Chen, forcing him to shift his foreign policy focus back to maintaining and establishing diplomatic relations. While acknowleging all these realities, the Director said leadership is often defined in explaining unpleasant realities to the public. Meaning of Cross-Strait "Active Management" -------------- ¶9. (C) Urging Taiwan not to miss the economic opportunities offered across the Taiwan Strait in the PRC, the Director queried Wu on the concerns raised by the American Chamber of Commerce (Taipei) and other business groups over President Chen's "active management" policy (see Ref B). Would the new policy restrict cross-Strait commerce and end up hurting Taiwan by making it less competitive in the PRC market and economy? Will the new regulations have teeth or will they push Taiwan-based businesses to sneak investments or even leave Taiwan? Wu responded that "active management" would be implemented in tandem with "effective opening," and he pledged the former would be manifest through rational and transparent rules and regulations that would encourage investment. Other issues raised by AmCham, such as the need for direct cross-Strait flights, he argued, require bilateral negotiations between the governments of the two sides, which thus far Beijing has refused. Hu in Washington -------------- ¶10. (C) Chairman Wu told the Director that Taiwan is particularly concerned about the April Hu Jintao visit to Washington and whether President Bush will criticize Taiwan alongside Hu. The Director responded that the Hu visit was one of the reasons he wanted to meet with Wu and other senior Taiwan officials so soon after he arrived. It is important that Taiwan not act in ways that raise cross-Strait tensions, he continued, pointing to possible constitutional reforms that might threaten the status quo. While it is the democratic right of the Taiwan people to determine their own constitution, it is also the responsibility of leaders to help guide the choices in ways that do not heighten cross-Strait tensions and undermine Taiwan's security. The Director explained that the U.S. needs good relations with China on a whole range of international issues, and does not see relations with China and Taiwan as a zero-sum game. YOUNG