LIEN-HU MEETING STIRS UP TAIWAN'S CROSS-STRAIT

C O N F I D E N T I A L SECTION 01 OF 04 TAIPEI 001341 SIPDIS SIPDIS E.O. 12958: DECL: 04/17/2016 TAGS: PREL PGOV TW SUBJECT: LIEN-HU MEETING STIRS UP TAIWAN'S CROSS-STRAIT POLITICS REF: TAIPEI 1261 Classified By: Director Stephen M. Young, Reason(s): 1.4 (B/D). ¶1. (C) Summary. The KMT-CCP economic forum closed with the PRC's announcement of fifteen measures to unilaterally expand agriculture, tourism, and education links between China and Taiwan. DPP critics say the measures are simply "united front" tactics to weaken President Chen Shui-bian and deepen Taiwan's domestic political divide. Former KMT Chairman Lien Chan's visit to Beijing challenged Chen's government, which reacted first by lambasting the visit as "evil" and then sought to one-up Lien. Lien's second successful visit to China may heighten his profile and strengthen his clout within the KMT, but KMT insiders say Lien is focused on building his legacy, not competing with KMT Chairman Ma Ying-jeou for control of the party. The upshot is that this second Lien visit appears to have stimulated competition between the ruling DPP and the opposition KMT. Each side seems to be seeking to demonstrate their ability to handle cross-Strait relations, both to ensure stability and to appeal to critical swing constituencies that have not benefited thus far from cross-Strait economic links. In the longer term it may help the DPP portray the KMT -- and thereby Ma Ying-jeou -- as PRC "fellow travelers." End Summary. MAC's Attempt To Get Ahead of Lien-Hu Meeting -------------- ¶2. (C) The Chen government was already under pressure for its heavy-handed cross-Strait policy from discontented elements within the ruling DPP, particularly from the strong New Tide faction (reftel). The participation of more than fifty prominent Taiwan business leaders, many long-time DPP supporters, representing firms that reportedly account for approximately half of Taiwan's GDP, brought the challenge close to home. The DPP government first sought to beat the KMT to the punch. On April 13, the day before Lien departed for China, MAC Chairman Wu told PFP legislators that Taiwan wants to reach an agreement with the PRC within six months on regular non-stop passenger and cargo charter flights and on allowing PRC tourists to visit Taiwan. This time, however, Wu went beyond the formulaic statement to announce that if an agreement could not be reached, Taipei might unilaterally lift remaining restrictions on tourism, as preliminary steps toward routine charter flights, thus abandoning Taipei's long-standing insistence on formal cross-Strait negotiations. Wu also suggested that the lunar new year flight model could be extended to other holidays and even weekends and that Taipei's ultimate goals is of daily charter flights. (Comment: This would likely mean working through the civil airline associations that represented the two sides in the successful new year negotiations. End Comment.) Lo Chih-cheng, Executive Director of the green-leaning Institute for National Policy Research (INPR),told AIT that these measures had been under discussion for some time within the Chen government, but the Lien trip had "prompted the government to put them on the table earlier than expected." PRC Announces 15 Economic Initiatives -------------- ¶3. (C) At the closing ceremony of the KMT-CCP meetings, TAO Director Chen Yunlin announced a set of fifteen unilateral economic initiatives that the PRC would implement. The most important initiatives focused on cross-Strait tourism and agricultural trade. Chen announced that the PRC would issue regulations allowing PRC tourists to travel to Taiwan. According to media reports, three different PRC agencies the following day jointly released the Procedures for the Management of Mainland Resident Traveling to the Taiwan Region. Many observers in Taiwan had expected the PRC to announce that it would unilaterally lift its restrictions on tourism to Taiwan. MAC Vice Chairman Liu Te-shun commented to AIT April 17 that the PRC announcement falls short of completely lifting restrictions. He pointed out that Taiwan has not yet been added to the PRC's list of approved tourism destinations. He also noted that some countries, Canada in particular, have been added to the approved list but have not TAIPEI 00001341 002 OF 004 seen significant numbers of PRC tourists because other restrictions remained in place. ¶4. (C) TAO's Chen announced a total of six different initiatives aimed at increasing Taiwan agricultural exports to the PRC and enhancing opportunities for Taiwan farmers and agribusinesses to invest there. As with the previous round of fruit import initiatives announced by the PRC after Lien Chan's April 2005 visit to Beijing, these measures will have only a very small impact on the overall Taiwan economy or even its overall export performance. Exports to the PRC accounted for only 0.09 percent of Taiwan's total agricultural production in 2005 and a much smaller fraction of Taiwan's total exports. However, the initiatives may benefit farmers in southern Taiwan who in the past have been strong supporters of the ruling DPP government. MAC's Liu told AIT that the two sides still have many issues to resolve on agricultural trade that should be addressed in bilateral consultations or through the WTO. These problems include the transfer of Taiwan agricultural technology to the PRC, PRC fruit that is falsely labeled as grown in Taiwan, and unclear quarantine procedures. ¶5. (C) Some Pan-Blues are wondering why PRC President Hu Jintao did not include a mention of direct cross-Strait cargo links in his list of fifteen proposals to improve cross-Strait relations. People First Party legislator and James Soong adviser Daniel Hwang told AIT said he was surprised Hu Jintao did not include a timetable for establishing cross-Strait cargo flights in his 15-point package of agricultural, travel and medical services proposals. Hwang said Hu must have known that direct cross-Strait cargo links are the top priority of the 50-plus Taiwan business leaders who accompanied Lien to Beijing. ¶6. (C) According to Hwang, Hu could simply have affirmed his April 2005 commitment to PFP Chairman Soong to have direct cargo flights in place by the end of 2006. By doing so, Hu could have earned the gratitude of Taiwan's business community. Hwang said it is possible that Hu's advisers thought it beneath the President to restate earlier commitments, or that Hu wanted to limit his 15-point package to items that the PRC could deliver unilaterally. KMT Legislator Joanna Lei, who accompanied Lien to Beijing, said cross-Strait cargo flights were omitted because the airline industry on both sides of the Strait knows little progress is possible with the DPP government in power. The decision has been made, said Lei, to pursue incremental gains using the Macao model; i.e. more regular flights into more airports. Taiwan Government Response -------------- ¶7. (C) The DPP government wasted no time in launching a series of broadsides attacking the Lien visit. They attacked the PRC for its "united front" strategy of dividing Taiwan politically by cozying up to the opposition Pan-Blue and weakening the ruling DPP by siphoning off its supporters, notably farmers and fishermen. President Chen charged that the KMT-CCP Economic Forum and the Lien-Hu meeting were just a cover for China's malicious intentions. Vice President Lu lambasted Lien for criticizing, rather than standing up for, Taiwan during his Beijing visit. Premier Su Tseng-chang urged Lien Chan to respect the elected government during his negotiations and urged Taiwan businessmen to look elsewhere, particularly India, for economic partners to prevent Taiwan dependence on the PRC. MAC charged that China has been playing a two-handed strategy of advocating peaceful cross-Strait relations while refusing to resume cross-Strait negotiations, and it added that Hu Jintao had refused to endorse the "one China with two definitions" formulation that the KMT had long touted. ¶8. (C) The Chen government has modulated its stance in response to the heavy press coverage of the Lien visit. INPR's Lo told AIT that the (successful) Lien trip and the highly-publicized Hu-Lien meeting "made it difficult" for the Chen government to respond wholly negatively. The government, he said, must not be left out of the movement and will have to find ways to benefit farmers and business. The TAIPEI 00001341 003 OF 004 MAC, however, did cautiously welcome Beijing's April 16 announcement of "Regulations for Chinese Tourists to Taiwan" even though noting this was four and a half years late. ¶9. (C) DPP Chairman Yu Shyi-kun said the KMT and CCP clearly did not reach consensus on "one China with two definitions," since Hu Jintao failed to accept the principle in public. Yu urged the KMT not to mention the principle any more because it will only cause disputes on the island and across the Strait. The DPP legislative caucus charged the Hu-Lien agreements were an illusion with annexation as China's intention. Some DPP legislators, however, suggested a more open-minded attitude toward the forum. DPP legislator and New Tide faction leader Hung Chi-chang said the forum might serve as a "window of the opportunity" across the Strait. Fellow New Tide legislator Lee Wen-chung suggested that since the KMT had found a way to negotiate with China, the DPP should let it serve as an authorized mechanism for negotiation with China. As long as the agreements are beneficial to the people the government should acknowledge and accept the results. Lien A Threat To Ma? -------------- ¶10. (C) Lien's warm welcome in Beijing and Hu's willingness to cooperate with him came as a surprise to People First Party legislator Daniel Hwang (Yih-jiau),who said he had heard rumors that some within the PRC leadership view Lien as "the guest who comes too often and asks too much." The fact is, said Hwang, Lien attracted Taiwan's most powerful business leaders and dozens of KMT legislators to his delegation, demonstrating to the PRC, Taiwan, and the overseas Chinese community that he still has considerable political influence in Taiwan. Lien may not be charismatic, said Hwang, but he has proven himself among Taiwan's politicians to be the one most capable of leading on cross-Strait issues. Hwang added that Ma Ying-jeou does not control Lien, and that both men remain ambivalent about each other. ¶11. (C) KMT Legislator Joanna Lei said Lien's accomplishments in the Mainland are consistent with Ma's stated position, which is to maximize the benefits of cross-Strait trade for the people of Taiwan. Lei said Ma has made the decision to let Lien manage cross-Strait relations until January 2007, when Ma will step down as Taipei Mayor. Ma is busy enough integrating the rest of the KMT under his leadership, said Lei, and he is satisfied with Lien's cross-Strait management thus far. Lei opined that this arrangement is possible because Lien is not "competing" with Ma, but rather is focused on maximizing his "legacy." Comment: A Mixed And Divisive Legacy -------------- ¶12. (C) The PRC package is aimed at stakeholders in Taiwan's domestic economy, namely farmers, fishermen and the service industry, who have traditionally supported the DPP but have not generally benefited from the rapid growth in cross-Strait trade and investment. It is consistent with the PRC's "united front" tactics aimed at isolating the Chen administration. After Lien Chan's first visit to the PRC, the Chen administration went into a defensive posture that saw little movement on cross-Strait economic initiatives. However, with MAC Chairman Joseph Wu's announcement last week on charter flights and tourism, it appears that Taiwan may prepared to move forward on these issues perhaps pushed by the latest round of KMT-CCP meetings. ¶13. (C) The Lien visit to Beijing is having two impacts. First, it has put a great deal of pressure on President Chen to show that he can deal with cross-Strait relations in a positive way. This is creating a kind of competitiveness to demonstrate capability of handling cross-Strait relations. Second, with Lien outshining Ma on cross-Strait affairs, the possibility of tensions within the KMT between Chairman Ma Ying-jeou and the Lien Chan-Wang Jin-pyng camp has increased. In the longer term, as the 2008 presidential election approaches, it may help the DPP portray the KMT and thereby TAIPEI 00001341 004 OF 004 Ma Ying-jeou as PRC "fellow travelers." YOUNG