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

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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

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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

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Ma Ying-jeou as PRC "fellow travelers."
YOUNG