MAC OFFICIAL DOWNPLAYS CROSS-STRAIT OPENING

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001728 SIPDIS SIPDIS DEPT FOR EAP/TC E.O. 12958: DECL: 05/17/2016 TAGS: ECON EAIR EINV PREL CH TW SUBJECT: MAC OFFICIAL DOWNPLAYS CROSS-STRAIT OPENING MEASURES REF: A. TAIPEI 8 ¶B. TAIPEI 980 ¶C. TAIPEI 1644 Classified By: AIT Deputy Director David J. Keegan, Reason 1.4 d ¶1. (C) Summary: Mainland Affairs Council Economic Division Director Fu Don-cheng told AIT on May 17 that recent cross- Strait economic liberalization measures were "small steps" and did not represent any change in policy. Further opening is unlikely before the Economic Sustainable Development Conference (ESDC) June 18-19. Taiwan and the PRC may be able to agree on holiday charter flights in time for the Mid-Autumn Festival in October. Despite Fu's dismissal, recent opening measures demonstrate that there will be an "effective opening" component to the "active management, effective opening" policy. The ESDC may give the Chen administration incentive and political cover for more substantial liberalization. End summary. Just "Small Steps" -------------- ¶2. (C) In a May 17 meeting with AIT/T, MAC Economic Division Director Fu Don-cheng disagreed with the notion that recent cross-Strait economic opening measures signaled a shift in the administration's policies. He characterized recent developments, including liberalization of investment restrictions on the semiconductors and flat- panel display industries, expansion of the mini-links, and the announcement of possible unilateral action on tourism, as "small steps." He described these recent measures as an integral part of President Chen's "active management, effective opening" policy announced on January 1 (ref A) and the natural next step after "active management" mechanisms were announced on March 22 (ref B). Fu also pointed out that recent liberalization measures had caused a backlash among some members of the ruling Democratic Progressive Party, suggesting that there might be some delay before additional opening measures are announced. More Progress Unlikely Before Conference -------------- ¶3. (C) According to Fu, further liberalization of cross- Strait economic restrictions will not occur before the ESDC scheduled for June 18-19 (ref C). "Globalization and Cross-Strait Relations" will be one of five major topics for the conference. Fu explained that MAC Chairman Joseph Wu will co-chair that session along with one private sector ;representative and one scholar or legislator. Fu noted that the 40 percent ceiling on investment in the Mainland will definitely be one of the items discussed. The conference will also provide guidance on additional measures to strengthen "active management" of cross-Strait relations. Charter Flights in the Fall -------------- ¶4. (C) Fu observed that there is not enough time to implement cross-Strait charter flights for the Dragon Boat Festival, which will fall on May 31. Cross-Strait industry-led discussions continue on an informal basis. Fu said that the two sides hope to put together a package of passenger charters for four major holidays: Lunar New Year (January-February),Tomb Sweeping Festival (April),Dragon Boat Festival (May-June) and Mid-Autumn Festival (October). Weekend passenger charters will take longer because they will be linked to further opening of Taiwan to Mainland tourists. Fu explained that Taiwan is still waiting for more information about the new organization that the PRC created to discuss tourism with a Taiwan industry organization. Once Taiwan fully understands the structure of the PRC organization, it will create a comparable organization to participate in the discussions. ¶5. (C) On May 16, Taipei Airlines Association Chairman Tony Fan also told AIT/T that the two sides were discussing charter services for the four major holidays. He said that TAIPEI 00001728 002 OF 002 he would participate in an informal meeting with his Mainland counterpart in the coming weeks to work out implementation details. Fang indicated that there might be progress on weekend charters and tourism in October or November. Direct Navigation Bill Only "Moral Significance" -------------- -------------- ¶6. (C) When asked about the potential impact of the Cross- Strait Direct Navigation Bill under consideration in the Legislative Yuan, Fu insisted it would not have any practical effect. He argued that even if passed, direct links will still require cross-Strait consultations. He said the bill only had "moral significance" (jingshen yiyi) for the KMT. MAC's Low-key Support for Standards Visit -------------- ¶7. (C) Fu confirmed that MAC had given special approval for the visit of PRC Vice Minister of Information Industry Jiao Yaoping but said that MAC had urged Sinocon Foundation, Jiao's Taiwan hosts, to keep the visit low profile. On discussion of information technology standards with Sinocon, Fu commented that MAC knows that the PRC's huge market for information technology is important to the interests of Taiwan industry. However, the Taiwan authorities want firms to maintain their competitiveness in international markets as well Comment - More Progress after ESDC -------------- ¶8. (C) Despite Fu's dismissal of recent developments as "small steps," the spate of new opening measures are important in their own right and also for demonstrating that there will be an "effective opening" component to the "active management, effective opening" policy. We may not see much more progress in the next several weeks as the Taiwan authorities prepare for the ESDC. However, the bipartisan conference may give the Chen administration both incentive and political cover to implement bolder, more extensive cross-Strait economic liberalization measures. End comment. YOUNG