AIT CHAIRMAN BURGHARDT VISIT TO TAIWAN

C O N F I D E N T I A L SECTION 01 OF 04 TAIPEI 002006

SIPDIS

SIPDIS

STATE PASS USTR, STATE FOR EAP/TC

E.O. 12958: DECL: 06/12/2016
TAGS: ECON PGOV PREL TW
SUBJECT: AIT CHAIRMAN BURGHARDT VISIT TO TAIWAN


Classified By: Director Stephen M. Young, Reason(s): 1.4 (B/D).


1. (C) Summary and Introduction: From June 8-11, AIT Chairman
Burghardt visited Taiwan. This cable reports his meetings
with Taipei Mayor and KMT Chairman Ma Ying-jeou, KMT LY
President Wang Jin-pyng, prominent Taiwan academics, Foreign
Minister James Huang, AmCham business leaders, and Mainland
Affairs Council (MAC) Chairman Joseph Wu. Mayor Ma said a
growing KMT consensus makes progress on arms procurement a
possibility in September 2006, though Ma and Wang said PAC-II
upgrades and PAC-III purchases will have to wait until March

2007. For the good of Taiwan, Ma argued, the KMT should do
what it can to force President Chen out of office. Thinktank
academics expect the recall to force the DPP government to
moderate its cross-Strait policy, but are divided on whether
China will cooperate with a weakened Chen to improve
cross-Strait relations. FM Huang thanked the U.S. for its
"quick and positive" response to President Chen's affirmation
of the "four nos" and pledged stable cross-Strait relations
for the remainder of Chen's term. American business leaders
in Taiwan remain frustrated by endemic corruption and
political stalemate. MAC Chairman Wu expects regularized
cross-Strait charter flights to become a reality. End Summary
and Introduction.

Ma: Chen Recall Not Just Politics
--------------


2. (C) Taipei Mayor and KMT Chairman Ma Ying-jeou told AIT
Chairman Burghardt that the KMT began building its consensus
on the arms procurement issue in mid-April, and he advised
that within the KMT LY caucus, funding for the P-3Cs and
submarine exploratory study were no longer controversial,
even though Ma said PFP Chairman James Soong is working to
retard the growing Pan-Blue consensus. Ma ruled out the
purchase of the PAC-III missiles until the referendum-related
ban expires in March 2007, and noted that some Pan-Blues are
using the failed March 2004 referendum as a basis to object
even to the upgrade of existing PAC-IIs. Ma said he remains
optimistic that progress can be made this year but said it
would likely have to wait until September.


3. (C) Burghardt reminded Ma of the considerable time and
expense invested by the U.S. to prepare contingency plans for
Taiwan's defense, and urged Ma to help Taiwan bear an
increasing share of that burden. He added that, from the
U.S. perspective, it is becoming increasingly difficult to
justify that expense if Taiwan itself does not take the China
threat seriously. Last time the Pan-Blues used Chen's
tampering with the National Unification Council and
Guidelines (NUC/NUG) as an excuse to scuttle the arms bill,
said Burghardt, and the U.S. hopes that there will not be
another excuse to derail progress this time. Ma acknowledged
that Taiwan must bear its good-faith share of the defense
burden, and for this reason he had been pushing for consensus
within the KMT LY caucus.


4. (C) Ma justified his decision to support the recall
movement against President Chen, citing increasing public
opposition to Chen, and the incompetence and corruption of
his administration. Ma acknowledged the recall has little
chance of success, but said the KMT must do what it can to
pressure Chen to step down for the good of Taiwan. Burghardt
stated that the U.S. does not want to interfere in Taiwan's
internal affairs, but the recall movement against Chen, which
everyone acknowledged does not have the necessary LY votes,
seems designed to score political points, not to improve the
government's ability to manage Taiwan's affairs. Ma
responded that if he were solely focused on winning the
presidency in 2008, he would prefer to leave Chen in office.

TAIPEI 00002006 002 OF 004


But, since the corruption of the Chen administration is
"unprecedented in Taiwan's history," he had no choice but to
go forward with the recall.

KMT Caucus Rejects PAC-II Upgrade
--------------


5. (C) Burghardt discussed the legislative politics of the
defense budget and the effort to recall President Chen with
LY President Wang Jin-pyng. On the defense budget, Wang
echoed Ma's statement that there is a KMT consensus in favor
of the P3-C and submarine design. However, the KMT will
continue to block both the PAC III and the PAC II upgrade,
arguing that the 2004 referendum defeat precludes either
until after March 2007. Wang said that although he
personally supports the PAC II upgrade and believes it is not
legally precluded by the referendum, the KMT caucus
disagrees.


6. (C) Wang noted that public support for arms procurement is
slowly increasing. According to public opinion polls, Wang
said, voters are split 50-50 for/against, an improvement over
previous majorities which opposed arms purchases. He
attributed this change to KMT efforts to educate the public
about the Chinese military threat and to the fact that the
price of the arms package had dropped significantly.
Burghardt remarked that Washington would view any progress on
the arms procurement issue as an important breakthrough.


7. (C) On the recall, Wang said that it is entirely the
political creation of James Soong, who is using it to
increase his chances of winning the Taipei mayoral election.
Wang agreed, as have all those we have met, that the recall
has no chance of passing, but it will still give Soong a
stronger role in the Pan-Blue which is all he is seeking.

Recall Could Affect DPP, Cross-Strait
--------------


8. (C) With four prominent Taiwan academics, Burghardt
discussed the reactions of Taiwan political leaders to the
recall movement, and how cross-Strait relations may be
affected. Soochow University professor and polling expert
Emile Sheng remarked that, by promising publicly to respect
Taiwan's constitutional system and to rule out independence,
Vice President Annette Lu is trying to calm public anxiety
over the prospect of her becoming president. Sheng added
that Lu has no supporters within the DPP, and therefore must
draw support from outside the party, including KMT LY
President Wang Jin-pyng. President Chen, Premier Su, and DPP
Chairman Yu Shyi-kun have allied to oppose Lu. Former
President Lee Teng-hui is taking a "wait-and-see" approach
and, if convinced of Chen's guilt, will "fire the last shot"
which will effectively force Chen out.


9. (C) Sheng also opined that PFP Chairman James Soong may
opt out of the Taipei mayoral race to "legitimize" the recall
by silencing accusations he is using it only to boost his
mayoral chances. Soochow University professor Lo Chih-cheng
remarked that the DPP can only defend against the recall by
casting it as a political or ethnic issue; Sheng added that
the DPP, by choosing to stand by Chen instead of cutting him
out of the party, has bet the party's future on Chen's
credibility. If the KMT offers concrete evidence against
Chen or his wife, the party will then need years to win back
the public's trust.


10. (C) Professor Lo (a DPP stalwart) said cross-Strait
relations will remain stable despite, or perhaps because of,
President Chen's recent political setbacks. Chen has lost

TAIPEI 00002006 003 OF 004


his legitimacy and will remain a lame duck for the remainder
of his term, with insufficient political capital to push
controversial, sovereignty-related issues. Should Chen be
forced out, Premier Su would likely push for a moderate
cross-Strait policy to help his presidential chances in 2008.
Lo and Sheng disagreed on whether cross-Strait relations
could improve during the coming two years: Lo said China
will not help the weakened Chen or his successor by, for
example, agreeing to expand direct links. Moreover, if Ma is
elected in 2008, there will be "no presents left over for
(Ma's) honeymoon" if the PRC gives them to Chen or President
Lu. Sheng said China is thinking long-term, and wants to win
the hearts of the Taiwan people. If realizing direct flights
seems possible, then China will agree, even at the cost of
helping Chen or the DPP government.

Four Nos Will Ground Foreign Policy
--------------


11. (C) Burghardt opened the meeting with Foreign Minister
Huang by remarking that the general sense in Washington and
around the world is that cross-Strait relations are stable
and will remain so, as long as neither side becomes
complacent or acts to provoke crisis. President Chen helped
ensure future stability by his public re-affirmation of the
"four nos" on June 8, a decision which was very welcomed in
Washington. FM Huang conveyed President Chen's deep
appreciation for Washington's quick and positive response.


12. (C) Closely related to cross-Strait stability is the
question of constitutional reform, Burghardt continued.
Washington understands Taiwan's 1947 constitution gives rise
to practical problems, and requires structural reform.
Washington has told the PRC leadership to learn to
distinguish between pragmatic reforms which do not touch on
sovereignty and those that do. Burghardt urged FM Huang and
the DPP government to narrowly focus any constitutional
reform efforts on good governance.


13. (C) FM Huang said President Chen's affirmation of the
"four nos" would be the guiding principle for Taiwan
cross-Strait policy and international affairs for the next
two years, with an emphasis on stability. FM Huang added
that the embattled DPP government does not have the capacity
to raise controversial issues like sovereignty, national
territory, or national title. He promised that neither the
Executive Branch nor the DPP LY caucus would raise these
issues, and there would be no organized party campaign to
foster such discussion. However, since Taiwan is a
democracy, the government could not prevent "deep-green
fundamentalists" from voicing their opinions.


14. (C) FM Huang said Taiwan's top foreign policy priority
was to protect and improve relations with the United States,
through better communication, reduced misunderstanding, and
strengthened mutual trust. Huang said he was most
appreciative of the U.S.'s willingness to work closely with
Taiwan to resolve the NUC/NUG issue, preventing Beijing from
"driving a wedge" between the U.S. and Taiwan. Burghardt
responded that he hoped his remarks to the press earlier in
the day had driven a stake through the NUC/NUG issue for the
Taiwan media once and for all. Huang said Taiwan's second
foreign policy goal is to defend its diplomatic
relationships. FM Huang told Burghardt he is very concerned
about possible defections among Taiwan's diplomatic allies
and he is eager to have consultations with the U.S. on this
subject. Taiwan understands it is a small player in regional
affairs, but hopes to be a constructive partner of the U.S.
in the region.


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AmCham: Politics and Corruption Retard Progress
-------------- --


15. (U) AmCham members from the banking, finance, chemical,
transport, and military technology industries met with AIT
Chairman Burghardt June 9. AmCham participants agreed that
Taiwan's government was increasingly ineffective. The
inability of political parties to reach acceptable
compromises and recurring examples of deeply entrenched
corruption combine to restrain Taiwan's economic progress and
ultimately threaten Taiwan's security. Impending regulations
adopting European standards for auto parts manufacturers are
symptomatic of a government bent on directing the economy
without consultation with industry. Financial reforms,
including the creation of the Financial Supervisory
Commission (FSC),have not resolved problems. Burghardt
acknowledged the AmCham's gloomy outlook and briefed
participants on his key messages to Taiwan government
officials.

MAC: Charter Flights Are Delayed, But Will Arrive
-------------- --------------


16. (C) MAC Chairman Joseph Wu said that on May 24, Taiwan
and the PRC reached agreement on a "small package" of
passenger charter flights and special "ad hoc" cargo charter
flights. This agreement was to be made public by joint
announcement within a few days. The Chinese, possibly
waiting to see what happens to President Chen, have stalled.
Wu says he remains optimistic that the announcement and
charter flights package will go forward, as long as the PRC
delay is not motivated by Taiwan's internal political
problems.


17. (C) Burghardt asked Wu for an update of the relations
between the Straits Exchange Foundation (SEF) and the
Association for Relations Across the Strait (ARATS). Wu
explained that while policy contact has been completely
stopped for years, SEF continues to perform a variety of
"consular-type" services for the large Taiwanese community
living in the Mainland.
YOUNG