VICE PREMIER TSAI ON GPA AND FTA

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003972

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E.O. 12958: DECL: 11/26/2031
TAGS: PGOV TW WTO
SUBJECT: VICE PREMIER TSAI ON GPA AND FTA

REF: STATE 190265

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


1. Summary: Vice Premier Tsai Ing-wen said Taiwan is "not
ready to consider" having any footnote in its WTO GPA
accession language during a meeting with AIT DIR late on
November 24. She said that Taiwan was prepared to discuss a
bilateral GPA during AUSTR Stratford's visit next month. DIR
also relayed reftel talking points on outcomes of the APEC
Leaders' Meeting. End summary.

Taiwan Stand on Government Procurement Agreement
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2. (C) During a meeting with AIT DIR on November 24, Vice
Premier Tsai said Taiwan still wants a government procurement
agreement, but is "not ready to consider" having any footnote
language in its WTO GPA accession statement. She added that
Taiwan is prepared to discuss a bilateral procurement
agreement in the context of preparations for an FTA between
the United States and Taiwan. In response, DIR strongly
emphasized that the United States could not accept any
linkage between a bilateral GPA and FTA discussions. DIR
said that, at most, Tsai could use language that suggested a
bilateral GPA would, to some extent, improve the prospects
for consideration of an FTA. Tsai said the link to a
bilateral FTA would not be made public, but that she needed
to use that argument to address the concerns of those
interest groups opposed to opening Taiwan's government
procurement market to outside competition. She said Taiwan
was prepared to discuss a bilateral GPA with AUSTR Stratford
during his proposed December 18-19 visit to Taiwan.


3. (C) Note: local newspaper reports on November 22
criticized efforts to join the WTO GPA because "Taiwan's
market would be opened to all the other members of the GPA"
and complaining that Taiwan's procurement market was quite
small. End note. Comment: Since Taiwan's accession to the
WTO in 2002, officials have consistently stated its interest
and desire to join the WTO GPA. These news reports and
Tsai's comments about needing arguments to rebut opponents of

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joining the WTO GPA are the first examples we have seen of
Taiwan raising protectionist concerns in discussing the GPA.
End comment.

AmCham Speech Says it All
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4. (C) The Director highlighted some of the points he had
made in his November 21 speech to Amcham. He noted that in
the speech, in spite of PRC assertions that Taiwan could not
be a full member of any free trade arrangement, he had
clearly expressed U.S. support for full Taiwan membership in
a Free Trade Area of the Asia Pacific (FTAAP). The Director
said that while FTAAP was a long-term goal, there are other
short-term economic goals Taiwan and the United States should
pursue, including the GPA and bilateral investment and
taxation agreements. The Director noted that during the Q&A
session after the speech he had said the U.S. would not enter
into an FTA with Taiwan for political reasons. As he said in
the Amcham speech, an FTA with the United States cannot
eliminate Taiwan's need for closer ties with China. The U.S.
believes that as the PRC becomes more sophisticated in its
cross-Strait policies, Taiwan needs to become more creative
in its initiatives.

U.S. Has More Important Considerations
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5. (C) VP Tsai replied that Taiwan had plenty of solid
economic reasons for wanting an FTA with the United States,
but for the United States, she thought there were other, more
important considerations. If the United States wanted Taiwan
to remain an economically prosperous and democratic place,
she said it needed to do something to counter the growing PRC
influence in Taiwan. The VP said the current strong
opposition to the U.S. arms package was a reflection of the
extent of PRC influence in Taiwan. Tsai noted that China
refused to respond to Taiwan's requests for dialogue. She

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said Taiwan welcomes China as a trading partner, but did not
welcome its political agenda or its attempts to manipulate
Taiwan politics.

Possible Resignations After Election
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6. (C) The Director noted that USDOC U/S for International
Trade Frank Lavin was considering visiting Taiwan from Friday
December 8 thru Monday December 11. VP Tsai said she had no
problem with weekend meetings, and was free all day Saturday,
and in the morning on Sunday and Monday. She indicated
however, that if the December 9 mayoral election results were
unfavorable to the ruling party, the Premier and some cabinet
members might submit their resignations. She said the
Premier would definitely need to take some responsibility for
poor election results, but it was less likely that the
Ministers of Economics or Finance would need to submit their
resignations, and other cabinet officials fell somewhere in
between.

Agricultural Issues
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7. (C) The Director mentioned that USDA Deputy U/S Lambert
had held meetings in Taipei to discuss imports of U.S. beef.
He noted that the Minister of Health Hou Shen-mou told the
Director that the personal criticism leveled against him for
supporting science-based measures for evaluating the BSE risk
had led him to consider resigning his post. The Director
asked Tsai to do what she could to support the Health
Minister on this issue. The Director said he hoped to
arrange for someone from the USG at the U/S level to sit down
with Premier Su to discuss the Consultative Committee on
Agriculture (CCA) and other agricultural issues in a
"strategic" way. The Director said he belives that senior
visits should be used to push difficult issues forward.

Impressions of APEC
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8. (C) When the Director asked for her impressions of the
recently completed APEC Leaders' Meeting in Hanoi, VP Tsai
said she thought that APEC generally gave Taiwan good
opportunities to express its views.


9. (C) Comment: Tsai's rejection of footnote language and
linkage of a bilateral GPA to a bilateral FTA both underscore
the tremedous domestic poltical pressures at play on the
goernment today, even on economic issues. However, a
bilateral GPA agreement might actually serve U.S. commercial
interests better than WTO GPA accession, and Tsai committed
to no public use of arguments linking a bilateral GPA to an
FTA. End comment.
YOUNG