ECON VIEW OF TAIWAN FUTURE/U.S. INTERESTS, PART II

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000895

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/17/2031
TAGS: ECON PINR PREL TW JP
SUBJECT: ECON VIEW OF TAIWAN FUTURE/U.S. INTERESTS, PART II

REF: TAIPEI 774

Classified By: AIT Acting Director David Keegan,
Reasons: 1.4 (b/d)


1. (C) Summary: Taiwan Minister-without-portfolio Ho
Mei-yueh expressed economic-strategic views emphasizing
China's threat to traditional U.S. allies in East Asia during
a recent meeting with AIT Acting Director. (Part I, reftel,
discussed Ho's use of strategic arguments to support a
U.S.-Taiwan FTA. Septel will further discuss Taiwan's FTA
views.) While we do not share her views, we believe they are
widely held by top officials of the Chen Administration, and
reflect a growing frustration by these top officials over
their limited ability to slow or control Taiwan's economic
integration into China. End summary.

Pan-Green Favors Japan Over China
--------------


2. (C) Minister Ho argued that the United States needs
Taiwan to bolster its strategic defense in the western
Pacific, a view based on a Pan-Green adversarial view of
cross-Strait economic as well as political relations.
Right-leaning scholars from Japan at this year's
U.S.-Japan-Taiwan trilateral strategic dialogue held in
Taipei in January, however, did warn that a Taiwan tilt
towards China would create serious strategic vulnerabilities
for Japan.


3. (C) Attitudes in Taiwan towards Japan and China generally
reflect political attitudes (Pan-Green being pro-Japan and
anti-China, Pan-Blue being pro-China and anti-Japan.)
Pan-Green Taiwan scholars explain that the foundations of
Taiwan's social, political, and economic achievements were
laid during the fifty years of Japanese rule 1895-1945,
during which Taiwan achieved far higher levels of health and
education than existed even on the coastal provinces of
China. Many Japanese, in turn, view Taiwan favorably for
historical reasons and because of shared values such as
democracy and rule of law, and many Japanese companies
partner with Taiwan companies for operations in China.


4. (C) PRC scholars are also aware of the Pan-Green's
affinity for Japan. A recent article by Liu Jianfei of the
PRC Central Party School's Institute of Strategic Studies
describes "Taiwan independence forces" and "Japanese
rightists" as the major sources of trouble for East Asian
peace and stability. He urges the world to be wary of these
two "evil forces" forming an alliance.

Rapid Economic Integration
--------------


5. (C) Chunghua Institute of Economic Research (CIER)
President Ke Chen-en recently emphasized in conversations
with AIT that the cross-Strait status quo is not static, but
dynamic: the two economies are rapidly integrating.
Economists and analysts have long urged removing barriers
(i.e., implementing the three links) to cross-Strait trade
and investment precisely in order to preserve Taiwan's
prosperity and prevent its "economic marginalization." Ho's
sees an inevitable Taiwan "tilt towards China," leading her
to worry that economic integration will not lead to conflict
between China and Taiwan, but to political accommodation and
common interests. Some in the Pan Blue opposition argue that
such trends will render the military balance irrelevant.
Pan-Green supporters like Ho seek a separate identity for
Taiwan therefore resist the integration trend. Minister Ho
told AIT that Taiwan is reluctant to lift restrictions on
cross-Strait trade and investment because of fear this would
increase China's influence over Taiwan.

Impact on Region
--------------


6. (C) Minister Ho intended her warning to AIT that
Taiwan-PRC economic integration could bring strategic
instability to refer to the larger East Asia region, not just
to the cross-Strait situation. A Taiwan "tilt" towards China

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would threaten not only Japan's sea lanes, but also Japan's
territorial claims. While Taiwan makes roughly the same
claims as the PRC in the South and East China Seas, it uses a
different rationale, and does not discuss or coordinate
claims with the PRC. Taiwan political accommodation with the
PRC would, at a minimum, allow Taiwan and the PRC to
coordinate strategic territorial claims, including those in
dispute with Japan, Vietnam, the Philippines, and Malaysia.


7. (C) A recent article in a PRC Ministry of Foreign Affairs
journal noted that Taiwan is of much higher strategic value
to Japan than to the United States. Cross-Strait
reunification, the article argued, would place China in a
much more favorable position in its disputes with Japan over
access to resources in disputed territories in the East China
Sea and around the Diaoyutai Islands.

Danger and Frustration
--------------


8. (C) There is a danger in Minister Ho's view that the
current trend of rapid Taiwan-PRC economic integration will
inevitably lead Taiwan to tilt towards China. If President
Chen believes current trends inevitably lead to political
accommodation with China, he may conclude that he must act
soon to secure Taiwan's current degree of separateness from
China. This may be already happening. Several local
contacts have attributed President Chen's New Year's remarks
on implementing "active control" over economic relations with
China to his "frustration" over the current trend.

Comment
--------------


9. (C) The Pan-Green view that Taiwan-PRC economic
integration is a threat to U.S. strategic interests reflects
a Pan-Green ideological view of the region through Pan-Green
Taiwan lenses. We do not know how Japan will respond to
these Pan-Green arguments.
KEEGAN