MEDIA REACTION: U.S.-ROK FREE TRADE AGREEMENT,

UNCLAS AIT TAIPEI 000777

SIPDIS

SIPDIS

DEPARTMENT FOR INR/R/MR, EAP/TC, EAP/PA, EAP/PD - LLOYD NEIGHBORS
DEPARTMENT PASS AIT/WASHINGTON

E.O. 12958: N/A
TAGS: OPRC KMDR KPAO TW
SUBJECT: MEDIA REACTION: U.S.-ROK FREE TRADE AGREEMENT,
U.S.-CHINA-TAIWAN RELATIONS



1. Summary: Taiwan's major Chinese-language dailies focused news
coverage April 7-9 on the suspicion that China's "Internet army" may
have hacked into home computers of senior officials from Taiwan's
University of National Defense, planted a Trojan Horse virus, and
gained access to classified information, including the Yushan war
game, the Hankuang no. 23 military exercise and the Posheng project.
Another focus of news coverage was on a villa of the late President
Chiang Kai-shek on Yangmingshan that was burnt to the ground on
Saturday morning, apparently by arson and allegedly by pan-Green
supporters who were influenced by President Chen Shui-bian's
campaign to uproot Chiang's legacy.


2. In terms of editorials and commentaries, an editorial in the
pro-independence, English-language "Taipei Times" said that the
U.S.-ROK Free Trade Agreement surely will have a negative impact on
Taiwan's economy and called upon Taiwan manufacturers to enhance
their competitiveness and quality. An editorial in the
pro-unification, English-language "China Post" said that TECRO
Chief-designate Joseph Wu's wish actively to lobby the U.S.
government to treat Taiwan 'fairly and equally' will not help the
opening of cross-Strait direct transportation links, since Taiwan
cannot avoid responsibility for the lack of trust and bad atmosphere
that has stymied the chances for talks under President Chen's
administration. End summary.


3. U.S.-ROK Free Trade Agreement

The pro-independence, English-language "Taipei Times" [circulation:
30,000] editorialized that (04/08):

"It would be difficult to overstate the likely impact on Taiwan of
last week's free-trade agreement (FTA) between South Korea and the
US, because South Korea and Taiwan produce many similar products and
are rivals in key industrial sectors.

"But the strange thing is that few -- especially in the media -- saw
the issue as being as serious as trade officials and analysts did.
Most daily newspapers last week displayed such an indifference to
the trade pact [that] it was as though it had never happened.
Instead, these newspapers were reporting on the campaign activities
of the potential candidates for next year's presidential election,
the proposals to allow auto and horse racing and politicians
bickering over issues of ethnicity.

"On the bright side, the South Korea-US trade pact could encourage
the US to develop more bilateral free-trade agreements in the
region, as countries fear they may fall behind in the race to cut
trade barriers.

"Most importantly, though, if the pact is ratified by lawmakers in
both countries, South Korean companies will receive advantageous
access to the US market, which would in turn put many Taiwanese
firms at a potential disadvantage. In other words, it would not only
make South Korea's economy more competitive but also result in US
trade being lost by Taiwan and gained by South Korea.

"Based on a study conducted by the Chung Hua Institute for Economic
Research, approximately US$2 billion worth of goods are shipped to
the US from Taiwan each year, goods that could be replaced by those
from South Korea.

"Those US$2 billion goods are likely to be shipped from South Korea
once the lower, or zero, tariffs agreed in the FTA take effect. That
would represent a potential loss of approximately 5 percent of
Taiwan's annual shipments to the US, or 0.5 percent of the nation's
GDP growth.

"Some economists have warned that a South Korea-US deal would
negatively impact on Taiwanese firms, particularly those in
traditional manufacturing sectors such as textiles, automobiles,
bicycles and shoes, and urged the government to accelerate its own
trade talks with Washington. Others believe that Taiwanese
manufacturers would be able to survive the South Korean competition
as they have shifted production offshore to retain a price
advantage.

"The South Korea-US trade deal is likely to increase the pressure on
other Asian countries to seek similar pacts, and, as long as
Taiwan's economy is heavily export-oriented, it also needs to
negotiate similar pacts with its trading partners.

"It is lamentable that the 'China factor' has been used as an excuse
to slow the progress of the nation's FTA negotiations, and so far
Taiwan has only managed to secure FTAs with some Central American
allies, including Panama, Guatemala and Nicaragua. But the trend
toward trade agreements is not going to stop and the government
needs to catch up and better prepare for the imminent changes in
trading patterns that these agreements will bring.
U.S.-CHINA-TAIWAN RELATIONS


"Whether the plan is to achieve FTAs with other countries or the
nation looks to join a Free-Trade Area of Asia Pacific -- a free
trade area proposed by APEC leaders at their summit in Vietnam last
November -- the government should study the South Korea-US deal
carefully and use it as a starting point for their future talks.

"For now, the government should be watchful, because, with no
immediate possibility of new trade pacts, large Taiwanese
manufacturers may well respond by shifting even more production
overseas, adding to concerns about economic isolation. As for the
future of Taiwanese firms, without the promise of FTAs to remove
tariffs and other trade barriers, all they can do is to strive to
enhance their competitiveness and quality, nothing else."


4. U.S.-Taiwan Relations

"'Treatment' is not the Issue"

The conservative, pro-unification, English-language "China Post"
[circulation: 30,000] said in its editorial (04/08):

"Once again, it appears that ideology is clouding the thinking of
our high-ranking government officials. On the eve of his departure
for Washington, Joseph Wu, the new de facto ambassador to the United
States, told reporters he would actively lobby the U.S. government
to treat Taiwan 'fairly and equally' after taking up his new post.

"Wu, the former Mainland Affairs Council chairman who is known to be
close to President Chen Shui-bian, told reporters that ordinary
people in Taiwan generally feel that Washington has not treated
Taiwan fairly.

"As a glaring example of how the Americans are purportedly treating
us badly, Wu noted that a U.S. official who recently visited our
country pressed us to lift our longstanding ban on direct
transportation links with mainland China.

"According to Wu, our American visitor 'missed the point,' since our
government has repeatedly expressed its desire to negotiate direct
transport links with Beijing and never gotten a positive response.

"Wu told reporters that if Washington really wanted to see
cross-strait transport links opened up, the United States should
lobby Beijing to open talks with our government so the technical
details of transport links could be worked out.

"While Wu means well and we are sure he intends to promote our
interests, it is clear to see that he views the world through
ideologically tinted glasses.

"In the narrow world-view of Joseph Wu, Beijing is solely to blame
for the fact that both sides of the Taiwan Strait are not talking to
each other.

"While Beijing remains politically hostile to our government and
shares some of the blame for the lack of talks, we cannot avoid
responsibility for the lack of trust and bad atmosphere that has
stymied the chances for talks to take place under President Chen's
administration.

"That is because every time a tiny thaw has appeared in the icy
relations between Taipei and Beijing, President Chen has done his
best to make sure they go back into a deep freeze.

"When Beijing pragmatically offered to sidestep political
sensitivities by having representatives of private aviation
associations negotiate details about direct links, our government
refused to go along.

"In the meantime, President Chen has deliberately irritated
cross-strait ties by taking steps toward de jure independence every
time an election is around the corner.

"Besides tossing a monkey wrench in the potential to resume
cross-strait talks, these actions have also become a major irritant
in our relations with the United States.

"Since taking office, President Chen has all but abandoned his
momentous 'four noes and a not' pledge made at his inauguration in

2000.

"In that speech, President Chen solemnly promised not to declare
independence, not to change the national title of the Republic of
China, not to amend the Constitution to codify the existence of two
separate states in Taiwan and mainland China, and not to seek to
hold a public referendum on sensitive issues of independence or
reunification that would change the status quo in the Taiwan Strait.
U.S.-CHINA-TAIWAN RELATIONS



"In that same speech, President Chen promised that there was 'no
question of abolishing the National Unification Guidelines and the
National Unification Council,' the advisory guidelines and body that
had formed the basis of our policies toward Beijing before President
Chen took office.

"Since these promises were mainly aimed at reassuring leaders in
Washington and Beijing that President Chen's government would not
make radical changes, we should not in the least bit be surprised
that our friends in Washington are not pleased with us right now.

"Indeed, just about the only part of 'four noes and a not' that has
not been smashed into pieces is the promise not to change our
national title of the Republic of China.

"Since the United States needs Beijing's help to cope with major
world crises ranging from Iraq to Iran and North Korea, Wu should
not be shocked to learn that sometimes our friends in Washington
would like to see us stop rocking the boat at every opportunity.

"The reason why Washington wants us to open direct transport links
with the mainland is because the U.S. government is, as it should
be, primarily looking after American interests.

"We find it especially odd that Joseph Wu thinks that our problems
can be solved through lobbying foreign governments, rather than by
making our own wise policies that produce good results.

"The reason why cross-strait transport links have not been opened
has little to do with our poor treatment from the Americans, and
more to do with our own incompetence.

"If our leaders had done less to shake up the status quo in the
Taiwan Strait for the sake of scoring votes in local elections,
direct transportation links probably would have been opened long
ago."

WANG