EAP/ANP DIRECTOR MCGANN'S JUNE 9-11 VISIT TO TAIPEI

C O N F I D E N T I A L SECTION 01 OF 04 TAIPEI 001363

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E.O. 12958: DECL: 6/15/2032
TAGS: PREL TW
SUBJECT: EAP/ANP DIRECTOR MCGANN'S JUNE 9-11 VISIT TO TAIPEI


Classified By: AIT Director Stephen M. Young, Reason 1.4 (b/d)


1. (C) Summary: During his June 8-11 visit to Taipei,
EAP/ANP Office Director C. Steven McGann commended Taiwan for
its significant contributions to the South Pacific region and
urged Taipei to conduct its foreign assistance and other
activities in an open and transparent manner that promotes
democracy, rule of law, and good governance. Taiwan Vice
Foreign Minister Catherine Chang told McGann that Taipei
views his visit as a positive continuation of the US-Taiwan
dialogue on the South Pacific initiated by Assistant
Secretary Hill in Nadi last year. Chang underscored Taiwan's

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willingness to enhance cooperation with the U.S. in the South
Pacific, particularly on Fiji. She stressed that Taiwan will
continue to withhold the "grassroots" funding it had
previously provided to the Fijian Prime Minister,s office
until the restoration of a democratically elected government
in Suva. McGann also met with Taiwan officials from MOFA,
NSC, and ICDF, as well as Australian and New Zealand
representatives, to exchange views on foreign assistance,
economic cooperation, and capacity building in the South
Pacific. End Summary.

Director McGann's Message
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2. (C) During his June 8-11 visit to Taipei, EAP/ANP Office
Director C. Steven McGann commended Taiwan for its positive
contributions to countries in the South Pacific. Noting that
the U.S. and Taiwan share democratic values, McGann urged
Taiwan officials to ensure that Taipei's foreign assistance
and other activities are conducted in an open and transparent
manner that promotes democracy, rule of law, and good
governance. McGann explained that U.S. regional assistance
is moving towards capacity building, technical cooperation,
and developing trade and economic opportunities with the
ultimate aim of creating "sustainable individuals." McGann
encouraged Taipei to work with its South Pacific partners to
help them take advantage of the potential USD multi-billion
in opportunities that the relocation of U.S. forces from
Okinawa to Guam will create in the South Pacific. McGann
also recommended Taiwan enhance information sharing and
exchanges with EAP/ANP and other U.S. government agencies and
NGOs that work on regional issues to discuss other areas of
bilateral cooperation.


3. (C) Despite Taiwan's largely positive role in the South
Pacific, McGann underscored that the U.S. remains concerned
that Taipei's "grassroots" payments to local politicians and
other under-the-table assistance undermine good governance.
McGann stressed that Taipei should not weaken the
international sanctions against the military regime in Suva
by making such payments to the Fiji Prime Minister's office.
The U.S. remains neutral with respect to the competition for
diplomatic recognition between Taipei and Beijing, but
Washington insists that both sides should conduct their
foreign assistance programs in accordance with international
standards of accountability and transparency, McGann added.

Taiwan's Response
--------------


4. (C) Taiwan Vice Foreign Minister Catherine Chang
(Siao-yue) told Director McGann on June 11 that Taiwan is
more than willing to enhance cooperation with the U.S. in the
South Pacific, particularly on Fiji. Chang said she viewed
McGann's visit as a positive continuation of the US-Taiwan
dialogue on the South Pacific initiated by Assistant
Secretary Hill in Nadi last year. She stressed that Taiwan

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is committed to withholding the &grassroots8 funding it had
previously provided to the Fijian Prime Minister,s office
until the restoration of a democratically elected government
in Suva. Chang emphasized that this decision will not be
affected by Taiwan's loss of formal recognition by Costa

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Rica, which she attributed to Beijing's &dollar diplomacy.8



5. (C) Despite the domestic pressures on MOFA and President
Chen's administration resulting from that break, Chang said
Taipei's decision on Fiji underscores Taiwan's commitment to
abide by international norms of foreign assistance. Taiwan
is committed to promoting good governance and rule of law in
the region. Chang suggested that the political situation in
Suva, nevertheless, remains unstable and unlikely to return
to democracy in the near future, but she reiterated that
Taipei would honor its pledge not to "make friends" with the
coup regime. Chang urged the U.S. to encourage Beijing,
which she noted is recognized by Suva and has a stronger
motivation to support the military government, to respect the
international sanctions.


6. (C) Chang said that although derecognition by Costa Rica
was a "heavy blow," Taiwan has faced bigger diplomatic
challenges in the past and managed to not only survive but
thrive. She underscored that Taiwan will work hard to
solidify its remaining diplomatic relations because these
allies give Taipei a voice in the international arena. Chang
asserted that Taiwan's official presence in the South
Pacific, Central America, and Africa also serves U.S.
interests. Chang said maintaining a dialogue with Australia,
New Zealand, Japan, and the U.S. about Taiwan's foreign
assistance and other activities in the South Pacific is
important for dispelling any "misunderstandings" and
establishing areas of cooperation. She invited Washington to
send a representative to the Second Taiwan-Pacific Allies
Summit, scheduled for October 13-15 in the Marshall Islands,
to observe the proceedings and further the dialogue.
Director McGann said he would inform Washington of the
invitation.


7. (C) MOFA Director-General for East Asia and Pacific
Affairs Donald Lee (Chuan-tong) in a separate meeting the
same day expressed his appreciation for the ongoing
U.S.-Taiwan dialogue on South Pacific affairs. Lee said that
as a donor Taipei tries its best to provide assistance in as
transparent and responsible a manner as possible, but added
that sometimes local politicians from the receiving countries
do not effectively use the funds provided by Taiwan. Lee
stressed that Taipei is committed to improving its oversight.
For example, Lee pointed out that Taipei recently decided to
send 50 auditors to supervise the distribution of
"grassroots" funds in the Solomon Islands. Lee suggested
that his department is working to shift the focus of its
foreign aid policy in the South Pacific to capacity building
and trade promotion in order to better complement U.S.
priorities for the region.


8. (C) Lee emphasized that, nevertheless, a key part of his
department's work in the region will remain strengthening
diplomatic ties with the 6 countries that recognize Taipei.
Taiwan needs allies to retain a voice in the international
arena and to show it is a sovereign country, Lee explained.
Having partners in the South Pacific also helps Taiwan
protect its more than USD 5 billion fishing interests in the
region. Lee pointed to Costa Rica President Arias' recent
criticism of Taiwan "stinginess" as evidence that Taipei is
not engaged in "dollar diplomacy." In dollar terms, Lee
continued, Taipei can't compete with Beijing but has "no
choice" but to work to maintain relations with the countries
that recognize Taiwan.


9. (C) Director McGann said that Washington has taken note
of Taiwan's decision not to provide weapons to Solomon
Islands police, to enhance dialogue with Australia, and to
cooperate with the Regional Assistance Mission to the Solomon
Islands (RAMSI). Taiwan should put considerations of
diplomatic recognition aside to focus on such efforts, which
show Taipei is able and willing to comply with international

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norms, added McGann. Lee characterized friction with
Australia over weapons training as a "misunderstanding" and
added that reports Taiwan intended to also provide weapons to
the Sogavare government were "untrue" rumors. Lee pointed to
meetings between the International Cooperation and
Development Fund (ICDF),Taiwan's USAID equivalent, and
AUSAID and NZAID this February as a sign that Taipei is
improving its communication and cooperation with Canberra and
Wellington. Lee expressed hope that Australia and New
Zealand could raise future meetings from the deputy-level to
the principal-level and include Foreign Ministry officials
since the ICDF is only one component of Taiwan foreign
assistance.

ICDF Willing to Enhance Cooperation
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10. (C) ICDF Secretary General Chen Cheng-chung in a
separate meeting on June 11 stressed to Director McGann that
the ICDF's assistance work is completely accountable and
transparent. Chen explained that the fund focuses on
providing aid in the form of agricultural projects, medical
missions, information technology, and financial assistance to
small and medium enterprises. Chen said the ICDF is open to
working with the U.S. in a "low key" manner to better
coordinate assistance in the South Pacific, noting that its
first-ever meetings with AUSAID and NZAID in February focused
on improving accountability. Chen expressed his desire to
hold similar meetings with the U.S. ahead of the Pacific
Island Forum Donor's Conference. Chen added that as a
"foundation," rather than a government agency, participation
by the ICDF would minimize "political" considerations and
allow the discussions to focus on humanitarian assistance.
Director McGann praised ICDF's transparency and its
assistance, particularly its deployment of medical missions
to the South Pacific. He suggested that the ICDF expand
contacts with the U.S. Department of Interior and Health and
Human Services to enhance cooperation in the South Pacific.

NSC On the Same Page
--------------


11. (C) National Security Council (NSC) Senior Advisor for
Japan and Pacific Affairs Lin Cheng-wei told Director McGann
in a meeting on June 9 that Taiwan highly values working with
the U.S., particularly in the South Pacific. Pointing to the
Palau Declaration that resulted from the first Taiwan-Pacific
Allies summit last year, Lin suggested that Taiwan's
priorities for the region--economic development, capacity
building, and social and cultural exchanges--closely parallel
U.S. goals. Lin explained that the NSC is working to expand
Taiwan's approach to the region beyond a traditional focus on
the competition with Beijing for diplomatic recognition to
include the long term goal of providing sustainable growth.
In particular, Lin said Taiwan has extensive commercial
interests in the region's fishing industry as well as a
strategic interest in the event of a conflict across the
Taiwan Strait. To enhance Taiwan's coordination with other
donor states, Lin suggested that Taiwan would like to
participate in multilateral forums; McGann responded that the
U.S. finds working with Taiwan bilaterally the most
productive approach.

AUS/NZ Concerns over Solomon Islands Training & Fiji
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12. (C) Director McGann also exchanged views with
Australian Acting Representative Harry Genn and New Zealand
Director Clare Fearnley on June 10. Genn emphasized that
Australia sees some of Taiwan's activities, such as the
"grass roots" payments to local politicians, as destabilizing
and undermining Australian effort to shore up faltering
governments in the South Pacific. Genn cited Taiwan's recent
offer to train the SI Coast Guard as the latest example,

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noting that Australia has managed to talk Taiwan into
reducing the training to one week. Nevertheless, Glen said
Canberra remains concerned that Taiwan's venture into police
and coast guard training could open up security and defense
as arenas of competition between Beijing and Taipei, which
would have long-term destabilizing effects on the region.
Both Genn and Fearnley expressed their government's
appreciation of U.S. cooperation and assistance in enforcing
the international sanctions against the military regime in
Suva.
YOUNG