DIRECTOR URGES TIFA PROGRESS AND PROMPTS VICE

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001660

SIPDIS

SIPDIS

STATE ALSO FOR EAP/TC
USTR FOR STRATFORD AND ALTBACH
TREASURY FOR OASIA/TTYANG
USDA FOR FAS/OCRA/ASIA RADLER, HIGGISTON, AND BEILLARD

E.O. 12958: DECL: 07/23/2017
TAGS: ECON ETRD EAGR PGOV PREL KIPR TW
SUBJECT: DIRECTOR URGES TIFA PROGRESS AND PROMPTS VICE
PREMIER TO ENGAGE ON FOOD IMPORTS


TAIPEI 00001660 001.2 OF 002


Classified By: AIT Director Stephen M. Young for reasons 1.4 (b) and (d
)


1. (C) SUMMARY. In a July 23 meeting with Vice Premier Chiou
I-Jen, the Director highlighted the importance of moving the
Trade and Investment Framework Agreement (TIFA) agenda
forward, and emphasized the need for progress on beef imports
and pharmaceutical pricing. On maximum residue levels
(MRLs),the Director pressed for a science-based approach
that would facilitate U.S. meat and wheat imports, prompting
Chiou to instruct Chief Trade Negotiator John Deng to devise
a solution within the Taiwan bureaucracy. END SUMMARY.


2. (U) The meeting took place on July 23rd. The Director was
joined by econoffs; Vice Premier Chiou I-Jen was accompanied
by Office of Trade Negotiations Chief Negotiator John Deng.

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TIFA status and next steps
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3. (C) The Director noted U.S. satisfaction with progress
made during the July 10-11 TIFA talks in Washington and
highlighted the importance of maintaining momentum. He
acknowledged Taiwan's progress on IPR protection, but urged
continued efforts to pass pending ISP legislation and
increase enforcement. The Director hailed bilateral
cooperation on export controls, prompting Chiou to express
his support for the overall initiative, despite complaints
from Taiwan companies about the process. U.S. provision of
additional background information on individual cases would
facilitate Taiwan's participation in the export control
program, Chiou added.


4. (C) The Director stressed that scheduled July 26 and
August 2 digital videoconferences (DVCs) on bilateral
investment issues would be enhanced by a reduction in
Taiwan's proposed non-conforming measures (NCMs) list. Chiou
said he has asked Taiwan agencies to narrow the list, and
reiterated Taiwan hopes that the investment discussions will
result in a formal announcement to launch bilateral
investment agreement (BIA) negotiations.


5. (C) The proposed U.S.-Korea FTA has increased pressure on
Taiwan to achieve concrete results through the TIFA process,
asserted Chiou. Deng stated his hope that a negotiation on
the Bilateral Investment Agreement (BIA) could be launched
after the August 2 DVC. The Director emphasized that,
although the U.S. is willing to move ahead, a decision to
launch BIA negotiations depends on review of NCMs and other
outstanding investment regime issues. In Chiou's view,
Congressional approval of the U.S.-Korea FTA would increase
pressure on Taiwan to show concrete results on a BIA.
Evoking Ambassador Bhatia's remarks during the TIFA talks,
the Director urged Taiwan to provide a sectoral analysis of
the U.S.-Korea FTA's expected impact, and raised the
possibility of exploring additional areas for trade
facilitation under the TIFA framework.


6. (C) Both the Director and Chiou expressed optimism that
the July 31-August 2 exploratory tax agreement meetings in
Washington would be fruitful. The Director stressed the
importance of keeping the tax discussions as discreet as
possible. He noted USG interest in working with the EU to
facilitate Taiwan's accession to the plurilateral WTO
Government Procurement Agreement (GPA). Chiou reiterated
that nomenclature issues still make the plurilateral option
difficult for Taiwan to accept.


7. (C) On pharmaceutical pricing, the Director said the U.S.
is pleased that Taiwan has agreed in principle to establish a
mandatory standard contract, but is disappointed at the lack
of a firm timeline and other benchmarks for implementing that
decision. Many outstanding problems remain on the
pharmaceutical issue, he emphasized, and the U.S. and Taiwan
must work toward resolving them. Taiwan's economic growth is
accompanied by rising consumer expectations for health care,

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said the Director, and the U.S. is ready to help Taiwan meet
new needs. Chiou replied that Taiwan recognizes the need to
reform its pharmaceutical pricing system, both for its own
interests and for those of the U.S.

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Beef imports
--------------

8. (C) The Director reiterated U.S. interest in Taiwan taking
a science-based approach to facilitate the full range of U.S.
beef imports. He urged Taiwan to play a regional leadership
role and become the first in Northeast Asia to allow renewed
imports of U.S. bone-in beef. According to Chiou, President
Chen has "a different opinion" on the beef issue, and sent
Health Minister Hou to the TIFA talks in order to explain the
Taiwan position. Hou should not be intimidated by political
opposition on the beef issue, observed the Director, but
should instead use the OIE science-based standard to allow
the full range of beef imports.

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Meat and wheat MRLs
--------------

9. (C) The Director acknowledged Taiwan's decision to notify
the WTO about a new maximum residue level (MRL) for Malathion
on wheat, which should be established by August 23. He
stressed, however, that Taiwan does not have a scientific
argument for banning U.S. meat imports containing
Ractopamine. The U.S. FDA has set acceptable limits for
Ractopamine, he noted, but Taiwan appears to have taken a
zero tolerance approach to domestic meat while failing to
establish a standard for imports. According to Deng, the
decision to ban imports of meat with Ractopamine is a natural
extension of the domestic ban. The Director emphasized that
the U.S. FDA has determined Ractopamine to be safe within
established guidelines, and urged Taiwan to follow a
science-based approach and establish an appropriate standard
for meat imports containing Ractopamine.


10. (C) Chiou observed that the Director's request was
"reasonable," and instructed Deng to coordinate within the
Taiwan bureaucracy to resolve the issue. Deng explained that
the Council of Agriculture (COA) has prohibited the use of
Ractopamine in domestic meat since last fall, and there is
reluctance to set different standards for domestic and
imported meats. The Director replied that the U.S. was led
to believe the COA ban would not be applied to imports and
that Taiwan is now trying to enforce a ban without having
first established any guidelines or standards. He urged
Taiwan to make rapid progress in setting clear MRLs for a
variety of commonly used hormones and additives. The
Director underscored that the U.S. will continue to press the
MRL issue with every concerned Taiwan agency, and called on
Taiwan to resist domestic political pressure and rely on a
science-based approach to address the problem.

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IPR protection
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11. (C) As the meeting ended, Deng noted that Vice Minister
of Education Lu has been incorrectly criticized in the Taiwan
press for bowing to U.S. pressure by increasing IPR awareness
and enforcement efforts on university campuses. The Director
reiterated the importance of IPR protection, noting that the
issue will only increase in importance as Taiwan develops its
own biotechnology and other cutting-edge economic sectors.


12. (C) COMMENT. Thus far, Health Minister Hou in particular
appears reluctant to confront the handful of individual
legislators eager to exploit food safety issues for partisan
gain. Chiou's sensible perspective will help begin to
resolve the problem, and we will continue to engage with the
COA, the Ministry of Health, and other concerned agencies
until an acceptable solution is reached. END COMMENT.
YOUNG