MAINLAND AFFAIRS COUNCIL BLAMES CHINA AND PUSHES

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002074

SIPDIS

SIPDIS

STATE PASS EAP/TC

E.O. 12958: DECL: 08/26/2012
TAGS: ECON PREL ETRD PGOV PINR CH TW
SUBJECT: MAINLAND AFFAIRS COUNCIL BLAMES CHINA AND PUSHES
STAFFDEL FOR FTA


Classified By: ECONOMIC CHIEF HANSCOM SMITH FOR REASONS 1.4 B/D


1. (SBU) SUMMARY. In a recent meeting with U.S. Senate
Budget Committee Staff Director Scott Gudes and Staff
Economist Daniel Brandt, Mainland Affairs Council (MAC) Vice
Chairman Tung Chen-yuan laid out the Chen administration's
position on cross-Strait relations. China threatens Taiwan
militarily and refuses to negotiate, Tung argued, and has
halted productive discussions on tourism and direct flights.
Taiwan, working from the basic principles of sovereignty,
democracy, peace and parity, stands ready to improve the
relationship. He claimed that DDP Presidential Candidate
Frank Hsieh would be in a much better position to negotiate
with China than the KMT's Ma Ying-jeou, since Hsieh has not
agreed on the "one China, two interpretations" model. In
response to a plea for the U.S. to negotiate a Free Trade
Agreement with Taiwan, Staffdel members pointed out the
difficulties of negotiating and ratifying any trade agreement
in Washington.

Talks Stalled and No Mutual Trust
--------------


2. (SBU) Tung lamented that cross-Strait dialogue has
stopped and pointed the finger at China. He noted that since
2004, Taiwan has offered to discuss 18 different agenda items
with the PRC, including direct links. So far, he asserted,
the PRC has only agreed to discuss one of these items
(charter flights). Taiwan had high hopes for the
negotiations to expand both direct cargo and passenger
flights and to open Taiwan to PRC tourists. Currently,
charter flights and emergency medical flights are also
allowed on a case-by-case basis, but Taiwan hopes a
regularized schedule can be negotiated. Tung maintained
that China has suspended productive negotiations on both the
tourism and charter flights issues and has given no
indication on when they might resume. Taiwan is eager to
welcome up to one thousand tourists per day from China, he
said.


3. (SBU) Tung said many cross-Strait difficulties stem from
a lack of trust, and that confidence-building measures are
needed. Taiwan hopes to set up what he called a framework
for peace and stability, develop economic exchanges, and
promote democratic development on the Mainland to bring a
long-term peaceful resolution between the two sides. He said
the MAC is pursuing the general goals of reconciliation,
cooperation, and peaceful resolution with China.


PRC-Taiwan: Military Threats but People-to-People Exchanges
-------------- --------------


4. (SBU) Tung pointed out that the PRC threatens Taiwan
with about 1,000 missiles targeting the island. The PRC's
military budget has increased by 17 percent over the last
year, and over the past few years has acquired 16 attack
submarines, long-range bombers, and mid-air refueling
capabilities. The PRC continues to sabotage Taiwan's
participation in international organizations, he asserted.
Tung noted that although the Palestinian Authority has
observer status in the WHO, Taiwan is excluded. On the
positive side, since 2005 the PRC has not insisted that
Taiwan accept the one-China principle as a condition for
talks, and there are more people-to-people exchanges. There
is a growing tourist exchange, with 300,000 PRC nationals
visiting Taiwan over the last few years. Taiwan travelers
made about four million visits to China and about one million
Taiwan business persons currently reside in China. He
reiterated that Taiwan would like to allow up to one thousand
PRC tourists per day to enter Taiwan.

Taiwan - A Beacon of Democracy
--------------


5. (SBU) Tung stressed that Taiwan could provide the PRC
with examples of how it can develop its own nascent
democratic values. He argued that President Chen's family
legal woes have drawn intense scrutiny by the Taiwan press,
to the consternation of the PRC authorities, who have tried
to limit public exposure to this news. Tung cited
constitutional reform and public referenda as tools of

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Taiwan's vibrant democracy. Taiwan's example of a democratic
open society is its leverage in dealing with the PRC, he
argued. China was also not all of one opinion in dealing
with Taiwan. Tung trotted out the old joke that while
Beijing favors invasion, Shanghai favors negotiation . . .
and Xiamen favors surrender.

A Plea for an FTA with the U.S.
--------------


6. (C) Turning to the U.S. - Taiwan trade relationship, Tung
argued that the U.S. - Korea Free Trade Agreement (FTA) would
have negative consequences for Taiwan exporters and urged the
U.S. to negotiate an FTA with Taiwan. Staffdel members noted
that the U.S. administration does not currently have trade
promotion authority, and thus is in no position to negotiate
any new FTAs. Furthermore, they noted that Senate
ratification of the U.S. - Korea FTA is far from guaranteed.
Tung asserted that lack of a U.S-Taiwan FTA would lead to
Taiwan's isolation, and claimed other economic heavyweights
would be likely to follow the U.S. lead and not sign FTAs
with Taiwan.

DPP better poised to negotiate with PRC
--------------


7. (C) Over the long term, Tung said that Taiwan's
cross-Strait policy is guided by four principles:
sovereignty, democracy, peace and parity. Democracy is the
bottom line and cannot be negotiated away. Parity, or equal
footing, is something President Chen insists upon, although
he added that Chen would be open to considering an eventual
arrangement similar to the current European Union model.
Tung said the Kuomintang's "one China, two interpretations"
position is a non-starter since the PRC never accepted that
version. If the KMT wins the 2008 elections, he noted, China
will press for adoption of the "one China, two systems"
concept currently applied to Hong Kong. The DPP, on the
other hand, has never accepted the notion of one China, and
therefore has a little more room to negotiate should it win
the elections. He said a DPP win in the next elections would
offer new ground to negotiate a peaceful settlement and would
guarantee Taiwan sovereignty.

Bio Note
--------------

8. (U) Tung Chen-yuan was a professor of Social Science at
the National Chengchi University before assuming his current
position. He received a Ph.D. in International Affairs from
the John Hopkins SAIS program and his expertise is in
Taiwan-China economic relations and Taiwan-US-China
relations.

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

9. (C) In his meeting with the Staffdel, Vice Chairman Tung
unsurprisingly gave Taiwan's boilerplate language on
cross-Strait issues -- China has broken off negotiations, is
threatening Taiwan militarily, and is actively trying to
squeeze Taiwan's international space. Interestingly, he did
not talk about China's economic importance to Taiwan.
Instead, he chose to argue that Taiwan's leverage, in
response to China's rising economic and political clout, is
its free and open society. He seemed unable or unwilling to
acknowledge, however, that Taiwan's democracy is played on
the Mainland as messy and inefficient. Fistfights in the
legislature and electoral gridlock obscure the achievements
of Taiwan's young democracy and free press. The logic behind
the ruling Democratic Progressive Party's oft-repeated claim
that its presidential candidate, Frank Hsieh, would be in a
better position to negotiate with Mainland China has never
been effectively explained. The fact that Frank Hsieh does
not accept the "one China, different interpretations"
construct is counter-intuitive and unpersuasive. A stronger
argument for Frank Hsieh's cross-Strait negotiating bona
fides would be his track record of reaching out to the PRC
during his tenure as Kaohsiung Mayor, and his more moderate
rhetoric during his January 2005-January 2006 premiership.


WANG