USTR/USDA BEEF DELEGATION PRESSES TAIWAN ON BEEF

UNCLAS SECTION 01 OF 06 TAIPEI 002382 SIPDIS SENSITIVE SIPDIS STATE PASS USTR, STATE FOR EAP/TC,USTR FOR STRATFORD, KATZ, AND O'CONNOR, TREASURY FOR OASIA/TTYANG, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN USDA FOR FAS/OA, OSTA, OFSO, AND OCRA E.O. 12958: N/A TAGS: EAGR ETRD ECON PGOV PREL TW SUBJECT: USTR/USDA BEEF DELEGATION PRESSES TAIWAN ON BEEF AND PORK MARKET ACCESS TAIPEI 00002382 001.2 OF 006 ¶1. (SBU) SUMMARY. During October 17-19 meetings with a range of senior Taiwan officials and industry representatives, a USTR/USDA beef trade delegation led by USTR Special Envoy Ambassador Richard Crowder stressed the importance of rapid Taiwan action in following the science-based guidelines of the OIE to facilitate trade in the full range of U.S. beef and beef product imports, including live animals. The delegation also raised the pork issue, highlighting the need for a ractopamine maximum residue limit (MRL) to be established as quickly as possible. On beef, Taiwan committed to abide by OIE guidelines, but outlined a six-month process for an independent risk assessment that the Ambassador sought to compress. On pork, the delegation was told that establishment of a MRL will not be possible until after upcoming elections (Note: most cited the January legislative elections while COA cited the March presidential election. End Note). Ambassador Crowder pressed Taiwan to again show leadership regionally on beef access and called for greater flexibility in application of interim measures to permit commercially viable imports of U.S. pork until the MRL can be established. END SUMMARY. ¶2. (U) The meetings took place in Taipei on October 17-19. The USTR/USDA delegation was led by USTR Special Envoy Ambassador Richard Crowder, and included Deputy Under Secretary of Agriculture for Farm and Foreign Agricultural SIPDIS Services Ellen Terpstra, USTR Director of Agricultural Affairs Leslie O'Connor, and USDA Office of Science and Technical Affairs Animal Division Deputy Director Clay Hamilton. The delegation was accompanied by AIT Agriculture Chief, and for the meetings with the Vice Premier and the Minister of Economic Affairs was also joined by the Acting Director and the Economic Chief. ¶3. (SBU) In each of the meetings, Ambassador Crowder expressed appreciation for Taiwan's status as an important customer for U.S. agricultural products, but stressed that lack of a rapid resolution to outstanding beef market access and pork trade disputes could lead to an "explosive" U.S. reaction and threaten progress on the overall U.S.-Taiwan economic agenda. On beef, the Ambassador emphasized he is carrying the same message throughout the region: Since the OIE classified the United States as controlled risk for BSE, the U.S. expects its trading partners to follow OIE guidelines and adopt science-based trade regimes to facilitate the full range of U.S. beef and beef product imports. Regarding pork, the Ambassador highlighted the importance of coordination between the Council on Agriculture (COA) and the Department of HEALTH (DOH) in lifting the ban on ractopamine and quickly establishing a maximum residue limit (MRL) for pork and other food imports containing ractopamine. Although very limited U.S. ractopamine-free pork imports are continuing under Taiwan interim measures triggered by findings of ractopamine residue in U.S. pork entering the market, the Ambassador underscored the importance of using an MRL as the basis for a long-term solution that provides full access to the U.S. pork industry. He also repeatedly stressed the importance of keeping the pork market open on a commercially viable basis (not just a technically open market) in the short term through more flexible interim measures applied to U.S. pork until the MRL is established. He also pointed out the urgency of resolving both of these issues, noting that "time is not our friend." ¶4. (SBU) At the Department of Health, the delegation met with Deputy Minister Wang (Hsiu-Hung) joined by senior staff including Food Safety Bureau Director-General, David Cheng. After the Ambassador explained the dual purpose for his visit to address the beef and pork issues, the Deputy Minister responded that Taiwan had re-opened its market to U.S. beef just last year, and must follow administrative procedures in considering further access. She then turned to Director-General Cheng, who outlined a 5-step process for the TAIPEI 00002382 002.2 OF 006 review regarding BSE to include: conducting the risk assessment, undertaking a U.S. field visit, holding a Legislative Yuan (LY) hearing that would be open to the general public, continuing a series of experts committee meetings (the BSE Risk Advisory Committee),and as a final step, holding an interdepartmental meeting that includes participation of the COA and the Ministry of Economic Affairs (MOEA). ¶5. (SBU) Cheng did not specify a timeline for the entire process, but indicated the risk assessment to be conducted on four categories of beef and beef products still denied access would take about six months to complete. The Ambassador called for a more rapid process, and Cheng indicated that some steps might be collapsed into or done concurrently with the period required to do the assessment (e.g., carrying out a field visit). The Ambassador pointed out the OIE had already done a risk assessment, and asked Cheng whether he expected a gap in findings. Cheng replied that, "Taiwan will follow OIE principles, but also has to follow due process" and stated that he expected that Taiwan's science-based risk assessment would be the same or similar to OIE. The Ambassador stated the OIE guidelines should be followed by members holistically, to which the Vice Minister agreed in principle while emphasizing that, "Taiwan must have an independent assessment to convince legislators and consumers." She added that Taiwan has been rated as "controlled risk" by the OIE "because it opened up to U.S. beef, even though Taiwan has no domestic BSE cases." The Ambassador closed on beef by again urging DOH for a speedy process that would lead to full implementation of OIE-consistent access, i.e., all products from animals of all ages with appropriate specified risk materials (SRMs) removed. ¶6. (SBU) Turning to pork, the Ambassador indicated that shutting down imports or failing to resume trade on a commercial basis would be explosive politically in the United States, particularly in Congress. He indicated that moving quickly to establish the MRL is critical and asked whether DOH remains committed to doing this. In the meanwhile, he said DOH appears to have greater flexibility for interpreting the import regulations than the course currently being taken. The Vice Minister responded that DOH does not have a schedule for establishing the MRL, and needs the cooperation of COA to lift the domestic ban before this can happen. In the interim, she noted that ONE of her staff was dispatched to Washington recently to discuss an improvement plan involving a list of U.S. exporters that can self-certify to meet the current standard of ractopamine-free. The Ambassador expressed appreciation for these efforts, but reiterated the need for Taiwan to communicate a date for establishment of the MRL, and to show greater flexibility in applying its current regulations to ensure commercially viable import conditions prior to the MRL being established. He indicated that the proposed list of plants wishing to self-certify and ship ractopamine-free pork would not achieve this objective. Cheng responded that new ideas are always welcome for working toward a solution, and wished to maintain open lines of communication on the issue. He said that if ractopamine were not a banned chemical under COA authority, DOH would be "ready to establish the MRL tomorrow.8 The Ambassador expressed hope for quick action on the MRL and interim measures to ensure trade, saying U.S. industry and Congress are not patient enough for a long wait on this issue. ¶7. (SBU) Responding to the Ambassador's concerns, Vice Premier Chiou I-jen said that beef will be politically easier to resolve than pork, since Taiwan has very little domestic beef production, and noted that Taiwan will conduct a risk assessment on beef imports. Such an assessment should take place on an accelerated timeline, stressed the Ambassador, and should follow a holistic approach consistent with the OIE TAIPEI 00002382 003.2 OF 006 guidelines, rather than a line-by-line mechanism that would slow the process. Chiou observed that many members of the previous BSE Risk Advisory Committee (RAC) had resigned after the previous reviews, and it has taken time to re-invite them to configure the new panel. He agreed to urge the DOH to set up the beef review committee as quickly as possible. (Note: The RAC has already been established, but has not yet launched formal discussion on the U.S. case. End Note). The Vice Premier cautioned that Taiwan's many small pork-producing farmers are a potent political force, and said it was "highly possible" that an MRL could not be set until after the January 12 legislative election. The process on pork is tougher, observed Chiou, as farmers have reacted very negatively on the issue. COA Chairman Su's outreach efforts met a further backlash, but the strength of reaction is slowly ratcheting down. Reiterating the importance of fast progress, the Ambassador urged a flexible interpretation of Taiwan import measures that would allow commercially viable U.S. pork imports in the interim. The Ambassador also stressed that the market needed to be open to all U.S. companies, not just specialized farmers. Chiou mentioned that the COA is trying to persuade pork farmers to follow the "Japan model", in which an MRL for imports is established while domestic use of ractopamine is still prohibited. AIT A/DIR encouraged Taiwan to play a leadership role by becoming the first economy in the region to move to full access for U.S. beef and beef products, along with fixing the pork issue quickly. President Chen is aware of U.S. interest and the importance of resolving the beef and pork issues, concluded Chiou. ¶8. (SBU) Minister of Economic Affairs Steve Chen (Ruey-long),accompanied by Chief Trade Negotiator John Deng and a range of senior Ministry officials, observed that Taiwan remains ONE of Asia's biggest importer of U.S. agricultural products, and wants to maintain good trade relations with the U.S. Since Taiwan has virtually no domestic beef industry, he explained, "there will be no excuse for protection of local industry" in opening the market to bone-in beef imports. Chen said he will encourage his DOH and COA counterparts to address the beef issue in accordance with WTO, and science-based guidelines. He observed that DOH, in particular, is wary of criticisum from the legislature and remains cautious. MOEA, however, "supports opening the market" and "sees no reason to further delay decision-making," stated Chen. He asked the U.S. to provide Taiwan with information on how others in Asia, especially Korea, are handling the beef problem. Noting Korea's pending FTA with the U.S., Chen asserted that Taiwan will be in a better position to facilitate expanded beef and beef product imports if Korea does the same, but will not necessarily wait for Korea until taking action on its own. Congress will not approve the Korean FTA unless the beef problem is fully resolved first, said the Ambassador. ¶9. (SBU) According to Chen, extensive media coverage has made pork a more difficult problem to resolve than beef. If the authorities lift the current ban, he asserted, there will be a dramatic negative reaction from industry and consumers. Given political sensitivities, Chen said Taiwan needs more time to build an internal consensus on how best to establish a ractopamine MRL. In reply, the Ambassador reiterated the importance of moving quickly and reaching a commercially viable solution in the interim. Failure to resolve the beef and pork problems could affect the broader U.S.-Taiwan trade relationship, he added. Chen replied that Taiwan always does its best to accommodate U.S. requests, but noted a "sense of frustration" that past efforts have not always been recognized by the U.S. Taiwan, he maintained, has made significant progress in improving IPR protection, but remains on the U.S. IPR watch list. Taiwan is very eager to negotiate an FTA with the U.S., he continued, but its requests have not met with success. A/DIR emphasized the TAIPEI 00002382 004.2 OF 006 importance of avoiding disruptions in pork trade while Taiwan devises an MRL. "We will make maximum efforts to avoid trade disruption," answered Chen. ¶10. (SBU) Taiwan National Security Council (NSC) Advisor Connie Yang (Guang-hwa) said the beef import problem would be easier politically to solve than pork, since Taiwan has very little beef production and domestic political actors are so focused on pork, a situation exacerbated by plans to reduce the size of the LY in the next election. She cautioned, however, that due to the impending election season, both sides should "keep a low profile" as they work on a solution for beef imports. On pork, Yang said the administration told DOH to interpret current pork import regulations as flexibly as possible so that some imports could continue, but stressed that there would be no progress toward resolution on the MRL until after the elections. (Note: all interlocutors focused on the January 2008 legislative elections, while COA mentioned the March Presidential election. End Note). Ambassador Crowder again emphasized that the U.S. expects its trading partners to follow OIE guidelines on BSE and adopt science-based trade policies, and also reiterated that foot-dragging on the beef and pork disputes is politically unacceptable in Washington. He added that if import problems aren't resolved quickly, it would negatively affect the bilateral trade agenda and "will be difficult to keep the lid on" negative reaction in the U.S. He concluded by saying the beef issue is an opportunity for Taiwan to show leadership. Yang replied that "there was a big cost last time for being the frontrunner, when Japan and Korea didn't move ahead similarly." ¶11. (SBU) The delegation met with local representatives of the meat trade (including importers and U.S. suppliers) at AIT,s Agricultural Trade Office. After providing a brief introduction on the purpose of the mission, Ambassador Crowder engaged the attendees in a one-hour question and answer session to discuss the impact of these issues for beef and pork trade with Taiwan. A quick stocktaking revealed that very little U.S. pork is now being imported other than "natural" product and limited shipments from another U.S. supplier not present at the meeting. ONE attendee noted Canadian pork has suffered less impact and wondered why there have been no positive findings of ractopamine in Canadian muscle cuts (note: there has been a case of detection in Canadian pork offal). On beef, those attending expressed strong support and appreciation for efforts to resume full trade. The representative of ONE major U.S. packer estimated this would increase their sales by 40 percent in Taiwan. ¶12. (SBU) In addition to the discussion with traders, representatives of the U.S. producer of Paylean (the brand name of the ractopamine hog feed ingredient) also attended and offered insights on their unsuccessful efforts to date gaining approval for the product in Taiwan. They also briefed the delegation on the negative public relations and confusion this issue has sown regarding the documented safety of Paylean vs. other feed additives (beta-agonists) on the COA,s ban list that are considered truly dangerous (e.g., clenbuterol). They also expressed a view that Taiwan has misapplied its testing regime for ractopamine by using an overly sensitive detection limit. As a result, the testing program overseen by DOH is out-of-sync with the company,s own published methodology for the product and stricter than the limits employed in other countries, including Japan and the United States. ¶13. (SBU) Council of Agriculture (COA) Vice Minister Lee (Jen-Chyuan),joined by senior officials including Dr. Watson Sung of the Bureau of Animal, Plant, HEALTH Inspection & Quarantine (BAPHIQ),opened the meeting by stating "relations in agriculture are better than 2-3 years ago." He also expressed hope that when launched, the Consultative Committee TAIPEI 00002382 005.2 OF 006 on Agriculture (CCA) would allow the two sides to handle many issues. Ambassador Crowder agreed and commended the excellent overall agricultural trading relationship and market we enjoy in Taiwan. He proceeded to outline the purpose of the delegation,s visit to six Asian markets as a mission "intended to deliver a clear, consistent message on the need for OIE-consistent beef trade." He expressed appreciation for Taiwan,s early leadership regionally on reopening to U.S. boneless beef from animals less than 30 months of age, but said the current status of beef and pork market access issues with Taiwan is "becoming a drag on overall relations." With the pork trade basically shut down, the Ambassador urged Taiwan to establish the MRL quickly while finding an interim solution that allows our exports to resume "on a commercial not technical basis." He stated recognition that the issue involves the jurisdictions of both COA and DOH, and that the solution had become entangled in political considerations with upcoming elections in January and/or March (depending on speaker),but warned that "time is not our friend" given the explosive reaction being provoked in the United States. The Ambassador stated with emphasis that U.S. trade access is caught up in finger pointing between DOH and COA on who is responsible for the current issue. ¶14. (SBU) In response to the Ambassador,s points, the Vice Minister stated that as a member of OIE, Taiwan would honor its guidelines. He noted that Taiwan had shown goodwill with its early resumption in 2005-06, and reiterated they would follow the OIE. Dr. Sung echoed this point and said COA is only responsible for "beef-related products other than beef." He assured the Ambassador that pending U.S. requests on certain beef-related products already deemed "safe to trade" by the OIE, such as protein-free tallow, would be discussed at the upcoming sanitary and phytosanitary (SPS) bilaterals in November and "should be resolved." The Ambassador noted that the long process for achieving OIE consistency on these products combined with the process described by DOH on beef "is not helping." He asked how best the overall review can be handled across the two organizations. The Vice Minister responded that "COA cannot commit on a timeline," given the split responsibility with DOH, which controls the decision for many beef and beef product imports. The Ambassador asked whether COA would be supportive in the interagency process on following OIE for beef, to which the Vice Minister replied, "yes." ¶15. (SBU) On pork, the Vice Minister was far less forthcoming, stating the issue "has extremely high political sensitivity, having become wrapped up in the campaign for the presidency." He also noted that protests by farmers had forced the DOH Minister to sign a pledge not to act unilaterally in establishing an MRL as long as ractopamine remains banned for use domestically by COA. As a result, according to the Vice Minister, "while a parallel system of establishing an MRL for imports only is possible theoretically, it is not possible politically." The Ambassador asked how best to facilitate COA and DOH agreement on setting an MRL, and then further stated that the U.S. cannot abide having such a trade disruption when there is no rationale for banning ractopamine at the same time Codex has advanced an international MRL to the final step of its process. ¶16. (SBU) The Vice Minister responded that he had asked his staff to check on the international status of ractopamine and found several cases of other economies with a policy similar to what Taiwan had originally proposed. (Note: BAPHIQ's Sung mentioned the EU, Japan, and New Zealand in this regard without providing further details on how their policies compared to Taiwan's situation. End Note.) The Vice Minister added that Taiwan had not suspended U.S. pork imports despite several detection cases. The Ambassador TAIPEI 00002382 006.2 OF 006 responded that the market is only technically open, and the situation has to be resolved before Congress takes action. Furthermore, from the standpoint of our WTO relations, Taiwan,s stance cannot be considered scientific, but rather seems a policy to handle an election. The Vice Minister stated the issue was &beyond his ability,8 but agreed to carry the Ambassador,s message forward. ¶17. (SBU) COMMENT. We believe the visit fully achieved its primary objective of conveying to key Taiwan officials the need for moving to OIE-consistent access for the full range of U.S. beef and beef products as expeditiously as possible. Discussions with DOH, in particular, should serve to invigorate and hopefully compress the review period. The meeting with the Vice Premier and NSC Senior Advisor revealed that the process has languished in part due to fallout among committee members from the tough political environment surrounding previous reviews that led to reopening for boneless beef from animals under 30 months of age ahead of other markets in the region. While it may be more difficult to secure similar leadership this time, Taiwan officials consistently stated a commitment to following the OIE guidelines and providing for a transparent process. ¶18. (SBU) Resolution of the pork issue, while simpler procedurally, looks far more difficult politically. We did not detect any movement on the key obstacle for establishing the MRL: overcoming resistance from farmers and legislators to lifting the domestic ractopamine ban in the midst of a tough election season. Ambassador Crowder pointed out in all meetings that he is big on follow-up, and that given the sense of urgency on these issues, the delegation and AIT will be following up quickly and vigorously to explore ways of restoring commercially viable conditions for pork trade (as an interim step until an MRL is established) within the context of discussions already underway with DOH to provide an "improvement plan." END COMMENT. ¶19. (U) This message was reviewed by Ambassador Crowder, Under Secretary Terpstra, and delegation after departing Taiwan. YOUNG