Identifier
Created
Classification
Origin
07TAIPEI550
2007-03-09 09:08:00
SECRET
American Institute Taiwan, Taipei
Cable title:  

CWC-RESTRICTED CHEMICALS IN TAIWAN

Tags:  CN CW ETTC KNNP PARM TW 
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VZCZCXRO0663
OO RUEHGH
DE RUEHIN #0550/01 0680908
ZNY SSSSS ZZH
O 090908Z MAR 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4392
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6446
RUEHRL/AMEMBASSY BERLIN PRIORITY 0170
RUEHBY/AMEMBASSY CANBERRA PRIORITY 4469
RUEHLO/AMEMBASSY LONDON PRIORITY 0203
RUEHUL/AMEMBASSY SEOUL PRIORITY 8512
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 6837
RUEHTC/AMEMBASSY THE HAGUE PRIORITY 0319
RUEHKO/AMEMBASSY TOKYO PRIORITY 8554
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0050
RUEHHK/AMCONSUL HONG KONG PRIORITY 7698
RUEHOK/AMCONSUL OSAKA KOBE PRIORITY 0423
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0871
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
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RUEAIIA/CIA WASHDC PRIORITY
RHMFISS/HQ BICE WASHINGTON DC PRIORITY
S E C R E T SECTION 01 OF 03 TAIPEI 000550 

SIPDIS

SIPDIS

STATE FOR EAP/TC, ISN/CB AND ISN/MTR

E.O. 12958: DECL: 03/11/2027
TAGS: CN CW ETTC KNNP PARM TW
SUBJECT: CWC-RESTRICTED CHEMICALS IN TAIWAN

REF: A. TAIPEI 78

B. MIKULAK-NEELY EMAIL OF 12/20/2006

Classified By: AIT Director Stephen Young, 1.4 B/C

S E C R E T SECTION 01 OF 03 TAIPEI 000550

SIPDIS

SIPDIS

STATE FOR EAP/TC, ISN/CB AND ISN/MTR

E.O. 12958: DECL: 03/11/2027
TAGS: CN CW ETTC KNNP PARM TW
SUBJECT: CWC-RESTRICTED CHEMICALS IN TAIWAN

REF: A. TAIPEI 78

B. MIKULAK-NEELY EMAIL OF 12/20/2006

Classified By: AIT Director Stephen Young, 1.4 B/C


1. (S) Summary: As reported ref A, China is now Taiwan's
sole acknowledged source of Chemical Weapons Convention
(CWC)-restricted schedule two (S2) chemical imports. This
contributes to a significant gap in CWC controls and is
contrary to U.S. interests because: 1) Taiwan's trade,
production, and use of CWC-restricted chemicals remains
entirely outside the CWC control regime; 2) China ignores CWC
rules by shipping restricted chemicals to Taiwan without
effective jurisdiction over the end users; 3) As the main
supplier of chemicals critical for Taiwan's high tech
industries, China potentially could cut off Taiwan's
production and sales to the United States of certain
strategic high tech items. AIT explored ways to better
protect these U.S. interests with a Taiwan interagency group
on March 7. AIT recommends that we work with Gameplan
partners to set up a CWC-like inspection regime to bring
Taiwan under international supervision. End summary.

Years of Stalemate on Monitoring Taiwan's Chemicals
-------------- --------------


2. (S) While the Head of China's MFA CW/CB Office Chen Kai
claims that China is open to pragmatic solutions to enable
Taiwan's participation in the CWC, China's suggestions have
been non-starters (i.e, Taiwan should first accept the "one
China" principle, ref B),and China has blocked efforts to
find a formula acceptable to both sides. China appears to
benefit from the current situation and lacks incentive to
change it.

How China Benefits From Taiwan's Exclusion from CWC
-------------- --------------


3. (S) As reported ref A, Taiwan Customs statistics show
that China has become the sole-source supplier of CWC S2
chemicals imports, which are used by Taiwan's high tech
industries as cleaning and doping agents in semiconductors,
specialty glass, light-emitting diodes, and electronics
production. Taiwan produces several S3 chemicals and at
least one S2 chemical on the island. China claims that its

chemical shipments to Taiwan are "internal transfers" rather
than "exports" and therefore not a violation of CWC controls.



4. (S) According to Taiwan officials, China has also become
Taiwan's largest supplier of S3 chemicals, providing about
half of Taiwan's total imports of these chemicals. Taiwan
officials explain that China's simplified approval process is
one of the attractions of S3 suppliers in China: it is much
easier to get an unofficial end-user certificate from one of
Taiwan's several private industry associations (which is all
that China requires) than to get an official end-user
certificate from Taiwan's Ministry of Economic Affairs (MOEA)
Bureau of Foreign Trade (BOFT) (which all other CWC member
states must obtain in order to export S3 chemicals to
Taiwan). This gives chemical companies in China a clear
commercial advantage in the Taiwan market.

Red Question Marks Over Taiwan
--------------


5. (S) Although PRC officials permit shipments of
CWC-restricted chemicals to Taiwan, China does not have
effective jurisdiction over the end users of the chemicals,
and has no way to conduct background checks, inspect,
monitor, or sanction the Taiwan end users as required by the
CWC. China also lacks the direct communications with Taiwan
Customs and other enforcement agencies necessary to verify
whether the chemicals actually enter Taiwan or are diverted

TAIPEI 00000550 002 OF 003


to other countries or to illicit users.


6. (S) The evidence for S2 chemical imports are Taiwan
Customs documents showing a total of approximately US$5
million worth of five different types of S2 chemicals
imported from China from January 2004 through October 2006.
However, PRC officials, who see only the unverified industry
association-issued end user certificates, may not even be
aware that S2 chemicals are being shipped to Taiwan.


7. (S) The total lack of outside inspection or monitoring of
CWC-restricted chemicals in Taiwan exacerbates the unknowns
surrounding Taiwan's possible chemical/biological (CB)
weapons programs, possible plans to develop satellite space
launch and long-range cruise missile capabilities, and its
possible interest in acquiring retaliatory capabilities to
deter attack from China. AIT does not/not see any
indications of a chemical weapons program in Taiwan, but even
the small value of S2 chemicals shown on Customs documents
entering Taiwan could be significant in a weapons program.


More Dangerous Than Chemical Weapons
--------------


8. (S) From a broader point of view, the greatest danger in
the current situation comes from Taiwan's high tech
industries' dependence on China for critical inputs. China
could potentially use this dependence to speed the migration
of these high tech industries to China (which is already
underway for various other reasons) or to disrupt the supply
of high tech products to global markets. About two-thirds of
the world's semiconductor foundry production is done in
Taiwan. Taiwan supplies 40-50 percent of the global market
for glass fibers, integrated circuit packaging, and liquid
crystal displays, and is the world's second largest supplier
of integrated circuit substrates and dynamic random access
memory chips. These and other high tech electronics products
require small quantities of CWC-restricted chemicals in their
manufacture.

AIT Discussions on Protecting U.S. Interests
--------------


9. (S) On March 7, AIT met with an interagency group of
Taiwan officials to exchange views and explore ideas on how
to arrange outside inspection and monitoring of Taiwan's
trade, production, and stores of CWC-restricted chemicals.
The discussion covered how CWC-like inspections could be
conducted that did not include China (Taiwan officials said
that Taiwan could not accept inspections involving officials
from China.)


10. (S) Taiwan officials reacted positively to the
possibility of allowing inspections of both civilian and
military production and stores by officials from the export
control Gameplan participants (Australia, Germany, Japan, UK,
and the United States) and to having the Gameplan
participants replace China as the source of the
CWC-restricted chemicals needed in Taiwan's high tech
industries. Taiwan officials agreed to research further how
a CWC-like regime of outside inspections could be established
under the Gameplan for both civilian and military chemical
facilities in Taiwan, but they cautioned that this idea would
require clearance at the highest levels.


11. (S) The Taiwan officials acknowledged that there are
stockpiles of S2 chemicals in Taiwan, but said that these
stockpiles had mainly been imported prior to the year 2000,
when CWC restricted such exports to Taiwan. They mentioned
one Taiwan company that produced a "small quantity" of an S2
chemical for its own "internal" use (the company and chemical
name were not mentioned),but claimed to have no information
on military production and stores of CWC-restricted

TAIPEI 00000550 003 OF 003


chemicals.


12. (S) Taiwan participants in the discussions:
-- Ms. Liu Shu-lin, Technical Specialist, IDB, MOEA
-- Mr. Lai Kwo-shing, Deputy Director BOFT, MOEA
-- Ms. Susan Lu, Export Control Task Force, BOFT
-- Dr. William Jang, Director, ITRI
-- Mr. Ke Liang-ruey, Department of Treaty and Legal Affairs,
MOFA

No Immediate Problem for Taiwan
--------------


13. (S) Between its stockpiles, domestic production, and
imports, Taiwan does not seem to be facing any acute crisis
regarding supplies of CWC-restricted chemicals. The current
situation is not so much a problem for Taiwan as it is a
significant gap in the global controls over CWC-restricted
chemicals.


14. (S) Recommendations: AIT recommends that we press China,
like all other CWC member states, to require official
BOFT-issued end user certificates for its exports of
CWC-restricted chemicals to the WTO-designated "Separate
Customs Territory of Taiwan, Penghu, Kinmen, and Matsu." The
industry-issued certificates now accepted by China provide
little guarantee of how or where the chemicals are being
used, and the claim that these are "internal transfers" is
inappropriate. We should consult with our export control
Gameplan partners about establishing a CWC-like control and
inspection regime for Taiwan under the Gameplan and replacing
China as Taiwan's main source of CWC-restricted chemicals.
To have an effective global regime to prevent proliferation
of chemical weapons, Taiwan's chemicals must be subject to
outside inspection and monitoring.
YOUNG