PREMIER SU TSENG-CHANG ON PRESIDENTIAL PRIMARY

S E C R E T SECTION 01 OF 03 TAIPEI 000878

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/19/2032
TAGS: PGOV PREL TW
SUBJECT: PREMIER SU TSENG-CHANG ON PRESIDENTIAL PRIMARY
CAMPAIGN AND U.S.-TAIWAN RELATIONS


Classified By: AIT Deputy Director Robert Wang,
Reasons: 1.4 (b/d)


1. (S) Summary: In an April 18 meeting with Premier Su
Tseng-chang, the Director underscored U.S. concerns about the

SIPDIS
stalled defense budget and the possibility of election-driven
moves by Taiwan that could damage cross-Strait stability. Su
said the DPP is trying to work out a compromise with the KMT
to allow passage of the defense budget, and he suggested that
once the primary season is over in June, the DPP and its
presidential candidate will moderate their rhetoric in an
effort to win the political center. Su emphasized that
Taiwan's new president will have to pay attention both to
public opinion and to the attitude of neighboring countries,
including China, the U.S., and Japan. Su hoped Beijing would
grasp the opportunity to engage Taiwan's next president, and
he also discussed the value of further cross-Strait opening.
End Summary.


2. (S) The Director discussed U.S.-Taiwan relations and
domestic politics with Premier Su Tseng-chang on April 18.
Briefing Su on his recent consultations in Washington, the
Director underscored concerns about the stalled defense
budget and about the possible effects on cross-Strait
stability of President Chen Shui-bian's new "four wants"
("four imperatives") formulation.

Defense Budget
--------------


3. (C) Su blamed the KMT for holding the 2007 annual budget
hostage to its Central Election Commission (CEC) bill in the
Legislative Yuan (LY),and added that the KMT had rejected a
DPP compromise intended to allow the defense portion of the
budget to pass first. While the KMT wants the CEC membership
to be based on party representation in the LY, this is
unconstitutional, and the DPP has suggested that the two
sides propose candidates and then agree on a common list.
The KMT goal is to gain the majority of seats on the CEC,
which the DPP cannot accept, Su said.

The KMT
--------------


4. (C) Su said LY Speaker Wang Jin-pyng supports passing the
defense budget but former KMT Chairman Ma Ying-jeou has
insisted that the CEC bill must be dealt with first.
According to Su, Ma appointed Wu Den-yih as Secretary General
and selected Wu Poh-hsiung as the new chairman to retain
control of the KMT. Ma's rival Wang Jin-pyng is supported by
the People First Party (PFP),the Non-partisan Solidarity
Union (NPSU),and some KMT legislators. Ma-Wang rivalry is
having a polarizing effect on the KMT, but the "final battle"
between Ma and Wang has not yet been joined, Su suggested.

WHO and UN
--------------


5. (S) The Director reviewed U.S. concerns about possible
political moves by Taiwan on sovereignty-related issues,
including applying under the name "Taiwan" to join the UN.
Taiwan appeared to be laying the groundwork for a UN
initiative with President Chen's recent letter applying to
join the WHO under the name "Taiwan." Su responded that the
application to join WHO under the name "Taiwan" reflected the
public's frustration with the lack of progress in Taiwan's
WHO campaign over the past ten years. Almost half of the LY
members had signed a petition asking the government to apply
for WHO membership, Su added.


6. (C) The Director noted that Taiwan's next president will
have to figure out how to deal with China. The U.S. is
concerned Taiwan might take destabilizing steps during the
presidential election that would make it harder for the next
president to find a practical and productive cross-Strait
approach. Su suggested that the most extreme political
rhetoric and moves were taking place during the current
primary season. Once the primary process is completed, the
DPP and its presidential candidate will move to the middle of
the political spectrum to win more votes, Su predicted. He

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added that he believed President Chen would gradually give
more and more room to the DPP presidential candidate.


7. (C) Whoever is elected president in 2008 will have to pay
careful attention at the same time both to Taiwan public
opinion, and to the attitude of neighboring countries,
especially China, the U.S., and Japan, Su observed, saying
that all leaders in Taiwan realize this. Public opinion in
Taiwan, a new democracy, is subject to change and gradual
shifts, Su suggested. For example, increased PRC
unfriendliness leads to a more confrontational attitude in
Taiwan.

Cross-Strait Relations
--------------


8. (C) It is highly regrettable, Su observed, that China
refused from the beginning to have contact with the DPP and
President Chen. Chen was willing to make his "four noes"
commitment, despite pressure not to do so, because he wanted
to open contact with China. For the same reason, he
announced his "active opening" cross-Strait economic policy.
However, the response was disappointing, public opinion
changed, and Chen therefore adjusted his policy toward the
PRC. Su hoped that China would grasp the opportunity
presented by a new president coming into office in Taiwan in

2008. Those in Taiwan who support direct cross-Strait links
and "active opening" need encouragement for cross-Strait
policy to move forward rather than back to the starting
point, Su pointed out. He said that there needs to be an
effective cross-Strait mechanism given the very close
cross-Strait economic relationship.


9. (C) While taking into account sovereignty and security
concerns, Su suggested there should be cross-Strait
discussions on a range of issues, including flights, PRC
tourists, and banking. As experience is gained with charter
flights, there can be further step-by-step progress in this
area. Having tourists visit Taiwan is very good for
educational purposes, Su suggested. He noted that members of
PRC academic and religious groups often appeared not to have
slept well during meetings held on the day after their
arrival in Taiwan. The reason was they had all stayed up
late watching Taiwan's famous political call-in talkshows, a
type of program that is not possible in the PRC at this time.


DPP Presidential Primary
--------------


10. (C) Turning to the DPP primary, Su noted that he and
Frank Hsieh are very close in public opinion polls and in
expected votes from party members, which together will
determine who will become the DPP's presidential candidate.
Su expects a turnout of about sixty percent of the 250,000
DPP members in the May 6 primary vote and believes a high
turnout will help him. In the subsequent public opinion
poll, Su would have preferred not to exclude Blue supporters,
and he believed the provision to exclude about 30 percent of
the (Blue) respondents would hurt him slightly. If he wins
the primary, Su said, he will want to select a vice
presidential candidate who is different from himself and can
appeal to a different set of voters. Su noted, however, that
he had already said he could accept one of the three other
presidential candidates as his running mate, a proposal that
Yu Shyi-kun and Annette Lu had already rejected.

Foreign Investment
--------------


11. (C) The Director noted the collapse of Carlyle's
takeover bid for Advanced Semiconductor Engineering (ASE).
DDIR pointed out that some large western companies which were
interested in Taiwan's financial market were holding off
investing because they believed Taiwan's government was not
especially welcoming. In particular, Taiwan's government
seemed to drag its feet on approvals while saying that it
welcomes foreign investments in general. Su stressed that
Taiwan's policy is to welcome and encourage foreign
investment and that any problems of slow approvals are due to

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"other reasons," adding that the government could look into
concrete cases. The Director urged Su to pay attention to
the attitude of international business toward Taiwan,
observing that impressions can become realities, and he
suggested AIT could hold follow up discussions on this issue
with Vice Premier Tsai and Economics Minister Chen.

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


12. (C) Su seemed relatively at ease despite the pressures
of an intense presidential primary campaign in addition to
his normal duties as a premier. Su's well-known moderation
and pragmatism came through clearly in his remarks on
cross-Strait opening and on the importance of paying
attention to U.S. and Chinese attitudes as well as Taiwan
public opinion. If nominated as the DPP candidate, Su's
remarks suggest also that he will move back to the center of
the political spectrum.

YOUNG