TAIWAN VICE PREMIER ON BILATERAL TRADE

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000091

SIPDIS

SIPDIS

STATE PASS USTR
STATE FOR EAP/TC,
USTR FOR STRATFORD AND ALTBACH
TREASURY FOR OASIA/LMOGHTADER

E.O. 12958: DECL: 01/12/2010
TAGS: ETRD ECON PREL TW
SUBJECT: TAIWAN VICE PREMIER ON BILATERAL TRADE

REF: A. TAIPEI 63


B. TAIPEI 49

C. 2005 TAIPEI 4187

Classified By: AIT DIRECTOR STEPHEN YOUNG FOR REASONS 1.5 (b),(c)


1. (C) Summary: Vice Premier Tsai told AIT Director Young
January 12 she is focused on managing the financial crisis
resulting from a run on a local bank and criminal
investigations into the collapse of a large local
conglomerate. The Director reaffirmed U.S. interest in
advancing bilateral trade issues through the TIFA process and
in sending more high-level visitors to Taiwan in 2007. Tsai
welcomed more visitors from the U.S. and reiterated Taiwan's
interest in working with the U.S. to reinvigorate the Doha
Round. Tsai said Taiwan remains committed to enhancing its
export control regime and continues to work on enhancing
cross-Strait economic ties, but needs Beijing to also work on
this issue. End Summary.


2. (U) On January 12, AIT Director Young met with Vice
Premier TSAI Ing-wen to discuss bilateral trade and other
economic issues. The Director was accompanied by Deputy
Director Wang and Econ Chief. Tsai was accompanied by her
chief of Staff, Chang Hsieng-huei.

Jittery Financial Sector
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3. (C) Tsai had briefly delayed the scheduled meeting
because she was deeply involved in emergency deliberations
concerning the Chen Administration's handling of the recent
run on Chinese (Zhonghua) Bank (CB) and a growing
investigation into financial improprieties of the China Rebar
Pacific Group (CRPG) (refs A and B). Tsai said she and her
financial regulators are focused on making sure the problems
of CB and CRPG do not expand and affect the six or so
vulnerable banks in Taiwan that have been considered "shaky"
since the 2001 Taiwan banking crisis. She said the situation
is difficult right now, particularly because of the intense
media focus and the tough political environment.
Nevertheless, looking on the bright side, Tsai indicated this
crisis could be an opportunity to push ahead with cleaning up
the financial mess left from the banking crisis. She said
conditions had recently improved because both foreign and
domestic buyers are interested in entering Taiwan's banking
market. These vulnerable banks could now be seen as a
desirable purchase. Tsai said the Administration is
currently considering amending existing laws to provide
additional assets to stabilize vulnerable banks. (See ref c
for reporting on Taiwan's financial sector reform.)

Trade Agenda
--------------


4. (C) The Director said he had met in Washington with
Deputy USTR Bhatia just as AUSTR Tim Stratford was concluding
his Taipei visit. Bhatia confirmed his desire to actively
pursue the agenda under the Trade and Investment Framework
(TIFA) and to visit Taiwan again in 2007. The Director also
said he had met with Secretary of Agriculture Mike Johanns
and found the Secretary to be an old friend of Taiwan's from
his days as Governor of Nebraska. In the immediate future,
we are looking to finalize the text of the Consultative
Committee on Agriculture (CCA) and have an inaugural session
with a senior official from USDA visiting Taiwan to meet with
Council of Agriculture (COA) Chairman Su. Tsai indicated she
was familiar with the CCA text and expressed her view that it
would be finalized shortly. She would welcome a visit from
USDA officials and a return trip by Bhatia. Tsai observed
that the Chen Administration will have to notify the CCA to
the Legislative Yuan (LY) but that no LY concurrence will be
required. She speculated that LY members may well use the
notification of the CCA as a platform to complain about
government policy. (Note: AIT/T AGR confirmed the same day
that the Department of Health and COA had earlier received
instructions from Tsai to get together and resolve any

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differences over the text of the CCA. End Note.)


5. (C) Sometime after the inaugural meeting of the CCA, the
Director said he believes USTR would want to hold the 2007
TIFA Council meeting, but that precise timing remains
uncertain. The U.S. side wants to work closely with Taiwan
to address and resolve the outstanding TIFA issues, including
Taiwan's import regime for rice. The U.S. is committed to
working with Taiwan should any member of the World Trade
Organization (WTO) object to Taiwan's regime. Finally, the
Director noted Secretary Johanns emphasized the importance
constantly placed by President Bush on restarting and
reinvigorating the Doha Development Round in the WTO. We
urged Taiwan's best efforts in this process. Tsai quickly
responded she had discussed this issue with AUSTR Stratford
in December and was looking forward to suggestions from the
U.S. on how best Taiwan and the U.S. could cooperate on
reinvigorating the Doha Round. She recalled that she
suggested to Stratford that USTR's Dorothy Dwoskin could be
very helpful in making specific suggestions. She noted she
had received a report from John Deng, Deputy in the Taipei
Economic and Cultural Relations office (TECRO),about a
meeting with USTR where the topic was raised, but that it
contained no specifics on how to push ahead on Doha.

Export Controls
--------------


6. (C) The Director said he is pleased with the cooperation
from Taiwan on implementing a variety of programs on export
controls. This remains a key concern of top American policy
makers. He emphasized the need for a comprehensive approach
from Taiwan that involved all relevant agencies cooperating,
including the National Security Bureau, the Ministry of
Justice Investigation Bureau, the Board of Foreign Trade, the
Customs Service and more. He noted it would be important to
avoid "stovepiping." He told Tsai that the U.S. Department
of Energy has a team in Kaohsiung now and is looking to put
the Megaports Program into operation this year; we will
launch a series of Export Control and Border Security
training programs on January 22; and the Container Security
Initiative (CSI) will shortly move into its renovated office
in Keelung. Tsai jotted down a note saying the U.S. was
pleased with Taiwan's cooperation on export controls. She
said Taiwan welcomes the increased security cooperation with
the U.S. and suggested that the programs had had a beneficial
effect on security in other ports in Taiwan. (Note: BOFT
officials have separately told AIT/T that CSI has contributed
to increased security in Taiwan's ports outside of Kaohsiung
and Keelung. End note.)


7. (C) Tsai said one issue involving CSI is the amount of
time it takes for goods to clear customs. She said Taiwan is
trying to establish Free Trade Zones in Kaohsiung and other
ports and rapid Customs clearance is a major factor in such
endeavors. The Deputy Director responded that while CSI does
take some additional time, even if only a matter of seconds,
having the CSI process done in Kaohsiung saves much more time
for clearance of the goods when they arrive at a U.S. port.
Tsai said that was very useful information and time saved at

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U.S. ports would be a significant factor. She believed that
this was an issue that could be solved technically. The
Director said AIT would take any delays as a serious issue
and would check into it.

Cross-Straits & AmCham
--------------


8. (C) The Deputy Director noted the new American Chamber of
Commerce in Taipei President, Jane Hwang of State Street
Bank, met recently with the Director and noted a prime
concern of AmCham would be cross-Strait relations. The Vice
Premier said she would always be happy to meet with AmCham to
discuss commercial issues like cross-Straits exchanges. The
Director said U.S. firms would, of course, like to have
access to any direct cross-Strait flights available to Taiwan
or Chinese residents. Tsai acknowledged foreigners' clear

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interest in such access, saying AmCham should raise this
issue in Beijing as well as Taipei. (Comment: Left unsaid
was Tsai's -- and Premier Su Tseng-chang's and Mainland
Affairs Council Chair Joseph Wu's -- repeated statements that
Beijing is the party unwilling to come to terms on
cross-Strait flights or tourism. End Comment.) The Director
also noted the desirability of third-party carriers also
participating in cross-Strait flights.

COMMENT
--------------

9. (C) Though somewhat distracted by the crisis of the day,
Tsai clearly remains engaged and supportive of strengthened

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U.S.-Taiwan economic cooperation and is ready to work with us
on CCA and other TIFA agenda items. Of pressing note: FTA
never came up. This is probably more because the Taiwan side
realized this is not a realistic topic of discussion until
Congress considers extension of fast-track authority than
that our friends here have fallen off their enthusiasm for
the subject. End Comment.
YOUNG