Taiwan COA Minister and AIT Director Discuss

UNCLAS AIT TAIPEI 001002 SENSITIVE SIPDIS STATE PASS USTR FOR STRATFORD, KATZ, AND O'CONNOR STATE PASS AIT/W USDA FOR FAS/OCRA FOR RADLER, BEILLARD; FAS/OSTA FOR HAMILTON, BEAN, DAWSON; AND FAS/OFSO FOR BREHM E.O. 12958: N/A TAGS: EAGR ETRD ECON PGOV PREL TW SUBJECT: Taiwan COA Minister and AIT Director Discuss Key Agricultural Issues ¶1. (SBU) SUMMARY: In a July 2 introductory call at the Council of Agriculture (COA) on new Chairman, Chen Wu- hsiung, the AIT Director raised the importance of resolving key access issues for U.S. agricultural products including beef, pork, and rice. Responding on beef, the Chairman expressed caution on the prospects for progress, saying the issue had become very sensitive given developments in Korea and worries about slipping public support for the Ma administration. Chen stated that the pork ractopamine issue is a matter of "national treatment," with farmers firmly opposed to allowing the presence of a compound in imports that is banned for domestic use. He added that COA would face great difficulty changing a regulation established less than two years ago. While acknowledging the domestic sensitivities involved, the Director pressed for a science-based solution to restore U.S. exports which he noted would help consumers at a time of very high pork prices. On rice, the Director raised concerns about Taiwan's delay in fulfilling its purchasing commitments under the Country Specific Quota (CSQ) system. Speaking for Chen, the newly assigned Director-General for International Affairs, Zhang Su-san, sought understanding for the difficulty Taiwan faces in the current tight world market, arguing that it could not import rice with international prices rising above Taiwan domestic wholesale levels. Finally, the Chairman indicated tentative willingness to hold an inaugural session of the Consultative Committee on Agriculture (CCA) this fall. The Director proposed active efforts to nail down a schedule for the meeting, possibly in conjunction with TIFA, with decisions on level of participation and agenda to follow. END SUMMARY. Domestic Concerns Dominate COA's Attention -------------- ¶2. (SBU) In response to the Director's opening question on key work facing the Council of Agriculture (COA) early in the new administration, Chairman Chen indicated that low prices for flowers (a major Taiwan farm and export product),and fertilizer price increases have dominated his attention. He noted that the increase in fertilizer prices had been partially offset by subsidies in the face of farmer criticism of the move. Chen also mentioned recent flooding in Central and Southern Taiwan had created headaches for COA as it worked to rapidly assess damage and revise relief payment guidelines. Noticeably absent in the Chairman's comments was any mention of the current international food crisis or trade issues. Beef Remains Top Access Priority -------------- ¶3. (SBU) Turning to U.S. access priorities for agriculture with Taiwan, the Director told Chen that he had discussed the beef issue with President Ma recently and encouraged him to discuss the topic with DOH and COA to ensure their reviews are proceeding as expeditiously as possible. He also gave the Chairman a brief readout on his meeting held the day before with Health Minister Lin, noting the latter had expressed determination to rely on science for conducting DOH's additional review on fully opening to U.S. beef for human consumption. The Director urged COA to cooperate with DOH to the extent required, and to proceed likewise toward opening for the animal feeding products (e.g., protein-free tallow) under its jurisdiction. The Director noted that Taiwan consumers enjoy and trust U.S. beef, as evidenced by our record-setting exports after the market was re-opened to boneless beef - a trade now valued at $130 million. ¶4. (SBU) Chen responded that beef is a very sensitive issue for the new administration. The timing has become difficult after the heavy news coverage of problems for President Lee in Korea. Meanwhile, the high price of petroleum is affecting prices across the board and is contributing to a decline in public approval of the Ma administration. The Director countered that there are reasons other than beef playing into the situation President Lee faces in Korea. While not dismissing the difficulty this had presented Korea's still-new administration, beef had become an excuse to attack the President. Taiwan's situation is very different, argued the Director. He encouraged Chen to review the research already completed, have his staff do any further study needed quickly, and then base its decision on science. As conveyed to the DOH Minister the previous day, the Director said if this means visiting additional packing houses or meeting with officials, the U.S. would do its best to accommodate Taiwan requests provided it is leading to a timely, science-based decision. Chen replied that the WTO requires members to base policy on science -- to which the Director observed, "so does the OIE." Don't Forget About Pork -------------- ¶5. (SBU) Recognizing the more sensitive nature of the pork issue, the Director urged Chen to make a quiet review of the science. This could then be shared with the public to gain support for approving ractopamine. Given the rising price of pork in Taiwan, imports could play a role stabilizing the market and help consumers, added the Director. Moreover, while some Taiwan hog producers may never support the U.S. position on ractopamine, AIT has been told others understand the benefits and wish to use it. In response, the Chairman took a different tack in justifying Taiwan's position than his COA predecessor. He referred to the issue as a matter of "national treatment," given that the compound had been banned for domestic use. As a result, farmers have taken a firm stand against imports being allowed to contain ractopamine since they are not allowed to use it. Chen told the Director that COA would encounter great difficulty allowing the presence of ractopamine in pork since it would mean changing regulations COA instituted less than two years earlier (i.e., in October 2006) prohibiting its use. ¶6. (SBU) The Director reiterated the importance of basing decisions on science, which had clearly not been adhered to in this case. Setting a MRL at the Codex- recommended level of 10 ppb remains the only viable solution ultimately, but in the interim, Taiwan should revisit setting the 1 ppb MRPL (detection limit) it rescinded in March. Absent such action, explained the Director, the trade has become too risky. This is hurting U.S. exporters and Taiwan consumers alike as there is clear demand for the product. ¶7. (SBU) Chen agreed there is demand, as witnessed by the significant flow of U.S. pork into Taiwan in recent years. He maintained, however, that the issue is one of "national treatment" that had become extremely difficult for COA to address. The Director suggested the Chairman should work with Taiwan producers, and then educate consumers to gain support for a change. He noted that the previous administration had repeatedly pointed to upcoming elections as the reason it couldn't move on the issue. With elections over until well into 2009, the Director argued the politics should be easier to manage now. Growing Concern about Delayed Rice Purchases -------------- ¶8. (SBU) The final issue raised by the Director was growing U.S. concern about delays in Taiwan fulfilling its purchase commitments for U.S. rice under the Country Specific Quota (CSQ) system initiated in 2007. The crux of the problem, according to the Director, lies with implementation of Taiwan's ceiling price policy which appears to lag international market conditions. This has caused purchase tenders for U.S. rice to fail in an all too frequent pattern, resulting in Taiwan falling well behind filling the 2007 and 2008 quotas. ¶9. (SBU) The newly-assigned Director General of the International Affairs Department, Zhang Su-san, responded that skyrocketing international rice prices were the real problem. She pointed out that Taiwan's ceiling price policy is bound by government procurement requirements, and argued that it has generally functioned well except in recent months when market conditions radically changed. Zhang stated that international prices have risen above Taiwan wholesale rice prices making it very difficult for Taiwan to import. She also sought understanding for Taiwan's decision not to put added pressure on the tight international market during this sensitive period. [Note: Zhang's previous position was in the TECRO Office in Geneva, where she was involved in negotiations to establish the rice CSQs, and thus she is already familiar with this issue. End Note] ¶10. (SBU) AGR Chief responded that the problem of failing tenders pre-dates the current run-up in international prices and has been a recurring problem for timely purchasing of U.S. rice. While the U.S. appreciated Taiwan's efforts to establish the new CSQ system as agreed under the WTO, the tendering process is raising serious concerns about Taiwan's ability to fulfill commitments that are already well behind schedule. In a side discussion with Zhang following the meeting, AGR Chief noted we look forward to discussing the issue further and receiving Taiwan's reply as soon as possible to a USDA letter outlining these concerns sent under AIT cover to the Director General of COA's Agriculture and Food Agency (AFA) in early June. Consultative Committee on Agriculture -------------- ¶11. (SBU) The Director remarked that agriculture has been a big positive for U.S.-Taiwan relations over many years. As a result, Taiwan is the United States' sixth largest export market, and the U.S. ranks second for Taiwan. To build further on that important sectoral relationship, the two sides had agreed last year to set up a Consultative Committee on Agriculture (CCA). He told Chen the U.S. is interested in holding an inaugural session this fall, and hoped the two sides could use the meeting to discuss areas in the relationship that are positive as well as those where things have soured. Such a session would then set a course for our continued work into 2009, according to the Director, and would ensure the CCA is held once per year as agreed. ¶12. (SBU) The Director acknowledged that the proposed timing might be a little off for Taiwan given the still-recent change in administrations, but also emphasized the importance of holding it ahead of U.S. elections in November. Otherwise, he cautioned, scheduling could slip into mid-2009. Seeking a soft commitment from Chen, the Director said the first order of business is to agree on timing, possibly in conjunction with the next round of the Trade and Investment Framework Agreement (TIFA) talks. Then the two sides can proceed to firm up participation levels and agenda. ¶13. (SBU) In response, Chen did not object to launching the CCA this fall, but he expressed concern about avoiding a conflict with the restart of Taiwan's legislative session in September. He then turned to Grace Lin, Deputy Director-General of the International Affairs Department, for additional comment. Lin indicated COA has already identified topics covering the broad areas of policy, trade, and technical cooperation. She also mentioned organic agriculture specifically. She said the COA is anxious to know which topics the U.S. wants to discuss and would appreciate conferring on this well in advance. The Director replied this would not be a problem once a commitment to hold the meeting has been set. He noted that the key issues for his call on the Chairman (e.g., beef, pork, and rice) should provide a good clue on our access-related priorities should they remain unresolved. The Director also provided the Chairman with a fact sheet on the CCA prepared by USDA. ¶14. (SBU) COMMENT: COA Chairman Chen, while professing interest in using science as the basis for decision- making on the beef and pork issues, gave no sign of having initiated any new processes for doing so. Flanked by the Deputy Director General of COA's Bureau of Animal and Plant Health Inspection & Quarantine (BAPHIQ),who did not speak during the meeting, the Chairman at times seemed reticent to engage and stuck to the theme of caution that has pervaded all of our contacts with the new administration on the beef and pork issues. As had been the case at DOH and elsewhere, Chen pointed to the situation in Korea and its ramifications for the fledgling Ma administration, which already faces slipping public support under the weight of slower-than-expected progress improving Taiwan's economy. One exception was Chen's apparent willingness to hold the CCA at a relatively early date. He even queried the Director whether this would be possible in late August, although we think this unrealistic target simply reflected the Chairman's concern about senior COA availability after the Legislature Yuan returns to session in early September. END COMMENT. ¶15. (SBU) COA Participants: Chairman Chen Wu-hsiung International Affairs Dept. DG Chang, Su-san International Affairs Dept. DDG Lin, Grace Lih-fang BAPHIQ DDG Huang, Kwo-ching BAPHIQ, Animal Quarant. Div., Sec. Chief Peng, Ming- hsing AFA, Food Storage & Transport. Div. Director, Pan Chih ¶16. (U) BIO Note: Bio of New COA Chairman (Minister) Name: Chen, Wu-Hsiung Birth Place: Taipei County, Taiwan Birth Date: March 11, 1944 Education: --Dept. Agricultural Economics, University of Illinois at Urbana-Champaign, U.S.A., Ph.D., 1980 --Graduate School of Agricultural Economics, National Chung-Hsing University, Taiwan, M.S., 1970 --Department of Agricultural Economics, National Chung-Hsing University, B.S., 1966 Employment & Experience: --Foundation Fellow, Technology & Economy Division, National Policy Foundation (KMT Think Tank) --Associate Professor, Dept. of Agricultural Economics, National Taiwan University --Ad Hoc National Assembly Representative, 2005 --Advisor, Executive Yuan, January 2002 - October 2004 --Vice Chairman, Council of Agriculture, July 1999 - January 2002 --Secretary General, Taiwan Provincial Government, December 1998 - June 1999 --Commissioner, Provincial Department of Agriculture & Forestry, November 1996 - December 1998 --Deputy Commissioner and Acting Commissioner, July - November 1996 --Chinese Taipei's lead agricultural negotiator in WTO accession talks, 1994 - 1996 --Division Chief, Deputy Director General and Director General, Dept. of Economics & Planning, Council of Agriculture, 1984 - 1996