VICE PRESIDENT SIEW OUTLINES TAIWAN ECONOMIC

C O N F I D E N T I A L AIT TAIPEI 000808


STATE FOR EAP/TC
STATE PASS USTR FOR STRATFORD AND KATZ, TREASURY FOR
OASIA/TTYANG,
NSC FOR TONG, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN, USDA
FOR FAS/OCRA RADLER AND BEILLARD

E.O. 12958: DECL: 06/09/2018
TAGS: ECON ETRD EAGR PROG PREL TW CH
SUBJECT: VICE PRESIDENT SIEW OUTLINES TAIWAN ECONOMIC
POLICY AGENDA

REF: TAIPEI 731 (NOTAL)

Classified By: Robert S. Wang, Acting AIT Director, for reasons 1.4 (b)
and (d).


1. (C) SUMMARY. In a June 10 meeting with ADIR and visiting
AIT/W Director for Trade and Commercial Policy, Vice
President Vincent Siew said the Ma administration is now
concentrating on inflation control, stimulating domestic
demand, and expanding cross-Strait economic ties through
implementing weekend charter flights and increasing the
number of Mainland tourists. Taiwan must work to "normalize"
cross-Strait economic relations, said Siew, a process he
estimated would take at least three-to-four years. Siew
asserted that South Korean protests have made it politically
difficult for Taiwan to secure rapid market opening for the
full range of U.S. beef imports. ADIR emphasized the
importance of addressing beef and other priority bilateral
trade concerns as a precursor to a successful U.S.-Taiwan
Trade and Investment Framework Agreement (TIFA) meeting in
Taipei this September. END SUMMARY.


2. (SBU) The meeting took place at the Office of the Vice
President. Vice President Vincent Siew was accompanied by
Ministry of Economic Affairs (MOEA) Bureau of Foreign Trade
(BOFT) Second Bilateral Trade Division Section Chief Jason
Hsu, MOEA BOFT Second Bilateral Trade Division U.S. and
Canada Trade Officer Kate Liao, and a staff aide. Vice
Presidential Chief of Staff Francis Liang was present for the
beginning of the meeting. Acting Director and AIT Washington
Director for Trade and Commercial Policy Francis Ruzicka were
joined by Economic Chief (notetaker).

--------------
Cross-Strait economic agenda
--------------

3. (C) Outlining the Ma administration's overall economic
priorities, Siew stressed that Taiwan must avoid economic
isolation by pursuing a policy of openness, including
enhancing its economic relationship with the U.S. Siew
emphasized the importance of stimulating domestic demand, and
said the administration's success in that area would depend
on maintaining consumer confidence in the face of rising
inflation (reftel) and enhancing cross-Strait economic links.
Successful negotations with the PRC to implement
cross-Strait weekend charter flights and increase the number
of Chinese tourists visiting Taiwan, in particular, will help
boost domestic spending and consumer confidence. Siew
estimated that the charter flight and tourism measures could
increase Taiwan's annual GDP growth rate by roughly 1
percentage point.


4. (C) Responding to a question from Ruzicka, Siew observed
that a cross-Strait common market is "a long way in the
future," and will "probably not be reached in my lifetime."
Instead, he emphasized, Taiwan's "most important" task is to
"build up mutual trust" with the PRC and "normalize economic
relations" across the Taiwan Strait, a process Siew estimated
would take "at least three or four years." According to
Siew, the Ma administration "does not have any illusions"
that cross-Strait relations will improve to the extent that
all problems will be resolved. Instead, he observed, Taiwan
must pursue a patient, incremental policy of gradual
improvement in its relations with the PRC. Siew mentioned
that Taiwan's ASEAN trading partners all say they are waiting
to see the results of efforts to improve cross-Strait
economic ties before considering how to enhance their own
economic relations with Taiwan. Improved relations with
Beijing will give Taiwan a chance to participate in regional
economic integration, noted Siew.



5. (C) After implementing passenger flights and raising the
limit on Mainland tourist visits, explained Siew, Taiwan's
cross-Strait economic priorities will shift to setting up
mechanisms for air and sea cargo, and to increasing financial
market integration with the PRC. According to Siew, the PRC
is unlikely to pursue its obligations with Taiwan within the
WTO, as doing so would require internal coordination with the
Foreign Ministry, a step the PRC's officials responsible for
Taiwan would prefer to avoid. Ruzicka thanked Siew for
Taiwan's decision to support the U.S. as a co-complainant in
its WTO action involving the Information Technology Agreement
(ITA),a policy the Office of Trade Negotiation (OTN) shared
with Ruzicka and visiting USTR representatives the previous
day.

--------------
Infrastructure program and WTO GPA accession
--------------

6. (C) Siew mentioned that his new duties as Vice President
will require him to spend a great deal of time on unfamiliar
areas such as culture and sports, rather than the economic
issues on which he has concentrated in the past. He noted
that many foreign equity funds are showing interest in the Ma
administration's twelve major infrastructure projects, which
will be the subject of an investment promotion campaign later
in the year. The projects will be incoroporated in next
year's official budget, added Siew. After Ruzicka highlighted
the importance of Taiwan's accession to the WTO Government
Procurement Agreement (GPA),Siew said he has asked the
Ministry of Public Works to devise more transparent
procurement policies. Siew indicated that he has not yet
focused on the WTO GPA issue, and noted that the Cabinet has
primarily been concentrating on inflation control, domestic
demand, and cross-Strait relations.

--------------
Health care reform
--------------

7. (C) Alluding to Siew's past role in helping to establish
Taiwan's national health insurance program, Ruzicka urged the
Vice President to address reform of a health care system that
lacks accountability and leads to significant discrepancies
between the cost of original drugs and the official
reimbursement price. Siew noted that Taiwan's national
health scheme is mired in deficit, and said he has asked the
Ministry of Health to reform the system.

--------------
Beef market access
--------------

8. (C) Ruzicka stressed the importance of assuring the prompt
opening of Taiwan's market to the full range of U.S. beef
imports, consistent with OIE standards. Siew cited ongoing
South Korean protests and a recent demonstration by Taiwan
farmers against efforts to revise fertilizer prices in
asserting that the issue is "too sensitive" to be resolved in
the immediate future. Ruzicka emphasized the OIE's
science-based criteria indicating that bone-in and other
restricted forms of beef are safe for human consumption, and
underscored White House and Congressional interest in opening
the Taiwan market to affected U.S. beef exports. Siew said
he is unfamiliar with the details of the beef issue, but
maintained that the issue is "highly politically sensitive in
Korea and Taiwan" and "has to be cooled down" before Taiwan
can address the problem.

--------------
TIFA agenda
--------------



9. (C) The Acting Director noted U.S. interest in preparing a
strong, positive agenda for the Trade and Investment
Framework Agreement (TIFA) talks tentatively scheduled for
September in Taipei. Taiwan's ability to resolve outstanding
concerns regarding beef, GPA, and other priority trade issues
would help demonstrate its ability to pursue a productive
TIFA agenda and enhance economic relations with the U.S.
Siew observed that the relevant ministries now have varying
degrees of familiarity with the U.S.-Taiwan economic agenda,
and expressed a general hope for improved bilateral economic
ties based on a "new framework to consolidate our relations."
ADIR and Ruzicka noted that the TIFA already exists as the
primary vehicle for improving bilateral economic relations,
and progress will best be made by achieving progress on
outstanding priorities in that forum.


10. (C) COMMENT. Siew and Ruzicka have known each other for
many years, and the meeting was formally billed as a private
exchange between old friends and colleagues. Domestic and
cross-Strait concerns are at the center of Siew's economic
policy agenda, and he appeared less familiar with the current
U.S.-Taiwan economic and trade agenda. Siew's invocation of
the South Korean protests as cause for caution on beef
market-opening has been echoed by other Taiwan officials in
recent days, and will complicate our efforts to achieve
progress on that front. END COMMENT.


WANG