SEF CHAIRMAN-DESIGATE P.K. CHIANG ON CROSS-STRAIT

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000672 SIPDIS E.O. 12958: DECL: 5/13/2023 TAGS: PGOV PREL PINR ECON CH TW SUBJECT: SEF CHAIRMAN-DESIGATE P.K. CHIANG ON CROSS-STRAIT RELATIONS Classified By: AIT Director Stephen M. Young, Reason 1.4 (b/d) ¶1. (C) Summary: SEF Chairman-designate P.K. Chiang told the Director on May 13 that future discussions with Beijing on cross-Strait issues will focus initially on establishing weekend charter flights and increasing the number of Chinese tourists to Taiwan. In the course of discussions, Taipei is also likely to raise other issues, such as relaxing financial and banking sector investment restrictions and improving intellectual property rights protection. The work ahead will be difficult, Chiang emphasized, adding that the prospect of starting cross-Strait weekend charter flights by July 4 is "simple in theory but complicated in practice." Chiang said he will serve as the main negotiator on behalf of the Taiwan government with Beijing, but also expects to participate in policy formulation. Chiang acknowledged that as MAC chairman the controversial Lai Shin-yuan will play a coordinating role on cross-Strait policy, but will take direction from Ma and the NSC. President-elect Ma Ying-jeou plans to largely bypass honorary KMT Chairman Lien Chan as an intermediary in the future, but also faces the challenge of reining in other KMT channels of communication with Beijing. End Summary. ¶2. (C) Taiwan Straits Exchange Foundation (SEF) Chairman-designate Chiang Pin-kung (P. K. Chiang) met with the Director on May 13 to discuss cross-Strait RELATIONS after President-elect Ma Ying-jeou's inauguration on May 20. Chiang said he expects future discussions with Beijing to focus initially on establishing direct weekend charter flights and increasing the number of Chinese tourists to Taiwan, but added that Taipei is likely to raise other issues, such as relaxing financial and banking sector investment restrictions and improving intellectual property rights protection. The work will be "complicated and difficult" for the Ma administration, Chiang emphasized, noting that at 76 years of age, he and his family were hesitant about returning to public service. He nevertheless felt obliged to build upon the KMT-CCP party-to-party negotiations started over three years ago. Chiang added that, at KMT Chairman Wu Poh-hsiung's request, he will retain his position as KMT vice chairman while serving in the SEF. (Note: Chiang had earlier been quoted in the Taiwan media as planning to resign the party position.) Cross-Strait Weekend Charter Flights Simple in Theory... -------------- -------------- ¶3. (C) Asked about the prospect of starting cross-Strait weekend charter flights by the Ma-imposed deadline of July 4, Chiang said in theory the undertaking should be relatively straight-forward because procedures and agreements are already in place for holiday charter flights. Expanding holiday charter flights to weekend flights could be done easily and would not take extensive negotiations. Such weekend charters would be limited to the currently established routes, which must pass through Hong Kong or Macao airspace en route to the final destination, and take place between a small number of airports (two on the Taiwan side, four in China). ...More Complicated in Practice -------------- ¶4. (C) Establishing the full-blown direct weekend flights that Ma has proposed, however, Chiang continued, will be more complicated, requiring extensive negotiations and a formal agreement between the two sides. Chiang said he was not sanguine such an agreement could be reached by July 4 because of bureaucratic and procedural impediments. (Note: While current holiday charter flights between Taiwan and China pass through a third flight information region (FIR),Chiang explained, direct flights from Taiwan would fly parallel to the Strait before turning west toward their destination without going through a third FIR. For reasons of air defense, direct flight routes would be unlikely to cut directly across the Taiwan Strait, Chiang added. End note.) ¶5. (C) According to SEF procedures, May 26 is the earliest a formal meeting can be held to select him as chairman and TAIPEI 00000672 002 OF 003 appoint a new board of directors, Chiang noted. The SEF and its Chinese counterpart, the Association for RELATIONS Across the Taiwan Strait (ARATS),would need to move quickly to start discussions the first week in June. The two sides would then have to conclude and sign an agreement by the middle of the month to give airlines at least two weeks to prepare for starting weekend charter flights by July 4. Opening new ports of entry and making the flights direct, vice transiting through third FIR, could require extensive modifications to existing arrangements for holiday charter flights, Chiang added. These additional details would complicate the negotiations and make it difficult to reach a quick agreement. SEF to Serve as Main Negotiator -------------- ¶6. (C) Chiang said as SEF chairman his primary role will be to serve as the chief negotiator on behalf of the Taiwan government with Beijing. Given his past experience in cross-Strait affairs and future SEF position, Chiang said he expects to participate in the policy formulation process conducted by the Presidential Office, National Security Council, and the Mainland Affairs Council. Aside from conducting negotiations with Beijing at the request of the government, Chiang noted, he would have no authority over actual cross-Strait policy implementation. ¶7. (C) Chiang told the Director one of his top priorities will be to strengthen the operation and organization of the SEF, which compared to the MAC is seriously short-staffed and under-budgeted. Chiang will rely heavily on the help of SEF Secretary General-designate Kao Kong-lien, who will serve concurrently as a MAC Vice Chairman to coordinate between the two bodies. Chiang said Kao will play an important role in handling working level communications and exchanges with ARATS. Chiang added that he expects current SEF Chairman Hong Chi-chang to remain on the SEF board and to play an active role in the SEF board's work. Hong, a "good guy," had told Chiang he felt frustrated by the lack of support from President Chen and some other DPP officials to carry out certain cross-Strait initiatives. ¶8. (C) Chiang said he does not believe the appointment of Lai Shin-yuan from the pan-Green Taiwan Solidarity Union as head of the MAC will derail cross-Strait RELATIONS because the general policy direction will be set by Ma and the NSC. MAC will serve as policy coordinator among the various government ministries. In the case of many policies that fall under the purview of one or two ministries, such as lifting the 40 percent ceiling on Taiwan investment in China, the MAC will not play a leading role. ¶9. (C) Chiang said he expects the SEF-ARATS dialogue to resume at the working level before a higher profile and politically-laden meeting between the chairman from both organizations can take place. Chiang said he would welcome a visit to Taiwan by China's Taiwan Affairs Office (TAO) Director Chen Yunlin, if he is appointed ARATS chairman, noting that an earlier KMT invitation to Chen had been blocked by the Chen administration. Lien Chan Will by By-passed as Intermediary -------------- ¶10. (C) Asked by the Director about KMT honorary Chairman Lien Chan's future role in cross-Strait relations, Chiang said the situation will be "complicated" once Ma assumes the presidency on May 20. Ma is unlikely to rely on Lien for specific help, but rather will work through the official SEF-ARATS dialogue and build his own private channels to Beijing. Lien, at most, will convey on Ma's behalf simple pleasantries with Chinese leaders. Chiang said Ma should not completely ignore Lien because he has built personal rapport with Chinese President Hu Jintao and could help smooth any difficulties that may arise at the working level. Communication between Ma and Lien, however, has been poor and Lien did not help himself by visiting Beijing in April without informing Ma in advance, Chiang added. TAIPEI 00000672 003 OF 003 Party-to-Party Dialogue A Secondary Conduit -------------- ¶11. (C) Chiang said the KMT side currently has too many channels of communication going into Beijing. Reining in all the players and taking control of the informal "pipelines" will be one of Ma's early challenges. The KMT-CCP party-to-party dialogue, once managed, can serve Ma as an important, informal channel for discussing both economic and more sensitive POLITICAL issues, such as the question of Taiwan's international space. Chiang said he hoped the party-to-party dialogue will continue, but acknowledged that the KMT currently faces the problem of determining whether Lien Chan or current KMT Chairman Wu Poh-hsiung will lead the dialogue. (Note: In a separate lunch with AIT on May 14, KMT Vice Chairman John Kuan told the Deputy Director that he will be accompanying KMT Chairman Wu to mainland China shortly after the May 20 inauguration. More broadly, he indicated that President-elect Ma is fully on board with this decision as well as maintaining the party-to-party dialogue. End Note.) Comment -------------- ¶12. (C) P.K. Chiang did not minimized the challenges President-elect Ma faces in moving quickly on his election promise to improve economic RELATIONS across the Strait. In addition to handling a delicate relationship with China, Ma also faces the challenge of reining in competing KMT channels to Beijing, which if not properly managed could give the Chinese additional levers for exerting pressure on the next Taiwan administration. YOUNG