TAIWAN ANTICIPATES CONTINUED ADVANCES IN

C O N F I D E N T I A L AIT TAIPEI 001396 STATE FOR EAP/TC STATE PASS USTR FOR STRATFORD AND ALTBACH, TREASURY FOR OASIA/WINSHIP AND PISA, NSC FOR LOI, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN E.O. 12958: DECL: 11/23/2019 TAGS: ECON ETRD EINV PREL PGOV TW CH SUBJECT: TAIWAN ANTICIPATES CONTINUED ADVANCES IN CROSS-STRAIT ECONOMIC TIES REF: TAIPEI 917 Classified By: AIT Economic Chief Hanscom Smith for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY: Taiwan officials have confirmed that the next round of economic talks with the PRC will take place in Taichung on December 21-25, when both sides are slated to ink agreements on agricultural inspection and quarantine, industrial standards, double taxation, and fisheries practices. The Ma administration will also use the Taichung meetings to encourage greater PRC investment in Taiwan. Although Taiwan and the PRC will discuss plans for a bilateral Economic Cooperation Framework Agreement (ECFA) during the Taichung talks, formal ECFA negotiations are not expected to be launched until January 2010. Taiwan has resisted PRC requests to open its market to Chinese agricultural imports under the ECFA progress. END SUMMARY. -------------- -------------- Preparation for Next Round of Talks Nearly Complete -------------- -------------- ¶2. (C) According to Straits Exchange Foundation (SEF) Economic Affairs Department Director Chen Rong-yuan, Taiwan and the PRC have agreed on the substance and agenda of the December 21-25 talks in Taichung between SEF and the PRC's Association for Relations Across the Taiwan Strait (ARATS). Chen said during the talks, both sides will assess the implementation of the agreements concluded at the previous three rounds of talks in 208-09. In addition to signing agreements covering agricultural inspection and quarantine, industrial standards, avoidance of double taxation and fisheries practices, the SEF-ARATS meeting will also include a conference on investing in Taiwan. The Ma administration, Chen noted, has been disappointed with the meager amount of Mainland investment since Taiwan's June 30 liberalization of restrictions on capital from the PRC. As a result, Taiwan hopes to use the conference to stimulate discussion of how to attract more PRC investors to Taiwan. ¶3. (C) Chen explained that the agreement on agricultural inspection and quarantine will facilitate agricultural imports by establishing a mechanism for information exchange between PRC and Taiwan officials on issues of plant and animal health. The double taxation agreement, said Chen, is designed to protect Taiwan investors in China, and to attract more Mainland capital to the island, particularly to Taiwan's stock market. The fisheries agreement is primarily intended to ensure that Taiwan ship owners provide adequate health care and wages to PRC crew members. ¶4. (C) Chen observed that there are a large number of economic issues Taiwan and the PRC have yet to address through the SEF-ARATS channel, such as protection of intellectual property, resolution of commercial disputes, and cooperation on energy production. In Chen's view, these and other important issues will be addressed in future rounds of SEF-ARATS talks. -------------- ECFA Negotiations Slated to Start in January -------------- ¶5. (C) In a November 20 meeting with economic chief soon after returning from APEC meetings in Singapore, Ministry of Economic Affairs Bureau of Foreign Trade (BOFT) Director General Franco Huang said Taiwan and the PRC have agreed on preliminary steps to open formal negotiation of a cross-Strait Economic Cooperation Framework Agreement (ECFA). Huang said he met with PRC counterpart Tang Wei, Director of the Department of Taiwan, Hong Kong and Macau Affairs at the PRC Ministry of Commerce, in Beijing on November 4-6. According to Huang, both sides agreed that ECFA should simply be a framework agreement similar to the free trade agreement between the PRC and ASEAN. In addition, both sides concurred that ECFA will be a topic of discussion at the December 21-25 SEF-ARATS talks. Separately, the SEF's Chen clarified that although Taiwan and the PRC will discuss ECFA in Taichung, the topic will not be included in the official agenda for the talks. ¶6. (C) Huang said that before his meeting with Tang Wei, which was the fourth time the two have met to discuss ECFA, Taiwan and PRC officials met to compare the methodology and models used by both sides to estimate the potential economic impact of an agreement (reftel). A joint impact study, noted Huang, said a joint impact study predicted ECFA would increase Taiwan's GDP by 1.7 percent, and increase the PRC's GDP by 0.63 percent. ¶7. (C) According to Huang, Taiwan and the PRC are slated to begin official ECFA negotiations in January, although the specific date has yet to be decided. He said the date could be fixed during the Taichung SEF-ARATS talks, although the SEF's Chen told us considerable preparation is still needed before both sides would be ready to begin negotiations. Huang said he does not believe Taiwan and the PRC will be able to complete ECFA negotiations in 2010, as Minister of Economic Affairs Shih Yen-hsiang has publicly declared to be the Ma administration's goal. -------------- -------------- Agricultural Imports a Critical Area of Disagreement -------------- -------------- ¶8. (C) During his November 4-6 meetings in Beijing, explained Huang, the PRC made clear that it expects Taiwan to remove existing barriers to agricultural imports from the Mainland if it wants to conclude a comprehensive trade liberalization agreement. Huang, however, said he underscored President Ma's position that Taiwan will not lift bans on more than 800 categories of PRC agricultural products. He added that the PRC appeared to appreciate the political pressure on Ma to publicly refuse any action that could be construed as jeopardizing Taiwan's farmers. Although both sides agreed to continue to discuss the issue of agricultural imports, Huang indicated that resolution would have to await a later stage of ECFA negotiations. ¶9. (C) The next step, according to Huang, is for Taiwan and the PRC to compile detailed lists, by commodity import codes, of the products both sides would like to be included in an "early harvest" tariff reduction scheme. After Taiwan receives the PRC's list of potential early harvest items, the Ma administration can begin consultations with industry, said Huang. (NOTE: Taiwan has earlier indicated that petrochemicals, textiles, autos and auto parts, and machine tools are its top "early harvest" priorities, a list Huang confirmed.) ¶10. (C) Huang said the BOFT would work closely with Taiwan's Mainland Affairs Council (MAC) on scheduling ECFA negotiations. Separately, MAC Chairwoman Lai Shin-yuan told AIT Chairman Burghardt (septel) that MAC and BOFT will coordinate their efforts to prepare for ECFA negotiations, although she did not specify what each agency's areas of responsibility would be. -------------- Comment -------------- ¶11. (C) Taiwan and the PRC continue to make progress in strengthening cross-Strait economic ties. Although there is considerable uncertainty regarding the timing and scope of ECFA negotiations, the SEF-ARATS talks are by now well-established, and with regular working-level communication between the two organizations. End Comment. STANTON