Identifier
Created
Classification
Origin
09AITTAIPEI170
2009-02-13 10:23:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

VICE PRESIDENT DISCUSSES ECONOMY, U.S.-TAIWAN

Tags:  PREL PGOV ECON ETRD CH TW 
pdf how-to read a cable
P 131023Z FEB 09
FM AIT TAIPEI
TO SECSTATE WASHDC PRIORITY 0911
INFO CHINA POSTS COLLECTIVE
AMCONSUL CHIANG MAI 
AMCONSUL HO CHI MINH CITY 
NATIONAL SECURITY COUNCIL WASHINGTON DC
DEPT OF TREASURY WASHDC
DEPT OF COMMERCE WASHDC
CIA WASHDC
DIA WASHINGTON DC
USPACOM HONOLULU HI
C O N F I D E N T I A L AIT TAIPEI 000170 


STATE PASS USTR, STATE FOR EAP/TC,USTR FOR STRATFORD AND
ALTBACH,NSC FOR LOI, TREASURY FOR OASIA/CWINSHIP AND
MPISA,COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 10/24/2018
TAGS: PREL PGOV ECON ETRD CH TW
SUBJECT: VICE PRESIDENT DISCUSSES ECONOMY, U.S.-TAIWAN
TRADE AND CROSS-STRAIT RELATIONS

REF: A. 08 TAIPEI 01781

B. TAIPEI 00059

C. 08 TAIPEI 01630

D. TAIPEI 00152

E. 07 TAIPEI 01670


Classified By: AIT Director Stephen M. Young, reasons 1.4 (b) and (d).

C O N F I D E N T I A L AIT TAIPEI 000170


STATE PASS USTR, STATE FOR EAP/TC,USTR FOR STRATFORD AND
ALTBACH,NSC FOR LOI, TREASURY FOR OASIA/CWINSHIP AND
MPISA,COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 10/24/2018
TAGS: PREL PGOV ECON ETRD CH TW
SUBJECT: VICE PRESIDENT DISCUSSES ECONOMY, U.S.-TAIWAN
TRADE AND CROSS-STRAIT RELATIONS

REF: A. 08 TAIPEI 01781

B. TAIPEI 00059

C. 08 TAIPEI 01630

D. TAIPEI 00152

E. 07 TAIPEI 01670


Classified By: AIT Director Stephen M. Young, reasons 1.4 (b) and (d).


1. (C) In a February 13 meeting with AIT Director Young, Vice
President Vincent Siew said Taiwan's economy faces "a very
difficult year", with prospects for growth tenuous at best.
According to Siew, the island's economy requires "fundamental
restructuring" in order to attract foreign investment. Siew
said economic recovery will depend on the resumption of U.S.
consumer demand. He highlighted the struggles of the
island's memory chip and flat panel screen producers as
indicative of the challenges Taiwan faces because it depends
on exports for growth. On U.S.-Taiwan economic ties, Siew
said market access for beef should not obstruct progress on
enhancing two-way trade and investment. Siew echoed recent
remarks to the Director by President Ma in reporting the Ma
administration would proceed more cautiously on cross-Strait
relations, recognizing that many Taiwan residents are not
certain that closer ties with China are in their best
interests. End Summary.

--------------
Economic Difficulties Far from Over
--------------


2. (C) The Director called on the Vice President in order to
hear Siew's assessment of the current state of and future
prospects for the economy. Siew was frank in his assessment
that the coming year will be a difficult one for Taiwan.
Siew said the consumer vouchers distributed by the
administration over the Lunar New Year holiday were effective
in stimulating spending. However, he believes that Taiwan
cannot afford another tranche of vouchers. Siew said
Taiwan's economy needs "fundamental restructuring" to attract
investment. Noting that the island's stock markets have been
relatively stable, he said the administration still hopes to
achieve at least "non-negative" economic growth in 2009,

while acknowledging numerous private sector projections of
negative GDP growth this year. (Note: The official GDP growth
forecast is 2.12 percent, a figure that will likely be
revised downward when new economic data are released this
month. End Note.)


3. (C) In contrast to his prediction in late December (Ref.
A) that Taiwan's export volume would rebound in the second
half of 2009, Siew today said it was too early to predict
when the economic downturn would end. Siew said recovery in
Taiwan will depend on a resumption of growth in U.S. consumer
demand.

--------------
High Technology Sectors a Concern
--------------


4. (C) In particular, Siew highlighted the problems Taiwan's
DRAM (memory) chip manufacturers face (Ref. B). Siew
asserted the administration's commitment to assisting the
troubled sector, although he said the administration was not
contemplating a bailout for any particular firm. In stead,
according to Siew, the focus is on coming up with a package
that strengthens Taiwan's competitiveness in the global DRAM
market through acquiring manufacturing technology from
Japanese or U.S. firms in partnership with Taiwan chip
makers. In response to the Director's query, Siew
acknowledged the DRAM industry is strategically important for
Taiwan.


5. (C) The Director asked about the similar difficulties
facing the island's flat panel producers (Reg. C),noting
that the single largest U.S. investor in Taiwan is Corning
Display Technologies Co., which produces the glass for these
display panels. Unlike the DRAM industry, Siew carefully did
not characterize the panel industry as strategic. Rather, he
noted that Taiwan's two largest screen manufacturers, Chi Mei
Optoelectronics and AU Optronics, had recently received large
orders from China and would probably not suffer significant
losses over the next six months, though their profitability
beyond that period is less certain.

--------------
U.S.-Taiwan Economic Ties
--------------


6. (C) Siew took the initiative to say the administration is
moving toward complete opening of Taiwan's market to U.S.
beef imports, saying Health Minister Yeh Chin-chuan knows
what needs to be done to assuage public concerns about food
safety. The Director noted that President Ma recently told
him the administration is actively working to resolve
outstanding issues. Siew said the beef issue should not
present an impediment to progress on trade and investment
talks or other areas of mutual interest.


7. (C) Regarding on-going efforts to make progress in the
trade and investment framework agreement (TIFA) talks, Siew
said further liberalizing trade, investment and taxation are
reachable goals and urged resumption of the TIFA process as
soon as possible. The Director said he would convey Taiwan's
position to USG officials, noting that key senior-level
positions in USTR remain unfilled. But the Director intends
to follow up during his late February consultations in
Washington.


8. (C) In reply to the Director's inquiry about progress on
Taiwan's accession to the WTO government procurement
agreement (GPA),Siew said he was confident that accession
would get LY approval, although when is difficult to predict.
(Note: Public Construction Commission contacts tell us that
the GPA accession agreement is a priority item for
consideration when the LY reconvenes on February 20. End
Note.) The Director noted that GPA accession would not only
benefit U.S.-Taiwan economic ties, it would also enhance
Taiwan's ties with Japan and the EU.

--------------
Cross-Strait Relations: A Slower Approach
--------------


9. (C) Siew described the PRC as a 'secondary' market for
Taiwan exports, saying the U.S. remains the most important
market for the island's manufacturers. Regarding Ma
administration efforts to encourage Taiwan companies to
redirect capital back to the island (Ref. D),Siew said, with
the exception of Hon Hai Precision Industries, he knows of no
concrete examples of significant investment by China-based
Taiwan companies. He seemed pessimistic that returning
Taiwan capital would revitalize the island's economy.


10. (C) In regard to progress on economic ties with the PRC,
Siew appeared to distance himself from his earlier advocacy
of a cross-Strait common market (Ref. E). According to Siew,
China is interested in a Comprehensive Economic Cooperation
Agreement (CECA),but Taiwan must carefully evaluate the
positive and negative aspects of such an arrangement. Siew
said people often tell him they are not certain that growing
cross-Strait economic integration is in Taiwan's best
interest. Siew suggested that the Ma administration has
recognized the political downside of liberalizing trade and
investment relations with the Mainland, saying it will
proceed more cautiously in coming months.


11. (C) The Director, noting that he will be briefed on
Secretary Clinton's trip to China while he is in Washington,
reiterated U.S. support for measures that reduce cross-Strait
tensions. Siew said strong ties with the U.S. and Japan are
prerequisites for the Taiwan public to feel confident Ma is
taking the right approach to improving relations with Beijing.

--------------
Comment
--------------


12. (C) Siew's emphasis on the importance of U.S. Taiwan
ties, in comparison with cross-Strait relations, is a
reminder that Taiwan's security and level of confidence
depend heavily on U.S. support. Siew's comments reinforce
President Ma's recent statement to the Director that he is
quietly putting the brakes on cross-Strait ties, possibly in
connection with his current focus on successfully resolving
WHA in May.


SYOUNG