TAIWAN OFFICIALS OUTLINE PLANS FOR CROSS-STRAIT

C O N F I D E N T I A L AIT TAIPEI 000415 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,USDA FOR FAS/OCRA RADLER AND BEILLARD; FAS/OSTA FOR BERMAN, HAMILTON, DAWSON, AND SHNITZLER; FAS/ONA FOR BERTSCH AND FAS/OFSO FOR WAINIO E.O. 12958: DECL: 04/06/2019 TAGS: ECON ETRD PGOV PREL TW CH SUBJECT: TAIWAN OFFICIALS OUTLINE PLANS FOR CROSS-STRAIT TRADE PACT REF: TAIPEI 360 AND PREVIOUS Classified By: Deputy Director Robert S. Wang forreasons 1.4 (b) and (d). ¶1. (C) SUMMARY. During the April 1-3 visit of an interagency trade delegation led by Deputy Assistant USTR Eric Altbach (septels),senior Taiwan officials outlined Taiwan's plans to negotiate a bilateral Economic Cooperation Framework Agreement (ECFA) with the PRC. Although details remain vague, Taiwan envisages the ECFA as a general framework for obtaining "early harvest" trade liberalization in the petrochemical, machinery, and textile sectors expected to be affected by the 2010 advent of the ASEAN-China FTA. ECFA negotiations will take place under the rubric of existing cross-Strait economic talks. While there is no timeline for concluding an agreement, Taiwan officials expect at least initial progress by the end of this year. On a broader level, officials emphasize that the agreement will be consistent with Taiwan's existing WTO obligations. Ma administration officials see ECFA as a critical first step in avoiding Taiwan's regional economic marginalization and paving the way for expanded trade relations with ASEAN, the U.S., and other major trading partners. END SUMMARY. ¶2. (C) In an April 1 meeting, Ministry of Economic Affairs (MOEA) Bureau of Foreign Trade (BOFT) Director General Franco Huang said Taiwan's decision to negotiate an ECFA stems from a campaign promise by President Ma. Huang believes an ECFA would eventually lead to a WTO-consistent bilateral free trade agreement (FTA) with China, but not for another 10-15 years. In his view, an ECFA would include liberalization of PRC investment in Taiwan, as well as the elimination of restrictions on the import of approximately 2100 non-agricultural products from the PRC. Huang acknowledged complaints about a general lack of internal administration coordination on ECFA (Note: Huang's frustrations have been echoed by other senior administration officials, who have decried ECFA's muddled public rollout and dearth of interagency coordination). He stressed that Taiwan and China have thus far had no "formal" contact on ECFA, and predicted that the first such exchange of views on the topic will take place during the Straits Exchange Foundation (SEF)-Association for Relations Across the Taiwan Strait (ARATS) talks slated for May. ¶3. (C) Huang said ECFA talks will likely be held at the Director General or Deputy Director General level, and that he would probably represent Taiwan if the former level is chosen. He noted that Taiwan's delegation for ECFA talks will include SEF personnel plus "advisors" on detail from MOEA and other ministries. The ECFA text will read much like the ASEAN 1 agreemeent between ASEAN and China, explained Huang, and will include a list of "early harvest" liberalization sectors. In Huang's view, an ECFA would be WTO-consistent because the proposed "ASEAN-plus" agreements have not been challenged at the WTO. Huang added that Taiwan is working on an impact analysis of the agreement, in accord with WTO obligations, and emphasized that the ECFA would be squarely in the interests of the U.S. business community. "We want to get out of the ditch we're in, trade-wise," he stated. ¶4. (C) On April 2, National Security Council (NSC) Deputy Secretary General Ho Szu-yin said the U.S. should consider ECFA as a "trilateral" issue including the U.S., and that Taiwan will keep "international obligations and U.S. interests in mind" when negotiating the agreement. He described ECFA as "just a framework," and said the actual content of the agreement remains uncertain. ¶5. (C) During an April 3 meeting, Mainland Affairs Council (MAC) Vice Chairman Chao Chien-min explained that although Taiwan still views China as a military threat, "opportunities and responsibilities vis-a-vis the Mainland" beckon. Chao said ECFA is "still in the early planning stage," and that the administration is soliciting public opinion on the process. MOEA will have lead responsibility in negotiating the agreement, noted Chao, while the Chung-hua Institution for Economic Research (CIER) will conduct a study on the agreement's economic impact. CIER will complete its study in approximately three months, he added, and compare its findings with similar studies now being conducted by PRC think tanks. According to Chao, ECFA talks will take place under the SEF-ARATS framework, but it is not yet clear who will lead and conduct the actual negotiations. ¶6. (C) Chao characterized ECFA as a "framework," rather than a comprehensive FTA, and highlighted Taiwan's interest in an "early harvest" for sectors such as petrochemicals, machinery, and textiles expected to suffer after next year's advent of the ASEAN-China FTA. Although Taiwan would like ECFA talks to take place within a WTO framework, observed Chao, China does not want cross-Strait relations to be "internationalized," and opposes such a format. Chao said there is no firm timeline for completion of ECFA negotiations, but indicated Taiwan would like to see initial progress by the end of the year. Taiwan, he emphasized, does not want to be left "alone with North Korea" on the outside of regional trade pacts. ECFA, Chao explained, would be a prelude to Taiwan concluding bilateral FTAs with individual ASEAN members and possibly Japan. At the same time, he added, progress under the U.S.-Taiwan Trade and Investment Framework Agreement (TIFA) would also be helpful as a means of improving Taiwan's external trade ties. ¶7. (C) COMMENT. Despite an internal lack of coordination, a more detailed view of Taiwan's ECFA planning is slowly emerging. The Ma administration's emphasis appears to be rapid conclusion of a general framework that can then be used to jump-start relations with the U.S., ASEAN, and other trading partners. While Taiwan's push for rapid progress toward an ECFA will depend in large part on the PRC, the prospects of greatly enhanced cross-Strait economic ties present an opportunity - and a wake-up call - for pursuing our own extensive economic interests with Taiwan. END COMMENT. ¶8. (U) DAUSTR Altbach did not have the opportunity to review this message before leaving Taipei. YOUNG