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