POHNPEI STATE SEEKS TO OPEN TRADE OFFICE IN TAIWAN - CHINA

C O N F I D E N T I A L SECTION 01 OF 02 KOLONIA 000035 SIPDIS SIPDIS; STATE FOR EAP/ANP E.O. 12958: DECL: 3/18/2019 TAGS: PREL PGOV CH TW FM SUBJECT: POHNPEI STATE SEEKS TO OPEN TRADE OFFICE IN TAIWAN - CHINA OBJECTS CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia, State. REASON: 1.4 (b),(d) ¶1. (C) SUMMARY. People's Republic of China (PRC) Ambassador to the Federated States of Micronesia (FSM) Liu Fei recently complained to Amembassy officers that Pohnpei State Governor John Ehsa planned to establish a Pohnpei trade office in Taiwan. Liu said China had raised strong objections and would need to consider retaliatory measures, although she was unable to specify any. Taiwan will apparently fund the office. Meantime, approval for this state initiative remains pending in the Pohnpei Legislature, which has deferred action. END SUMMARY. ¶2. (C) On the margins of the Pohnpei "State of the State" address to the state legislature delivered by Governor John Ehsa on March 13, China's Ambassador Liu Fei complained to Ambassador Hughes that the Governor had rejected her advice to forgo establishment of a state trade and investment office in Taiwan. She said Taiwan would cover costs of the office. Governor Ehsa had sought $45,000 from the legislature for travel expenses. In a letter to the legislature, Ehsa said that re-establishment of the office was "crucial to raising Pohnpei's visibility in Taiwan's dynamic economy." While the notion of opening a trade office in Taiwan was approved under a former Pohnpei Governor nine years ago, the office itself was apparently short lived and shut down by the next Governor, who favored projects and commercial deals with the PRC. ¶3. (SBU) On March 12, 2009, the Budget and Resources Committee of the Pohnpei Legislature recommended approval of a small travel budget to enable a two-member delegation to go to Taiwan for the opening of the office later in March. However, under pressure from China, the legislature as a whole deferred further action. (Note: Under the FSM's loose federal umbrella, each of the four Micronesian states is responsible for its own commercial policies and development. While they exercise constitutional autonomy in this economic area, the states defer to the FSM National Government for the conduct of foreign affairs, where a strict One China policy currently prevails. A driving goal of the Chinese Embassy in the FSM is clearly to keep Taiwan out.) ¶4. (C) Liu, who had just returned from a lengthy absence in Beijing, said she planned to protest Governor Ehsa's initiative to FSM Foreign Affairs Secretary Lorin Robert. However, it was unclear what, if anything, the FSM National Government (FSMNG) could do about a commercial action sanctioned by the Pohnpei state constitution. Pohnpei is the capital state of the FSM and arguably the most strongly led and influential of the four FSM states. A constitutional convention that will meet later this year in Pohnpei is likely to approve measures to facilitate the legality of a unilateral declaration of secession. ¶5. (C) Ambassador Liu said that for months, she had urged Governor Ehsa to eschew commercial relations with Taiwan. If absolutely necessary, she had suggested he could confer with Taiwanese business representatives on the nearby U.S. territory of Guam. However, Ehsa had opted instead to travel to Taiwan last November. Liu indicated her Embassy had recently contacted members of the Pohnpei legislature to try to persuade them to deny the travel money for the opening of the office. On March 16, the legislature deferred action on the authorization, apparently in response to Chinese pressure. ¶6. (SBU) Liu attributed Ehsa's interest in Taiwan to family business interests. A company that belongs to Ehsa's brother, Pacific Marine Services, is an agent for over 20 Taiwanese fishing vessels that dock in Pohnpei port. Some of these vessels have been detained in port for illicit fishing practices, Liu claimed. ¶7. (C) On March 16, Liu came to the U.S. Embassy to share her further displeasure with Governor Ehsa's initiative. Ambassador and economic-consular officer listened and finally questioned whether commercial relations would necessarily pose a threat to the FSMNG's firm allegiance to a One China foreign policy. Liu responded vehemently that Taiwan had other intentions in the FSM. A fully subsidized commercial office in Taipei was a clear first step toward tipping the balance of China's relationship in a vulnerable Pacific island nation, she said. She additionally implied that establishment of the office would be viewed in Beijing as a setback to the current economic rapprochement between China and Taiwan, which in any event, China ultimately aimed to use to incorporate Taiwan into Mainland China. KOLONIA 00000035 002 OF 002 ¶8. (C) COMMENT. The PRC remains extremely active in the FSM, particularly in the capital state of Pohnpei, where Chinese workers continue to labor seven days a week to construct a mammoth government compound that is expected to near completion in September. Later this month, China will launch biogas projects that utilize pig manure in the Pohnpei municipality of Madolenihmw. Technicians will come from China for the launch. Separately, Liu is arranging a visit of the Governor and state legislators to tour a hydroelectric facility in south China on the Yangtze River, with a view to initiating a hydroelectric power project in Kitti, Pohnpei. ¶9. (C) Comment Continued. While the establishment of a Pohnpei commercial office in Taiwan would be a notable diplomatic setback for China in the FSM, it is unclear whether China can block it or will even seek to retaliate by slowing down its prolific projects. FSM President Mori is likely to appeal to Ehsa to defer establishment of the office, exacerbating tensions that are mounting steadily between the FSMNG and Pohnpei. In fact, Governor Ehsa wields considerable influence in his own right, particularly at a time when the FSMNG leadership is weak and its bureaucracy is dysfunctional. The other three semi-autonomous FSM states will take cues from the outcome. Finally, under pressure from China the Pohnpei Legislature may be the pivotal player. In cautious island style, state senators can put a controversial initiative on ice indefinitely. HUGHES