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.


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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