THE DIRECTOR'S MARCH 31 MEETING WITH PREMIER LIU

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000377

SIPDIS

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
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SHNITZLER; FAS/ONA FOR BERTSCH AND FAS/OFSO FOR WAINIO

E.O. 12958: DECL: 03/31/2019
TAGS: ECON PGOV ETRD EAGR PREL CVIS KIPR TW
SUBJECT: THE DIRECTOR'S MARCH 31 MEETING WITH PREMIER LIU
CHAO-SHIUAN

TAIPEI 00000377 001.2 OF 003


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


1. (C) SUMMARY. In a March 31 meeting with the Director,
Premier Liu Chao-shiuan said opening Taiwan's market to the
full range of U.S. beef imports is only a matter of timing.
He predicted the opening could take place as early as May or
early June. The Premier saw no obstacles to Legislative Yuan
(LY) approval of Taiwan's accession to the WTO Government
Procurement Agreement (GPA),and said draft Internet Service
Provider (ISP) legislation is a priority bill for the
administraiton. The Director urged rapid progress on
resolving pork market access problems, filling Taiwan's WTO
rice quota, and establishing maximum residue levels (MRLs)
for common food additives. He stressed the importance of
avoiding protectionism, including in the implementation of
Taiwan's new public infrastructure projects. The Premier
reiterated Taiwan's interest in participating in the Visa
Waiver Program (VWP). He also provided an update on plans to
consolidate local government jurisdictions, and noted that
Taichung is likely to be the first of Taiwan's three major
cities to merge with its surrounding county. END SUMMARY.

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Participants
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2. (SBU) The meeting took place at the Executive Yuan (EY)
Office of the Premier. The Director was accompanied by
economic chief (notetaker) and acting political chief.
Premier Liu Chao-shiuan was joined by Deputy Minister of
Foreign Affairs for Administration Javier Hou, MFA Department
of North American Affairs Director General Harry Tseng, MFA
Staff Assistant Jiang Xen, EY Second Section Chief Lee
Tien-ming, EY Fifth Section Chief Hsia Zheng-zhong, and EY
Second Section Staff Assistant Chang Hong-jun.


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Cabinet relations with the legislature
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3. (C) The Premier complained that the Cabinet has to spend a
great deal of time explaining and defending administration
policy to the Legislative Yuan (LY),and must often sit and
wait while the LY conducts internal business. He noted with
relief that he will not have to return to the LY until
September, after the current session ends later this spring.
According to Liu, all but a few members of the KMT majority
are generally supportive of the Cabinet. In contrast, the
opposition DPP is often "very reactive," although such
behavior is "understandable" given their small number of
seats.


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Economic Cooperation Framework Agreement with the PRC
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4. (C) According to Liu, DPP criticism of administration
plans to negotiate an Economic Cooperation Framework
Agreement (ECFA) with the PRC has been helpful in spurring
the Cabinet to "work harder" in explaining the policy to the
public. The Director reiterated U.S. support for Taiwan's
efforts to improve relations with China and enhance its
international space. The Obama administration is committed
to continuing longstanding U.S. policy toward Taiwan, he
stated. The Premier replied that the Ma administration has
set the direction of its cross-Strait policy, but must "very
carefully" calibrate the pace of its implementation. He
expressed appreciation for ongoing U.S. support of Taiwan.


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GPA accession and ISP bills

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5. (C) In response to the Director's question, Liu said he
could not see any obstacles to LY approval of Taiwan's
accession to the WTO Government Procurement Agreement (GPA).
The Director urged prompt LY action on draft Internet Service
Provider (ISP) legislation, which the Premier said is a
"priority" bill for the administration.


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Beef, pork, rice, and MRLs
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6. (C) Referring to his late February meetings in Washington
with U.S. economic and trade officials, the Director
emphasized the importance of rapid Taiwan action on opening
its market to the full range of U.S. beef imports. He noted
that Taiwan published its beef risk assessment report over
two months ago, with virtually no negative reaction from the
public so far. The Premier agreed that the report has
elicited "very little" unfavorable comment. Liu said he sees
"no problem" for beef market opening, and it is "just a
matter of the best timing" to announce that Taiwan will allow
all U.S. beef imports. Liu said such an announcement could
"hopefully" be made in May or early June.


7. (C) In addition to beef, the Director stressed U.S.
interest in resolving pending market access problems related
to pork and the fulfillment of Taiwan's WTO rice quota. The
underlying problem remains Taiwan's lack of progress in
establishing internationally-consistent maximum residue
levels (MRLs) for a large number of food additives. The
Director observed that resolving outstanding agricultural
market access problems will contribute to an environment
conducive to expanding the overall bilateral trade agenda,
including eventual progress on bilateral investment and other
agreements.


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Public infrastructure and protectionism
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8. (C) The Premier explained that the Ma administration's
"I-Taiwan" (a play on "Ai", or "Love" Taiwan) twelve major
public infrastructure projects would help reduce unemployment
and stimulate economic development. He described reducing
Taiwan's record-high 5.75% jobless rate as the
administration's top priority. Liu said some spending for
the "I-Taiwan" projects is included in the regular budget
already passed by the LY, and that additional funding would
be part of the supplemental budget slated to be approved by
the legislature on April 10. He clarified that work on all
twelve projects will begin simultaneously, in part to boost
public confidence that the administration is serious about
tackling the economic downturn.


9. (C) The Director emphasized the importance of facilitating
free trade and avoiding protectionism, including in the
implementation of public works and other official stimulus
measures. He drew the Premier's attention to a March 26
letter from the president of AmCham regarding troubling
indications that some official agencies appear to be pursuing
"Buy Taiwan" initiatives. The Premier was familiar with the
letter, and said free trade is a core economic value for
Taiwan. "We will do our best to fight against
protectionism," he stated.


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Visa Waiver Program
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10. (C) The Premier expressed hope that Taiwan could
participate in the Visa Waiver Program (VWP) as quickly as

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possible. The Director replied that Taiwan must make
additional progress in meeting VWP criteria, including a
lower visa refusal rate and improved procedures for issuing
passports. At the same time, other potential VWP
participants are further along the route to qualification for
the program. Taiwan's VWP participation is a future
possibility, said the Director, but the process will take
time. The Director added that a bilateral extradition
agreement is a more near-term prospect, and the issue is now
being looked at by State Department legal experts. The
Premier observed that VWP participation would further enhance
the people-to-people ties that have long been a main pillar
of the bilateral relationship.


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Local government consolidation
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11. (C) In response to the Director's question, the Premier
confirmed the administration's plan to consolidate Taiwan's
local government jurisdictions into three municipalities
(Taipei, Kaohsiung, and Taichung) and fifteen counties.
Achieving this plan would require merging Taipei, Kaohsiung,
and Taichung with their surrounding counties and raising the
status of Taichung from city to municipality. According to
the Premier, Taichung county and city are closest to
achieving this consolidation. The LY must now amend existing
laws to form the legal basis for consolidation. The Premier
said the bill would need to be approved by the end of April
for the Taichung merger to take place before the December
2009 local elections. If the merger is approved in time, the
incumbent mayor and magistrate would have their terms
extended for a one-year transition period, he added, and a
new municipality chief would be elected in December 2010. The
Premier, who said he is hopeful the Taichung merger can move
ahead, declined to offer a timeline for when Taipei and
Kaohsiung would effect similar consolidations. (Comment:
Other contacts have told us they are unsure if the Taichung
merger will take place during this election cycle.)


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DRAM restructuring
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12. (C) The Premier appeared unfamiliar with the current
status of administration plans to restructure Taiwan's DRAM
sector. He implied that announcement of the new Taiwan
Memory Company's (TMC) choice of foreign partner originally
scheduled for that day would in fact take place on April 1,
and might simply be a "progress report" rather than a final
decision on whether Japan's Elpida or Micron of the U.S.
would be chosen to work with TMC. Liu said creating a strong
competitor for South Korea's Samsung is the major goal of the
restructuring program. The administration, he added, is also
concerned about DRAM companies' outstanding debt to
state-owned banks. The Director expressed appreciation for
the administration's attention to Micron's efforts to be
chosen as TMC's partner. (Note: On April 1, TMC announced
that it will choose both Elpida and Micron as partners.
Negotiations with Elpida are apparently more advanced than
those with Micron. See septel for details.)


13. (C) COMMENT. We've had false dawns on the beef issue in
the past. Nevertheless, the Premier's words (in conjunction
with what we've heard from others recently) were encouraging,
and we'll continue to press the administration for prompt
action on market opening. END COMMENT.
YOUNG