TAIWAN PREPARED FOR CROSS-STRAIT TALKS IN NANJING

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000494 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 E.O. 12958: DECL: 10/24/2018 TAGS: ECON ETRD PGOV PREL TW CH SUBJECT: TAIWAN PREPARED FOR CROSS-STRAIT TALKS IN NANJING THIS WEEKEND REF: TAIPEI 480 TAIPEI 00000494 001.2 OF 002 Classified By: AIT Deputy Director Robert S. Wang for reasons 1.4 (b) a nd (d). ¶1. (C) Summary. According to Taiwan's Straits Exchange Foundation (SEF),the April 25-26 talks in Nanjing between SEF and its counterpart, the PRC's Association for Relations Across the Taiwan Strait (ARATS),will produce three agreements on cross-Strait flights, liberalization of the financial services sector and judicial and law enforcement cooperation. In addition, the two sides will issue a joint statement about liberalizing restrictions on Mainland investment in Taiwan. The agreement on financial sector integration will be a general framework that will require subsequent talks between relevant agencies in Taiwan and the PRC. According to SEF, the agreement on judicial and law enforcement cooperation is a high priority for the Ma administration. The third round of SEF-ARATS talks will also touch on the issue of an economic cooperation agreement, but there is still debate within the Ma administration about how quickly to proceed toward actual negotiations with China. Taiwan does not expect the issue to appear on the formal agenda until the fourth round of talks later this year, according to an SEF official. As with the previous rounds of SEF-ARATS talks, the substance of what both sides will agree to was worked out beforehand to avoid unwanted surprises. The apparently noncontentious preparation for the upcoming talks suggests that the SEF-ARATS dialogue at the working level is now well established. End Summary ¶2. (C) On April 21, Deputy Secretary General of the Straits Exchange Foundation (SEF),Maa Shaw-Chang indicated to us that the April 18 meeting in Taipei between SEF Vice Chairman Kao Koong-lien and his PRC counterpart, Vice Chairman of the Association for Relations Across the Taiwan Strait (ARATS), Zheng Zhongli, had resulted in consensus on the agenda for the April 25-26 SEF-ARATS talks in Nanjing. Following the pattern of previous rounds of SEF-ARATS talks, the substance of what both sides will agree to was worked out by lower level officials before the meeting of the two chairmen, in order to avoid unwanted surprises. ¶3. (C) According to Maa, the talks will cover cross-Strait charter flights, liberalization of the financial services sector, and judicial and law enforcement cooperation. In addition to signing agreements on these three issues, the two sides will issue a joint statement on PRC investment in Taiwan. Both sides will also discuss the issues for the agenda for the next rounds of SEF-ARATS talks later this year. Maa said that, during the talks this weekend in Nanjing, it is likely there will be limited discussion of a possible Economic Cooperation Framework Agreement (ECFA). ¶4. (C) Regarding cross-Strait flights, Maa said the talks on establishing "regularly scheduled flights" will primarily entail expanding the current regime of daily charter passenger and cargo flights. The focus of the talks will be on increasing the frequency of flights and the number of destinations in China. Maa stated that the regularly scheduled flights will only fly into and from Taiwan's Taoyuan International Airport and Kaohsiung International Airport. Flights to and from Taiwan's other airports, including Songshan airport in downtown Taipei, will continue to be considered charter flights. He added that regularly scheduled passenger flights will be allowed to carry cargo. Under the present scheme, passenger charter flights are not allowed to carry cargo. ¶5. (C) The agreement on liberalizing the financial services sector on both sides of the Taiwan Strait, according to Maa and other administration officials (Reftel and previous), will be a broad framework outlining general principles for cooperation. Maa said future negotiations between relevant agencies on both sides of the Strait would lead to memoranda of understanding detailing specific responsibilities and obligations in the areas of banking, securities and TAIPEI 00000494 002.2 OF 002 insurance, Maa said, adding that the issue of a NTD/RMB currency settlement mechanism would be left for future talks between the central banks of both sides. He said the framework agreement to be signed in Nanjing would not address the more sensitive issue of market access. ¶6. (C) The agreement on judicial and law enforcement cooperation is the highest priority for President Ma Ying-jeou's administration in this round of talks, according to Maa. The agreement on this issue will address information exchange and extradition of suspects. Maa said he expected the SEF-ARATS talks will continue to discuss this issue, as authorities on both sides of the Taiwan Strait seek mutual assistance in dealing with more sophisticated types of crime. He said this round of talks will not deal with any particular cases. ¶7. (C) In regard to the joint statement on PRC investment in Taiwan, Maa said both sides opted for a statement rather than an agreement since the matter involves unilateral action by Taiwan. During the April 25-26 talks, said Maa, the Taiwan side will solicit specific statements from the PRC side about what industry sectors the Mainland would like to see opened for investment. Subsequently, Taiwan would evaluate how, and to what extent, investment in those sector would be permitted. According to Maa, the Taiwan authorities anticipate liberalization will entail simply revising existing regulations and will not require approval by the Legislative Yuan. ¶8. (C) According to Maa, there is still debate within the Ma administration about how quickly to proceed with efforts to negotiate an ECFA. Maa said the issue is complicated by concerns about its impact on the December local elections. Although proponents of ECFA hope that the issue will be included on the formal agenda for the fourth round of SEF-ARATS talks expected to occur later this year, Taiwan expects there will be limited discussion of ECFA at the Nanjing talks. ¶9. (C) Comment. Maa's statements accorded with information we have received from other administration officials, suggesting that the process of cross-Strait consultations at the working level prior to the formal SEF-ARATS talks has become routine and that there are unlikely to be any surprises during the talks, a goal both sides share. The ultimate impact of the framework agreement on financial services will largely depend on the details to be included in the subsequent memoranda of understanding which both sides have yet to begin negotiating. End Comment. YOUNG