MAC CHAIR ON CROSS-STRAIT TALKS AND OPPOSITION

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000590 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: MAC CHAIR ON CROSS-STRAIT TALKS AND OPPOSITION CRITICISM OF MA POLICY REF: A. TAIPEI 518 ¶B. TAIPEI 543 ¶C. TAIPEI 537 TAIPEI 00000590 001.2 OF 003 Classified By: AIT Director Stephen M. Young for reasons 1.4 (b) and (d ). ¶1. (SBU) Summary. Cross-Strait talks continue to be successful, Mainland Affairs Council Chair Lai Shin-yuan stressed to the Director on May 14, and she dismissed opposition criticisms as baseless. Plans to open financial services markets on both sides of the Strait, along with investment opportunities in Taiwan, are proceeding apace. Both sides see an Economic Cooperation Framework Agreement (ECFA) as in their best interests, although they differ on how to proceed with negotiations. Recent statements by Ma about establishing representative offices have been misinterpreted, according to Lai. She believes the next round of cross-Strait talks will take place in Taiwan after the December 5 local elections, perhaps outside Taipei, where large protests greeted the visit of the PRC,s Chen Yunlin last November. End Summary ¶2. (C) On May 14, the Director called on Mainland Affairs Council (MAC) Chair Lai Shin-yuan to discuss recent developments in cross-Strait relations. Lai characterized the April 25-26 talks between Straits Exchange Foundation (SEF) Chairman P.K. Chiang and the PRC's Association for Relations Across the Taiwan Strait (ARATS) Chairman Chen Yunlin as successful. Lai said the Chiang-Chen talks have become "normalized," such that it was not necessary for Chiang to report directly to President Ma immediately after the conclusion of each round of talks. (Note: Chiang was not asked to brief President Ma immediately after his return to Taipei on April 29 (Ref A). End Note.) Lai declined to comment directly on Chiang's submission of his resignation as SEF Chair to President Ma on May 4. She did confirm that she accompanied Ma during his May 6 call on SEF, where he endorsed the foundation's work and persuaded Chiang to remain as chairman. (Ref. B) ¶3. (SBU) The Director noted several events related to cross-Strait relations will take place in the coming months, including a May 15-22 cross-Strait forum sponsored by the Fujian provincial government and the PRC Taiwan Affairs Office (TAO). Taoyuan County Magistrate/KMT Vice Chairman Eric Chu and Taichung Mayor Jason Hu will attend the forum. KMT Chairman Wu Poh-hsiung will take part in a ceremony in Nanjing on June 1 honoring Sun Yat-sen, and Wu is also expected to meet President Hu Jintao during his visit to China. In addition, the KMT-CCP cross-Strait forum will take place in July. Lai concurred with the Director's view that the plethora of events reflects a new dynamism in cross-Strait relations. Next Round of Chiang-Chen Talks -------------- ¶4. (C) According to Lai, the date for the next round of talks has not yet been set, although she believed the best time would be after the December 5 local elections. Lai noted that holding the talks late in the year would allow both sides more time to prepare, particularly in regard to difficult issues like the Economic Cooperation Framework Agreement (ECFA). Lai said it is very possible the talks will be held in a location other than Taipei, adding it is not necessary for President Ma to meet Chen Yunlin during the talks. Implementation of Financial Services Agreement -------------- - ¶5. (C) Lai said the Executive Yuan has notified the details of the agreements signed during the Chiang-Chen talks (Ref. C) to the Legislative Yuan before the agreements take effect. Once the 60-day notification period ends, Lai explained, relevant implementing agencies on both sides will proceed TAIPEI 00000590 002.2 OF 003 with negotiations to finalize memoranda of understanding (MOU) covering banking, insurance, and securities supervision and regulation. According to Lai, the content of the MOUs has largely been agreed to by both sides, and completing these supporting agreements should not take long. ECFA - Both Sides Favor but Timing Uncertain -------------- ¶6. (C) The Director inquired how the proposed ECFA would further Taiwan's interests. Lai responded that the administration's goal is to have "many months" of negotiations, culminating in signing an agreement at the next round of SEF-ARATS talks that would provide a general framework and also meet the urgent needs of certain Taiwan industries. (Note: In an interview this week with Time magazine, this is much the way President Ma described his approach to ECFA. End Note.) Lai said Ma recognizes the political sensitivity of ECFA, but also has to contend with pressure from industry in sectors such as petrochemicals and auto parts, which would potentially be disadvantaged by the removal of tariffs under the ASEAN free trade agreement with the PRC. Ma's position in support of ECFA is unwavering, according to Lai, which has led the PRC also to favor strongly some type of agreement on opening trade and investment. Lai characterized statements by TAO Chairman Wang Yi in support of liberalizing economic relations as an attempt to respond to calls for ECFA coming out of Taiwan. Lai acknowledged Beijing's position that Taiwan's domestic controversy over ECFA needs to be resolved in order for both sides to negotiate, but she noted the PRC has not ruled out including ECFA on the agenda for the next round of SEF-ARATS talks. Opening to Investment from the PRC -------------- ¶7. (C) Regarding the joint statement on cross-Strait investment issued at the April 25-26 talks in Nanjing, Lai said MAC's position is that Taiwan should take a "cautious and orderly approach" toward opening to Mainland capital. According to Lai, MAC coordinated the administration's policy on the first tranche of investment liberalization. (Note: On May 12, the Executive Yuan approved 99 industrial sectors in manufacturing, non-financial services, telecommunications and public construction in which capital from PRC investors will be allowed. Economic Minister Yiin Chi-ming announced investment will be allowed effective sometime in early June. End Note.) Lai said Ma and Premier Liu Chao-hsuan were briefed extensively by MAC and MOEA on the process of removing restrictions on PRC investment in Taiwan. Moving Beyond Economic Issues -------------- ¶8. (C) Lai said that President Ma needed to show the public his confidence in the strategic line he is taking in improving cross-Strait relations. She pointed to tourism as an example where early skepticism about the benefits to Taiwan has dissolved as the public now sees significant numbers of tourists coming from the Mainland. Regarding Ma's recent reference to a possible peace agreement, Lai said there is zero chance of such an agreement during Ma's current term and no certainty if he is elected to a second term. Even the DPP in 2003-2004 supported a cross-Strait peace agreement, at the time it was in power, she said. Noting that, at one point, Taiwan's participation in the World Health Assembly was unimaginable, Lai said Taiwan could continue to make progress on issues in the international arena if the administration uses a patient approach. Representative Offices - Ma's Statement Misinterpreted -------------- -------------- ¶9. (C) In regard to Ma's recent statement that Taiwan and the PRC could establish representative offices, Lai explained that Ma had simply misspoken at the May 6 press conference at TAIPEI 00000590 003.2 OF 003 SEF. Lai claimed Ma later told her he had not been thinking of semi-official representative offices but rather travel agencies, to facilitate cross-Strait tourism. Lai noted that pursuant to the SEF-ARATS agreements on cross-Strait aviation, airlines from both can set up representative offices. According to Lai, an arrangement similar to the China Travel Service office in Hong Kong, which issued PRC visas, would not be appropriate for Taiwan. However, some arrangement that would allow travel agencies on both sides to collect travelers' documents and forward them to the relevant authorities for processing, might be feasible in the future. Opposition Criticism of Ma's Cross-Strait Policy -------------- --- ¶10. (C) Lai argued that the opposition's criticisms of Ma's cross-Strait policy are "baseless," asserting there is no evidence to support allegations that liberalizing cross-Strait economic relations is destabilizing Taiwan's economy. On the question of the legislature's involvement in cross-Strait negotiations, Lai pointed out that Taiwan's law authorizes the President to conduct foreign policy and negotiate agreements. Lai said, rather emphatically, that legislators should not have a role in actual negotiations. ¶11. (C) Lai said she wanted to discuss cross-Strait issues with the DPP and Chair Tsai Ing-wen , but they refused. Citing a recent poll commissioned by MAC which showed 56.7 percent of the public supports Ma's cross-Strait policies, Lai accused the DPP of "playing the ideological card" for political gain, rather than addressing the real issues of greatest concern to the people. Lai added that, in contrast to her dealings with the DPP, she regularly meets with her mentor former President Lee Teng-hui, who, she said, gives her encouragement and supports her efforts. Comment -------------- ¶12. (C) Lai, a former legislator of the pan-Green Taiwan Solidarity Union, became noticeably agitated when discussing the DPP and its criticisms of the Ma administration's cross-Strait and other policies. In Lai,s view, the DPP had won power based on support from social movements, but had turned on the movements after gaining power and shifted to ideological and ethnic politics. Lai appears increasingly comfortable and confident in her position within the KMT cabinet, and she seems fully committed to advancing Ma's cross-Strait agenda. End Comment. YOUNG