A ROADMAP FOR BUILDING THE U.S.-TAIWAN ECONOMIC

C O N F I D E N T I A L AIT TAIPEI 000080


STATE FOR EAP/TC
STATE PASS USTR FOR STRATFORD AND ALTBACH, TREASURY FOR
OASIA/WINSHIP AND JEWELL, NSC FOR LOI, COMMERCE FOR
4431/ITA/MAC/AP/OPB/TAIWAN,USDA FOR FAS/OSTA BEAN, DAWSON,
AND RASMUSSEN; FAS/OCRA RADLER, BURDETT, AND
ANDERSON-SPRECHER; FAS/OTN BERTSCH; AND FAS/OFSO SALLYARDS

E.O. 12958: DECL: 01/19/2020
TAGS: ECON ETRD PGOV PREL EARG TW
SUBJECT: A ROADMAP FOR BUILDING THE U.S.-TAIWAN ECONOMIC
RELATIONSHIP

REF: A. 09 TAIPEI 1224

B. TAIPEI 23


Classified By: Bill Stanton, AIT Director, for reasons 1.4 (b) and (d).


1. (C) SUMMARY: As the U.S. works to resolve the beef market
access issue while reviving its bilateral economic agenda
with Taiwan (reftels),AIT proposes using a revived Trade and
Investment Framework Agreement (TIFA) as a vehicle to
facilitate progress on a specific timeline of trade
agreements. Devising a more detailed timeline would bolster
U.S. interests with our tenth-largest trading partner,
reinforce a key forum for resolving trade disputes and market
access issues, and serve as a dynamic counterpoint to
Taiwan's burgeoning economic ties with the PRC. END SUMMARY.

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Improving Prospects for a Major Trading Partner
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2. (C) Although the volume of bilateral trade slumped during
the global recession, Taiwan was our tenth-largest trading
partner for the first eleven months of 2009. Taiwan is now
emerging from the worst economic slump in its history, and is
projected to post over 4% GDP growth in 2010. Later this
year, Taiwan hopes to conclude an Economic Cooperation
Framework Agreement (ECFA) with the PRC. Combined with
numerous other PRC-Taiwan measures, expanded cross-Strait
economic ties will continue to contribute to Taiwan's
economic growth and increase its attractiveness as a
destination for U.S. business and investment.

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Expanding U.S. Engagement
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3. (C) With over USD 16 billion in cumulative investment, the
U.S. is Taiwan's largest foreign investor. Although
generally satisfied with Taiwan's investment climate, the
U.S. business community has grown increasingly restive as
agricultural market access concerns have dominated our
bilateral trade agenda. As we have already noted, a revived
Trade and Investment Framework Agreement (TIFA) process
should form the centerpiece of an expanded bilateral economic
relationship (reftels).

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Targets for the End of 2010
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4. (C) The last TIFA meeting took place in July 2007. While
recognizing the potential impact of unforeseen circumstances,
setting an ambitious timeline for action would help ensure
that our efforts achieve concrete results. Assuming we are
able to hold one TIFA meeting by the summer of 2010, followed
by a series of follow-on technical meetings by DVC, we should
target the following accomplishments this year:

-- Completion of the pending eCommerce agreement before or
during the next TIFA meeting.

-- Interagency consultation to address issues related to
Congressional approval of potential bilateral and tax
agreements with Taiwan, followed by a decision to launch
negotiations toward these agreements before or during the
next TIFA meeting (see septel for more detailed analysis of
these two proposed agreements),plus at least two follow-up
DVCs apiece to negotiate these agreements.

-- Before or during the next TIFA meeting, a decision to
explore negotiations on at least two of the following
candidates (reftel) for other bilateral agreements: labor,
environment, transparency, IPR, and technical barriers of
trade (TBT). Based on U.S. business interests, TBT should be
the top priority among these.

-- In conjunction with the next TIFA meeting, consider
holding the inaugural session of the bilateral Consultative
Committee on Agriculture (CCA) to address priority
agricultural issues such as maximum residue levels (MRLs),
pork, rice, and remaining beef market access issues not
covered by the bilateral protocol (e.g., BSE-related
suspensions for animal feeding products). The CCA would also
serve to invigorate cooperation in areas such as biotech,
food security, and agricultural research.

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Targets for the End of 2011
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5. (C) By the end of 2011, we should use at least one
additional meeting, follow-up DVCs, and other meetings to:

-- Complete negotiations for a bilateral investment
agreement, and continue negotiations toward completion of a
bilateral tax agreement.

-- Make significant progress toward the completion of the two
new agreements identified as priorities before or during the
2011 TIFA.

-- In addition to resolving beef market access concerns
through the bilateral protocol consultations process, make
significant progress in further reducing the MRL backlog
through a joint workplan that sets a timetable for completing
work on new MRL priorities, including Taiwan's suspended
efforts on pork ractopamine. On rice, we should seek
re-tendering or compensation for shortfalls in 2007-08
quotas, while ensuring Taiwan fulfills its 2009
Simultaneous-Buy-Sell (SBS) purchase commitments and all
upcoming 2010 quota tenders.


6. (C) COMMENT: Bilateral trade agreements should not be the
only benchmark by which to evaluate the U.S.-Taiwan economic
relationship. At the same time, however, recent years have
seen a lack of concrete progress that has frustrated the U.S.
business community and stood in growing contrast to
blossoming cross-Strait ties. Individual trade disputes will
continue to arise, and we must also continue to emphasize
broad, sectoral issues such as government procurement and
pharmaceuticals. In addition to addressing individual
disputes and sectoral concerns, however, TIFA should also be
revived as a vehicle for advancing concrete progress toward
building trade ties with a key partner. END COMMENT.


STANTON