US embassy cable - 05DUBLIN107

C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000107 
 
SIPDIS 
 
E.O. 12958: DECL: 01/28/2015 
TAGS: PREL, PHUM, ECON, ETRD, EINV, SOCI, SCUL 
SUBJECT: PRIME MINISTER AHERN'S TRIP TO CHINA NETS DEALS 
FOR IRELAND 
 
 
Classified By: Political-Economic Counselor Mary E. Daly; Reasons 1.4 ( 
B) and (D). 
 
1.  (C) Summary: The January 17-21 visit to China of 
Ireland's largest ever trade delegation advanced the GOI's 
"Asia Strategy" of raising Ireland's commercial profile in 
the Pacific region, though the extent to which Prime Minister 
Ahern used the opportunity to press Beijing on human rights 
remains unclear.  The trade mission boosted bilateral trade, 
which has grown 170 percent since 1999, and aimed to spur 
Chinese investment in Ireland, which is minuscule due to high 
Irish business costs.  University links were also a 
significant focus of the visit, mainly for their potential to 
raise funds for Ireland's cash-starved higher education 
sector through increases in the Chinese student population. 
Irish Foreign Affairs officials disagreed with press reports 
that Prime Minister Ahern had been soft on human rights and 
on the proposed lifting of the EU arms embargo against China, 
noting that Ahern had been stronger in private sessions with 
Chinese counterparts.  The officials added that Chinese 
comments on the embargo suggested that larger EU Member 
States had been making promises to Beijing on the issue. 
Notwithstanding these officials' comments, Post continues to 
doubt that Ireland would be prepared to fight EU consensus on 
the ban's removal, just as we suspect that Ahern was not 
prepared to jeopardize the success of Ireland's largest ever 
trade mission with pointed messages on human rights.  End 
summary. 
 
2.  (U) Ireland's largest ever official trade delegation 
returned home the weekend of January 21 after a successful 
week-long visit to Beijing, Shanghai, and Hong Kong.  Led by 
Prime Minister Bertie Ahern, the 300 person-strong delegation 
consisted of representatives from 121 Irish firms, 7 
universities, a host of technology institutes and English 
language schools.  Four Cabinet members also took part: 
Agriculture Minister Mary Coughlan, Enterprise Minister 
Michael Martin, Education Minister Mary Hanafin, and 
Communications Minister Noel Dempsey.  Reportedly, agreements 
worth more than euro 125 million were signed, including, most 
notably, a deal by agri-business giant Kerry Group to acquire 
Hangzhou-based foods company, Lanli, and a commitment by 
property developer Treasury Holdings to build a 
housing/office/leisure complex on Chongming island near 
Shanghai.  The visit reciprocated trips to Ireland by Premier 
Wen Jiabao in 2003 and Vice Premier Huang Ju in 2004, and 
Prime Minister Ahern met with Wen, President Hu Jintao, and 
National People's Congress Chairman Wu Bangguo while in 
Beijing.  During discussions with Ahern, President Hu 
committed to visit Ireland in late 2005.  On January 26, 
moreover, Vice Foreign Minister Zhang Zhijun arrived in 
Dublin for an immediate follow-up to the Irish visit. 
 
The GOI's Asia Strategy 
----------------------- 
 
3.  (SBU) The trade delegation was central to the GOI's "Asia 
Strategy," which Prime Minister Ahern had launched after his 
first visit to China in 1998, according to Geoffrey Keating, 
Department of Foreign Affairs (DFA) Counselor for Bilateral 
Economic Relations, who participated in the trade mission and 
spoke with econoff afterward.  Keating said that the 
Strategy, as outlined in a 1999 government white paper, aimed 
to raise Ireland's profile in Asia and to help Irish firms 
exploit commercial opportunities afforded by Asia's economic 
rise, particularly in China.  In line with the Strategy, 
Deputy Prime Minister Mary Harney had led sizable trade 
delegations to China in 2002 and to Japan in 2003.  Keating 
noted that Irish-Chinese economic relations had benefited 
from this outreach, with 250 Irish firms now doing business 
in China and two-way trade having increased 170 percent since 
1999 and 40 percent since 2003.  (In the first 11 months of 
2004, Chinese exports to Ireland stood at euro 2.3 billion, 
while Irish exports to China were euro 577 million; 
indigenous Irish firms, as opposed to Irish-based foreign 
multinationals, only accounted for euro 43.2 million of Irish 
exports to China.)  Keating added that, following the 
delegation's visit last week, Ireland's Department of 
Enterprise, Trade, and Employment (DETE) had been tasked to 
update the Asia Strategy paper, looking ahead to 2010. 
 
4.  (SBU) The Irish trade delegation's visit also had the aim 
of spurring Chinese investment in Ireland, which at the 
moment was minuscule, econoff was told by Zhu Meidao, Chinese 
Embassy Economic/Commercial Counselor in Dublin.  Zhu said 
that larger Chinese firms were intrigued by the success of 
U.S. companies in Ireland (whose investment stock in the 
country is valued at USD 55 billion, roughly five times the 
U.S. investment stock in China), and he cited Prime Minister 
Ahern's statements in Beijing about Ireland's attractiveness 
as a base for EU-focused operations.  He cautioned, however, 
that rising wages and other production costs in Ireland were 
a disincentive to investment by Chinese firms.  Zhu recalled, 
for example, that China's largest construction firm, 
Zhongjian Gongcheng Gongsi, had come to Ireland in 2002 at 
Deputy Prime Minister Harney's invitation to take part in an 
urban infrastructure project, only to pull out within a year 
due to cost overruns.  One promising possibility, according 
to Zhu, was Chinese investment in the Shannon Free (Trade) 
Zone, whose authorities conducted briefings as part of the 
trade mission.  He explained that China knew well the 
corporate tax advantages and other investment incentives 
offered by Shannon, as former President Jiang Zemin had 
visited the area in 1980 and had brought back ideas that were 
later incorporated in China's Special Economic Zones in 
Shenzhen and Guangzhou. 
 
Promoting the Business of Education 
----------------------------------- 
 
5.  (U) University relationships were a significant focus of 
the mission, particularly from the perspective of education 
as business, econoff was told by Frank O'Conor, International 
Education Manager of Enterprise Ireland, the 
business-promotion agency that organized the delegation. 
O'Conor noted that 15 education-related agreements were 
reached, including, most critically, a protocol signed by 
Education Minister Mary Hanafin and her Chinese counterpart, 
Zhou Ji, on mutual recognition of higher education 
qualifications.  O'Conor said the protocol would underpin 
Enterprise Ireland's goal of tripling by 2008 the 
university-level Chinese student population in Ireland, which 
now stands at roughly 2,900.  (An estimated additional 29,000 
Chinese students are enrolled at English language schools 
that are not part of the university system.  The GOI and 
Chinese Embassy are uncertain as to that number, however, 
since Ireland does not track departures from the country.) 
O'Conor noted that Chinese university students currently pay 
euro 8,000 to 15,000 per year in tuition and that a tripling 
of this student population would make more funds available to 
the cash-starved higher education system.  (Irish students 
are exempted from paying university fees, a serious resource 
constraint on state-funded Irish education.)  He added that 
an increase in Chinese students would be a critical piece of 
Enterprise Ireland's effort to double the total revenue 
generated by foreign students to euro 600 million by 2008. 
 
6.  (C) Ironically, Minister Hanfin had to contend with 
complaints from English language schools' representatives 
within the delegation about new student visa restrictions, 
said the DFA's Geoffrey Keating.  He noted that Ireland's 
Department of Justice (DOJ) announced during Christams week 
that foreign students (who currently can work 20 up to hours 
a week and have been a boon to Ireland's low-end services 
sector) would be forbidden to work unless they were enrolled 
in a course lasting longer than one year.  The new regulation 
targeted a number of bogus language schools that were 
providing visa application materials to Chinese who primarily 
intended to work in Ireland.  The language schools, observed 
Keating, had protested the regulation, claiming that it would 
seriously reduce their Chinese student populations, which had 
quintupled since 2000.  He added that the DOJ had not 
sufficiently consulted inter-agency before "springing" the 
regulation and that a thorough government review would be 
conducted before the regulation's scheduled enactment in 
April.  Chinese Commercial Counselor Zhu told econoff that 
the Chinese Embassy had not opposed the regulation, but had 
voiced concerns about the impact on Chinese students' ability 
to pay living expenses in one of the EU's most expensive 
countries.  Zhu pointed out that more than 90 percent of 
Ireland's Chinese students were from the northeastern 
Liaoning and Shenyang provinces, where economic conditions 
were less favorable than in Beijing and along China's coast. 
 
The EU Arms Embargo and Human Rights 
------------------------------------ 
 
7.  (C) Irish newspapers reported Prime Minister Ahern as 
saying that the lifting of the EU arms embargo against China 
was inevitable and that Ireland was aware of China's desire 
to end the embargo as a matter of respect and equal 
treatment.  Cliona Manahan, DFA's Political Division 
Counselor for Asia and a participant in the Prime Minister's 
discussions with Premier Wen Jiabao on the arms embargo, told 
econoff that media reports had not reflected the balance in 
Ahern's comments.  Ahern, she recalled, had told Wen that 
"there was still work to be done on the embargo issue," both 
in terms of the Chinese delivering on human rights and the EU 
finalizing an acceptable Code of Conduct.  Manahan said the 
discussions had strengthened her earlier impression that 
larger EU Member States had complicated the issue by making 
promises to the Chinese Government about the embargo.  She 
remarked that Ireland knew the implications that the arms 
embargo posed for U.S.-EU relations; China also understood 
the agitation that the issue had created among East Asian 
neighbors.  She added that Ireland had no intention of 
selling weapons to China even if the ban were lifted, 
consistent with Ireland's position against arms trading in 
general. 
 
8.  (C) Manahan also disagreed with media comments, including 
by the local Amnesty International office, that Ahern had 
soft-pedaled human rights in order to secure contracts for 
delegation members.  (The comments were prompted by an Irish 
Times report that Ahern had said Ireland could not take a 
stronger line with China on human rights than had been taken 
by larger EU Member States.)  Manahan pointed out that 
journalists had not been privy to the discussions on human 
rights, which, she added, were free-flowing, forthright, and 
focused on individual cases.  She noted that the discussions 
had benefited from the fact that the Irish government 
officials involved were well known to their Chinese 
counterparts, with Ireland having led the EU-China Human 
Rights Dialogue as EU president in 2004.  According to 
Manahan, the Irish side had been clear about the drift in 
China's commitment to deliver on human rights, and Ahern had 
asked his interlocutors to expend more energy on this front. 
She remarked that the EU-China Human Rights Dialogue, now in 
its eleventh year, remained the best tool for Member States 
to convey their collective concerns to Beijing. 
 
Comment: Ireland's Opaqueness on China and Human Rights 
--------------------------------------------- ---------- 
 
9.  (C) Manahan's read-out notwithstanding, the Irish DFA has 
been cagey with Post in past conversations as to Ireland's 
exact position on the lifting of the EU arms embargo.  For 
example, although DFA officials have noted the need for an 
acceptable Code of Conduct and for Chinese progress on human 
rights, they have consistently avoided our direct questions 
on whether Ireland opposed lifting the ban in the current 
circumstances.  Similarly, econoff asked Manahan several 
times about the accuracy of reports that Ahern had used the 
word "inevitable" in discussions on lifting the ban, but she 
repeatedly deflected the question.  We continue to doubt that 
Ireland would be prepared to fight EU consensus on the ban's 
removal, just as we suspect that Ahern was unwilling to 
jeopardize the success of Ireland's largest ever trade 
mission with pointed messages on human rights.  The 
broad-based trade, diplomatic, education, and cultural links 
that the trade mission helped to advance, however, should 
give more weight to whatever future messages the Irish 
leadership might deliver to Beijing on human rights. 
KENNY