US embassy cable - 05TAIPEI555

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000555 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 02/01/2015 
TAGS: PREL, ECON, ETRD, EAGR, ENRG, PGOV, CH, TW, Cross Strait Economics, Cross Strait Politics 
SUBJECT: PREMIER PROMISES ACTION ON SPECIAL BUDGET, 
ECONOMIC AGENDA 
 
 
Classified By: AIT Director Douglas Paal, Reason: 1.4 (B/D) 
 
1. (C) Summary: During a February 14 meeting with the 
Director, Premier Frank Hsieh (Chang-ting) promised a 
pragmatic approach to domestic, cross-Strait, and economic 
issues during his tenure in office.  The Director highlighted 
a number of pressing issues in the U.S.-Taiwan relationship, 
including the Special Defense Procurement Budget, Taiwan's 
ban on U.S. beef imports, intellectual property rights, and 
pharmaceutical pricing.  He also urged the Premier to 
exercise caution on cross-Strait and nuclear energy policies. 
 Hsieh appealed for USG assistance on Taiwan's World Health 
Assembly (WHA) observer bid and reiterated Taiwan's interest 
in signing a U.S.-Taiwan Free Trade Agreement (FTA).  Hsieh 
warned that PRC moves to pass an Anti-Secession Law might 
cause a strong reaction in Taiwan and asked the USG to urge 
Beijing to reconsider its plans.  End Summary. 
 
New Approach to Governance 
-------------------------- 
 
2. (C) During a February 14 courtesy call, the AIT Director 
praised Premier Frank Hsieh's public commitment to inject 
moderation into Taiwan's political discourse.  Hsieh said 
that his five main priorities as Premier were to establish 
political stability, open dialogue with the opposition 
legislative majority, de-politicize the public policy debate, 
instill greater respect in government for the current "ROC" 
constitution, and enhance Taiwan's economic performance.  As 
a first step towards accomplishing these goals, Hsieh said he 
would avoid pursuing divisive issues, such as revisions to 
the Referendum Law, that would endanger cross-partisan 
cooperation. 
 
Urgent Issues: Defense Budget and Beef 
-------------------------------------- 
 
3. (C) The Director said he looked forward to moving ahead 
with the new cabinet to resolve a range of irritants in the 
U.S.-Taiwan relationship.  The Director emphasized two major 
issues that needed the Premier's immediate attention -- the 
proposed Special Defense Procurement Budget and Taiwan's ban 
on beef imports.  On the first item, the Director warned that 
failure to act during the current Legislative Yuan (LY) 
session would cause serious and lasting harm to U.S.-Taiwan 
relations.  Hsieh responded that passage of the special 
budget was critical to demonstrating Taiwan's commitment to 
its self-defense and thus will be the government's number one 
legislative priority.  He stated that the government would 
begin formal consultations with the opposition when the LY 
reconvenes on February 25.  Hsieh added that he was 
encouraged by recent signs of flexibility on the Pan-Blue's 
part over the special defense budget. 
 
4. (C) On beef imports, Hsieh urged that health experts be 
allowed to make the final determination in order to avoid 
turning the issue into a partisan football in the LY.  The 
Director noted that there is wide-spread agreement within the 
health community that the ban is not justified on scientific 
grounds.  The problem, he added, is that some ministries 
appear to be slowing the process down for non-scientific 
reasons.  Hsieh said he would immediately follow up with the 
Council on Agriculture (COA) on where the issue stands. 
 
Trade Irritants: IPR, Pharmaceuticals 
------------------------------------- 
 
5. (C) Looking further ahead, the Director noted that Taiwan 
needs to address a number of outstanding trade disputes 
before the USG can consider starting FTA negotiations.  The 
Director advised Taiwan to focus on the enhanced consultative 
role the U.S. Congress now plays in the FTA negotiating 
process.  Taiwan will need to demonstrate to a majority of 
U.S. legislators that a U.S.-Taiwan FTA will bring real 
benefits to their constituencies. 
 
6. (C) The Director noted that a good first step towards an 
FTA would be for Taiwan to prepare deliverables on IPR and 
pharmaceutical pricing ahead of proposed Trade and Investment 
Framework Agreement (TIFA) talks to be held later in the 
year.  The Director praised Taiwan's recent progress on IPR 
enforcement, but cautioned that further action to stop 
internet piracy would be necessary before the USTR would 
consider taking Taiwan off the Special 301 Watch List.  The 
Director also welcomed the LY's recent passage of a Data 
Exclusivity Law for pharmaceutical products.  He urged the 
Executive Yuan (EY) to vigorously enforce its provisions. 
 
7. (C) The Director said that the USG still objects to the 
different reimbursement levels for innovative versus generic 
drugs under Taiwan's National Health Insurance (NHI) system. 
Hsieh responded that the problem stems in large part from 
under-funding in the NHI system.  He added that he has 
already authorized an injection of NTD 25 billion (USD 800 
million) from EY discretionary funds into the NHI and would 
seek further budgetary support from the LY to ensure that the 
NHI has the flexibility needed to fully fund drug purchases 
of all kinds. 
 
Nuclear Power 
------------- 
 
8. (C) In addition to resolving existing disputes, the 
Director underscored the importance of not reopening old ones 
like the Fourth Nuclear Power Plant.  Hsieh acknowledged that 
the cabinet is under pressure from anti-nuclear groups to 
stop construction on the plant, but he pledged that his 
cabinet would honor the 2001 EY-LY agreement to complete the 
project.  Hsieh added that later this week he would 
personally tell anti-nuclear activist and former Democratic 
Progressive Party (DPP) Chairman Lin Yi-hsiung that the EY 
remains bound by the LY resolution on the nuclear power plant 
project.  He added that the EY would only change its position 
on the issue if the LY revised its resolution. 
 
Cross-Strait: Avoiding Provocations 
----------------------------------- 
 
9. (C) Hsieh said he would also work to maintain stability in 
cross-Strait relations in the coming years, but warned that 
PRC moves to pass an Anti-Secession Law could provoke a 
sharply negative reaction in Taiwan.  While acknowledging 
that no one in Taipei knows the contents of the law, Hsieh 
asserted that 80 percent of Taiwanese polled expect it to be 
harmful to Taiwan's interests.  Hsieh urged the USG to 
intervene with Beijing either not to pass the law in March, 
or to rename it to make it appear less provocative.  The 
Director responded that the USG has advised Beijing that its 
decision to press forward with the law is not helpful to 
cross-Strait stability.  However, the Director urged Taipei 
to take a low-key public stance in order to avoid 
strengthening the hands of those in Beijing seeking tougher 
language.  He added that until the contents of the bill are 
known, it is premature to assess the law's longer term 
implications. 
 
10. (C) On a final note, Hsieh urged the USG to support 
Taiwan's bid for WHA observer status.  Hsieh said that WHA 
participation would offer real benefits to Taiwan's public 
health system.  The Director noted that the U.S. is working 
closely with Taiwan's delegation in Geneva on WHO-related 
issues.  He welcomed any new ideas Taiwan has for advancing 
Taiwan's application at the upcoming WHA meeting. 
PAAL